Davis Index: Market Intelligence for the Global Metals and Recycled Materials Markets

Alcoa Corporation lowered its annual outlook for depreciation, depletion, and amortization expenses to $665 mn from $685mn, driven by favourable currency rates resulting in lower expenses in H1, in addition to lower capital expenses.

The American mining company expects to increase interest expense to $150mn from $125-130mn on the back of debt issuance. Alcoa shared that the uncertainty due to COVID-19 pandemic could cause the actual results to differ from the outlook. 

Alcoa’s shipment outlook for bauxite, alumina and aluminium remains unchanged from the prior full-year estimates. Alcoa expects to ship 48-49 mn mt of dry bauxite, 13.6-13.7 mn mt of alumina and 2.9-3mn mt of aluminium this year. 

Its revenue from bauxite segment is likely to drop in the Q 3, 2020 (July- Sept 2020) due to high energy costs in Australia. An improvement is expected in the aluminium segment with lower raw material cost including energy.

Their annual operational tax rate is likely to fluctuate due to drop in profit before taxes in the current pandemic situation. In Q3, 2020, the operational tax expense is expected to be around $150mn, considering the prevailing pricing. 

Full curtailment at its Intalco Works Smelter in Ferndale, Washington is likely to be completed in Q3. Alcoa decided to reduce production capacity by 230,000mt more from Intalco. The company had previously announced potential curtailment of 1.5mn mt globally in the next five years through curtailment, divestiture and significant improvement. 

The company reported restructuring charges of $27mn associated with curtailment, employee severance and costs associated with the termination of the contract in the Q2, 2020. The charges are expected to be paid in Q3, 2020.

It reported net loss $197mn Q2, 2020 (April-June) from $80mn net income in Q1, 2020. Q2 results include the net impact of $193 mn including interim tax impacts, the cost associated with the curtailment of the Intalco smelter in Washington and restart of ABI smelter. The restart process will be completed in Q3,2020.

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