Alcan speeds toward financial targets

NEW YORK (Reuters) - Alcan Inc. AL.TO AL.N said on Tuesday it expects to meet its financial targets earlier than expected, largely because of robust prices for aluminum and cost controls.

Speaking at the Reuters Global Mining and Steel Summit in New York, Richard Evans, president and chief executive of Alcan, the world's second-largest maker of primary aluminum, said: "We're going to meet our financial targets much earlier than we anticipated, particularly on our balance sheet targets."

Evans said those key targets include exceeding Alcan's 8 to 8.5 percent cost of capital employed, generating free cash flow of $2 billion a year, 15 percent compounded growth in operating earnings and a debt-to-capital ratio of 35 percent.

Evans said that on a pro rata basis, he expects the Montreal company to generate more than $2 billion of cash from operations this year. Alcan began the year with a debt-to-capital ratio of 40 percent.

"Clearly, at the rate that we are going, unless there is some cataclysmic event, we're going to pass (down) through the 35 percent in the second half of this year," he said.

Evans noted that Alcan is clearly benefiting from this year's surge in aluminum prices, but the hot commodities market makes it difficult to make acquisitions at acceptable prices on the upstream side of the business.

"There is such a built-in expectation of current price levels, and then if you put a control premium on top of that, we think we would be in most cases overpaying to make upstream acquisitions," he said.

($1=$1.10 Canadian)