Arconic Inc. (Formerly Value-Add business units of Alcoa, Inc.) Business Report FY ended Dec. 2016
Financial Overview |
(in million EUR) |
| FY ended Dec. 31, 2016 | FY ended Dec. 31, 2015 | Rate of change (%) |
Factor | |
| Net Sales | 12,394 | 12,413 | (0.2) | 1) |
| Net Income | (941) | (322) | - | - |
| Sales by Segments | ||||
| Global Rolled Products | 4,864 | 5,253 | (7.4) | 2) |
| Engineered Products and Solutions | 5,728 | 5,342 | 7.2 | 3) |
| Transportation and Construction Solutions | 1,802 | 1,882 | (4.3) | 4) |
Factors
1) Net Sales
-The Company’s sales for the fiscal year ended December 31, 2016 decreased by 0.2% from the previous year to USD 12,394 million. The positive full-year effect of two acquisitions in 2015 in the Engineered Products and Solutions segment combined with automotive volume increased in the Global Rolled Products Segment were offset by negative effects due to the ramp-down of the Tennessee packaging operations, decreasing metal prices, and unfavorable price and product mix across all segments.
2) Global Rolled Products Sales
-The Global Rolled Products segment had sales of USD 4,864 million in the fiscal year ended December 31, 2016, a decrease of 7.4% from the previous year. The ramp-down of the segment’s Tennessee packaging operations was the primary cause for the decline in sales, though lower aluminum prices and demand in non-automotive markets also contributed. These decreases were partially offset by higher sales volumes in the automotive market.
3) Engineered Products and Solutions Sales
-In the fiscal year ended December 31, 2016, the Engineered Products and Solutions segment had sales of USD 5,728 million, an increase of 7.2% over the previous year. Factors for the increase include the increased sales from the segment’s acquired businesses and increased demand for the industrial gas turbine end market. Lower sales volumes in the oil, gas and commercial transportation end markets partially offset the gains.
4) Transportation and Construction Solutions sales
-Sales in the Transportation and Construction Solutions segment decreased by 4.3% to USD 1,802 million in the fiscal year ended December 31, 2016. Lower demand in the North American commercial transportation end market offset rising demand from the building and construction end markets.
Restructuring and separation of Alcoa Inc.
-The separation of Alcoa Inc. into two standalone companies, Arconic Inc. and Alcoa Corporation, took effect on November 1. Arconic Inc., trading on the New York Stock Exchange as "ARNC", has launched as a leader in multi-materials innovation, precision engineering and advanced manufacturing. In the split, Arconic retained a 19.9% interest in Alcoa Corporation. In 2015, the businesses that today comprise Arconic recorded revenues of approximately USD 12.5 billion. Of this, approximately 65% was derived from aerospace and automotive segments and the remaining 35% was from industrial and building products. In the North American automotive market, Arconic invented the aluminum bonding process in response to market demand for light-weighting. The company expects its North American automotive sheet revenues to grow six-fold, from USD 229 million in 2013 to USD 1.3 billion in 2018. In North America, 96% of the company’s automotive revenues come from products where it is ranked first or second in its market. Within the aerospace segment, which accounts for approximately 40% of Arconic’s total revenues, the company manufactures engineered products and solutions for airframe structures and aero engines. The company is a leader in structural parts for both metallic and carbon fiber reinforced plastic (CFRP) aircraft. (From press release on November 1, 2016)
-In September 2015, Alcoa Inc. announced its plan to separate into two independent, publicly traded companies. The Upstream Company will comprise five business units that today make up Global Primary Products - Bauxite, Alumina, Aluminum, Casting and Energy. The company's footprint will include 64 facilities worldwide, and approximately 17,000 employees. Revenues for the 12 months through June 30, 2015 totaled USD 13.2 billion. The Value-Add Company will include Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. The Value-Add Company will have 157 globally diverse operating locations and approximately 43,000 employees. Pro-forma revenues for the company for the 12 months through June 30, 2015 totaled USD 14.5 billion. The transaction is expected to be completed in the second half of 2016. (From a press release on September 28, 2015)
Contracts
-The Company announced that it has signed more than USD 450 million in long term agreements over the past year with customers in North America, South America, Europe and Asia for its forged aluminum wheels. The largest is a long-term agreement with PACCAR in which the Company will supply forged aluminum Alcoa wheels for PACCAR trucks. (From a press release on December 13, 2016)
Outlook
-The Company is targeting revenue between USD 11.8 and 12.4 billion in the fiscal year ending December 31, 2017, with a CAGR between 7% and 8% through 2019. (From a press release on December 14, 2016)
R&D Expenditure |
(in million USD) |
| FY ended Dec. 31, 2016 | FY ended Dec. 31, 2015 | FY ended Dec. 31, 2014 | |
| Total | 132 | 169 | 123 |
-The decrease in research and development expenses in the fiscal year ended December 31, 2016 was primarily due to the decrease in spending for a Micromill facility in San Antonio, Texas that was completed in 2015.
R&D Facilities
-In 2016, the Company completed a new powder production facility at its Arconic Technology Center in New Kensington, Pennsylvania. The powder production facility focuses on the development of aluminum, nickel and titanium alloys.
R&D Activities
-The Company’s research and development activities in the fiscal year ended December 31, 2016 focused on further investment in additive manufacturing and the development of advanced 3D printing design and manufacturing techniques.
Capital Expenditure |
(in million USD) |
| FY ended Dec. 31, 2016 | FY ended Dec. 31, 2015 | FY ended Dec. 31, 2014 | |
| Total | 1,125 | 1,180 | 1,219 |
-The Company is planning to invest no more than USD 650 million in capital expenditures in the fiscal year ending December 31, 2017.