There is more to Alcoa than simply making aluminum, and Chairman and CEO Klaus Kleinfeld highlighted the company’s evolution to include more "value-added" products on a conference call Monday evening with company analysts.
“We are massively shifting the focus of our portfolio to the value side and we are doing it with the profitable growth of these businesses,” he said following the company’s latest earnings release.
The focus of this shift is the company’s Engineered Products Segment and Global Rolled Products. In 2012 these two segments made up 71 percent of after-tax operating income for the company. Back in 2003 they were just 25 percent.
Kleinfeld broke out two of the company’s end markets from last year, aerospace and automotive, to highlight the revenue in value-add products. Looking at annual results from 2012 aerospace accounts for $3.8 billion in value add revenue and automotive accounts for $700 million.
On aerospace he noted that at 2012 production rates there is an eight-year backlog of aircraft and Alcoa is positioned well.
“Every western commercial aircraft flying today uses Alcoa fasteners,” he said.
And the few places on airplanes where aluminum isn’t, the company has plans to move into. He noted the work to introduce an aluminum lithium alloy to the market and the company already has commitments for it that will quadruple aluminum lithium alloy revenue by 2019. At that point the company projects $197 million in revenue from this alloy.
“Most of these revenue are already committed contracts. We have that,” he said. That capacity is primarily at the company’s technical center in New Kensington but a facility is being built in Lafayette, Ind.
On the automobile side the company is already pushing aluminum across more of the vehicle and is building capacity at its Davenport, Iowa, facility to handle higher demand. Alcoa has said it is preparing for more high-volume aluminum intensive vehicles. Kleinfeld was coy when discussing specific aluminum intensive vehicles, and declined to say whether the company is working with Ford on an F-150 truck, but noted that the added capacity at Davenport is already committed. So if more platforms decide to increase aluminum the company will have to evaluate capacity.
“That is something to talk about at a later point,” he said.