Alcoa Shares Drop After Aluminum Producer's Quarterly Sales Miss Estimates
Alcoa Inc. (AA), the largest U.S. aluminum producer, fell in New York trading after it reported first-quarter sales that missed analysts’ estimates and said raw-material costs climbed.
Alcoa declined as much as 7 percent, the biggest drop in eight months. The company’s sales increased 22 percent from a year earlier to $5.96 billion, Alcoa said yesterday in a statement. That trailed the $6.06 billion average estimate of eight analysts in a Bloomberg survey.
Alcoa, traditionally the first company in the Dow Jones Industrial Average to report quarterly results, said its earnings were curbed by a weaker U.S. dollar, and higher energy and raw-material costs. Prices for carbon products and caustic soda, used in the processing of bauxite, are increasing following the earthquake in Japan and political turmoil in North Africa, Chief Financial Officer Chuck McLane said on a conference call to discuss the earnings.
“Maybe some people were a bit worried about input costs trending higher and Alcoa not being able to pass along the price increases quickly enough,” Bill Selesky, a New York-based analyst at Argus Research Co., said in a telephone interview today. “It’s had a nice run so I’m sure there are some short- term investors who are taking profits.”
Alcoa fell $1.07, or 6 percent, to $16.70 at 4:15 p.m. in New York Stock Exchange composite trading. The shares have advanced 8.5 percent this year.
“We are seeing increasing tightness in the Asian caustic market,” McLane said on the call yesterday. “Due to this disruption as well as the continuing unrest in the Middle East, we expect to see higher input costs for fuel oil.”
Crude-oil prices on the New York Mercantile Exchange averaged 20 percent more in the first quarter than a year earlier.
First-quarter net income of $308 million, or 27 cents a share, compared with a loss of $201 million, or 20 cents, a year earlier, the New York-based company said in the statement. Profit excluding restructuring costs and other one-time items was 28 cents a share, topping the 27-cent average estimate of 14 analysts surveyed by Bloomberg.
“They beat on the bottom line with a lower top-line number, which suggests their cost control was better than expected,” John Stephenson, a portfolio manager at First Asset Investment Management Inc. in Toronto, said yesterday in an e- mailed response to questions. “Primary metal and sheet product prices have risen since March, so second-quarter earnings should be even better.”
Aluminum prices have advanced 10 percent in the past year in London because of improving demand for the metal, which is used in construction, autos and beverage cans. Alcoa said its average realized price for aluminum rose 15 percent from a year earlier to $2,682 a metric ton.
Alcoa operates in 31 countries, selling aluminum in U.S. dollars and paying costs in local currencies. The Canadian dollar has advanced 4.8 percent against its U.S. counterpart in the past 12 months while the Brazilian real gained 11 percent. In Australia, where the company generated 14 percent of its revenue last year, second to the U.S., the currency appreciated 12 percent.
“They took a significant hit in the strong loonie, the Aussie dollar and the real,” Chuck Bradford, president of Bradford Research, said in a telephone interview from New York yesterday.
The company reiterated its forecast that global aluminum demand will grow 12 percent this year.
“Our outlook for the rest of 2011 and beyond remains very positive,” Chief Executive Officer Klaus Kleinfeld said in the statement.
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