Alcoa 2009 Annual Report Download - page 64

industrial markets. While the customer base for flat-rolled products is large, a significant amount of sales of RCS,
sheet, and plate is to a relatively small number of customers.
Third-party sales for the Flat-Rolled Products segment declined 32% in 2009 compared with 2008. The decrease was
primarily due to a drop in prices, attributable to unfavorable changes in the variable components of certain customer
contracts, and a reduction in volumes across most businesses, both of which were mostly the result of weak end
markets in Europe and North America, and unfavorable foreign currency movements due to a weaker euro and
Australian dollar. Third-party sales for this segment decreased 4% in 2008 compared with 2007. The decline was
principally due to lower volumes across all businesses, mainly the result of weak end markets in North America and
Europe, partially offset by positive foreign currency movements, mostly due to a stronger euro, and a favorable pricing
and product mix.
ATOI for the Flat-Rolled Products segment fell $46 in 2009 compared with 2008, primarily as a result of reduced
volumes across most businesses, the previously mentioned drop in prices, and an increase in depreciation expense as a
result of the new coating line commissioned in Samara (Russia) and the new flat-rolled product facility in Bohai
(China). All of these items were mostly offset by procurement and overhead cost savings and favorable foreign
currency movements due to a stronger U.S. dollar. ATOI for this segment declined $181 in 2008 compared with 2007,
mainly the result of continued higher direct materials, energy, and other cost increases and lower volumes across all
businesses, partially offset by favorable pricing and product mix.
In 2010, continued benefits from cost savings initiatives are anticipated while higher energy costs are expected. Also,
can sheet volumes are expected to decline significantly in North America, the largest market for can sheet, due to a
change in pricing strategy, which will allow cost increases to be passed on to customers. The decision to reduce
volumes, particularly in the first quarter, will provide longer-term profitability for this business. Further, management
continues to explore divestiture alternatives for the remaining Global Foil business (the Sabiñánigo, Spain and
Shanghai, China plants were sold in late 2009).
Engineered Products and Solutions
2009 2008 2007
Third-party aluminum shipments (kmt) 180 257 290
Third-party sales $4,689 $6,199 $5,834
ATOI $ 315 $ 533 $ 435
This segment includes titanium, aluminum, and super alloy investment castings; forgings and fasteners; aluminum
wheels; integrated aluminum structural systems; and architectural extrusions used in the aerospace, automotive,
building and construction, commercial transportation, and power generation markets. These products are sold directly
to customers and through distributors. Additionally, hard alloy extrusions products, which are also sold directly to
customers and through distributors, serve the distribution, aerospace, automotive, and commercial transportation
markets.
Third-party sales for the Engineered Products and Solutions segment declined 24% in 2009 compared with 2008. The
decrease was mostly due to lower volumes (aluminum and nonaluminum) across all businesses because of weak end
markets, lower pricing in the building and construction sector, and unfavorable foreign currency movements due to a
weaker euro. Third-party sales for this segment increased 6% in 2008 compared with 2007. The improvement was
primarily due to higher demand in the aerospace and industrial gas turbine markets; favorable pricing in the building
and construction market; positive foreign currency movements due to a stronger euro; and the addition of two fastener
businesses acquired in early 2008; all of which was partially offset by significant volume declines in the commercial
transportation market.
ATOI for the Engineered Products and Solutions segment fell 41% in 2009 compared with 2008, principally the result
of lower volumes across all businesses and lower pricing, partially offset by procurement and overhead cost savings
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