More Aluminum horror stories :-(((
NEWS STORY
Alcan to axe up to 3,640 jobs
FRANCOIS SHALOM
Montreal Gazette
Thursday, October 18, 2001
CP
A woman leaves Alcan's head office in Montreal yesterday after the aluminum giant announced cutbacks.
Alcan Inc. said yesterday it will cut between 2,600 and 3,640 people from its global work force and shut down some operations, moves that will cost the company $250 million U.S.
That represents between 5 and 7 per cent of the Montreal-based aluminum producer's 52,000 employees worldwide.
But Travis Engen, Alcan's new president and chief executive, would not say in teleconference calls with analysts and reporters where the layoffs will occur nor which plants or other facilities would shut down.
After reporting the firm's third-quarter results, he did say that "the vast majority" of cuts would be carried out "in the next couple of months" - and that the Montreal head office will be among those affected.
He would not elaborate.
The continuing drop in U.S. industrial output is one of the main reasons for the cuts, which are unrelated to the Sept. 11 terrorist attacks, Engen said.
Nor was Alcan's recent merger with Switzerland's Alusuisse Group Ltd. a factor in the layoffs, he said.
Declining industrial production has been a trend since September 2000, and Engen said the weakening in economic conditions prompted the decision to pare operations.
For aluminum, that has translated into a 4.7-per-cent decline in demand, the steepest in nearly 20 years, said Carmine Nappi, Alcan's director of industry analysis.
Engen said the economic recovery had been expected by yearend, but has now been pushed back to the second half of next year.
The announced cuts might only be the first round. "It's quite possible, if things continue to fall as they have been falling, that other action will be necessary," Engen added.
The restructuring plan is "aimed at safeguarding our competitiveness," and would result in cost improvements of about $200 million U.S. on an annual basis, he said, of which $175 million U.S. would be realized in 2002.
The company reported sharply increased revenues but waning profits yesterday. Alcan earned $151 million U.S., or 46 cents a share, in the quarter ended Sept. 30, down from $181 million U.S., or 85 cents per share, a year earlier. Revenue rose to $3.2 billion U.S. from $2 billion U.S., reflecting the contribution from Algroup.
Alcan is expected to report a loss in the fourth quarter as it takes the $250-million (U.S.) one-time charge for the restructuring, although Engen reiterated that Alcan should earn $2.77 U.S. per share next year.
Analysts were less than impressed by Alcan's announcements.
Tony Lesiak, who follows Alcan for HSBC Securities (Canada) Inc. in Toronto, particularly objected to next year's profitability projection, which is based on the assumption that world aluminum prices will average 71 cents U.S. per pound, or $1,565 U.S. a tonne.
"Currently, we're at 58 cents, and all we heard today was about the potential for restarts" of aluminum production capacity.
Alcan is still making money, thanks largely to the strong U.S. dollar. But production capacity will have to be cut for producers to make money, Lesiak said.
"We think (Alcan's forecast) is very unrealistic. We're using 64 cents a pound."
His earnings estimate for next year is substantially less than the $2.77 provided by the company, but Lesiak said he had yet to crunch the numbers more precisely in light of yesterday's figures.
As for share prices, which have tumbled by about one-third since May, Lesiak said they did so from overpriced levels.
"Even the current valuation is very difficult to support," he said, adding that many aluminum producers had outperformed other metals makers before May, which caused their stock prices to soar to unwarranted levels.
Lesiak also noted that the recently opened aluminum smelter in Alma is unlikely to be hit by the cuts, since "it's supported by very low power costs."
Quebec is one of the world's largest centres of primary aluminum production, thanks to cheap and bountiful energy, the major expense for making aluminum.
Engen said the Alma factory would turn out 275,000 tonnes this year and reach its full annual output capacity of 400,000 tonnes next year.
The company's Kitimat smelter in British Columbia has been shut down for months because of low water levels powering the plant. Whether the plant will be restarted won't be known before June, when the water-table levels can be properly assessed.
"But again, we're talking about re-starts," Lesiak said.
Lloyd O'Carroll, an analyst with BB&T Capital Markets of Richmond, Va., said "Engen has only been in the saddle since March," and chief financial officer Geoffrey Merszei, formerly vice-president of Dow Chemical Co., since July, "so some kind of cost-
cutting/restructuring was inevitable - only not nearly of this magnitude."
He gave Alcan credit for streamlining to deal with a worst-case scenario.
But Alcan is still behind competitor Alcoa in cutting costs, O'Carroll added. |
