2/14/2013 10:58:00 AM
NEWS BRIEF
As an aluminum producer, Alcoa’s fortunes “tend to be volatile because of its dependence on aluminum prices, and aluminum prices don’t always reflect the fundamentals of demand and supply,” according to a report by investment research firm Trefis.
To limit its exposure, Alcoa should focus more on value-added products “to improve and stabilize margins and earnings.”
That’s where fasteners and other engineered products come in.
Alcoa’s Engineered Products segment, including Alcoa Fastening Systems, is one of two Alcoa divisions manufacturing value-added products, Trefis points out.
And those divisions have done well recently.
In 2012, while ATOI for the Alumina division “sunk dramatically” to $90 million, the Flat Rolled and Engineered Products divisions “showed remarkable resilience,” with ATOI climbing to $358 million and $612 million respectively, according to Trefis.
“These products also have high margins as obvious from the all-time high EBITDA margins of 19% observed for the Engineering Products division in 2012.”
Trefis also likes the agreement Alcoa signed for strategic technology and commercial cooperation with Commercial Aircraft of China Ltd. (COMAC).
“Under the new agreement, AFS will provide COMAC with technical assistance in fastener and assembly tooling selection, joint design consideration and quality system management,” Trefis reports. “The technical assistance will include engineering, design and training. In return, COMAC will purchase a significant chunk of its requirement for fasteners from AFS which will be used in the production of COMAC’s C919 aircraft.”
These and other factors prompted Trefis to declare:
“It is thus clear that Alcoa has a better future if it focuses on downstream businesses that produce specialized products. It would help reduce volatility in earnings, generate higher margins, and lower the company’s dependence on aluminum prices which it cannot control.”
AFS is a worldwide designer and manufacturer of fastening systems including specialty fasteners, fluid fittings, assembly components, and installation systems for aerospace and industrial applications. Headquartered in Torrance, CA, AFS has over 6,800 employees at 32 manufacturing and distribution/logistics locations in 11 countries. ©2013 GlobalFastenerNews.com
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