PITTSBURGH - Alcoa (NYSE:AA) Corporation (NYSE: AA; ASX: AAI), a global leader in bauxite, alumina, and aluminum products, announced today the successful acquisition of Alumina (OTC:AWCMY) Limited. The transaction enhances Alcoa's position in the market, making it one of the largest bauxite and alumina producers worldwide.
The acquisition, which was completed through Alcoa's subsidiary AAC Investments Australia 2 Pty Ltd, involved an all-stock transaction where Alumina shareholders received 0.02854 Alcoa shares for each share of Alumina. Based on Alcoa's closing share price as of July 26, 2024, the equity value for Alumina is approximately $2.8 billion.
As a result of the acquisition, Alcoa now fully owns and controls the Alcoa World Alumina and Chemicals (AWAC) joint venture, having previously held a 60 percent interest. AWAC has operations in multiple countries, including Australia, Brazil, Spain, Saudi Arabia, and Guinea, and holds a 55% interest in an aluminum smelter in Victoria, Australia.
William F. Oplinger, Alcoa's President and CEO, stated that the acquisition is expected to create long-term value through increased financial and operational flexibility. He also emphasized the commitment to operational efficiency and the strategic importance of Alcoa's operations in Western Australia.
In conjunction with the acquisition, Alcoa has established a secondary listing on the Australian Stock Exchange (ASX) with the ticker of AAI, allowing Alumina shareholders to trade Alcoa common stock via Clearing House Electronic Sub-register System (CHESS) Depositary Interests (CDIs).
Alcoa Corporation has been in the spotlight due to various significant developments. The company's Q2 estimated adjusted EBITDA has been revised upward from $250 million to $277 million by B.Riley, following a surge in London Metal Exchange pricing and regional premiums.
Morgan Stanley and Citi have both raised their price targets for Alcoa to $50.00. Morgan Stanley's upgrade from Equalweight to Overweight is based on disruptions in global alumina supply, which have removed about 10% of the global supply excluding China. Citi has maintained a 'Buy rating', citing anticipated cost savings and the cyclical nature of Alcoa's earnings.
Alcoa is also approaching the final stages of its acquisition of Alumina Limited, which is expected to be completed around August 2024. The acquisition has received regulatory approvals from Brazil's Administrative Council for Economic Defense and the Australian Competition and Consumer Commission.
In terms of financial performance, Alcoa reported flat revenues of $2.6 billion and a net loss of $252 million in its latest earnings call. Despite these figures, the company's cash balance rose to $1.4 billion, supported by a $750 million green bond issuance.
InvestingPro Insights
Alcoa Corporation's recent acquisition of Alumina Limited is a strategic move that has the potential to reshape the company's market position. In light of this development, it's valuable to look at Alcoa's financial metrics and analyst insights to assess the company's current standing and future prospects.
According to InvestingPro data, Alcoa Corporation has a market capitalization of $5.93 billion. Despite a slight revenue decline of 1.53% over the last twelve months as of Q2 2024, the company has seen a quarterly revenue growth of 8.27% in Q2 2024, indicating a potential rebound in sales. Alcoa's gross profit margin stands at 9.04%, which, while demonstrating profitability on each dollar of sales, also reflects the challenges mentioned in the InvestingPro Tips regarding weak gross profit margins.
The company's stock price has been quite volatile, as evidenced by the 1-month price total return of -16.78%, yet it has managed to achieve a 6-month price total return of 11.96%, demonstrating a level of resilience. Alcoa's P/E ratio is currently negative at -10.84, underscoring that the company has not been profitable over the last twelve months. However, the forward-looking sentiment is more optimistic, with analysts predicting the company will be profitable this year, a sentiment supported by the three analysts who have revised their earnings upwards for the upcoming period. This aligns with the InvestingPro Tip suggesting that net income is expected to grow this year.
For readers interested in a deeper analysis, InvestingPro offers additional tips on Alcoa Corporation, which can be found at InvestingPro Alcoa Corporation. These insights could provide valuable guidance for investors considering the implications of the recent acquisition and Alcoa's financial health.
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