Alcan poised for acquisitions in cycle downturn

Posted by anzhuo on December 18th, 2015

    MONTREAL, Dec 5 (Reuters) - Alcan Inc. is poised to make large acquisitions if the cyclical aluminum market heads back into a downturn, the Canadian company's chief executive said on Tuesday.

    Dick Evans said Alcan has strong cash from operations and a solid balance sheet, which will allow it to benefit from the current aluminum cycle, which is longer and stronger than many people expected.

    Alcan has focused on being a low-cost operator and expects to be cash positive and operating "full out" in any market downturn, Evans told analysts at the Desjardins Securities Materials Conference in Montreal.

    "If that were to happen we would be looking for acquisitions as we did with Pechiney, Alusuisse and Alouette in the last down cycle," he said.

    Alcan, the world's second-largest maker of primary aluminum, took over Swiss aluminum and packaging maker Alusuisse in 2000 and followed that in early 2004 with the acquisition of France's Pechiney.

    In 2002, Alcan also made two investments bringing its stake in the 243,000-tonne Alouette aluminum smelter in Quebec to 40 percent.

    Until late 2005, aluminum had largely lagged the rapid price rally in other commodities.

    The metal, which topped ,100 a tonne in May only to fall back in subsequent months, has been on a new upturn. Aluminum futures <MAL3> hit a six-month high of ,851 on the London Metal Exchange on Tuesday.

    On the question of diversification away from aluminum, Alcan did take a look at participating in the takeover battle for big nickel and copper producers Inco and Falconbridge, but balked the prices in play for those mining assets, Evans said. Falconbridge is now owned by Swiss-based miner Xstrata Plc and Brazil's Companhia Vale do Rio Doce took over Inco.

    Evans said that in the longer term Alcan could be interested in acquiring titanium producing assets, largely because of the metal's use, along with aluminum, in the aerospace industry.

    "We have have no current, active plans to acquire anyone in titanium," Evans said.

    "I doubt that this is the right time to be doing that because they are very strong at this point in time, but it would be something that would be on our watch list for the future," he added.

    Otherwise, Alcan will continue to make smaller acquisitions in the aluminum engineered-products and packaging businesses, Evans said.

    The company also expects to expands its composites business, which has doubled in the last five years and is profitable, he said.

    Evans said Alcan will almost certainly top its forecast for cash from operations of .7 billion this year and an average of at least .8 billion in 2007 and 2008.

    "That's one reason why we went ahead and increased the dividend ... announced the share buyback and still feel we can execute on a very attractive pipeline of investment opportunities, he said.

    Alcan shares were up 31 Canadian cents at C.06 on the Toronto Stock Exchange and ahead 11 cents at .93 in New York on Tuesday morning.

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