Arconic' s segment profits in Q2 2018 drop on higher aluminium price despite improved sales volume

Arconic Inc., the Alcoa spin-off, reported Q2 2018 results on July 31 with revenues of $3.6 billion, up 10% YoY. Organic revenue was up 5% YoY, driven by higher volumes in the commercial transportation, automotive, aerospace engines, defence, and building and construction markets.

Arconic reported a drop in net income to US$120 million from net income of $212 million in Q2 2017. Net income excluding special items increased to $185 million from $165 million in Q2 2017. The company also reported operating income of $324 million, up 1% YoY and operating income excluding special items of $381 million, down 2% YoY.

In Q2 2018, cash provided from operations stood at US$176 million, up from US$79 million in Q2 2017.

Arconic Chief Executive Officer Chip Blankenship said, “In the second quarter, Arconic delivered strong organic revenue growth and doubled adjusted free cash flow. We announced contract awards at the Farnborough International Airshow, providing groundwork for exciting growth with valued customers. We have initiated the sale process of our Building and Construction Systems business as the first outcome of our ongoing strategy review.”

Engineered Products and Solutions (EP&S) reported 7% increase in revenue to US$1.6 billion YoY, Organic revenue was up 6% driven by volume growth in aerospace engines and defence. Segment operating profit was $212 million, down $38 million YoY.

Global Rolled Products (GRP) reported 14% increase in revenue to US$1.5 billion YoY. Organic revenue was up 5%. Segment operating profit dropped $10 million to $123 million YoY, driven by unfavourable aerospace wide-body production mix and higher aluminium prices.

Transportation and Construction Solutions (TCS) reported 12% increase in revenue to US$562 million YoY. Organic revenue was up 11%. Segment operating profit was $97 million, up $26 million YoY on higher volume in commercial transportation and building and construction, and net cost savings.  Headwinds from higher aluminium prices partially offset the growth.

Arconic sticks to its original 2018 Guidance of revenue of US$13.7-$14.0 billion, earnings per share of (excluding special items) $1.17-$1.27 and adjusted free cash flow of $250 million.