The aluminium giant Alcoa is splitting itself into two public companies: Upstream Company and Value-Add Company.
The names of the companies speak for themselves. Upstream Co. will be involved in getting the stuff out of the ground. Value-Add Co. will be engaged in downstream-type operations, turning that stuff into a workable product for its customers.
“The globally competitive Upstream Company will comprise five strong business units that today make up Global Primary Products — Bauxite, Alumina, Aluminium, Casting, and Energy,” management said. “The innovation and technology-driven Value-Add Company will include Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions.”
AA shares are up over 5% after the announcement.
As a global supplier of industrial metals, this 126-year-old company is widely considered a bellwether of the world economy. Formerly a member of the Dow Jones Industrial Average, Alcoa continues to be one of the first major international companies to announce quarterly financial results each earnings season.
Management expects the action to be completed in the second half of 2016.
“In the last few years, we have successfully transformed Alcoa to create two strong value engines that are now ready to pursue their own distinctive strategic directions,” CEO Klaus Kleinfeld said. “After steering the Company through the deep downturn of 2008, we immediately went to work reshaping the portfolio.”
“We have repositioned the upstream business; we have an enviable bauxite position and are unrivalled in Alumina, we have optimised Aluminium, flexed our energy assets, and turned our casthouses into a commercial success story,” Kleinfeld continued.
“The upstream business is now built to win throughout the cycle. Our multi-material value-add business is a leader in attractive growth markets. We have intensified innovation, made successful acquisitions, shed businesses without product differentiation, invested in smart organic growth, expanded our multi-materials profile and brought key technologies to market; all while significantly increasing profitability.”
For a rough sense of what the two companies could look like, here are two slides from a presentation Alcoa gave in May.
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