Big Charges Clear the Way to Future Growth

Article Excerpt

ALCAN INC. $56 (Toronto symbol AL; SI Rating: Average) plans to close two European smelters and consolidate some of its packaging operations. These moves cut Alcan’s after-tax profits in the fourth quarter of 2005 by $409 million (all amounts except share price in U.S. dollars). It also wrote down $122 million of goodwill related to the packaging operations. If you exclude all unusual items, Alcan earned $2.44 a share (total $911 million) in 2005, up 13.0% from $2.16 a share ($800 million) a year earlier. These moves should cut Alcan’s long-term costs and risk. It will also help it take full advantage of rising aluminum prices. The stock has gained 50% in the past six months, and now trades at 15.4 times its 2006 forecast profit of $3.17 U.S. a share. Alcan is a buy. buy…

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