Alcoa Inc. (NYSE:AA): Can the Company Sustain its Productivity Gain?


Dallas, Texas 11/14/2013 (Financialstrend) – Even though, there are pricing headwinds, during recent quarters, Alcoa Inc. (NYSE:AA) has managed to deliver good results, which are better than the expectations because the productivity gains have sustained to surprise to the positive side.

YTD productivity gains:

During 2013, the amount of YTD (year-to-date) productivity gains of the Alcoa Inc. (NYSE:AA) was $825 million which exceed the goal for 2013 of $750 million. It is noted that, these improvements in profits are over and above the gains of $1.29 billion which was realized in 2012, and it also significantly exceeded target savings of $850 million and also above $5.5 billion in total productivity gains which was realized in 2009 to 2012.

Analyst’s Note:

” Alcoa Inc. (NYSE:AA)  has been able to continually reduce the number of days in working capital, lowering the measure by 20 days since 3Q09 for a total savings of $1.3bn. These working capital reductions consist of an 8 day improvement in receivables, 4 days in inventories and 8 days in payables,” UBS analyst Brian MacArthur wrote in a note to clients.

Third Quarter Earnings Preview:

The company is expecting a combination of higher gains and lower capex for the result of the positive free cash flow for 2013. The management of the Alcoa Inc. (NYSE:AA) also believes that from the cash flow it will be able to fund ongoing pension contributions.

In upstream, towards the company’s 2015 global alumina and aluminum cost curve goals, Alcoa Inc. (NYSE:AA) carry on to make progress. Till date, the costs of alumina have moved down by three points to the 27%, and it is also expecting to reach at 23% by 2015.

Price update:

While trading on November 13, 2013, the shares of the Alcoa Inc. (NYSE:AA)’s percentage change plunged +0.78% to close at $8.99 with the total traded volume of 14.45 million shares and average volume of 32.66 million.