(MENAFN- AFP) Shares of US aluminum company Arconic tumbled Monday after it announced it would no longer sell cladding for high-rise buildings following the deadly Grenfell Tower fire in London this month.
Arconic, which was spun off from Alcoa last year, dropped 6.0 percent in midday trading to $24.01.
The company said it was ending global sales of Reynobond PE material for use in high rises due to "issues that have arisen in the wake of the Grenfell Tower tragedy" and the "inconsistency" in building regulations around the world.
"We will continue to fully support the authorities as they investigate this tragedy," the company said.
As emergency services continue to search through the ashes of the gutted building, suspicion has fallen on the recently-installed cladding with allegations it may have contributed to the ferocity of the fire.
The June 14 inferno left 79 people presumed dead after the fire spread rapidly up the 24-storey residential block in west London.
CFRA lowered its 12-month price target on Arconic by $4 to $27. A research note from the firm applauded the announcement Monday, but called questions about Grenfell an "overhang" on the equity.
CFRA analyst Matthew Miller told AFP there was "significant headline risk" around Arconic, although he does not think it is likely the company will face a major financial hit from the calamity because the problem appears to be with the building code.
Arconic's announcement came on the heels of weekend news accounts that scrutinized the US company's decision to sell the panels for the refurbishment of Grenfell.
A British-based Arconic executive sent and received six emails with the company involved in the Grenfell refurbishment questioning the use of the cladding, according to a Reuters report.
Arconic also was mentioned in a front-page New York Times story on Sunday that called the company's marketing of the material in Britain "opaque" compared with other parts of Europe, where there is an explicit warning against using the material on taller buildings.
The company issued a statement previously saying while it provides "general usage guidelines" for the material, the "regulations and codes vary by country and need to be determined by the local building code experts."
It also stressed that it did not supply the insulation used with the cladding system.
Sales of the Reynobond PE cladding for use in low-rise buildings will continue.
An estimated 600 tower blocks in England believed to have similar cladding to that used at Grenfell are currently going through tests.
Samples taken from 75 high-rises tested so far have all failed safety tests, communities minister Sajid Javid told parliament on Monday.
In May, Arconic reached an agreement with activist fund Elliott Management to accept three Elliott nominees to the board after a bruising proxy campaign that led to the resignation of chief executive Klaus Kleinfeld.
MENAFN2606201701430000ID1095581873
Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.