April 7 (Bloomberg) -- Alcoa Inc. reported a $497 million net loss in the first quarter, the second straight for the largest U.S. aluminum producer, as the global recession reduced demand for the metal used in automobiles and appliances.

Chief Executive Officer Klaus Kleinfeld said Alcoa’s efforts to reduce its dividend, workforce and production helped the company cope with a “historic” drop in aluminum prices. Excluding some items, the loss was 59 cents a share, trailing the average estimate of 14 analysts for a loss of 56 cents.

“While things are bad, they are not getting a lot worse,” James O’Mealia, chief investment officer of Sunnymeath Asset Management, said in an interview with Bloomberg Television.

The first-quarter net loss of 61 cents a share compares with net income of $303 million, or 37 cents, a year earlier, New York-based Alcoa said today in a statement. Sales fell 41 percent to $4.15 billion.

Alcoa, the first company in the Dow Jones Industrial Average to announce results, fell 7 cents, or 0.9 percent, to $7.72 as of 4:56 p.m. Aluminum prices on the London Metal Exchange have dropped 51 percent in the past year.

Job Cuts

Alcoa has fired 13,500 workers, sought pay cuts from salaried and hourly workers and idled about 20 percent of production since the second half of 2008. Last week, Alcoa said it will idle about 120,000 tons of output and fire some workers at its plant in Massena, New York. The cuts amount to about half of the facility’s capacity.

The company said changes to procurement practices saved $293 million in the quarter and lower overhead expenses reduced costs by $110 million.

Alcoa’s actions are “already beginning to bear fruit” and have helped lower the cost of producing aluminum by 30 percent, better than a company target of a 25 percent decrease, Kleinfeld said in the statement.

“They still have got a lot of production that’s losing money with prices being where they are,” Tony Robson, a Toronto-based analyst at Bank of Montreal, said in an April 1 interview. “It’s a lousy price for any aluminum company to live with, not just Alcoa.”

Robson forecast a 44-cent loss in the quarter. He rates the shares “underperform” and doesn’t own any.

Consecutive Losses

The results mark the first back-to-back quarterly net losses since the three months ended March 1994.

Rio Tinto’s Alcan unit cut production by 11 percent, Andrew Brady and Eugene Wang, analysts at Creditsights Inc., said in a March 5 note to clients. Norsk Hydro ASA Chief Executive Officer Svein Richard Brandtzaeg said on March 30 that as much as 70 percent of the aluminum industry is unprofitable at current prices. Norsk Hydro is Europe’s second-largest producer of the metal.

Annualized global aluminum output in the first two months this year fell by 8.9 percent to 35.5 million tons, according to the Macquarie report.

Alcoa will raise about $2.5 billion this year in proceeds from the sale of its interest in Rio Tinto to Aluminum Corp. of China and an offering of stock and convertible bonds.

Alcoa will use proceeds from the offerings to pay down debt drawn from a one-year revolving credit line and to cover “general corporate expenses,” the company said March 16.

“Investors want to see evidence that the $2 billion-plus is enough for the company to live off in these market conditions,” BMO’s Robson said.

To contact the reporter responsible for this story: Rob Delaney in Toronto at robdelaney@bloomberg.net.

Last Updated: April 7, 2009 17:02 EDT