Alcoa Expects Production Cost Benefits for Two Smelting Facilities

Aluminum-production giant Alcoa Corp. expects to see a "benefit" in production costs for two of its smelting facilities located in New York and Indiana. This news comes after the U.S. government announced that commercial-grade aluminum is eligible for a manufacturing-related tax credit.

Increased Cost Savings

Alcoa anticipates recording a cost of goods sold benefit between $35 million and $40 million, after taxes, in the fourth quarter. This translates to approximately 20 to 22 cents per share, benefiting the two mentioned facilities.

Advanced Manufacturing Tax Credit

The U.S. Treasury Department recently provided additional information on the Advanced Manufacturing Tax Credit. Created as part of the Inflation Reduction Act passed last year, this credit aims to incentivize domestic production of critical materials necessary for the transition to clean energy. Alcoa acknowledges the importance of this incentive and welcomes the opportunity it presents.

Valuation Allowance on Deferred Tax Assets

Additionally, Alcoa expects to account for a valuation allowance on certain deferred tax assets in Brazil. Consequently, this could result in a charge of $140 million to $150 million, equaling 78 to 84 cents per share in tax expense. Of this charge, approximately $100 million or 56 cents per share, is deemed "discrete." Consequently, a net loss of $40 million to $50 million is projected, resulting in an adjusted per-share loss of 22 to 28 cents for the fourth quarter.

Market Response

Following this news, Alcoa's shares experienced a moderate increase of 0.3% after hours.

Alcoa Corporation remains committed to optimizing production processes and ensuring sustainability in the production of critical materials for the clean energy transition.