Alcoa is a US aluminum company with operations all over the world. It mines bauxite, smelts them into alumina and produces aluminum coils and extrusions.
This is a cyclical company but the key characteristics is the very high tax rates. This of course turned its positive PBT into losses after tax. The chart below illustrates what I mean
Can anyone provide an explanation for this?
I have written to the Investors Relations dept on this tax issue but have yet to receive any response.
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Hong Chew Eu
22 Jun 2023
Non Executive Director at i-Bhd
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I found one simple explanation for this. The company had two segments - Domestic and Foreign. While the Foreign was profitable, the Domestic lost money thereby reducing the overall profits. But even though the Domestic had no taxes, when you calculate the overall tax rate you take to total tax divided by the total profits. The Domestic losses magnified the overall tax rate. For example, let us say that the profits/(loss) for the Foreign and Domestic was $ 600 and ($400) resulting in a total profit of $ 200 . And the taxes paid was $ 200 and zero. Then the overall tax rate = 200/200 = 100 %. While it seems like a arithmetic problem, the real question is when will the Domestic ops be profitable