RNS Number:6436U
Alcan Inc
16 April 2002
Press Release
------------------------------------------------------------
FOR IMMEDIATE RELEASE
ALCAN REPORTS IMPROVED OPERATING EARNINGS IN A CHALLENGING BUSINESS ENVIRONMENT
HIGHLIGHTS
• Net income of US$107 million (US$0.33 per share) before non-recurring
items and foreign currency translation effects
• Significant improvement coming from Rolled Products contributed to EBITDA
from operations of US$503 million, up 39% from the previous quarter
• On target with merger-related synergies and restructuring programs
• Free cash flow continued to be positive, reducing total debt to the lowest
level since the algroup merger in October 2000
MONTREAL, CANADA - April 16, 2002 - Alcan Inc. (Stock Symbol: AL) reports first
quarter consolidated net income, excluding non-recurring items and foreign
currency translation effects, of US$107 million (US$0.33 per share) compared to
US$163 million (US$0.51 per share) in the first quarter of 2001 and US$74
million (US$0.22 per share) in the fourth quarter of 2001.
Including non-recurring items and foreign currency translation effects, net
income for the quarter was US$86 million (US$0.26 per share) compared to net
income of US$135 million (US$0.42 per share) in the first quarter of 2001 and a
net loss of US$356 million (US$1.12 per share) in the previous quarter which
included significant special charges.
Commenting on the results, Travis Engen, President and Chief Executive Officer,
said, "I am pleased with our operating performance which reflected good progress
on implementing the restructuring program announced in October 2001, as well as
on achieving merger-related synergies. We expect to meet targets set for these
programs even though business conditions, while improving, continue to be
challenging. Late in the quarter, we began to see strengthening order books and
lengthening lead-times in some markets. In addition, financial discipline has
resulted in declining inventory levels and capital expenditures which were well
below depreciation charges. We also capitalized on profitable growth
opportunities, in line with our Value Maximization initiative, as demonstrated
by the acquisition of a 20% stake in the Alouette smelter."
The results for the first quarter of 2002 included a net non-recurring after-tax
charge of US$7 million (US$0.02 per share) which related mainly to the
restructuring program announced on October 17, 2001. The current quarter also
included a US$14 million loss (US$0.05 per share) for foreign currency
translation effects. Non-operating after-tax charges, net of foreign currency
translation effects, were US$28 million (US$0.09 per share) in the year-ago
quarter and US$430 million (US$1.34 per share) in the fourth quarter of 2001.
CONSOLIDATED REVIEW
FIRST FOURTH
QUARTER QUARTER
(US$ millions, unless otherwise noted) 2002 2001 2001
Sales & operating revenues 2,937 3,270 3,037
Shipments (thousands of tonnes)
Ingot products(1) 315 296 427
Rolled products 497 519 451
Conversion of customer-owned metal 75 91 82
Aluminum used in engineered products & packaging 126 186 101
Total aluminum volume 1,013 1,092 1,061
Ingot product realizations (US$ per tonne) 1,497 1,676 1,483
Rolled product realizations (US$ per tonne) (2) 2,250 2,444 2,298
Average London Metal Exchange 3-month price (US$ per tonne) 1,395 1,562 1,337
Net income excluding non-recurring items and foreign exchange 107 163 74
translation
Non-recurring items (7) (70) (446)
Foreign currency translation (14) 42 16
Net income (loss) including non-recurring items and foreign exchange 86 135 (356)
translation
Economic Value Added (EVA(R)) (198) (48) (199)
(1) Includes primary and secondary ingot and scrap, as well as shipments
resulting from metal trading activities
(2) Excluding conversion of customer owned metal
(R) EVA is a registered trademark of Stern, Stewart & Company
Sales and operating revenues for the quarter decreased compared to the year-ago
quarter, due mainly to lower shipments and price realizations. As compared to
the previous quarter, the higher shipments of rolled products and higher ingot
product prices were offset by lower ingot product shipments and rolled products
realizations.
