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Alcoa predicts China to drive packaging growth

By Joe Whitworth , 09-Jan-2013

Alcoa has forecasted beverage can packaging growth of 2% to 3% this year with China driving the trend and Europe remaining weak.

The aluminium specialist said the growth would be inline with last year but the regional mix has shifted with 8% to 12% growth in China, America holding steady and Europe weaker than last year.

The firm predicted 7% growth in global aluminium demand this year but said year-on-year, the price for the metal fell 12%, roughly equating to $1bn in market impact.

Seasonal slowdown

In the Global Rolled Product segment volumes were impacted by the Q4 seasonal slowdown in packaging.

Revenue of $1.8bn was down $78m or 4% sequentially driven by weaker packaging and North American and European industrial markets.

After tax Operating Income (ATOI) of $69m was a $29m sequential decline as productivity and favorable price mix were not enough to offset the drop in volume.

However, on a year-over-year basis ATOI was up $43m.

“If you look to the year, this segment recorded $358m…and 35% higher than 2011 and the EBITDA per metric ton was also a record of $390 of metric ton that's 66% higher than the 10-year average and 19% higher than 2011,” said Charles McLane in a conference call discussing the results.

Alba investigation

Alcoa is negotiating with the Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) to reach a resolution of their investigations into Alba, however, an agreement has not been reached.

In Q3, Alcoa reached a settlement with Aluminium Bahrain B.S.C. (Alba) resolving a civil lawsuit pending since 2008.

Alcoa agreed to make a cash payment of $85m in two instalments and entered into an Alumina Prince Index-based supply agreement.

However, yesterday the firm said they were unable to estimate a range of possible loss with regard to a settlement as there is uncertainty, if and on what terms, it may be reached.

“If a settlement of the government investigations is reached, we believe that the settlement amount would be material to Alcoa’s results of operations for the relevant fiscal period. If a settlement cannot be reached, Alcoa will proceed to trial with the DOJ and the SEC and under those circumstances is unable to predict an outcome or to estimate its reasonably possible loss,” said the firm.

“There can be no assurance that the final outcome of the government’s investigations will not have a material adverse effect on Alcoa.”

Meanwhile, William F. Oplinger has been named chief financial officer from 1 April 2013, succeeding Charles McLane who will retire after 40 years with the company.  

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