FINANCIAL ANALYSIS PROJECT ON ALCOA INCORPORATED
Dr. Margaret Garcia
Associate Professor of Finance
Saint Francis University
FINANCIAL ANALYSIS OF ALCOA INC.
FINANCIAL ANALYSIS OF ALCOA INC.
Adedotun (Tosin) Adeluyi
Senior, Accounting, Finance, and
Management Information System Majors
Saint Francis School of Business
February 22, 2011
The history of Alcoa Incorporated can be traced back to Charles Martin Hall’s discovery of finding a feasible way of commercially extracting aluminum. He received a patent for the discovery in 1889 (“Alcoa Celebrates 120 years”, 2011, pp. 4). Since this period, the corporation improved and has undergone various ...view middle of the document...
In August 2010, Alcoa acquired Traco (a maker of windows and doors for the commercial building and construction market) in its bid to leverage the construction markets to its favor (“Alcoa finalizes Traco Acquisition”, 2010, par. 1). Alcoa also resumed operations in three of its factories in the United States:
This operation is expected to create approximately 260 new jobs through recall and hiring, and also increase the corporation’s aluminum production by 137,000 metric tons over the course of 2011 and by 200,000 metric tons on an annual basis. Alcoa will also have advantage of long-term, low-cost power options that will help Alcoa to reduce on the aluminum cost curve and improve overall competitiveness (“Alcoa Inc. Plans to Resume”, 2011, par. 1).
In recent times, Alcoa has recorded an increase in demand for its aluminum and metal product which was driven largely by the Asian market. Klaus Kleinfeld, the Chief Executive Officer (CEO) of Alcoa said that the demand is going up and a 12% demand is projected for 2011 (“Update 1 – Alcoa CEO”, 2011, par. 2). In an effort to meet the rising demand from Asia, Alcoa is building a giant aluminum complex with state-run miner Saudi Arabian Mining Co (Maaden) in Ras Az Zawr on the Gulf coast of the kingdom (“Update 1 – Alcoa CEO”, 2011, par. 4).
In 2008, Alcoa recorded a market decline in all of its North American market due to a slow demand from the aerospace market (Robert Matthew, 2008, par.4), an increase in cost of foreign exchange, and other expenses (“Alcoa’s net drops”, 2010, par. 9). In the first quarter of 2010, the corporation’s loss reduced significantly when compared with previous quarters and there is hope for improvement in future quarters (Doug Cameron, 2010, par. 1). However, in the fourth quarter of 2010, Alcoa recorded an increase in earnings as a result of higher aluminum prices and better demand (John Shipman and Paul Vigna, 2011, par. 2).
In an interview session with Ron Dickel, an employee with Alcoa, Dickel explained that Alcoa’s cannot afford to operate only in the U.S. because there is no Bauxite deposit in the U.S. This situation made Alcoa to mine in countries such as Guinea, Australia, Suriname, and Jamaica (David Stallings, et al, 2010, pg. 4-5). Moreover, Alcoa recently launched a biological process for the destruction of sodium oxalate, a particle which has to be removed during the process of aluminum production because of its adverse effects on aluminum quality (Gerald Ondrey, 2011, par. 1).
In order to expand the growth and improve the efficiency of its fastening unit, Alcoa agreed to purchase the aerospace fastening business of TransDigm Group Inc., Fastenal, a leading global designer, producer and supplier of highly engineered aircraft components for $240 million (“Alcoa to acquire TransDigm”, 2011, par. 1). Besides, Alcoa signed a memorandum of understanding with China Power Investment Corporation (one of the five major power...