When discussions turn to aluminum stocks, there's no name that comes to investors' minds quicker than Alcoa Corp. (NYSE: AA); however, those same investors certainly don't know everything about the company. And since the best investors are well-informed investors, let's look at some things that help to provide a more complete view of the company.
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1. An industry inventor
Alcoa can trace its history back more than 130 years. In July 1886, Charles Martin Hall discovered a method -- still used today -- to produce aluminum through electrolysis. Two years later, he founded the Pittsburgh Reduction Company. The company kept its name until 1907, when it changed to The Aluminum Company of America -- its legal name for the next 91 years, until it legally changed to Alcoa.
2. Come fly with me
Alcoa's contributions to flight far exceed the aluminum cans from which airline passengers enjoy their beverages. Aluminum supplied by The Pittsburgh Reduction Company encased the engine and crankcase of the Wright Brothers' first plane. Other aerospace innovations have also relied on Alcoa's products; their alloys and propellants have been found on the first manned space flights, the first moon landing, and the International Space Station.According to the company, "more than 90% of all aerospace alloys currently used in the aerospace industry were developed by Alcoa research."
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3. More than just aluminum
Although the company's history is grounded in the aluminum business, today, it's operations are more diversified. They're comprised of six reportable segments: bauxite, alumina, aluminum, cast products, energy, and rolled products.
Bauxite is sold both internally -- to be used as a raw material in the alumina refining process -- and to third parties. Alumina, likewise, is supplied to Alcoa's own smelters and sold to third parties, which accounts for more than half of its production. According to Alcoa's 10-K from 2016, it is the world's largest bauxite miner and the world's leading producer of alumina. Most recognizable, the company sells aluminum to customers worldwide.
In addition, the cast product segment supplies the automotive, construction, electrical, industrial, and transportation markets. The company's rolled product segment provides flat-rolled aluminum for beverage and food cans to North American customers. Lastly, the company's energy segment includes approximately 1.7 gigawatts of capacity in four countries: Canada, the United States, Suriname, and Brazil.
4. Much more than just aluminum
Sure, Alcoa may have five operating segments in addition to aluminum, but it's obviously the latter that butters Alcoa's bread, right? Wrong! Of the company's six operating segments, aluminum was the fourth most profitable based on adjusted EBITDA in fiscal 2016. Instead, bauxite earned the title of "most profitable," reporting $375 million in adjusted EBITDA. Alumina and cast products reported $351 million and $284 million, respectively. Aluminum only reported $186 million in adjusted EBITDA.
How about profitability? Aluminum provides the greatest adjusted EBITDA margin, no? No, indeed. The most-profitable segment, instead, is the energy segment, which reported a 35.7% adjusted EBITDA margin in fiscal 2016. In fact, aluminum was the fifth most profitable; it reported an adjusted EBITDA margin of 4.9%.
5. From meager beginnings
Alcoa has come a long way from the shed attached to Charles Martin Hall's home in Oberlin, Ohio, where he discovered the smelting process. Gaining a presence in Europe though a bauxite partnership in France in 1912, Alcoa now has a significant global presence. The company maintains 43 operating locations -- bauxite mines, alumina refining facilities, and aluminum smelters -- in 10 different countries on six different continents.
6. Are you going to recycle that?
If it's an aluminum can, you're probably contributing to the more than 1.3 billion pounds of aluminum that Alcoa recycles each year. But Alcoa's commitment to the environment transcends the recycling of aluminum cans. In September 2016, Alcoa was named -- for the 15th consecutive year -- to the Dow Jones Sustainability Indices, which recognizes global leaders in corporate responsibility and sustainability.
Among the company's many targets, it aspires to reduce its carbon dioxide emissions by 35% by 2030 from a 2005 baseline, reduce landfill waste by 100% by 2030, and a 15% reduction in energy by 2030 from a 2005 baseline.
7. AA dedicated to 3D
In all likelihood, most people don't perceive Alcoa as a company at the vanguard of cutting-edge technology. But they should think again. In September 2015, Alcoa announced a $60 million expansion to its research and development facility in Pennsylvania that, according to its press release, will "accelerate the development of advanced 3D-printing materials and processes."
Alcoa's interest in additive manufacturing may come as a surprise to some, but the company contends that it has been creating 3D-printed tools, molds and prototypes for the past 20 years. Further demonstrating its commitment to this technology, in April 2016Alcoa announced a partnership with Airbus. Pursuant to the agreement, Alocoa willsupply 3D-printed titanium fuselage and engine pylon components for Airbus' commercial aircraft.
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