Alcan plans closures, job cuts (December 13, 2004)

Montreal-based aluminum giant Alcan (AL-T) plans to close three European facilities as part of a restructuring plan associated with its assimilation of French rival Pechiney, which it acquired in 2003.

Slated for closure are the Flemalle rolled products mill in Belgium, and packaging plants in Cruseilles, France, and Garbagnate, Italy. Alcan also intends to lay off some workers at Laffon in Italy, Kolin in the Czech Republic, Froges (pharmaceutical workshop) in France, and Alcan Mass Transportation Systems in Zurich, Switzerland.

The company will look to sell the Mercus and Froges alloy businesses in France.

In all, 520 jobs will be eliminated, though the losses will be partially offset by the creation of around 40 jobs in France, Switzerland and Italy. Alcan currently employs 46,000 people in Europe.

“Alcan continually reviews its portfolio based on changing economic and market conditions,” says CEO Travis Engen. “The proposed restructuring is necessary to ensure Alcan’s competitiveness in the marketplace and to create favourable conditions for growth and expansion. Maintaining competitiveness is the best insurance for long-term sustainable employment.”

Some of the new jobs will be a result of a 22-million-euro investment at the Issoire plant in central France. The company plans to boost plate production capacity there by 10% in 2005 and 2006; the plant supplies the aerospace industry.

Alcan is in talks with employee representatives over implementation of the restructuring plan.

Also, on Dec. 22, shareholders will vote on a plan to spin off its rolled-products businesses into an independent company. The new company, to be named Novelis, would start operating in early 2005 and be the world’s biggest rolled aluminum products company, based on shipment volumes. Pro forma revenues in 2003 were US$6.2 billion. The company will be domiciled in Canada, with an executive office in the U.S., and 38 operations and 13,600 employees in 12 countries.

The spinoff plan also calls for some $2.8 billion in new bank and bond financing; Alcan already has commitments from a group of financial institutions. The scheme is aimed at meeting conditions imposed by U.S. and European regulators after Alcan’s takeover of Pechiney.

Novelis shares will trade on both the New York and Toronto stock exchanges.

In mid-November, Alcan sold off its zinc and lead trading business and its ores and concentrate trading division to Trafigura, an independent commodity-trading company based in Amsterdam. Alcan considered the operations, picked up via the Pechiney acquisition, non-core assets. The sales were also aimed at placating competition authorities.

Meanwhile, in the Republic of Guinea, Alcan and Pittsburgh-based partner Alcoa (AA-N) have inked a protocol agreement with the government for the development of a 1.5-million-tonne-per-year alumina refinery. The protocol provides a framework for a memorandum of understanding, to be negotiated by the three over the next few months.

The world’s two largest aluminum producers expect to complete a feasibility study of the project in 2005, and a production decision would follow soon afterwards. Alumina production could begin in 2008. The cost of the project has yet to be determined. Alcoa would act as operator, with each company responsible for marketing its own share of production.

Feed for the refinery is expected to come from Compagnie des Bauxites de Guine (CBG), which currently mines bauxite for export (bauxite is a source of alumina, or aluminum oxide, which is extracted and smelted into aluminum). Alcan and Alcoa each have a 45% stake in Halco (Mining), which in turn owns 51% of CBG; the government holds the balance.

“Owing to the significant quantity and high quality of the bauxite reserves, Guinea represents an attractive location for an alumina refinery,” says Michael Hanley, CEO of Alcan Bauxite & Alumina. “In addition, the long-standing involvement of Alcan and Alcoa in Compagnie des Bauxites de Guine places us in a favourable position to develop such a project.”

CBG’s has exclusive rights to bauxite reserves and resources in a 25,900-sq.-km area in the northwestern part of the country.