Hot Commodity Stock to Watch: Alcoa Corp (NYSE: AA)

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Alcoa Corp (NYSE: AA) stock rose over 7.4% on April 16th, 2021 (as of 12:36:39 UTC-4 · USD; Source: Google finance) after the company posted better than expected earnings for the first quarter of FY 21. The company has reported adjusted net income was $150 million, triple the prior quarter’s adjusted net income of $49 million primarily due to higher aluminum and alumina prices, lower restructuring-related charges, and the recognition of a gain on the sale of the Warrick rolling mill.

Adjusted EBITDA was $521 million, a 44% sequential increase mainly due to higher aluminum and alumina prices.  Alcoa ended the first quarter with cash on hand of $2.5 billion, which included $583 million in initial net proceeds from the sale of Warrick rolling mill and $493 million in net proceeds from the March 2021 debt issuance. Cash provided from operations was $6 million and cash provided from financing activities was $428 million, mainly related to the debt issuance, and cash provided from investing activities was $514 million, mainly related to the sale of the Warrick rolling mill. The company generated negative free cash flow of $69 million.

Moreover, the total debt as of March 31, 2021 was $3 billion, and net debt was $492 million, which represents a 47% improvement from net debt of $935 million in the fourth quarter 2020. In March 2021, debt increased $500 million from the 4.125 percent debt issuance. In April, the Company used the proceeds of the debt issuance and cash on hand to contribute $500 million to U.S. pension plans and redeem in full $750 million of 6.75 percent senior notes.

On the other hand, on March 31, 2021, AA had completed the sale of the Warrick rolling mill, held by Alcoa Warrick LLC, to Kaiser Aluminum Corporation for total consideration of approximately $670 million, which included the assumption of $72 million in OPEB liabilities (as adjusted post-closing). Alcoa has retained ownership of the 269,000 metric tons per year aluminum smelter and its electricity generating units at Warrick Operations. In connection with the sale, Alcoa entered into a market-based metal supply agreement with Kaiser. With the Warrick rolling mill sale and the 2020 sale of the Gum Springs, Arkansas waste treatment facility, the Company reached its target to generate in the range of $500 million and $1 billion from non-core asset sales.

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