Dry Weather in Brazil Desiccates Alcoa’s Fourth-Quarter Numbers

Dry Weather in Brazil Desiccates Alcoa’s Fourth-Quarter Numbers

Battling against drought in Brazil and an upswing in power prices in Spain took a toll on Alcoa Corporation’s fourth-quarter numbers, which the firm released to the market on Wednesday.

Alcoa finished the quarter with US$3.2 billion in revenue, up from last quarter’s total of US$3.0 billion, and up year-on-year from last year’s Q4 total of US$2.5 billion. Alcoa credits the improvement on a corresponding improvement in alumina pricing. Net loss in the quarter came to US$196 million, a reversal quarter-on-quarter from Q3’s income of US$113 million, and deeper than last year’s fourth-quarter loss of US$125 million.

Adjusted net income for the quarter totaled US$195 million, an improvement quarter-on-quarter from the prior quarter’s adjusted net income of US$135 million, and a significant rise year-on-year from last year’s third-quarter adjusted net income of US$26 million.

Adjusted EBITDA excluding special items for the quarter totaled US$775 million, an improvement both quarter-on-quarter and year-on-year from US$561 million and US$335 million, respectively. Alcoa credits the rise to an improvement in alumina pricing.

For the year Alcoa reported a revenue of US$11.7 billion, an improvement over 2016’s total of US$9.3 billion, which the company chalks up to higher alumina and aluminium pricing. The firm recorded a net income for the year of US$217 million, a reversal from 2016’s US$400 million net loss. Adjusted net income for the year totaled US$563 million, a turnaround from 2016’s adjusted net loss of US$227 million. Adjusted EBITDA excluding special items came to US$2.4 billion, over double that of 2016’s adjusted EBITDA excluding special items of US$1.1 billion.

Roy Harvey, President and Chief Executive Officer, remained optimistic, noting the firm’s continuing efforts at shoring up the company’s operations while benefiting from a continually-improving aluminium market.

“Solid market fundamentals allowed us to deliver our strongest adjusted EBITDA quarter since our launch as an independent, publicly-traded company. With a series of operating and asset decisions, we also purposefully delivered against our strategic priorities. Our first full year has been truly remarkable. By continuously focusing on our strategic priorities, and supported by favorable markets, we’ve been able to accelerate our plan to strengthen Alcoa’s foundation for an even brighter tomorrow. As we enter 2018, we will continue to execute on our objectives and look forward to delivering more in the new year.”

In a conference call with analysts after Alcoa’s earnings were released, Harvey indicated that a drought in Brazil and the corresponding water shortages robbed operations there of water needed to wash and sort bauxite ore. In addition, as Alcoa is invested in hydroelectric systems in the country, the resulting lack of flowing water negatively impacted profits there as well.