Alcoa has filed an initial Form 10 registration statement with the US Securities and Exchange Commission paving the way for its planned separation into two standalone, publicly traded companies, the US company said Wednesday.
Last September, Alcoa announced plans to split into two independent, publicly traded upstream and downstream aluminum companies by the second half of 2016.
Alcoa Upstream Corp. -- to be renamed Alcoa Corp. prior to separation -- will hold the company's upstream and North American packaging businesses, while the value-add businesses will remain in the existing company, which will be named Arconic Inc.
"Alcoa Corporation has a low-cost base that will enable resilience and value-creation at all stages of the commodity cycle. Arconic is a technology-driven company producing performance materials and highly engineered products for growth markets, poised to deliver consistent profitable growth," Klaus Kleinfeld, Alcoa chairman and CEO, said in a statement.
Alcoa Corp's businesses will include bauxite, alumina, aluminum, cast products and energy, and rolling mill operations that will serve the North American packaging market.
Arconic will be a global leader in precision engineering and advanced manufacturing, with businesses including the engineered products and solutions, global rolled products, and transportation and construction solutions segments.
The separation will occur by means of a pro rata distribution by the current company Alcoa Inc. of at least 80.1% of the outstanding shares of the newly formed upstream company, initially named Alcoa Upstream Corp., which will own the upstream businesses.
The current publicly traded company will continue to own the value-add businesses and will change its name to Arconic Inc.
After the distribution becomes effective, Arconic will own no more than 19.9% of the outstanding shares of common stock of the new upstream company.
"In light of recent volatile commodity market conditions and conditions in the high-yield debt market, Arconic's retention of Alcoa Corporation shares positions both companies with appropriate capital structures, liquidity, and financial flexibility and resources that support their individual business strategies," the Form 10 filing stated.
The separation is on track to be completed in the second half of 2016, the company said.
ASSET BASE
According to the Form 10 filing, Alcoa Corp's asset base will include "the world's largest bauxite mining portfolio and what we believe is the most attractive global alumina refining system, both with first quartile cost curve positions."
Alcoa Corp. reported 45.3 million bone dry mt of bauxite production in 2015, with ownership in seven active bauxite mines globally, four of which it operates.
"In addition to supplying bauxite to our own alumina refining system, we are seeking to grow our newly developed third-party bauxite sales business," the form says.
The company is also the world's largest alumina producer, with nine refineries on five continents.
"In addition to supplying our aluminum smelters with high-quality feedstock, we also have significant alumina sales to third parties, with almost 70% of 2015 production being sold externally," the form notes.
The company said it continues to improve alumina margins by shifting spot sale to API or spot pricing from LME aluminum-based pricing; in 2015 the percentage of third-party smelter grade alumina shipments that were API or spot-priced rose to 75% from 68% in 2014, and up from 5% in 2010, with the figure expected to rise to around 85% this year.
The bauxite and refining operations supply a strategic global aluminum smelting portfolio with a "highly competitive second quartile cost curve position," it adds.
SMELTER PORTFOLIO
The smelter portfolio is "well-positioned to benefit from robust growth in aluminum demand," the form said, forecasting record global aluminum demand in 2016 of 59.7 million mt, up 5% from 2015.
"Our aluminum business intends to continue its pursuit of operating efficiencies and incremental capacity expansion projects. We intend to react quickly to market cycles to curtail unprofitable facilities, if necessary, but also maintain optionality to profit from higher metal price environments through the restart of idled capacity," the form says.
Since 2010 the company has closed, divested or curtailed 35% of total smelting operating capacity and 25% of total operating refining capacity.
In casting, the company currently operates 15 casthouses providing value-added products, and also has three casthouses that are currently curtailed. Value-added products grew to 67% of total cast products shipments in 2015, compared with 65% in 2014 and 57% in 2010, and are set to grow further to 70% this year, the form says.
Alcoa Corp. has rolling operations in Warrick, Indiana and Saudi Arabia which, together, serve the North American aluminum can sheet market -- the Warrick mill is focused on packaging, producing can body stock, can end and tab stock, bottle stock and food can stock, and industrial sheet and lithographic sheet, while the Ma'aden rolling mill currently produces can body stock, can end and tab stock, and hot-rolled strip for finishing into automotive sheet.
"Following the separation, it is anticipated that the facilities manufacturing products for the North American can packaging market will be located only at the Warrick and Ma'aden Rolling Mills, and that the Arconic rolling mills will not compete in this market," the form says.
