Alcoa 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Transformation is driving results

“As you probably all can see, the transformation is delivering results. All segments have improved sequentially. Very strong operational performance, earnings increase in every one of our groups downstream, highest-ever quarterly profits, as well as margins.’

Debt to cap could be impacted by strength of USD

“Year to date, we are on target to hit our full year goals, although our debt to cap could end up slightly above the target range, due largely to the strength of the U.S. dollar.”

aerospace is healthy

“We continue to see a very strong aerospace market and believe a growth between 8% and 9% for this year. And if you go to the large commercial aircraft, we see this even stronger, with 12.1% growth. The order books on the commercial jet side are full, nine years of production. ”

China auto activity is strong

“In China, we take the number also up. We had 6% to 10% before, and we narrow the range to 7% to 10%. It’s up year to date 7.7%, and obviously driven by two factors, the increase of the middle class. And the second one, which should not be underestimated, is this new clean air act, that for this year we believe is going to take roughly 6 million cars off the streets in China for lack of the appropriate emissions situation.”

Heavy truck and trailer market is back

“if there’s one fascinating thing, the heavy trucks and trailer is fortunately back, and we are clearly, for North America, taking up our projection.”

European heavy truck market not so strong though

“European side, we are not optimistic. In fact, we are more pessimistic. We had it at minus 1 to minus 5 in the last quarter. We now take it down to minus 7 to minus 10.”

Alumninum lithium alloys

“don’t walk away thinking, oh, you know what, this is all the old aluminum, but that’s not what it is, because we are not standing still, we are improving our metallurgical offerings, and aluminum lithium is really, I would call it, really a revolution, but if you are precise enough, the revolution started a while ago, so in reality it’s an evolution, right?”

In 2007 everyone was saying that metallic airplanes would be a thing of the past, but it’s clear that they are here to stay

“When I came into the operational role at Alcoa, [it was] end of 2007. And when I started to do my first round in talking to people in Alcoa as well as in the industry, there was pretty much the rhetoric that metallic planes are going to be a sign of the past, and there’s no metallic planes anymore, right?

Then we started to look into it, and we also started to look into what innovation potential we have. And as you saw, again, coming through this quarter, Boeing, the very Boeing that was very strong on the 787, has just given us a $1 billion plus contract, and it’s all metallic. And for their big planes, when they had to make a decision for the 737, are they going to renew it with the [max] as a nonmetallic or a metallic one, they decided they gotta go for a metallic version and just do a re-engining.”

We’ve built a slowdown assumption into our Europe projections

” on Europe, there is already, I think, a slowdown scenario for Europe in the second half of the year built into it.”

China may be slower but it’s still growing very strongly

“frankly, in China, Asian, they might be a little slower, but still going very, very strong.’

We think aerospace isn’t as cyclical of an industry as it used to be

“I personally believe, and our experts do so too, it’s a very solid industry. In fact, it used to be a cyclical industry. But I think that through the wisdom of the two major players, Airbus as well as Boeing, in terms of being moderate in their production expansion, they have accumulated this nine years of auto backlog…we said look, we don’t see that cyclicality in there at this point in time.”