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Alcoa Wins $1 Billion Parts Deal With Airbus

10/05/2015 | 01:45pm US/Eastern

Alcoa Inc. on Monday said it signed a $1 billion deal to supply airplane maker Airbus Group SE with bolts, rivets and other pieces used to hold planes together.

The contract, which New York-based Alcoa calls its largest deal for aerospace fastening systems with Airbus, comes just a week after the 127-year-old aluminum maker said it would split itself in two.

The parts, to be made from titanium, steel and nickel-based alloys at 14 factories, will be used on planes including the Airbus A350; the Toulouse, France-based plane maker's newest commercial aircraft, the A320neo; and the A330.

The pieces, designed to withstand lightning strikes and to be more resistant to wear, will be used in the assembly of panels and engine pylons on newer planes, Alcoa said.

Alcoa Chief Executive Klaus Kleinfeld called the fastening systems "breakthrough technologies for some of the most advanced aircraft in the world." Alcoa also has supply agreements with Airbus rival Boeing Co.

Airbus confirmed the deal, saying most of the work for the contract would be completed in California, and at more than a dozen Alcoa sites world-wide.

Alcoa's stock was recently up 8% to $10.30.

The company's raw-aluminum business has been battered by falling aluminum prices, driven by booming Chinese exports.

Last week, the company said its mining, processing and smelting divisions would next year become a separate company, still called Alcoa.

A second company, the name of which has yet to be determined, will be spun off and focus on making parts and pieces for airplanes and cars, including in deals such as the Airbus contract. That company is expected to be the more profitable one.

Under Mr. Kleinfeld, Alcoa last year bought U.K. jet-engine-parts maker Firth Rixson Ltd., and this year acquired Pittsburgh-based RTI International Metals Inc., one of the world's biggest makers of fabricated titanium products for the aerospace industry.

Those acquisitions made the split announced last week a better option than selling off the raw-aluminum business, according to people familiar with the matter. Mr. Kleinfeld, a former Siemens AG executive, will remain CEO of the still-unnamed company and will be temporary chairman of the new Alcoa.

Alcoa's new spinoff company will compete with Portland-based Precision Castparts Corp., which Warren Buffett's Berkshire Hathaway Inc. agreed to buy in August for about $32 billion, the investor's biggest acquisition yet.

For the second quarter, Alcoa posted a profit of $140 million, or 10 cents per share, up slightly from a year earlier.

Its smelting division earned $67 million, a 31% drop from a year earlier, and its average "third-party realized price," which it charged outside customers, fell 5% to $2,180 per metric ton.

Alcoa will kick off earnings season for major U.S. companies this week, with third-quarter results due out on Thursday.

Corrections & Amplifications: Alcoa Inc. is 127 years old. An earlier version of this article incorrectly said it was 126 years old.

Joann S. Lublin contributed to this article.

Write to John W. Miller at john.miller@wsj.com

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