(AA) Alcoa Wins $1 Billion Contract

Alcoa Inc. (AA) the largest U.S. aluminum producer was awarded a $1 billion multiyear supply agreement with aerospace firm Airbus for aluminum sheet and plate products.

As per the agreement, Alcoa’s products will be used in nearly all Airbus commercial aircraft programs including the fuselage panels, structural components and wing skins. Alcoa’s flat rolled products will be supplied from the company’s plants in Davenport, Iowa, the United Kingdom and Russia.

Earlier this month, Alcoa announced it had developed a new generation of alloys and technologies, which could lower the weight of airliners by up to 10% and improve fuel efficiency even more.

Alcoa’s new aluminum- or aluminum-lithium based alloys and advanced structural technologies use sheet, plate, forgings and hard alloy extrusion products across aircraft structures, including airplane wings and fuselage elements.

The new alloys and technology can also lower the cost of manufacturing and repairs by up to 30%. Along with new alloys, Alcoa is using advanced structural techniques.

The aerospace business is rebounding from the recession and demand for aluminum and light alloys is growing as Asia and the Middle East build up fleets and airlines in North America and Europe to replace the aging aircraft.

Based in Pennsylvania, Alcoa Inc. is among the world’s leading producers of primary and fabricated aluminum and alumina. It involves the technology of mining, refining, smelting, fabricating and recycling of aluminum. We believe that Alcoa’s cost reduction efforts are, to some extent, offsetting the negative impact of higher energy and raw material costs on profitability.

The company is divesting underperforming assets through its restructuring program. The annual global consumption of aluminum products, both upstream and downstream, is expected to double over the next 15 years. This consumption boom will be driven primarily by growth in China, India, Russia and Brazil, whose demographics are accelerating development.

In April 2011, the company kicked off another earnings season with its first quarter posting an EPS of 28 cents, exceeding the Zacks Consensus Estimate by a penny. Including the negative impact of special items, which is 1 cent per share, EPS came in at 27 cents.

Revenues for the quarter were $5.96 billion, which missed the Zacks Consensus Estimate of $6.112 billion. Revenues, however, increased 22% year over year, driven by rising prices for aluminum and alumina.

The company posted improved profits across all its segments. This was followed by revenue growth in the end markets led by double-digit increases in packaging, automotive, commercial transportation and industrial products.

Currently, Alcoa has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long-term (6 months) Neutral recommendation.

Alcoa faces stiff competition from Aluminum Corporation Of China Limited (ACH), Rio Tinto Plc. (RIO) and BHP Billiton Ltd. (BHP).

ALCOA INC (AA): Free Stock Analysis Report

ALUMINUM CP-ADR (ACH): Free Stock Analysis Report

BHP BILLITN LTD (BHP): Free Stock Analysis Report

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