Arconic to Cease High-Rise Sales of Panels in London Fire

  • Shares decline most since spinoff from Alcoa in November
  • Scrutiny adds to hurdles following proxy battle with Elliott

Smoke rises from the Grenfell Tower in London, on June 14, 2017.

Photographer: Leon Neal/Getty Images

Arconic Inc. plans to stop some sales of the type of flammable panels used on London’s Grenfell Tower following a deadly inferno at the high-rise apartment building this month.

The manufacturer is under scrutiny after media reports said Arconic was aware that the material, known as Reynobond PE, was a fire hazard before supplying it for a renovation of the 24-story structure. The shares fell the most since the company spun off from Alcoa Inc. eight months ago.

“Arconic is discontinuing global sales of Reynobond PE for use in high-rise applications,” the New York-based company said by email Monday. “We believe this is the right decision because of the inconsistency of building codes across the world and issues that have arisen in the wake of the Grenfell Tower tragedy regarding code compliance of cladding systems.”

The company said it would “continue to fully support” authorities investigating the June 14 blaze, which killed at least 79 people.

The scrutiny expands the challenges for Arconic, which was mired in one of corporate America’s biggest proxy battles this year. The company, which specializes in metal manufacturing for the aerospace, building and automotive industries, ousted its chief executive officer and agreed to give Elliott Management Corp. three board seats after the New York hedge fund took a stake and began agitating for changes.

Arconic supplied aluminum-and-polyethylene panels that were among the components in the cladding for the Grenfell project in 2015 while acknowledging in its marketing brochure that the substance can be unsafe for facades on tall buildings, Reuters reported June 24. The company also offers nonflammable versions of Reynobond. Arconic’s U.K. sales manager sent emails as early as 2014 questioning the decision to sell the product for the building, according to the report.

Possible Liability

The use of combustible cladding has become a focal point for investigators. As the U.K. looks to hold someone responsible, Arconic could be subject to significant liabilities, Seaport Global analyst Josh Sullivan said in an interview.

“The political sentiment on the ground in the U.K. is very aggressive right now,” he said. “Whether or not they are ultimately culpable, they are going to be a part of the inquiry process.”

While it’s too early to determine the possible financial impact, the situation could make it more difficult for Arconic to find a permanent CEO, Cowen & Co. analyst Gautam Khanna said in a note. David Hess has been serving on an interim basis since April, when Klaus Kleinfeld left the company.

Arconic’s shares fell 6 percent to $24 at 1:44 p.m. in New York after dropping as much as 11 percent, the most intraday since Nov. 2.

Separately, Celotex said in a statement that it would stop selling its RS5000 insulation boards for rainscreen cladding systems in buildings taller than 18 meters (59 feet) “pending further clarity.” The manufacturer, a unit of Cie. de Saint-Gobain SA, previously said the material was purchased for use in refurbishing Grenfell Tower.

— With assistance by Ania Nussbaum

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