Alcoa Looks to Finally Break Metal Shackles as Profit Sinks – by Sonja Elmquist (Bloomberg News – April 11, 2016)

Alcoa Inc. has an identity problem, and it’s something Chief Executive Officer Klaus Kleinfeld is hoping to finally fix.

For years, the company tried to persuade investors to value it more for its engineering prowess than its exposure to a global metal glut. After all, it now gets more revenue from car, airplane and building parts than from primary aluminum. The stock, though, still trades more like a miner than a manufacturer, losing 26 percent over the past 12 months.

In September, Kleinfeld said he’d split the company, separating units that make metal products from those that make the metal itself. With the release of earnings results on Monday, investors will be watching for evidence Alcoa can boost sales enough in the downstream parts business to offset the falling metal price.

The stakes are high. Alcoa has spent billions to fortify its automotive and aerospace offerings while greatly reducing its capacity to make aluminum.

“The key of what the valuation is really depends on the downstream,” David Lipschitz, a New York-based analyst at CLSA Americas LLC, said by phone on Thursday. “So that’s the big question.”

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