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Alcoa swings to Q4'18 profit, flags savings from closing 2 Spanish plants

Alcoa Corp. swung to a net profit of US$43 million, or 23 U.S. cents per share, in the fourth quarter of 2018, from a net loss of US$196 million, or US$1.06 per share, in the year-ago period, according to a Jan. 16 release.

The fourth-quarter results include a negative impact of US$82 million for special items, primarily due to a US$50 million noncash charge to establish an allowance on state value-added tax credits in Brazil.

Revenues in the quarter totaled US$3.34 billion, up from US$3.17 billion a year earlier. The results include impacts from lower realized prices for primary aluminum, alumina and Brazil energy sales, which were partially offset by increased shipments across all three segments.

Adjusted EBITDA, excluding special items, slipped to US$749 million from US$796 million in the year-ago quarter.

The company's full-year 2018 net profit climbed to US$227 million from US$217 million in 2017. Full-year revenue rose to US$13.40 billion from US$11.65 billion, while adjusted EBITDA also increased to US$3.10 billion from US$2.44 billion.

Cash from operations in 2018 totaled US$448 million and free cash flow stood at US$49 million, both of which reflect US$725 million in additional contributions made to certain U.S. and Canadian defined benefit pension plans. Alcoa ended 2018 with a cash balance of US$1.1 billion and debt of US$1.8 billion, for net debt of US$700 million.

The company expects its bauxite shipments to range between 47 million and 48 million dry tonnes in 2019. Alumina shipments are seen between 13.6 million and 13.7 million tonnes, while aluminum shipments are estimated between 2.8 million and 2.9 million tonnes this year.

Additionally, Alcoa reached a tentative agreement with workers' representatives at the Aviles and La Coruna aluminum plants in Spain, as part of the collective dismissal process flagged in October 2018.

The plan, which remains subject to ratification, will see curtailment of the two smelters' combined operating capacity of 124,000 tonnes per annum. The casthouses at both plants and the paste plant at La Coruna will remain operating.

The agreement preserves a portion of the jobs at the two facilities and includes retirement packages, as well as potential relocation to the company's San Ciprian facility, also in Spain.

Alcoa expects to record restructuring-related charges of around US$90 million and US$115 million, between 48 cents and 62 cents per share, in 2019.

The company may incur additional charges for the closure of the two smelters later in 2019 estimated at between US$125 million and US$135 million, or between 66 cents and 73 cents per share. About 75% of these additional charges will be noncash.

Following the closure of the facilities, Alcoa expects an annual improvement to its net income of US$70 million to US$80 million, based on 2018 market prices, beginning in the third quarter of 2019.