Total aluminum volume was 1,013 thousand tonnes (kt) in the quarter, compared to
1,092 kt a year earlier and to 1,061 kt in the preceding quarter. Year over
year, the additional volume from the new smelter in Alma, Quebec was more than
offset by a reduction in metal purchased for resale. As compared to the previous
quarter, the decrease in volume was mainly due to inventory movements.
Ingot product realizations of US$1,497 per tonne fell by 11% from the year-ago
quarter in line with a 11% decrease in the London Metal Exchange (LME) price.
Compared to the previous quarter, ingot product realizations increased by 1%
versus a 4% increase in the LME price.
Rolled product realizations of US$2,250 per tonne were 8% lower than the
year-ago quarter and 2% below the previous quarter.
For the quarter, the net income of US$86 million compares to a net income of
US$135 million in the year-ago quarter and to a net loss of US$356 million in
the previous quarter. The US$49 million decrease, as compared to the year-ago
quarter, was primarily due to lower ingot realizations, partially compensated by
improvements from the Company's restructuring and merger-related synergies
programs. As compared to the previous quarter, the US$442 million increase was
mostly due to the non-recurring charges of US$446 million recorded in the fourth
quarter of 2001, improved earnings from operations and lower interest expense.
In 2002, the Company adopted new accounting standards dealing with goodwill. As
a result of this change in accounting, goodwill is no longer being amortized.
This had a positive impact of US$18 million (US$0.06 per share) on net income in
the first quarter.
SEGMENT REVIEW
FIRST FOURTH
QUARTER QUARTER
(US$ millions) 2002 2001 2001
EBITDA
Bauxite, Alumina and Specialty Chemicals 64 100 55
Primary Metal 214 249 150
Rolled Products, Americas and Asia 92 86 57
Rolled Products, Europe 30 38 (3)
Engineered Products 27 34 16
Packaging 76 86 88
EBITDA from operating segments 503 593 363
Depreciation & amortization (205) (196) (216)
Restructuring, impairment and other special charges (14) - (657)
Intersegment and other (46) (118) 68
Corporate offices (24) (14) (26)
Interest (50) (55) (64)
Income taxes (78) (58) 184
Minority interests - 1 10
Net income (loss) before goodwill amortization 86 153 (338)
Net income (loss) after goodwill amortization 86 135 (356)
Segments
First quarter earnings before interest, taxes, depreciation and amortization
(EBITDA) for Bauxite, Alumina and Specialty Chemicals was 36% lower than in the
previous year. This was mainly due to lower selling prices for alumina, as well
as the absence in the current quarter of the Jamaican bauxite and alumina
operations sold in the second quarter of 2001. Compared to the preceding
quarter, EBITDA increased by 16%, as a result of lower alumina production costs
and a gain on the sale of three company-owned ships.
For Primary Metal, EBITDA of US$214 million decreased by 14% compared to the
year-ago quarter, due mainly to lower selling prices for aluminum, which was
partially offset by lower production costs and decreased startup expenses at the
Alma smelter. Compared to the preceding quarter, EBITDA was 43% higher due
mainly to lower startup costs at the Alma smelter and an increase in selling
prices.
EBITDA for Rolled Products, Americas and Asia, at US$92 million, was 7% higher
than in the previous year, as cost reductions more than offset volume decreases
in North and South America. Compared to the preceding quarter, EBITDA increased
by 61%, due to lower costs in North America and Asia, higher volumes in North
America and in Asia, as well as the time lag in passing the change in metal
prices to certain customers.
For Rolled Products, Europe, EBITDA, at US$30 million was US$8 million lower
than in the previous year, mainly due to lower volumes. Compared to the fourth
quarter of 2001, EBITDA increased by US$33 million, due mainly to higher
shipments and lower production costs.
EBITDA for Engineered Products of US$27 million was US$7 million lower than in
the previous year, mainly as a result of weaker economic conditions in Europe.
Compared to the fourth quarter of 2001, EBITDA increased by US$11 million, due
to improvements in extruded products, composites and mass transportation
markets.
