UPDATE: Alcoa issued a statement saying it is committed to its investment grade rating and is “in a stronger financial position than four years ago.” The company’s full statement is copied below.
Alcoa Inc. shares were down nearly 3 percent in morning trading today after Moody’s Investors
Service on Tuesday put the aluminum company on review for a downgrade.
Moody’s cited a nearly 22 percent drop in aluminum prices, according to an Associated Press report.
Alcoa has a manufacturing operation in Blount County that produces aluminum for beverage cans.
Alcoa currently has a rating of “Baa3,’ the lowest investment grade rating from Moody’s. If the rating goes any lower it could fall into junk status.”Europe’s recession and sovereign-debt crisis, sluggish performance in the U.S. economy and slower growth in China are expected to continue to adversely impact the aluminum industry,” Moody’s said in an AP report. “We do not see a material, sustainable improvement in aluminum prices over the next several quarters and expect Alcoa’s earnings performance and debt protection metrics to remain challenged.”
“Alcoa is committed to its investment grade rating. The company is in a stronger financial position than four years ago, and during that time period we have taken significant action to defend our investment grade rating, including:
* Generating $5B in productivity gains
* Reducing days working capital by 16 days (from the 4th quarter of 2008 to the 4th quarter of 2011)
* Contributing stock to the pension plan two of the last four years
* Monetizing assets
All of these levers have enabled Alcoa to decrease net debt. We anticipate net debt to be between $6.8-$7.1B by the end of 2012, which would be a 30% reduction from 2008.
In addition, we’ve taken action to manage our debt maturity schedule. Near term maturities have been minimized to roughly $400M (excluding 2014 convertible debt) over the next four years.”