Alcoa Has First Quarterly Loss Since 2009 After Prices Drop

Alcoa Inc. (AA), the largest U.S. aluminum producer, reported its first quarterly loss in more than two years after prices for the lightweight metal tumbled.

The fourth-quarter net loss was $191 million, or 18 cents a share, compared with net income of $258 million, or 24 cents, a year earlier, the New York-based company said yesterday in a statement. The loss excluding restructuring costs was 3 cents a share, matching the average projection from 18 estimates compiled by Bloomberg. Sales rose 6 percent to $5.99 billion.

The loss is Alcoa’s first on an adjusted basis since the second quarter of 2009, when the company was dealing with a slump in aluminum prices that followed the global financial crisis. Aluminum fell in 2011, with the benchmark three-month price in London averaging 11 percent lower in the fourth quarter than a year earlier, and Alcoa said last week it would close 12 percent of its smelting capacity.

The loss “makes it very much an uphill battle” to meet analysts’ expectations in 2012, Jorge Beristain, an analyst at Deutsche Bank AG who recommends holding the stock, said by phone yesterday. Earnings before interest, tax, depreciation and amortization must “essentially double in the next quarter and then stay at that level for the next four,” he said.

Alcoa rose 0.2 percent to $9.44 in New York. Aluminum for delivery in three months on the London Metal Exchange gained 2.7 percent to $2,164 a metric ton at 8:31 p.m. London time.

Index Decliner

The company is the first in the Dow Jones Industrial Average (INDU) to report earnings for the quarter. The stock sank 44 percent last year, the second-biggest decline in the index after Bank of America Corp.’s 58 percent slump.

The aluminum producer will cut its global smelting capacity by 531,000 tons. U.S. smelters at Alcoa, Tennessee, and Rockdale, Texas, will be affected, it said Jan. 5. Alcoa said yesterday it will curtail output at smelters in Portovesme, Italy, and La Coruna and Aviles in Spain as part of the plan.

Aluminum supply has exceeded demand and inventories have soared, leaving some smelters unprofitable at current metal prices. Global output exceeded demand by 953,516 tons in the first three quarters of 2011, according to data compiled by Bloomberg Industries.

Demand Outlook

Chief Executive Officer Klaus Kleinfeld said yesterday that global aluminum demand will grow 7 percent this year, compared with 11 percent in 2011. That expansion, combined with production cuts, will lead to a market deficit of 600,000 tons in 2012, Alcoa said.

Aerospace sales growth will be 10 percent to 11 percent in 2012, the company said yesterday in an analyst presentation. European auto- and truck-manufacturing output and construction sales will decline. Beverage-can and packaging sales will grow by as much as 5 percent in Europe, and by as much as 20 percent in China, Alcoa said.

European aluminum demand won’t expand in 2012, compared with growth of 1 percent last year, it said. Chinese demand will increase 12 percent this year, down from 15 percent.

Alcoa is a fully integrated aluminum producer. It mines bauxite, an ore that contains aluminum, and refines it into alumina, the raw material used by smelters. As well as selling aluminum to industrial users, Alcoa makes products such as can sheet and components for cars and aircraft.

Alcoa’s aluminum output increased 5.4 percent to 962,000 tons in the quarter. Its alumina production rose 1.4 percent to 4.18 million tons.

The company’s previous quarterly loss on a GAAP basis was in the first quarter of 2010.

To contact the reporter on this story: Sonja Elmquist in New York at selmquist1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net

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