The Packaging group's EBITDA, at US$76 million, decreased by US$10 million
compared to the first quarter of the previous year, reflecting a decrease in
volume and lower prices resulting from weaker economic conditions. EBITDA was
US$12 million lower than in the previous quarter, partly due to declining prices
in a continuing weak economic environment.
Reconciliation to net income
Depreciation and amortization of US$205 million was 5% higher than the year-ago
quarter largely due to the Alma smelter which reached full capacity during the
fourth quarter of 2001. As compared to the previous quarter, depreciation and
amortization was 5% lower, partly due to the asset write-downs recorded in the
fourth quarter of last year.
The "Restructuring, impairment and other special charges" consisted of
provisions for a portion of the restructuring program announced in the fourth
quarter of 2001.
"Intersegment and other" includes the deferral or realization of profits on
intersegment sales of aluminum as well as other non-operating items. The first
quarter included the deferral of profits on internally-transferred metal as
aluminum prices increased during the quarter.
Interest expense, at US$50 million, decreased by US$5 million compared to the
previous year reflecting lower interest rates and debt levels, which was
partially offset by the fact that no interest was capitalized during the current
quarter in relation to the new smelter in Alma, Quebec. Interest expense was
US$14 million lower than in the previous quarter, reflecting lower interest
rates and debt levels. The debt:equity ratio at March 31, 2002 was 31:69,
compared to 32:68 at the end of last year and 35:65 at the end of the first
quarter of 2001.
The Company's effective tax rate was 40% in the first quarter, excluding the
effects of non-recurring items and foreign currency translation.
For the first quarter of 2002, the average number of common shares outstanding
was 321.0 million compared to 318.2 million in the year-ago quarter and 320.9
million in the fourth quarter. At March 31, 2002, 321.1 million shares were
outstanding.
OUTLOOK
The Company expects to continue to benefit from merger synergies, restructuring
initiatives and recently completed investments. Late in the quarter, we began to
see strengthening order books and lengthening lead-times, consistent with a
modest rate of recovery in North America and some parts of Asia.
Based on the current 3-month LME aluminum price of about US$1,365 per tonne,
Alcan presently expects that net income per common share (excluding
non-recurring items and foreign currency translation effects) will be between
US$0.35 and US$0.45 for the second quarter of 2002.
With an expected improvement in the business conditions for the second half of
the year and based on the current 3-month LME aluminum price of approximately
US$1,365 per tonne, the Company continues to expect that net income per share
(excluding non-recurring items and foreign currency translation effects) will be
between US$1.70 and US$2.10 for 2002.
Statements made in this press release which describe the Company's or
management's objectives, projections, estimates, expectations or predictions of
the future may be "forward-looking statements" within the meaning of securities
laws, which can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "estimates," "anticipates" or
the negative thereof or other variations thereon. The Company cautions that, by
their nature, forward-looking statements involve risk and uncertainty and that
the Company's actual actions or results could differ materially from those
expressed or implied in such forward-looking statements or could affect the
extent to which a particular projection is realized. Important factors which
could cause such differences include global supply and demand conditions for
aluminum and other products, aluminum ingot prices and changes in raw materials'
costs and availability, changes in the relative value of various currencies,
cyclical demand and pricing within the principal markets for the Company's
products, changes in government regulations, particularly those affecting
environmental, health or safety compliance, economic developments, relationships
with and financial and operating conditions of customers and suppliers, the
effects of integrating acquired businesses and the ability to attain expected
benefits and other factors within the countries in which the Company operates or
sells its products and other factors relating to the Company's ongoing
operations including, but not limited to, litigation, labour negotiations and
fiscal regimes.
Alcan is a multinational, market-driven company and a global leader in aluminum
and specialty packaging with annual revenues of US$12.6 billion in 2001. With
world-class operations in primary aluminum, fabricated aluminum as well as
flexible and specialty packaging, Alcan is well positioned to meet and exceed
its customers' needs for innovative solutions and service. Alcan employs
approximately 48,000 people and has operating facilities in 38 countries.
NOTE
All tonnages are stated in metric tonnes, equivalent to 2,204.6 pounds.
