Alcoa Inc (AA) CEO Says Strong Q2 Earnings due to Business Strategy

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Alcoa Inc (NYSE:AA) is the world’s third largest producer of Aluminum. Alcoa was a Dow Component for 54 years before it was dropped in September 2013 due to its poor performance in the share market. Alcoa recovered from this blow and within a year doubled their share values. Klaus Kleinfield, the CEO and Chairman of the company, was on CNBC and he discussed about the company strategies, investments and acquisitions which led to a strong Q2 earnings.

Alcoa Inc (NYSE:AA), Strong Q2 Earnings, Klaus Kleinfield, Alcoa's investments

Kleinfield feels that the company has a free cash flow and reduced its net debt, which allowed the investments in various stuffs. He also talked about various investments and acquisitions made by Alcoa Inc (NYSE:AA) in United States.

He pointed out at the $100 million investment in Indiana, $25 million investment in Virginia, Firth Rixson acquisition for $2.85 billion as major ones. He also talked about investments in automotive industries through two big expansions in Tennessee and Davenport worth $300 million each. He told about $100 million investment made on usage of Aluminum Lithium for different application. Aluminum Lithium was invented by Alcoa and is considered a very strong material for aerospace applications.

“So we are very well positioned to capture the growth of the investments that we’ve made”, He said.

Regarding further acquisition plans for Alcoa Inc (NYSE:AA) after Firth Rixson deal, Kleinfield said that the company is committed towards value for customers and shareholders and they will do whatever is needed to meet that commitment. Company is ready to invest in both organic and inorganic growth. He feels that markets like automotive and commercial transportation are good place to go instead of relying totally on aerospace market.

“The good thing is we are building a lightweight multi materials innovation engine that’s firing very very heavily and at the same time we are building a ultra-competitive commodities business and these two things are very very nice fit”, Kleinfield stated.

He insisted that getting dropped from Dow did not influence them to change the business strategy of the company and they kept continuing on the path. According to the previously set strategy they have set up a lightweight multi material innovation powerhouse on one side and increased the competitiveness of commodities business on the other side. He feels that the strategy has worked and everyone can see Alcoa Inc (NYSE:AA) creating value in all fronts.

Coming to the Q2 results, the revenue has increased by 7% on the year to $5.8 billion. The stock had an EPS of $0.12 with a net income of $138 million, in line with the Street’s expectations. Q2 highlights include the announcement to acquire a jet engine component manufacturer Firth Rixson which is a global leader in the jet engine component manufacturing sector. It also invested $125 million in APP ( Alcoa Power and Propulsion ) and the revenues of APP are expected to reach $2.2 billion by 2016. Alcoa Inc (NYSE:AA) also announced to expand the smelting capacity in Brazil.

Disclosure: None

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