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Alcoa Reduces Capacity

by Tim Paradis, Dow Jones Newswires
Wall Street - July 31, 2002

PITTSBURGH -- Alcoa Inc. (AA) plans to book a third quarter charge of $15 million to $20 million under a plan to permanently close two facilities and idle another that had been operating at reduced capacity.

The world's largest aluminum maker said in a press release Wednesday that it would close an already idled plant in Oregon and one in Texas. A North Carolina plant that had been operating at 75% capacity will be idled.

Alcoa said its aluminum smelting plant in Badin, N.C., will be idled by Aug. 16, although ingot-casting operations will continue for the next few months and likely will end by Dec. 31. The facility has a capacity of 120,000 metric tons a year and employs 377 workers.

The Troutdale, Ore., facility had a capacity of 121,000 metric tons a year and has been idled since June 2000.

Alcoa plans to permanently close a portion of a facility in Rockdale, Texas. The move will reduce the plant's capacity to 244,000 metric tons a year from 320,000 metric tons.

In total, the moves will leave the company with idled aluminum-production capacity of 438,000 metric tons a year, or about 11% of its total capacity of 3,948,000 metric tons.

An Alcoa spokesman said the facilities targeted by the latest cuts sometimes faced higher energy and labor costs and also tended to be older than other plants.

Alcoa, which has about 129,000 workers worldwide, said these costs have made many smelters, particularly those in the U.S., less competitive globally.

The spokesman declined to discuss whether the decrease in production would prompt the company to alter its guidance. Alcoa said earlier this month that it expects its third-quarter earnings to show modest sequential improvement from the second quarter, when profits slid 14% from a year earlier.

According to Thomson First Call, analysts are expecting Alcoa to earn 34 cents a share for the third quarter, compared with 39 cents a year ago. Alcoa earned 27 cents a share in the second quarter.

New York Stock Exchange-listed shares of Alcoa, a component of the Dow Jones Industrial Average, traded recently at $25.48, down 51 cents, or 2%, on composite volume of 1.4 million shares. Average daily volume is 3.9 million shares.

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Tim Paradis, Dow Jones Newswires; 201-983-5400
Alcoa Reduces Capacity
Wall Street Journal, July 31, 2002

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