Alcoa Inc (AA), Airbus in $110M Supply Deal

Aluminum giant Alcoa (AA) has cut a multi-year supply pact with Airbus worth roughly $110 million. Under the deal, Alcoa will supply titanium and aluminum aerospace forgings to aircraft maker Airbus.

These parts will be made by Alcoa using its recently modernized 50,000-ton press in Cleveland, Ohio. The press leverages state-of-the-art controls to address stringent aerospace specifications and has the capacity to make the world’s largest and most complex titanium, nickel, steel and aluminum forgings.

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Titanium parts, to be supplied by Alcoa, include forgings used to connect the wing structure to the engine, for Airbus’s most fuel-efficient single-aisle jet – A320neo. The company will also supply large aluminum forgings for the A330 and A380 including the A380 inner rear wing spar, the world’s largest aerospace forging. Many of these forgings support the wing structure where strength-to-weight ratio is vital for efficient flight performance.

Alcoa, last year, entered into $1.4 billion multi-year supply agreements with Airbus for its aerospace aluminum sheet, plate and hard alloy extruded products. Apart from sheet, plate, forgings and extrusions, the company’s specialty fasteners and structural castings are also used on Airbus aircraft. The new agreement reinforces Alcoa’s long-standing relationship with Airbus.

Alcoa is a world leader in production and management of primary aluminum, fabricated aluminum, and alumina. The company is also the world’s largest miner of bauxite and refiner of alumina.

Alcoa holds leading market positions in aerospace forgings, extrusions, jet engine airfoils and fastening systems. Its aerospace business delivered $3.8 billion in revenues last year.

Alcoa is seeing strength in the aerospace market. The company expects 9% to 10% growth in the aerospace market this year, backed by higher air travel demand, new aircraft orders, strong existing order backlog and a rebound in the jet segment.

Alcoa currently retains a Zacks Rank #2 (Buy).

Other mining stocks with favorable Zacks Rank are First Quantum Minerals Ltd. (FQVLF), Freeport-McMoRan Copper & Gold Inc. (FCX) and Denison Mines Corp. (DNN). All of them hold a Zacks Rank #2 (Buy).

ALCOA INC (AA): Free Stock Analysis Report

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