Alcoa Snubs Govt. Plan, Shuts Plant

The Aluminum giant, Alcoa Inc. (NYSE:AA - News) announced that it will close its Portovesme smelter in Italy, despite Rome's call to keep operations on the island of Sardinia running.

Further, Alcoa added that it will close its smelter in Italy and slash output at two Spanish smelters as a measure to cut costs and also as a part of its effort to reduce global output by 12%.The government has proposed to suspend a collective dismissal procedure, known as mobilita in Italian, which usually leads to closing of business, and instead offered to work together to find alternative solutions.

However, Alcoa rejected the proposal and reaffirmed its decision about the closure of Portovesme smelter on the island of Sardinia.The Labor Unions of Sardinia are not at all happy and believes that approximately 1500 workers will be directly or indirectly affected and the decision will also be a heavy blow to the island's economy. The Trade Unions have decided to protest the decision of Alcoa.As per Alcoa, the plant had some structural deficiencies along with high electricity costs, which made it quite difficult for the plant to sustain. However, the government believes that the company was turning its back on a special decree that it passed in 2010 offering favorable power supply conditions to some industrial consumers for convincing Alcoa to keep its Italian plants working.Recently, Alcoa Inc. reported loss in its fourth-quarter 2011 results.

The company posted a loss from continuing operations of $193 million, or 18 cents per share compared with a profit of $172 million, or 15 cents per share in the comparable quarter of 2010.Excluding restructuring charge of $159 million and other items, Alcoa's loss came in at 3 cents per share, below the Zacks Consensus estimate profit of 1 cent.

It is the company's first loss in the last nine quarters.For full-year 2011, Alcoa reported income from continuing operations of $614 million, or $0.55 per share, which is more than double of 2010 results. The disappointing results were driven by higher costs of energy and transportation.Though revenues for the quarter rose 6% year over year to $6 billion, business was down in most areas including construction, industrial products, packaging and commercial transportation. Besides, sales to automobile manufacturers fell 2%.For 2011, revenue rose to $25 billion from $21 billion in the fiscal year 2010.For 2012, Alcoa expects global aluminum demand to grow 7% due to global deficit in primary aluminum supply.

Alcoa's growth projection is ahead of the 6.5% rate, which is required to meet its forecast of doubling the global aluminum demand between 2010 and 2020.In addition, Alcoa believes that growing demand for aluminum, combined with market-related production cutbacks, will result in a global aluminum industry deficit of 600,000 metric tons.

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