Alcoa announces consolidation of business units to stimulate cost cuts

Thursday, Mar 09, 2017

Alcoa-the global industry leader in bauxite, alumina and aluminum products has announced plans to consolidate its business units, as part of its restructuring efforts. The consolidation is expected to reduce complexity in business structure and reduce costs, the company press release noted.

The restructuring involves consolidation of the company’s business units into three divisions, reducing it from the current six. The aluminum smelting, cast products and rolled products businesses, along with the majority of its energy business assets, will be combined into the new aluminum unit. Henceforth, the company will operate with three business units-Alcoa Bauxite, Alcoa Aluminum and Alcoa Aluminum.

Also, the company has announced appointment of a new head for its aluminum business. Tim Reyes, President of Alcoa Cast Products since 2015, has been appointed as President of the new Aluminum business unit. Welcoming Tim Reyes as the new head of Aluminum BU, Roy Harvey, Chief Executive Officer of Alcoa noted that his strong track record at Cast Products and experience in development of innovative and sustainable aluminum products for end market customers makes him the best suit to the new post. Martin Briere, President of Aluminum unit since 2014, will leave the company.

The Company’s segment reporting will continue to align with the business units. Beginning with the first quarter of 2017, the Company’s operating and reportable segments will both be Bauxite, Alumina and Aluminum. The majority of the former Energy segment will be included in Aluminum. As previously announced, beginning the first quarter of 2017, the business units will use Adjusted EBITDA to measure and report segment profitability.

According to Roy Harvey, Chief Executive Officer of Alcoa, noted that streamlining the number of business units is aligned with the company’s strategic goal of reducing complexity, driving returns to create stockholder value and strengthening the balance sheet. It will further promote internal co-ordination, increase operational agility and lower costs. The company will consider further review of its organizational structure to ensure that it remains resilient through all market cycles, Harvey added.

Earlier in 2016, the New York-based aluminum producer had decided to split itself into two publicly traded entities. The separation was intended to isolate the company’s parts-making units from its raw aluminum operations. Accordingly it was announced that the upstream company, Alcoa, will take care of the company’s business related to bauxite-mining, alumina-refining, aluminum-production, casting and energy. The second entity, named Arconic Inc. was supposed to specialize in higher-end aluminum and titanium alloys for the automotive, aerospace and construction industries.

Alcoa Inc. is an American industrial corporation, it ranks as the world's third largest producer of aluminum, behind Rio Tinto Alcan and Rusal, with corporate headquarters in New York City. From its operational base in Pittsburgh, Pennsylvania in the United States, Alcoa conducts operations in 31 countries. Alcoa is a major producer of primary aluminum, fabricated aluminum, and alumina combined, through its active and growing participation in all major aspects of the industry: technology, mining, refining, smelting, fabricating, and recycling.

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