Arconic Drops After Cutting Outlook on Higher Aluminum Costs

(Bloomberg) -- Arconic Inc. plunged to the lowest since its first month of trading, after the company slashed its forecast because of rising aluminum prices and business inefficiencies.

Adjusted profit will be no more than $1.27 a share this year, 18 percent less than the previous estimate, the New York-based metals maker said in a statement Monday. That trailed the lowest estimate of analysts surveyed by Bloomberg.

“It is clear that we have areas in need of operational improvement,” Chief Executive Officer Chip Blankenship, who took the reins in January, said in the statement. “We are updating our full year 2018 guidance due to rising aluminum prices and my deeper understanding of our operations.”

The comments reflect Blankenship’s challenge as he looks to revitalize Arconic after a bitter battle with Elliott Management Corp. last year. He has already pledged to review Arconic’s strategy and portfolio while moving the headquarters to a lower-cost location. More recently, growing tensions over aluminum and steel tariffs, as well as U.S. sanctions on Russian aluminum giant United Co. Rusal, have roiled metals producers and their customers.

Arconic, which split from Alcoa, tumbled a record 21 percent to close at $17.81 in New York. That was its lowest price since Nov. 9, 2016, a week after the stock began trading. The shares have slumped 35 percent this year, while the S&P 500 Index has slipped less than 1 percent.

Russia Sanctions

Turmoil over Russian aluminum has fueled volatility in recent weeks. Russian billionaire Oleg Deripaska agreed on Friday to resign from the board of En+ Group, a part owner of Rusal, in a bid to escape sanctions imposed by the U.S. this month. Arconic, which has a large presence in Russia, counts Rusal as one of its top suppliers.

Aluminum for three-month delivery in London averaged 16 percent higher in the first quarter than a year earlier amid signs of improving global demand and bets on production cuts in China. The metal touched an almost seven-year high in April after the U.S. imposed sanctions against Rusal, the world’s biggest aluminum producer outside China.

Blankenship is looking to cut costs and bring stability to Arconic following last year’s clash with Elliott Management. The parts maker also took a hit from negative publicity over its production of flammable materials used in the cladding of a London high-rise that caught fire in a deadly blaze in June.

Headquarters Move

Arconic plans to move its headquarters to Fairfax County, Virginia, Governor Ralph Northam said in a statement Monday. A decision on the exact location hasn’t been made.

Adjusted profit will be $1.17 to $1.27 a share this year, Arconic said. The previous projection was $1.45 to $1.55 a share. Analysts had been anticipating $1.49.

While cutting its earnings forecast, Arconic boosted its outlook for 2018 revenue to between $13.7 billion and $14 billion. The company previously expected $13.4 billion to $13.7 billion.

--With assistance from Joe Richter

To contact the reporters on this story: Tony Robinson in New York at trobinson72@bloomberg.net, Richard Clough in New York at rclough9@bloomberg.net.

To contact the editors responsible for this story: Brendan Case at bcase4@bloomberg.net, Tony Robinson

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