All figures are unaudited.
QUARTERLY RESULTS WEBCAST
Alcan's quarterly results conference call with analysts will take place on
Tuesday, April 16, 2002 at 10:00 a.m. and will be webcast via the Internet at
www.alcan.com.
Supporting documentation (press release, presentation to analysts and
supplementary information) is available at www.alcan.com., using the Investors
link. A written transcript of the conference call will also be posted on the
website in the upcoming week.
- 30 -
MEDIA CONTACT: Marc Osborne
Tel.:+1 (514) 848-1342
INVESTMENT COMMUNITY CONTACT: Serge Michaud
Tel.:+1 (514) 848-8368
ALCAN INC.
INTERIM CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Three months ended March 31
(in millions of US$, except per share amounts) 2002 2001
Sales and operating revenues $ 2,937 $ 3,270
Costs and expenses
Cost of sales and operating expenses 2,331 2,577
Depreciation and amortization 205 196
Selling, administrative and general expenses 139 133
Research and development expenses 28 33
Interest (note 4) 50 55
Restructuring, impairment and other special
charges (note 2) 14 -
Other (income) expenses - net (notes 1 and 3) 7 68
2,774 3,062
Income before income taxes and other items 163 208
Income taxes 78 58
Income before other items 85 150
Equity income 1 2
Minority interests - 1
Net income before amortization of goodwill 86 153
Amortization of goodwill (note 1) - 18
Net income $ 86 $ 135
Dividends on preference shares 1 2
Net income
attributable to common shareholders $ 85 $ 133
Net income per common share before $ 0.26 $ 0.48
amortization of goodwill (basic and diluted) - 0.06
Amortization of goodwill per common share
Net income per common share
(basic and diluted) $ 0.26 $ 0.42
Dividends per common share $ 0.15 $ 0.15
ALCAN INC.
INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(unaudited)
2002 2001
Three months ended March 31 (in millions of US$)
Retained earnings - beginning of period
As previously reported $ 4,095 $ 4,290
Accounting change (note 1) 35 38
As restated 4,130 4,328
Net income 86 135
Dividends - Common (48) (48)
- Preference (1) (2)
Retained earnings - end of period $ 4,167 $ 4,413
ALCAN INC.
INTERIM CONSOLIDATED BALANCE SHEET
(unaudited for 2002)
March 31, 2002 December 31, 2001
(in millions of US$)
ASSETS
Current assets
Cash and time deposits $96 $119
Trade receivables 1,301 1,216
Other receivables 435 532
Inventories - Aluminum operating segments
. Aluminum 870 875
. Raw materials 377 413
. Other supplies 271 269
1,518 1,557
- Packaging operating segment 393 393
1,911 1,950
Total current assets 3,743 3,817
Deferred charges and other assets 744 716
Property, plant and equipment
Cost (excluding Construction work in progress) 16,189 16,225
Construction work in progress 611 613
Accumulated depreciation (7,228) (7,136)
9,572 9,702
Intangible assets, net of accumulated amortization 293 298
Goodwill, net of accumulated amortization 2,930 2,925
Total assets $ 17,282 $ 17,458
ALCAN INC.
INTERIM CONSOLIDATED BALANCE SHEET (cont'd)
(unaudited for 2002)
March 31, 2002 December 31, 2001
(in millions of US$, except per share amounts)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $ $
Payables 2,229 2,328
Short-term borrowings 410 555
Debt maturing within one year (note 3) 516 652
3,155 3,535
Debt not maturing within one year 3,005 2,884
Deferred credits and other liabilities 1,161 1,131
Deferred income taxes 1,004 1,006
Minority interests 129 132
Shareholders' equity
Redeemable non-retractable preference shares 160 160
Common shareholders' equity
Common shares 4,693 4,687
Retained earnings 4,167 4,130
Deferred translation adjustments (192) (207)
8,668 8,610
8,828 8,770
Total liabilities and shareholders' equity $ 17,282 $ 17,458
Common shareholders' equity per common share $ 26.99 $ 26.90
Ratio of total borrowings to equity 31:69 32:68
ALCAN INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three months ended March 31
(in millions of US$) 2002 2001
Operating activities
Net income $86 $135
Adjustments to determine cash from
operating activities:
Depreciation and amortization 205 196
Amortization of goodwill - 18
Deferred income taxes 3 (27)
Asset impairment provisions - 90
Equity income - net of dividends (1) (2)
Change in operating working capital
Change in receivables 6 (53)
Change in inventories 32 (90)
Change in payables (92) 5
(54) (138)
Change in deferred charges, other assets,
deferred credits and other liabilities - net 24 (111)
Other - net (5) (5)
Cash from operating activities $258 $156
ALCAN INC.
