Alcoa Inc (NYSE:AA): Shut Down Of High-Cost Plant In Australia Looks Certain

Boston, MA 01/08/2013 (wallstreetpr) – Alcoa Inc (NYSE:AA) is trying to find a way to deal with its operations at Geelong Point Henry, Victoria, Australia. The U.S. aluminum giant is expected to issue a review on what it plans to do with the embattled Geelong Point Henry plant.

In 2012, the company agreed for about $44 million bailout for the plant from the government so that it could keep it running up until June this year. The plant is at the heart of the Victorian government, given that it employs more than 500 workers and its economic contribution to the state is enormous.

But even with such support, Alcoa Inc (NYSE:AA) is looking for value for its investors and that means to decide where to stop production and where to increase production to earn better revenue and profits. Although talks are still in progress between the government and the company, many analysts believe that eventually the plant will be shut.

The reason Alcoa Inc (NYSE:AA) is keen on ending production in Geelong Point Henry is that it made a commitment to its investors to abandon high-cost plants and boost production in low-cost plants. The said plant is expensive for the company. Furthermore, the lag in global aluminum prices, high production output in China and stronger Australian dollar is hurting its profits.

Restructuring

Mining industry is generally failing and most players have sold many of their assets in consolidation efforts. Alcoa Inc (NYSE:AA) is just doing what its peers are doing elsewhere and of course, what is investors want.

It is basically in the best interest of Alcoa Inc (NYSE:AA) investors, that the company is exiting expensive operations and focusing on low-cost operations. Nonetheless, closure of the Geelong Point Henry smelter will affect the economy of Victoria.

The ongoing consolidation in Alcoa Inc (NYSE:AA) is bearing fruit. The stock started the year on a positive note, which is an indicator of good things to come. The idea is that, the management hopes that they can still earn value for investors even under the present sales condition by reducing expenses, and this strategy looks good for the company.

Currently a stock of Alcoa Inc (NYSE:AA) is trading around $10.54 per share, a significant rise from 52-week low of $7.63.

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