Alcoa 2003 Annual Report Download - page 34

construction, and distributor markets (mainly used in the production
of machinery and equipment and consumer durables), of which
approximately two-thirds is sold directly to customers while the
remainder is sold through distributors. Approximately 60% of the
third-party sales in this segment are derived from sheet and plate,
and foil used in industrial markets, while the remaining 40% of
third-party sales consists of
RCS .While the customer base for flat-
rolled products is large, a significant amount of sales of RCS ,sheet,
andplate are to a relatively small number of customers.
Third-party sales for the Flat-Rolled Products segment increased
4% in 2003 compared with 2002 primarily due to the acquisition
of the remaining 50% interest in KAAL Australia (can sheet rolling
mills) in October of 2003, which contributed $105; the favorable
impact of foreign currency exchange movements in Europe; and
increased volumesfor
RCS and sheet and plate. Partially offsetting
these increases were the absence of sales in 2003 from the commer-
cial foil business, which was discontinued as a result of a prior
year’s restructuring program. In 2002,third-party sales declined
7% compared with 2001 primarily duetolowermetal prices, an
unfavorable mix for sheet and plate in the U.S. and Europe due
to continued weakness in the aerospace market, and lower volumes
for
RCS and sheet and plate in Europe.
ATOI for this segment was flat in 2003 compared with 2002.
The contribution ofKAALAustralia to ATOI and the positive results
in Europe due to favorable foreign currency exchange movements
were offset by higher costs for raw materials, energy, and employee
benefits for
RCS and the U.S. sheet and plate business. ATOI decreased
16% i n 2002compared with 2001 primarily due to unfavorable
product mix for sheet and plate in the U.S. and Europe, as well as
lower volumes and lower prices in Europe. These decreases were
partially offset by cost savings in the
RCS business.
During 2003, Alcoa expanded operations in high growth markets
such as Asia through the addition of a foil line at its Shanghai foil
facility. Alcoa continued to make progress in its discussions of a
joint venture in Bohai. Alcoa dissolved its joint ventures with Kobe
Steel Ltd. and acquired theremaining50%interest in KAAL
Australia, which is now fully consolidated in the segment results.
Aluminum Product Shipments
thousands of metric tons
99
4,478
1,411
3,067
2,032
3,366
1,776
3,216 3,324
1,912 1,834
3,213
00
5,398
01
4,992
02
5,236
03
5,047
Fabricated Products
Primary
32
Engineered Products
2003 2002 2001
Third-party aluminum shipments (mt) 879 919 932
Third-party sales $5,589 $5,150 $5,910
Intersegment sales 24 34 35
To t a l s ales $5,613 $5,184 $5,945
ATOI $ 155 $ 105 $ 173
This segment includes hard- and soft-alloy extrusions, including
architectural extrusions, super-alloy castings, steel and aluminum
fasteners, aluminum forgings, and wheels. These products serve
the aerospace, automotive, commercial transportation, industrial
gas turbine, building and construction, and distributor markets
(mainly used in the production of machinery and equipment) and
aresold directlytocustomers and through distributors.
Third-party sales for the Engineered Products segment increased
9% in 2003 compared with 2002, primarily asaresultof the
Fairchild acquisition, which contributed approximately $560 in
2003. Additionally, higher sales in Europe driven by the favorable
impact of foreign currency exchange movements contributed to
the increase in 2003. These increases were somewhat offset by
volume declines in businesses serving the industrial gas turbine and
commercial building and construction markets. Third-party sales
declined 13% in 2002 compared with 2001 primarily due to lower
volumesinbusinessesservingthe aerospace, industrial gas turbine,
andcommercial building and construction markets, somewhat
offset by increased volumes in businesses serving the commercial
transportation market during the year.
ATOI for this segment increased 48% in 2003 compared with
2002 primarily due to cost savings, the contribution of Fairchild
results in 2003, andfavorable foreign currency exchange movements
in Europe. These favorable results were somewhat offset by higher
employeebenefit costs.
ATOI decreased 39% in 2002 compared with
2001.The decrease wasprimarily due to declining volumes as a
result of continued weakness in certain markets, as previously noted,
partially offset by productivity and purchasing cost savings, higher
volumes due to a stronger commercial transportation market during
the year, andtheabsence of goodwill amortization of $61 in 2002.
In 2003,Alcoa continued to build on its low cost capabilities
with soft-alloy extrusions production platforms in Hungary and
Brazil. Alcoa Fastening Systems and Howmet were awarded several
component contracts on various aerospace programs.
Revenues by Geographic Area
billions of dollars
99
16.3
1.0
1.7
3.2
10.4
1.5
2.0
15.4
3.9 4.6
1.5
1.7
14.8
4.2
13.0
1.6
1.6
1.4
2.1
4.8
13.2
00
22.8
01
22.6
02
20.4
03
21.5
Pacific
USA
Other Americas
Europe