Alcoa Corporation, formerly Alcoa Upstream Corporation, is engaged in the production of bauxite, alumina and aluminum of various cast and rolled products. The Company is engaged in the production and management of aluminum and alumina combined through its participation in various aspects of the industry, such as technology, mining, refining, smelting, and recycling. The Company's segments include Bauxite, Alumina, Aluminum, Cast Products, Energy and Rolled Products. The Company's Bauxite segment represents its global portfolio of bauxite mining assets. The Company's Alumina segment represents its refining system across the world, and processes bauxite into alumina and sells it directly to internal and external smelter customers across the world. The Company's Aluminum segment represents its smelter system across the world. Its Energy segment represents its portfolio of energy assets, with power production capacity of approximately 1,685 megawatts.
Business Analysis of Alcoa
The Basic Materials Sector is witnessing a major shakeup, new age business models in the industry are transforming both customers and businesses. Faced with this uncertainity, companies are investing resources to transform their business. An in-depth business analysis is a valuable resource to identify and articulate the need for a business model change. At R&P Research we believe, the starting point for a business analysis is Benchmarking. Business benchmarking can be done at various levels: 1) Industry Benchmarking 2) Peer Benchmarking 3) Disruptors Benchmarking. In this report, we share the snapshot of how Alcoa compares against the industry on the major performance indicators. This analysis, along with peer group/disruptors benchmarking and revenue model understanding can help identify growth and cost optimization opportunities to maximize the value delivered by Alcoa to its stakeholders. R&P Research Industry Intelligence Platform provides historical data for last 15 years with an easy to use benchmarking interface for an in-depth comparative business analysis.
Here is the performance snapshot of Alcoa with an interactive chart.
- Revenue Growth: Alcoa reported a revenue growth of -16.8% year-on-year during 2016. Metal Mining Industry grew at -5.5% in the same period
- COGS share of Revenues: As a percentage of revenue, Alcoa spent 84.8% of its total revenues on COGS. Metal Mining industry average (COGS share of revenue) in the same period was 86.3%
- R&D share of Revenues: As a percentage of revenue, Alcoa spent 0.4% of its total revenues on R&D. Metal Mining industry average R&D spending in the same period was 0.5%
- SG&A share of Revenues: As a percentage of revenue, Alcoa spent 3.9% of its total revenues on Sales, Marketing, and General Administration (SG&A). Metal Mining industry average SG&A spending in the same period was 6.3%
- Inventory share of Revenues: As a percentage of revenue, Alcoa spent 12.4% of its total revenues on Inventories. Metal Mining industry average Inventory spending in the same period was 20.9%
- Accounts Payable share of Revenues: As a percentage of revenue, Alcoa invested 15.6% of its total revenues on Accounts Payable (A/P) Metal Mining industry average Accounts Payable investment in the same period was 9.8%
- Accounts Receivable share of Revenues: As a percentage of revenue, Alcoa invested 9.0% of its total revenues on Accounts Receivable (A/R). Metal Mining industry average Accounts Receivable investment in the same period was 10.1%
- PP&E share of Revenues: As a percentage of revenue, Alcoa invested 100.1% of its total revenues on Property, Plants, and Equipments (PP&E). Metal Mining industry average PPE investment in the same period was 67.7%
- Intangibles share of Revenues: Alcoa Intangibles share of Revenues details are not available because either company does not share the data or we do not have it
- Net Margins: Alcoa Net Margins in the year 2016 were -4.3%. Metal Mining industry average Net Margins in the same period were -3.7%
Sector and Industry Association of Alcoa
For the purpose of performance benchmarking of a company with a sector or industry average, R&P Research associates every company with one sector and one industry. An industry consists of companies with related/similar business models. A sector comprises of a group of related/similar industries.
Alcoa is associated with Basic Materials Sector and Metal Mining Industry.
Basic Materials sector is comprised of the following industries: Metal Mining; Coal Mining; Chemicals. The definitions for each of the industries is as follows:
- Metal Mining industry includes companies primarily engaged in mining, developing mines, or exploring for precious metals such as Gold, Silver, Platinum and base metals such as Iron, Copper, Aluminum, Lead, and Zinc. It also includes companies that manufacture alloys such as steel.
- Coal Mining industry includes companies engaged in the exploration for and/or mining of coal.
- Chemicals industry includes companies that produce and/or distribute commodity and specialty chemicals. The companies manufacture three general classes of products: (1) basic chemicals, such as acids, alkalies, salts, and organic chemicals; (2) chemical products to be used in further manufacture, such as synthetic fibers, plastics materials, dry colors, and pigments; and (3) finished chemical products to be used as materials or supplies in other industries, such as paints, fertilizers, and explosives.
Industry Ranking of Alcoa
With $9.3 billion revenues, Alcoa ranked number 5 of all the companies in the US Metal Mining industry. There were a total of 34 public companies in the US Metal Mining industry that had revenues greater than $50 million during 2016.
The top-10 companies in the US Metal Mining industry by revenues during 2016 were:
- Nucor ($16.2 billion)
- Freeport-McMoRan ($14.8 billion)
- Arconic ($12.4 billion)
- United States Steel ($10.3 billion)
- Alcoa ($9.3 billion)
- Reliance Steel & Aluminum ($8.6 billion)
- Steel Dynamics ($7.8 billion)
- A-Mark Precious Metals ($6.8 billion)
- Newmont Mining ($6.7 billion)
- AK Steel Holding ($5.9 billion)
Business Model Analysis (BMA) Framework
We use the following framework to assess the business model of a company. Business Model Analysis framework can be used by organizations to articulate growth strategies and identify cost optimization opportunities. Technology and consulting companies can use this framework to identify the value drivers and pain points of their targeted customers. Entrepreneurs can use this framework to understand the language of business and identify promising business opportunities. This framework can be used by any professional aspiring to take up a leadership role to better understand the businesses challenges, articulate growth strategy, and monitor the business improvement requirements for the organization.