Loss-making aluminium producer Alcoa Corp (NYSE:AA) is to freeze final salary pension benefits of its employees in an effort to strengthen the balance sheet.
With effect from the first day of 2021, Alcoa’s salaried employees in the USA and Canada will cease accruing retirement benefits for future service under defined benefit pension plans.
The decision was difficult
Alcoa ended 2017 with US$1.36bn in cash, up US$505mln on a year earlier.
“The decisions were difficult and affect current employees who have been part of our Alcoa family the longest,” admitted Roy Harvey, the president and chief executive officer of Alcoa.
Participants already collecting benefits under the pension plans and those currently covered by collective bargaining agreements will not be affected by the changes.
The announcement came in a fourth-quarter earnings update that revealed a net loss of US$196mln, equivalent to US$1.06 a share, after taking a US$391mln hit relating to previously announced actions in relation to its Rockdale operations and the Portovesme smelter.
In the same quarter of 2016, the company reported a loss of US$125mln.
Excluding one-off items, the net income in the final quarter of 2017 was positive at US$195mln, equivalent to US$1.04 a share, though that was below the market consensus of US$1.23 per share.
Strongest adjusted EBITDA quarter
Underlying earnings (EBITDA), excluding exceptional items, clocked in at US$775mln on revenue of US$3.17bn; in the same period of 2016, revenue was US$2.54bn.
While professing sympathy for loyal employees who are set to see their benefits chopped, Harvey hailed the “strongest adjusted EBITDA quarter since our launch as an independent, publicly-traded company.”
“With a series of operating and asset decisions, we also purposefully delivered against our strategic priorities. Our first full year has been truly remarkable. By continuously focusing on our strategic priorities, and supported by favorable markets, we’ve been able to accelerate our plan to strengthen Alcoa’s foundation for an even brighter tomorrow,” Harvey said.
“As we enter 2018, we will continue to execute on our objectives and look forward to delivering more in the New Year,” he added.
Shares in Alcoa were down 6.8% at US$53.11 in pre-market trading.