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Arconic To Split Into Two Companies, Cut Dividend; Stock Down

Arconic Inc. (ARNC) announced as part of its strategy and portfolio review that it will separate into Engineered Products & Forgings and Global Rolled Products, with a spin-off of one of the businesses. In addition, it will also explore the potential sale of businesses that do not best fit into Engineered Products & Forgings or Global Rolled Products.

The company also intends to execute its previously authorized $500 million share repurchase program in the first half of 2019. The Board has also authorized an additional $500 million of share repurchases, effective through the end of 2020.

Arconic expects to reduce its quarterly common stock dividend from $0.06 to $0.02 per share.

The company commenced plans to reduce operating costs by approximately $200 million on an annual run-rate basis. The program is designed to maximize the impact in 2019.

ARNC is currently trading at $16.84, down $0.84 or 4.75 percent.

As previously announced on February 6, 2019, the Board appointed John Plant, current Chairman of the Board, to serve as Chairman and Chief Executive Officer. The Board also appointed Elmer Doty, a current Director, to serve as President and Chief Operating Officer. These appointments were effective immediately.

Arconic reported that its Net income, excluding special items, was $162 million, or $0.33 per share, in the fourth quarter of 2018, versus $152 million, or $0.31 per share, in the fourth quarter of 2017. The increase was driven by higher volumes and lower expenses for pension, interest, and taxes, largely offset by higher aluminum prices and unfavorable product mix.

Net income in the fourth quarter was $218 million, or $0.44 per share, compared to net loss of $727 million, or $1.51 per share in the fourth quarter 2017.
The latest-quarter results included $56 million of income from special items, primarily related to a gain on the sale of the Texarkana, Texas, rolling mill and discrete tax items, partially offset by pension plan settlement charges and a loss on the sale of the Eger, Hungary, forgings business.

The prior year result included the impairment of goodwill.

Revenues in the fourth quarter 2018 were $3.5 billion, up 6% year over year. Fourth quarter 2018 organic revenue was up 10% year over year, driven by higher volumes across all segments with double digit growth in most major end markets.

Analysts polled by Thomson Reuters expected the company to report earnings of $0.30 per share and revenues of $3.42 billion. Analysts' estimates typically exclude special items.

For 2019, the company expects revenue to be in the range of $14.3 billion-$14.6 billion, adjusted earnings per share $1.55-$1.65. Wall Street currently is looking for fiscal year 2019 earnings of $1.58 per share on annual revenues of $14.43 billion.

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