In an investor presentation, Alcoa stated that it expects its Alumina segment to take an unfavorable hit of about $60 million in the second quarter.
- The alumina segment was mainly impacted by higher production costs of $30 million at the Pinjarra refinery, according to Alcoa.
- The company said that third-party alumina shipments are now expected to fall by 120,000 metric tons in Q2.
- The total unfavorable impact in the second quarter was more than $45 million from the prior outlook, the firm noted.
Shares of Alcoa Corp. (AA) declined more than 8% on Wednesday after the aluminum giant updated its second-quarter business considerations with a more negative outlook for adjusted earnings before interest, taxes, depreciation, and amortization.
AA Expects To Take $60M Hit In Alumina Segment
In an investor presentation, Alcoa stated that it expects its Alumina segment to incur an unfavorable hit of about $60 million, primarily due to higher production costs of $30 million at the Pinjarra refinery in Western Australia, which is experiencing ongoing instability from Cyclone Narelle.
In addition to the weather impact, higher energy prices of $20 million, tied to the Middle East conflict, are inflating input costs throughout the refining process. Lower bauxite offtake pricing and volumes, worth $10 million, are also squeezing margins as the raw material market softens amid operational disruptions.
According to Alcoa, third-party alumina shipments are now expected to fall by 120,000 metric tons in the second quarter (Q2), due to Pinjarra refinery’s reduced output capacity. The total unfavorable impact in the second quarter was more than $45 million from the prior outlook, the firm noted.
The Aluminum segment is expected to swing favorably by approximately $55 million, unchanged from Alcoa’s prior outlook. Alcoa said that it is mainly due to inventory repositioning actions taken in the first quarter, higher shipments and product premiums, and lower production costs as the San Ciprian smelter restart in Spain wraps up.
Alumina Costs Within The Aluminum Segment To Be Favorable
Alcoa affirmed Section 232 tariff costs on U.S. imports of aluminum from Canada to increase by approximately $35 million, driven by higher metal prices and expected higher shipments. Alumina costs within the Aluminum segment are now expected to be favorable by $10 million, down $10 million from the prior outlook.
Based on foreign currency exchange rates through May 2026, the company expects depreciation expense to increase sequentially by approximately $15 million, while other expenses include approximately $30 million in favorable currency impacts in Q2.
Operational tax expense is now projected at $125 million to $135 million, an increase of $15 million from the prior outlook.
What Retail Thinks Of AA
On Stocktwits, retail sentiment surrounding the stock has remained ’bearish,’ amid ‘high’ message volumes in the past 24 hours.
AA stock has gained over 18% so far this year.
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