July 9 (Bloomberg) -- Alcoa Inc., the world's second- biggest aluminum producer, said second-quarter profit fell 3.9 percent after expenses for shutdowns at two U.S. smelters eroded the benefit of rising metal prices.

Net income dropped to $715 million, or 81 cents a share, from $744 million, or 85 cents, a year earlier, New York-based Alcoa said today in a statement. Profit excluding items topped analysts' estimates by 1 cent. Sales climbed 3.5 percent to $8.07 billion.

Alcoa, led by Chief Executive Officer Alain Belda, started a $27.9 billion hostile bid for Alcan Inc. in May after losing its spot as the world's biggest producer earlier this year. Costs for lost output in Tennessee and Texas cut earnings by $36 million in the quarter. The price of aluminum rose 5.5 percent, and profit gained at five of six units from the previous period.

``The underlying fundamentals are still very strong, and I take away a positive for the quarter,'' said Scott Burns, an analyst at MorningStar Inc. in Chicago. ``They did a good job keeping costs under control. The company really makes money, and they just had the one slip up with the outages.''

Alcoa was the first company in the Dow Jones Industrial Average to report second-quarter earnings. Profit excluding items was 81 cents a share. The company was forecast to earn 80 cents, the average estimate of eight analysts surveyed by Bloomberg.

Earnings were announced after the end of regular U.S. trading. Shares of Alcoa rose 4 cents to $42.40 at 7:14 p.m., up from the close of New York Stock Exchange composite business.

Offer Extended

The shares had gained 70 cents to $42.36 at 4 p.m. They have climbed 26 percent in the past year.

Alcoa said it extended its offer for Alcan to Aug. 10 from July 10. All other terms and conditions ``remain unchanged,'' Alcoa said. Only 418,500 Alcan shares, or 0.1 percent, of 367.6 million shares outstanding have been tendered in the bid.

``We remain the natural partner for Alcan with the most substantial synergies, and an unparalleled commitment to Canada and Quebec,'' Belda said in the statement.

Alcoa is seeking to buy Montreal-based Alcan, the world's third-largest aluminum producer, to almost double production and get access to cheaper power. Russia's United Co. Rusal is the biggest by current output.

Bid Expense

Costs for the bid reduced second-quarter profit by 2 cents a share, Alcoa said. The company reported a restructuring gain of $21 million, or 2 cents. Output at the Tennessee plant fell after lightning struck a power substation in mid-April.

Alcoa said on July 6 it was asked by U.S. antitrust regulators for more information on the Alcan bid. It has also submitted documents to Australian and Canadian regulators and made a draft filing to the European Union, Belda said on a conference call with analysts.

The company has said it is willing to sell assets to win antitrust approval for the deal, which has a target completion date of year's end.

Alcoa sold aluminum at $2,879 a metric ton on average in the quarter, up from $2,728 a year earlier. Production rose to 901,000 tons from 882,000 tons, while shipments rose to 565,000 tons from 508,000.

Profit at the engineered-products business rose to $105 million from $100 million, the company said. Profit at the flat- rolled products division rose to $93 million from $79 million.

Pricing Power

Buying Alcan would give Belda, 64, control of about 20 percent of the global aluminum market, greater pricing power over customers and more resources to compete for projects from Iceland to Australia. Belda has spent the past 34 years at Alcoa.

Alcoa ``is at the peak of its cycle now,'' Thomas Winmill, president of Midas Management Corp. in New York, said before earnings were announced. ``Inventories are coming down, and a lot of the problems in the industry have been solved. Alcoa needs these Alcan assets.''

The price of aluminum has doubled in the past five years. Global consumption will probably increase by that amount over the next 15 years, Alcoa had estimated.

Demand by aircraft makers including Boeing Co. is increasing. China, the world's largest user of aluminum, has boosted construction of bridges, skyscrapers and power- transmission lines that use the metal.

Alcoa reiterated that it expects a global surplus of 300,000 tons of aluminum this year, less than 1 percent of the 38 million-ton market.

Chinese demand will increase about 34 percent this year, while North America will probably consume 2.5 percent more than last year, Belda said on the call. Demand growth in the European Union will probably top 3 percent this year, he said.

New projects will add 15 to 20 cents a share to earnings in 2007, Belda said on Jan. 9. The company is closing metal plants from Europe to North America and may shed as many as 6,700 jobs after units failed to meet profit targets.

Alcoa's revenue a year earlier was $7.8 billion.

To contact the reporter on this story: Dale Crofts in Chicago at dcrofts@bloomberg.net

Last Updated: July 9, 2007 19:16 EDT