Alcoa 2003 Annual Report Download - page 35

Other
2003 2002 2001
Third-party aluminum shipments (mt) 230 308 228
Third-party sales $2,654 $2,806 $3,702
ATOI $51 $(9)$47
This group includes other Alcoa businesses that are not included
in the segments previously mentioned. This group includes AFL ,
whichproduceselectrical components for the automotive industry,
and produces fiber-optic cable and provides services to the telecom-
municationsindustry;the residential building products operations,
Alcoa Home Exteriors; and automotive parts businesses. Products
in this segmentare generallysold directlytocustomers or through
distributors.
AFL sales are dependent on a relatively small number
of customers. Seasonal increases in the building products business
generally occur in the second and third quarters of the year.
Third-party sales for the Other group declined 5% in 2003
compared with 2002 primarily at
AFL ,astheautomotive business
continuedtorebalance the customer base and telecommunications
volumes continued to deteriorate. The disposition of distribution
facilities in Europe also contributed to the sales decline. Third-
party sales decreased 24% in 2002 compared with 2001. The
decrease was due to the divestiture of Thiokol (aproducerofsolid
rocket propulsion systems acquired in 2000 as part of the Cordant
acquisition) and the contribution of the net assets of
RASCO
(a business acquired in 2000 as part of the Reynolds acquisition)
toajointventure in 2001, as well as lower volumes in the AFL tele-
communications business, as the market for this business continued
to decline. These decreases were partially offset by volume increases
in the automotivebusinesses (aided by the acquisition of the
remaining50% interest in Engineered Plastic Components, Inc.).
ATOI for this group rose substantially in 2003 compared to a
loss recognized in 2002. The increase in ATOI is primarily due to
productivity and purchasing cost savings recognized at AFL ,aswell
as the impact of a goodwill impairment recognized in 2002 asso-
ciated with the AFL telecommunications business. These increases
in 2003 were partly offset by volume declines at AFL . ATOI declined
significantly in 2002 compared with 2001 due to volume declines
in the telecommunications business, an impairment loss on goodwill
of $39 (before minority interests) associated with the
AFL telecom-
munications business, and the gains on the sales of Thiokol, Alcoa
Proppants, Inc., and Alcoa’s interest in a Latin American cable business
that were recognized in 2001. These decreases werepartially offset
by performance improvements in the automotive businesses and
the absence of goodwill amortization that favorably impacted the
segment by $32 in 2002.
During 2003, Alcoa broadened its customer base in this segment,
specifically in the automotive business, with new business contracts
with several automotive makers. Additionally, Alcoa focused on
low cost sourcingbyopening a facility in Honduras and further
operations in Romania.
33
Packaging and Consumer
2003 2002 2001
Third-party aluminum shipments (mt) 167 162 141
Third-party sales $3,215 $2,838 $2,625
ATOI $ 214 $ 197 $ 181
This segment includes consumer, foodservice, and flexible packaging
products; food and beverage closures; plastic sheet and film for
the packaging industry; and imaging and graphic communications
for the packaging industry. The principal products in this segment
include aluminum foil; plastic wraps and bags; plastic beverage and
food closures; flexible and protective packaging products; design
and prepress services; gravure and flexographic image carrier
products;thermoformed plastic containers and extruded plastic
sheet and film. Consumer products are marketed under brands
includingReynolds Wrap姞,Diamond姞,Baco姞,andCut-Rite姞wax
paper. Seasonal increases generally occur in the third and fourth
quarters of the year for such products as consumer foil and plastic
wraps and bags, while seasonal slowdowns for closuresgenerally
occur in the fourth quarter of the year. Products are generally
sold directlytocustomers, consisting of supermarkets, beverage
companies, food processors, retail chains, and commercial food-
servicedistributors.
Third-partysalesforthePackaging and Consumer segment
increased 13% in 2003 compared with 2002, primarily as a result of
the Ivexacquisition,which contributed approximately $350 more in
2003 than in 2002. Higher volumesintheclosures business also
contributed to the sales increase in 2003. Third-party sales increased
8% in 2002 compared with 2001 primarily due to the acquisition
of Ivex in 2002, which contributed approximately $290, as well as
higher volumes in the closures, consumer products, and packaging
design businesses. These increaseswerepartly offset by lower
volumes, lower prices, and currency devaluation in Latin America.
Despite significantly higher resin prices and the divestitures of
the Latin America
PET business and Latasa, ATOI for this segment
increased 9% in 2003compared with 2002 primarily due to the
full-year results ofIvex,costsavings, an increase inclosuresvolumes,
and positive results in Latin America due to improved economic
conditions.
ATOI increased 9% in 2002 compared with 2001 primarily
due to the acquisition of Ivex, which contributed approximately
$14. A lso impacting ATOI ,toalesserextent,werehigher volumes in
the closures, consumer products, and packaging design businesses,
as well as cost savings across various businesses within this segment.
These increases were partially offset by the negative impact of the
business conditions in Latin America, as noted.
During 2003,Alcoa continued its globalization of the closures
business with new operations in Asia. Additionally, new products
were launched in the consumer and closures businesses. Alcoa
sold its
PET business andits equity interest in Latasa in 2003.
The packaging equipment business was sold in January of 2004.