Hope floats as Alcoa rings in 2007 with wide-ranging restructuring

Dec 01, 2006 | 02:40 PM | Matthew Lerner

Next year is setting up to be interesting for Alcoa Inc. as the company implements a widespread downstream restructuring that will affect about 5 percent of the company's global work force and result in projected savings of around $125 million.

The restructuring plan was greeted with cautious optimism by the investment community. Alcoa's stock price, which has languished below $30 per share despite record earnings, climbed 4.1 percent from $29.19 per share at the close Nov. 21, the day of the announcement, to $30.43 the following day, and has since reached a high of $30.99. The stock has been viewed as an underperformer for several quarters and the company likely wants to see earnings translate to equity.

The first step in the company's plan is to fold its soft alloys extrusion business into a joint venture with the Stockholm, Sweden,-based Sapa AB unit of Orkla ASA, Oslo, Norway. "Sometimes you just have to change businesses—this was the case with soft alloys," Alain J.P. Belda, Alcoa's chairman and chief executive officer, said last week at Bear, Stearns & Co. Inc.'s 2nd Annual Commodities and Capital Goods Conference in New York. "The people at Sapa understand this business well. There are synergies, and Alcoa's business will be complementary to Sapa's business. It was the right decision at the right time."

The companies are not strangers, having shared ownership of primary aluminum operations through Elkem ASA, Oslo, for many years. "This new joint venture creates another opportunity for value creation by implementing a competitive industrial solution in the soft alloys extrusion area," Orkla said.....

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