Arconic Inc. (Formerly Value-Add business units of Alcoa, Inc.) Business Report FY ended Dec. 2017
Financial Overview |
(in million EUR) |
| FY ended Dec. 31, 2017 | FY ended Dec. 31, 2016 | Rate of change (%) |
Factor | |
| Net Sales | 12,960 | 12,394 | 4.6 | 1) |
| Net Income | (74) | (941) | - | - |
| Sales by Segments | ||||
| Global Rolled Products | 4,992 | 4,864 | 2.6 | 2) |
| Engineered Products and Solutions | 5,935 | 5,728 | 3.6 | 3) |
| Transportation and Construction Solutions | 1,985 | 1,802 | 10.2 | 4) |
Factors
1) Net Sales
-The Company’s sales for the fiscal year ended December 31, 2017 increased by 5.0% from the previous year to USD 12,960 million. The increase was the result of strong volume growth in all segments and higher aluminum pricing, partially offset by the planned ramp down and Toll Processing Agreement relating to the Company's North America packaging business in Tennessee in the Global Rolled Products segment, as well as unfavorable product pricing in both the Engineered Products and Solutions and Global Rolled Product Segments.
2) Global Rolled Products Sales
-The Global Rolled Products segment had sales of USD 4,992 million in the fiscal year ended December 31, 2017, an increase of 2.6% from the previous year. This was primarily attributable to volume growth in the automotive end market and higher aluminum pricing, partially offset by the impact associated with the ramp-down and Toll Processing Agreement with Alcoa Corporation at the Company's North America packaging business in Tennessee.
3) Engineered Products and Solutions Sales
-In the fiscal year ended December 31, 2017, the Engineered Products and Solutions segment had sales of USD 5,935 million, an increase of 3.6% over the previous year. Factors for the increase include volume growth in both aerospace engines and airframes, partially offset by lower product pricing, primarily in the aerospace end market, and the absence of sales related to the Remmele Medical business, which was sold in April 2016.
4) Transportation and Construction Solutions sales
-Sales in the Transportation and Construction Solutions segment increased by 10.2% to USD 1,985 million in the fiscal year ended December 31, 2017. The increase was primarily driven by increased volumes in the commercial transportation and building and construction end markets, higher aluminum pricing, and favorable foreign currency movements, partially offset by lower product pricing.
Site closure
-Alcoa announced decisions regarding smelting assets in the United States and Italy. In the United States, Alcoa intends to permanently close its Rockdale Operations site in Texas, which has been fully curtailed since the end of 2008. In Italy, Alcoa has reached an agreement to divest the Portovesme primary aluminum smelter, fully curtailed since 2012 and closed since 2014, to Invitalia, the Italian government agency that manages economic development. (From a press release, on December 21, 2017)
Relocation
-Alcoa will close its New York City office and move its global headquarters and principal executive office to its existing location in Pittsburgh as of September 1, 2017. In addition, within the next 18 months, another seven administrative locations across the U.S., Europe, and Asia will also close and affected employees will relocate to remaining office locations or operating facilities or will telecommute. As a result of today’s announcement, Alcoa expects annual savings of USD 5 million in corporate overhead once the changes are fully implemented. (From a press release on April 19, 2017)
Divestitures
-The Company announced the divestiture of its Fusina, Italy rolling mill to Slim Aluminum. The transaction follows a thorough review process and is part of Arconic Global Rolled Products' (GRP) continued drive to convert the business from a commodity producer to a high-margin aerospace and automotive supplier. Arconic expects to record restructuring-related charges representing the loss on sale of approximately USD 60 million after tax, or USD 0.12 per diluted share, in its Statement of Consolidated Operations for the first quarter of 2017. (From a press release on April 6, 2017)
Contracts
-The Company announced a multi-year supply deal with Toyota North America. Arconic is supplying aluminum to Toyota for its all-new Lexus RX. The vehicle debuted in 2016 and became Toyota’s first vehicle in North America to prominently feature aluminum exterior panels. This makes Arconic the sole aluminum sheet supplier to Toyota for the Lexus RX, named by Consumer Reports as the Best Luxury SUV of 2016. Arconic will supply Toyota from its plants in Davenport, Iowa, and Danville, Illinois. (From a press release on March 19, 2017)
R&D Expenditure |
(in million USD) |
| FY ended Dec. 31, 2017 | FY ended Dec. 31, 2016 | FY ended Dec. 31, 2015 | |
| Total | 111 | 132 | 169 |
-The decrease in research and development expenses in the fiscal year ended December 31, 2017 was driven by lower spending.
R&D Activities
-The Company’s research and development activities in the fiscal year ended December 31, 2017 continuously 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, 2017 | FY ended Dec. 31, 2016 | FY ended Dec. 31, 2015 | |
| Total | 596 | 1,125 | 1,180 |
-The Company's total capital expenditures are anticipated to be approximately USD 700 million in the fiscal year ending December 31, 2018.