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (cont'd)
(unaudited)
Three months ended March 31
(in millions of US$) 2002 2001
Financing activities
New debt $131 $1,235
Debt repayments (171) (990)
(40) 245
Short-term borrowings - net (127) 251
Common shares issued 6 13
Dividends - Alcan shareholders
(including preference) (49) (50)
- Minority interests (1) -
Cash from (used for) financing activities (211) 459
Investment activities
Property, plant and equipment (107) (244)
Business acquisitions - (379)
Net proceeds from disposal of businesses,
investments and other assets 36 -
Cash used for investment activities (71) (623)
Effect of exchange rate changes on cash and
time deposits 1 (8)
Decrease in cash and time deposits (23) (16)
Cash and time deposits - beginning of period 119 261
Cash and time deposits - end of period $96 $245
ALCAN INC.
1. ACCOUNTING CHANGES
Goodwill and Other Intangible Assets
On January 1, 2002, the Company adopted the new recommendations of the
Canadian Institute of Chartered Accountants (CICA) concerning goodwill and other
intangible assets. Under this standard, goodwill and all intangible assets with
an indefinite life are no longer amortized but are carried at the lower of
carrying value and fair value. Goodwill is tested for impairment on an annual
basis.
Any impairment identified as at January 1, 2002, will be charged to opening
retained earnings in 2002. Any further impairment arising subsequent to January
1, 2002, will be taken as a charge against income. As a result of the new
standard, the Company no longer amortizes goodwill. In the first quarter of
2001, the amount of goodwill amortized was US$18 million.
Deferred Foreign Exchange Translation Gains and Losses
As of January 1, 2002, the Company no longer amortizes the exchange gains
and losses arising on the translation of long-term foreign currency denominated
monetary assets and liabilities that have a fixed or ascertainable life
extending beyond the end of the following fiscal year. These exchange gains and
losses are now absorbed in income immediately.
This standard has been applied retroactively and consequently, prior years'
financial statements have been restated. For December 2001, Retained earnings
have been increased by US$35 million (2000: US$38 million), Deferred charges and
other assets were reduced by US$21 million (2000: US$18 million) and Deferred
translation adjustments reduced by US$56 million (2000: US$56 million). In the
first quarter of 2001, an exchange loss of US$2 million, that arose in that
quarter on the translation of long-term foreign currency denominated assets and
liabilities, has been included in Other (income) expenses - net.
2. RESTRUCTURING, IMPAIRMENT AND OTHER SPECIAL CHARGES
In the first quarter of 2002, the Company sold its extrusion operations in
Thailand. A loss of US$5 million is recorded in Restructuring, impairment and
other special charges.
As part of the restructuring program announced in 2001, a restructuring
charge of US$9 million pertaining to operations in Italy is recorded in
Restructuring, impairment and other special charges in the first quarter of
2002.
3. LONG TERM DEBT
On January 15, 2002, the Company redeemed all of its outstanding 8 7/8%
US$150 million debentures due on January 15, 2022. The redemption was at a price
of 104.15%. A loss of US$6 million is recorded in Other (income) expenses - net
in the first quarter of 2002.
4. CAPITALIZATION OF INTEREST COSTS
Total interest costs in the first quarter were US$50 million (2001: US$75
million) of which nil (2001: US$20 million) was capitalized.
Montreal, Canada
16 April 2002
This information is provided by RNS
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