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UPDATE 2-Alcoa cuts dividend, seeks to raise cash
March 16, 2009 / 8:27 PM / 9 years ago

UPDATE 2-Alcoa cuts dividend, seeks to raise cash

* Cuts dividend to 3 cents/quarter from 17 cents

* Will issue shares, convertible debt to raise $1.1 bln

* Plans to cut 2010 capital spending

* Stock sinks 10 percent in after-hours trade (Adds details on new cuts, background)

NEW YORK, March 16 (Reuters) - Alcoa Inc (AA.N) said on Monday it will slash its dividend, issue stock and convertible notes worth about $1.1 billion and trim its 2010 spending to help weather the steep downturn in aluminum demand.

The move sent Alcoa’s shares tumbling 10 percent to $5.50 in after-hours trade as investors again punished the stock that had fallen to 21-year lows earlier this month.

With the dividend cut, Alcoa joins other blue chip companies such as General Electric (GE.N) and Dow Chemical DOW.N in chopping its quarterly payout to shareholders amid the worst U.S. recession in decades.

Alcoa has suffered as the global economic downturn has eroded demand for the versatile metal from the automotive, commercial transportation and building and construction sectors.

That weakness will push the company to its second consecutive quarterly loss, it said in a filing to the Securities and Exchange Commission, as both prices and volumes decline.

Prices for alumina, the raw material used to make aluminum, are expected to be down 34 percent in the current quarter from the fourth quarter, the company said, while aluminum is likely to be down 26 percent.

In January, Alcoa said it would cut 15,000 jobs, halve its capital spending and sell four businesses, shortly before it announced a fourth quarter net loss of $1.19 billion.

Alcoa Chief Executive Klaus Kleinfeld told the Reuters Mining and Steel Summit last week he expected global aluminum demand to drop 6 to 7 percent this year, worse than the 2 percent decline he had expected in January.

“Today’s actions better prepare Alcoa to manage through prolonged downturn and position the company for the future,” Kleinfeld said in a statement on Monday.

SAVINGS SOUGHT

The company will save more than $400 million annually by cutting its quarterly dividend to 3 cents per share from 17 cents, it said, and move to increase its working capital to $800 million this year.

Its new cuts will also target cost savings in procurement of $2 billion annually and other cost reductions of $400 million by 2010.

Alcoa plans to issue 150 million shares in common stock, which would yield $850 million based on Friday’s closing price, and other $250 million in convertible notes due in 2014.

Money raised by the offerings will be used to repay an outstanding debt under its senior unsecured 364-day revolving credit facility.

Alcoa shares sunk 10 percent, or 62 cents, to $5.50 in post-market trade, erasing the 39 cent gain during the regular trading session on Monday (Reporting by Matt Daily; editing by Jeffrey Benkoe, Bernard Orr)

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