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Alcoa Corp. is shrinking its executive team as slowing global growth sent shares of the largest U.S. aluminum producer tumbling by more than half in the past year.

Chief Executive Officer Roy Harvey will have seven people directly reporting to him when the changes take effect Nov. 1, from 12 currently, the Pittsburgh-based company said Monday in a statement. Alcoa will eliminate its business-unit structure and consolidate sales, procurement and other commercial functions.

Alcoa will implement its second reorganization since its split in late 2016 as the company seeks to reduce its overhead after lower aluminum prices shaved its second-quarter earnings. Despite tariffs aimed at protecting the domestic aluminum industry, the metal producer cut its outlook for demand in July, citing trade tensions.

"In light of commodities under pressure, you're seeing a slew of announcements to cut costs, and that's what Alcoa is doing," Timna Tanners, an analyst at Bank of America Corp., said in a telephone interview. "The reason they're doing this now is because commodity conditions are challenging."

Aluminum prices have plunged 13% in the past year, while premiums paid by buyers in the U.S. Midwest fell 14%, even though President Donald Trump's administration imposed tariffs in 2018 on imports of the metal and steel.

Alcoa shares rose 6% to close at $20.30 in New York trading.

Andrew Cosgrove, an analyst at Bloomberg Intelligence, said Alcoa may not be able to cut much more fat from its operations. Alcoa's general expenses as a percentage of sales were at 1.9% last year, down from 2.4% in 2017 and 3.9% in 2016, he said in an email.

"How much can they trim from that?" Cosgrove asked.

Earlier this year, the Organisation for Economic Co-operation and Development said China's subsidies for its aluminum makers continued to fuel excess plant capacity. Like other large aluminum producers, Alcoa has a large global footprint, generating only 44% of its revenue in the U.S.

Alcoa is already a vastly different company than it was in 2016, when it split from the jet- and car-parts business in a big reorganization. The company's structure was further refined in 2017, when Alcoa merged the aluminum smelting, cast and rolled products and most of the energy segment into its aluminum unit to reduce costs and complexity.

The resulting units from that reorganization -- aluminum, bauxite and alumina -- will now be under the supervision of the smaller executive group, though the company will continue to report financial results for each of the segments separately. The new model means the presidents of alumina, Michael Parker, and bauxite, Garret Dixon, will leave after helping with the transition.

The moves announced Monday will result in restructuring charges, which Alcoa expects to report at the end of the third quarter.

Information for this article was contributed by Liezel Hill of Bloomberg News.

Business on 09/10/2019

Print Headline: Alcoa to cut 5 top posts as earnings fall

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