Alcoa Inc (AA) Considers Firth Rixson Will Complement its Business

Alcoa Inc (NYSE:AA) is shifting focus, and indeed it has travelled a pretty much distance over the last two years to establish itself as a chief aerospace component maker. But, recently the company took a major step to get a strong foothold in the aerospace business, which is by signing off a deal with the UK-based jet engine parts maker, Firth Rixson, worth $2.85 billion. The decision by the company received positive response from the market as its shares jumped close to 3% on Thursday. During an interview on Fox Business, Alcoa’s CEO Klaus Kleinfeld discussed about the new takeover and the future outlook about aluminium.

Alcoa Inc (NYSE:AA)

Future Calculation

Kleinfeld explained the reason of Alcoa Inc (NYSE:AA)’s interest in Firth Rixson on account of the latter’s dominant role in the aerospace sector. Kleinfeld said that 75% of Firth Rixson’s revenue comes from aerospace, where a majority of it is from jet engines, which is a critical part of new models and new planes. He said that Alcoa holds expertise in blades and Firth Rixson is an expert in disks and rings, and thus, the acquisition complements the company’s business.

At the same time Kleinfeld is sure that the cost of $2.85 billion for acquisition is not too much.

“When you do the calculations, you can’t look at today’s revenues, because Firth Rixson has invested massively into future technologies, that’s now coming online.”

Kleinfeld went on to state that Firth Rixson has recently invested in a very unique technology and they will start the production this year, the revenues of which will reflect next year. He said that the revenues in 2016 will be $1.6 billion and that is the number they factored in.

Value And Cost

Another interesting highlight about Alcoa Inc (NYSE:AA) is that it has been able to maintain its value despite a lackluster performance by aluminium as a commodity. In response, Kleinfeld said that, first of all, the company has built its own value at business. He said that todays value of the business makes 57% of the revenues and 80% of the profits. Secondly, he said that the company has worked really hard to come down to its cost position. Kleinfeld said, “I can’t influence the  price in commodities, but what I can influence is the cost position that we have.” Further, Kleinfeld sees positive environment building up for aluminium prices ahead.


Disclosure: none

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!