- The Washington Times - Wednesday, January 8, 2003

PITTSBURGH, Jan. 8 (UPI) — Alcoa Inc., the world's largest aluminum producer, said Wednesday it plans to divest certain businesses that have experienced negligible growth in sectors such as alumina and chemicals, packaging, building and construction, automotive and general industrial and distribution.

The company, which is a component of the Dow Jones industrial average and is viewed as an economic bellwether because aluminum is widely used, also reported a fourth-quarter net loss of $223 million, or 27 cents a share, compared with a net loss of $142 million, or 17 cents a share, during the same period a year earlier.

Sales declined to $5.06 billion from $5.10 billion a year ago.

Alcoa said its results were negatively affected by significantly lower realized prices for primary aluminum and alumina, and lingering weaknesses in key end markets.

Excluding one-time charges, income from continuing operations was $133 million, or 16 cents a share in the quarter.

Analysts on Wall Street were expecting the company to post a net income excluding charges of 25 cents a share, according to Thomson First Call.

"Global manufacturing weakness has persisted longer than we anticipated," said Alain Belda, chairman and chief executive officer.

"In particular, aerospace, industrial gas turbine and telecommunication markets remained soft, reinforcing the need to increase the scope of our cost savings and restructuring initiatives. These initiatives will give us increased flexibility for future profitable growth opportunities in our core activities," Belda said.

Alcoa noted it recorded a special after-tax charge of $95 million in the fourth quarter to restructure operations of businesses serving the aerospace, automotive and industrial gas turbine markets, and in the U.S. smelting system.

The restructuring includes operations that have experienced negligible growth, particularly in Europe and South America. The after-tax charge includes costs for employee severance and asset rationalization, and will affect approximately 8,000 employees at more than 70 locations. While these restructuring actions will take place in 2003, the majority of the economic benefits will be realized in 2004.

Alcoa also announced it has conducted a portfolio review of its businesses and the markets they serve. As a result of this review, Alcoa said it intends to divest certain businesses that do not meet the criteria in sectors such as alumina and chemicals, packaging, building and construction, automotive and general industrial and distribution.

Certain of the businesses to be divested include specialty chemicals, specialty packaging equipment, architectural products in North America, commodity automotive fasteners, certain fabricated operations in South America, a minority equity stake in Latasa, and foil facilities in St. Louis; and Russellville, Ark.

The company said the businesses generated approximately $1.3 billion in total revenues in 2002. Proceeds from the sales will be deployed primarily to reduce debt, increasing the company's flexibility for future growth opportunities in its core businesses.

"The actions announced today further Alcoa's drive to improve our cost position in ongoing operations around the world, focus on customers in key downstream sectors, and grow in core markets," said Belda.

"These initiatives, in conjunction with our continued focus on the application of the Alcoa Business System, will ensure that we will exceed our cost savings targets for 2003," he added.

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