Alcoa Realigns Downstream Segment after RTI Metals Acquisition
Alcoa at 52-Week Low: Important Takeaways
Alcoa realigns downstream segment
In the previous part, we discussed how RTI Metals (RTI) fits into Alcoa’s (AA) aerospace strategy. Alcoa announced a new organizational structure after it completed the acquisition of RTI Metals.
Currently, Alcoa forms ~4.4% of the SPDR S&P Metals and Mining ETF (XME) and 0.83% of the iShares North American Natural Resources ETF (IGE). Reliance Steel & Aluminum (RS) forms 4.8% of XME’s portfolio.
Downstream business split into two segments
Alcoa split its downstream business into two segments. The first segment would be focused on the aerospace sector, and the other segment would serve the construction and commercial wheels market. This can be seen in the above chart.
The Engineered Products & Services (or EPS) business would now comprise three business units that primarily serve its aerospace customers, including Boeing (BA).
RTI Metals would be renamed Alcoa Titanium & Engineered Products. Firth Rixson, which Alcoa acquired last year, would be merged with Alcoa Fastening Systems & Rings and Alcoa Forgings & Extrusions. TITAL would be merged with Alcoa Power & Propulsion.
Transportation and Construction Solutions segment
Alcoa has formed a new business segment—Transportation and Construction Solutions. The segment would comprise Alcoa Wheel and Transportation Products and Alcoa Building & Construction Systems. Earlier, both businesses were part of the EPS segment.
The realignment looks like a step in the right direction. The aerospace sector has become a key contributor to Alcoa’s earnings over the last few years. By having a separate segment catering to the aerospace sector, Alcoa would be in a good position to serve its aerospace customers.
You can learn more about Alcoa by visiting Market Realist’s Aluminum page.
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