Alcoa will cut capacity at its Intalco smelter in Ferndale, Washington as a first step towards closing it down in Q2, the company announced while reporting its Q1 2020 results on Wednesday.
The 230,000mt smelting capacity curtailment is the first step towards a full closure of the smelter by July 2020. The decision is a part of the company’s plans, initially announced in September 2019, to move away from non-profitable businesses. The Intalco smelter reported a net loss of $24mn in Q1 2020, Alcoa indicated.
The smelter’s competitiveness and weak demand “exacerbated the facility’s challenges,” said Roy Harvey, president and chief executive officer of Alcoa. He added that the plant’s full curtailment would bring the aluminum maker’s total curtailed global smelting capacity to 880,000mt, thus reducing its global smelting capacity by 30pc.
The company plans to set aside around $25mn in Q2 2020 for costs associated with Intalco’s closure and the layoffs that will significantly reduce its workforce of 700 people.
Additionally, the company said the closure, along with other curtailment actions and its recent sale of the Gum Springs, Arkansas plant, would bring in a total of $900mn in cash during the year.
Q1 results and outlook
The company announced a reduction in its aluminum shipments for the rest of the year. It estimated aluminum shipments at 2.9-3mn mt during the year, down from its earlier estimate of 3-3.1mn mt, mainly due to the impact of Intalco’s planned shut down in Q2 2020. However, its total alumina shipment estimates remain unchanged at 13.6-13.7mn mt during the year.
The company’s sales decreased slightly to $2.38bn in Q1 2020 from $2.7bn during the same quarter last year. The company reported an adjusted net loss of $42mn during the quarter, slightly down from a loss of $43mn in Q1 2019. Its adjusted EBITDA also decreased to $321mn in the first quarter of 2020 from $467mn in Q1 2019.