Alcoa beats savings target

13 January 2010

13 January 2010 | Jake Kanter

US metals giant Alcoa has outstripped its 2009 procurement savings target by $500 million (£308 million).

Speaking as the company announced its fourth-quarter results yesterday, CEO Klaus Kleinfeld said increasing global sourcing and changing product specifications helped save a total of $2 billion (£1.2 billion) last year. Cutbacks of up to 34 per cent were made on energy and transportation costs.

Alcoa also “cut overheads by $412 million” (£254 million) last year, including some job losses, and reductions in working capital generated more than $1.3 billion (£800 million) in cash.

“Procurement is certainly the biggest bucket [of savings],” Kleinfeld said. “I am particularly proud of this because at the same time we had quite a bit of headwind on rising currency levels as well as energy prices. We feel we have been able to overcome those challenges.”

As a result of the success, the company has raised its 2010 procurement cost reduction target by $500 million to $2.5 billion (£1.5 billion).

The cutbacks did not prevent Alcoa posting a $277 million (£171 million) loss in the fourth quarter. Wall Street was underwhelmed by the results and the company’s shares fell by about 9 per cent.

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