Alcoa Forecasts Record Auto-Sheet Shipments This Quarter

Alcoa Inc., the largest U.S. aluminum producer, forecast profit from auto and aerospace components will increase in the fourth quarter as it sells a record amount of the metal to carmakers.

Alcoa, which is shifting its focus to manufacturing components and alloys, said it would deliver a record amount of aluminum sheet to automakers this quarter as car and truck manufacturers use more of the lightweight metal. Earnings in the company’s rolled-products segment, a supplier of aluminum sheets to car, airplane and packaging manufacturers, will more than double from a year earlier, the New York-based company said today in a slide presentation.

Alcoa is benefiting from higher commercial-jet orders and a shift to aluminum components instead of steel among automakers such as Ford Motor Co., which plans to make its F-150 pickup truck with aluminum body panels.

“Auto body sheet has a much higher margin than anything except aircraft,” Lloyd O’Carroll, a Richmond, Virginia-based Analyst at Northcoast Research Holdings LLC who recommends buying Alcoa shares, said in an interview. “I think 2015 is going to get a pretty big lift of usage on the F-150 and of course all of the margin benefit of that.”

Alcoa also forecast after-tax operating income in its engineered products division, which makes components for jets and truck wheels, will climb by 8 percent to 12 percent this quarter from a year earlier.

Profit Rises

Companywide, third-quarter net income rose to $149 million, or 12 cents a share, from $24 million, or 2 cents, the New York-based company said today in a statement. Profit excluding one-time items was 31 cents, surpassing the 22-cent average of 17 estimates compiled by Bloomberg. Sales increased 8.2 percent to $6.24 billion, beating the $5.84 billion average estimate.

The results were released after the close of trading in New York, where Alcoa rose 1.9 percent to $16.37 at 5:26 p.m. The shares have climbed 51 percent this year through the close, outpacing the S&P 500’s 6.5 percent gain.

Alcoa has expanded capacity at downstream plants in Indiana and Virginia this year, and in June agreed to buy U.K. aerospace-component maker Firth Rixson Ltd. for $2.85 billion, its biggest acquisition since 1999.

The company also has permanently shut 905,000 metric tons of aluminum-smelting capacity since 2011 while a further 665,000 tons is being kept idle, Alcoa said today.

Despite a lingering global surplus, prices have rallied this year. Metal for delivery in three months, the benchmark contract on the London Metal Exchange, averaged $2,009 a ton in the third quarter, up 9.9 percent from a year earlier. The premium that buyers pay to have metal delivered from warehouses has soared, something that also benefits Alcoa.

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