Alcoa Profit Tops Estimates as Aluminum Prices Rise
After aluminum prices fell and global inventories rose, Alcoa CEO Klaus Kleinfeld idled 20 percent of smelting capacity. Photographer: Daniel Acker/Bloomberg
July 12 (Bloomberg) -- Dick Bove, analyst at Rochdale Securities, Hugh Johnson, chairman and chief investment officer at Hugh Johnson Advisors LLC, and Matt Shapiro of MWS Capital, discuss the outlook for U.S. stocks and corporate earnings. They speak with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." (Source: Bloomberg)
Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter profit that topped analysts’ projections as higher metal prices boosted sales. The shares rose.
Earnings from continuing operations were 13 cents a share, exceeding the 11-cent average estimate of 17 analysts surveyed by Bloomberg. Net income of $136 million, or 13 cents a share, compared with a net loss of $454 million, or 47 cents, a year earlier, New York-based Alcoa said today in a statement. Sales gained 22 percent to $5.19 billion.
Aluminum for delivery in three months increased 39 percent, on average, in the second quarter from a year earlier on the London Metal Exchange. The price today was still down more than 40 percent from the July 2008 high, before the global economic recession cut demand for the metal used in everything from jet planes to beer cans. After prices fell and global inventories rose, Chief Executive Officer Klaus Kleinfeld idled 20 percent of Alcoa’s aluminum-smelting capacity.
“The quarter came in pretty well considering what they were facing,” Charles Bradford, a partner at New York-based consulting firm Affiliated Research Group LLC, said in a telephone interview. “By any measure, 13 cents is better than a loss a year ago, but a year ago people thought the world was ending. You really should compare against a couple years further back for more normal times.”
Alcoa Profits
In the 18 months through June 2008, before commodity and stock markets tumbled, Alcoa’s profit excluding one-time items averaged 62 cents a share.
Alcoa, the first company in the Dow Jones Industrial Average to report earnings for the three months through June, rose 37 cents, or 3.4 percent, to $11.24 at 5 p.m. after the close of regular trading on the New York Stock Exchange. The shares dropped 33 percent this year through the close of regular trading today, the largest decline in the 30-member Dow.
Alcoa said stronger demand from end-use markets will mean global aluminum consumption will increase 12 percent this year, compared with the 10 percent that the company previously forecast.
During the second quarter, the union representing 6,000 workers at 11 of Alcoa’s U.S. plants agreed to avoid a strike and accept a labor contract under which employees share a greater portion of health-care costs.
To contact the reporter on this story: Edmond Lococo in Boston at elococo@bloomberg.net.
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