Arconic (ARNC) has cut full-year guidance due to higher energy costs and operational problems at two of its facilities. Investors were apparently caught off guard by the news, sending shares of the aluminum products company down as much as 15%.
Arconic, a onetime subsidiary of Alcoa, produces aluminum sheet, plate, and architectural products primarily for the aerospace, industrial, and construction markets. The company has had a rough time navigating macroeconomic problems that are hurting demand, with the shares down more than 20% for the year heading into Thursday trading.
News about the company from last night is sending the shares down more. Arconic said it expects to generate between $9.2 billion and $9.5 billion in revenue in 2022, down from previous guidance for between $9.6 billion and $10 billion. Analysts had been expecting $9.6 billion in sales.
Arconic expects adjusted EBITDA for the year in the range of $715 million to $765 million, down from a previous estimate of $820 million to $870 million. The company said that current-quarter results would be affected by "production outages and other operational challenges" at facilities in the U.S., adding that "hyperinflationary energy costs are driving increased cost pressures and declining demand in Europe."
"The third quarter has been substantially impacted by production disruptions," CEO Tim Myers said in a statement. "In addition to the previously discussed seasonality effect on our European facilities and the full quarter disruption related to the de-lacquering equipment at our Tennessee facility, we have had further operational issues."
The revised guidance caused analysts at both Benchmark and Deutsche Bank to lower their price targets on Arconic, though both analysts kept a buy rating on the shares. That seems appropriate, since Arconic's woes have more to do with the broader operating environment than with anything the company is doing wrong.
Energy costs are going to affect the company's results in at least two ways, leading to both higher costs inside Arconic and less demand from end users. Until the current troubles in the economy ease, there isn't much Arconic can do to deliver for shareholders.