Boston, MA 04/16/2014 (wallstreetpr) – Alcoa Inc (NYSE:AA) invested $40 million for rolling mills in Itapissuma, Brazil to increase production of specialty foils for packaging. The mill will start producing specialty rolls by 2016.
Value-added businesses
Customers prefer specialty foil for aseptic and flexible packaging to keep their products fresh for a long time. So, the rising demand will give opportunities for companies to increase their production to meet the customers’ need. In 2013, more than 175 billion specialty packages are delivered globally and continue to increase with rising customers’ preferences with increased population. As a result, the specialty packaging industry in Latin America expects to grow at CAGR of 7% in next three years. Consequently, companies like Alcoa will have a competitive advantage over others due to its leading position in Latin America for specialty foil.
Transformation accelerates performance
Alcoa reported $250 million YoY production across all segments in 1Q2014. The Company posted positive earnings excluding special items due to improved performances over up, mid and downstream businesses. Alumina (upstream) continues to report high after tax operating income since 2011. But, value-added business drove 76% of segment profit due to significant growth in Global Rolled Products (GRP) for midstream and improved results in Engineered Products and Solutions (EPS) for downstream business.
During 1Q2014, GRP reported total shipments of 489,000 metric tons with an adjusted EBITDA of $154 million. Thus, Alcoa can generate profit of $315 per metric ton. So, Alcoa Inc (NYSE:AA) continues to improve profitability from rolling mill business by investing in growing market such as Brazil. Alcoa also plans to close two mills in Australia due to higher capacity. These actions will further enhance rolling business and anticipates $1.0 billion revenue growth by 2016.
Final take
Alcoa Inc (NYSE:AA) intends to transform its businesses to attain profitable growth in foreseeable years. Therefore, it focuses on investing more in value-added businesses to capture the growing demand.
