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Aluminum producer Alcoa reported better than expected second quarter earnings but warned going forward on the Trade War affect and tariffs. The outlook sent the stock down over 10% after the release.

Alcoa Smelting

Alcoa Corporation $AA is a global leader in bauxite, alumina, and aluminum products. The stock had been rising on protectionist hopes as the Trump administration mulls curbs of imports on national security grounds. The tariff war has changed the dynmaics of such a hope. hese were just the second year of results since AA split off it's aerospace division. Alcoa is a harbinger for many in the commodities and global growth sectors.

Earnings: 

Net income of $75 million, or $0.39 per share excluding special items, adjusted net income of $286 million, or $1.52 per share on revenue of $3.58 billion beating expectations of $1.33 EPS and $3.555 revenu. Alcoa incurred $15 million of costs for tariffs on imports from its foreign operations for U.S. sale. Alcoa's imports were primarily from Canada.

Alcoa Inc NYSE: $AA

Market Reaction Pre-market $43.01 ▼ 4.93 (-10.28%)

Cash Position

Cash from operations in second quarter 2018 was a negative $430 million and free cash flow was a negative $525 million, both driven by $605 million in additional contributions made to certain U.S. and Canadian defined benefit pension plans and $92 million for cash payments related to the electricity supply contract for Wenatchee and the contractor arbitration matter.

Cash provided by financing activities was $433 million, which includes $492 million in net proceeds from a recent debt offering, and cash used for investing activities was $100 million in the second quarter of 2018. Alcoa ended second quarter 2018 with cash on hand of $1.1 billion and debt of $1.9 billion, for net debt of $0.8 billion.

The Company reported 24 days working capital, a 6-day increase from second quarter 2017, reflecting the impact of higher alumina and aluminum prices.

Outlook:

Adjusted full-year EBITDA is now seen at $3 billion-$3.2 billion, down from a prior view of $3.5 billion-$3.7 billion.

Management said the cut "reflects current market prices, tariffs on imported aluminum, increased energy costs, and some operational impacts." "Uncertainty continues to exist in the global supply chain due to U.S. tariffs and ongoing alumina supply disruptions in the Atlantic region," the company said in a statement.

Projecting full-year global deficits for both alumina and aluminum in 2018; surplus for bauxite Continuing progress on strategic priorities to reduce complexity, drive returns, and strengthen the balance sheet; used debt proceeds and available cash to reduce net pension liability by $605 million

Source: Alcoa

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