By Sonja Elmquist - Jul 10, 2012 4:10 AM GMT+0700
Alcoa Inc. (AA), the largest U.S. aluminum producer, reported second-quarter earnings and revenue that beat analysts’ estimates after an increase in orders from the auto and aerospace industries.
The company had a net loss of $2 million, or break even on a per share basis, compared with net income of $322 million, or 28 cents, a year earlier, New York-based Alcoa said today in a statement. Profit excluding a charge related a proposed settlement of Aluminium Bahrain BSC (ALBH)’s lawsuit and other items was 6 cents a share, compared with the 5-cent average of 19 estimates compiled by Bloomberg. Sales fell 9.4 percent to $5.96 billion from $6.59 billion, exceeding the $5.81 billion average of 11 estimates.
Alcoa, whose customers include Ford Motor Co. and Toyota Motor Corp., is benefiting as car and truck makers are being compelled by regulations to produce lighter vehicles. The U.S. aluminum industry will ship 16 percent more aluminum to automakers in 2012 as car output climbs 11 percent, according to Lloyd O’Carroll, an analyst at Davenport & Co. in Richmond, Virginia. Aircraft manufacturers also face record backlogs as airlines hurry to refurbish aging fleets.
“In their downstream business and midstream business, those two pieces we are seeing margin expansion,” Brian Yu, a San Francisco-based analyst at Citigroup Inc. who recommends holding Alcoa’s shares, said in a July 6 interview. “It’s a sign that, yes, the company is doing some things right.”
Forecast Reaffirmed
Alcoa rose 0.2 percent to $8.78 as of 5:03 p.m. in New York after the close of regular trading. The company, which is typically the first company in the Dow Jones Industrial Average to report quarterly results, has fallen 47 percent in the past year, the worst performance after Hewlett-Packard Co. (HPQ)
The aluminum producer also reaffirmed its forecast that demand for the metal will rise 7 percent this year, and that there will be a global supply deficit.
Global aluminum production rose 4.1 percent to 14.9 million tons in the first four months of 2012, beating usage by 623,703 tons, according to data compiled by Bloomberg. That surplus has weighed on prices. Aluminum for delivery in three months on the London Metal Exchange averaged $2,019 a metric ton in the quarter, 23 percent less than a year earlier.
“Although aluminum prices are down, the fundamentals of the aluminum market remain sound with strong demand and tight supply,” Alcoa Chief Executive Officer Klaus Kleinfeld said in the statement. “Alcoa is successfully capitalizing on accelerating demand in high-growth end markets such as aerospace and automotive.”
Price Decline
Alcoa’s earnings haven’t fully recovered since commodity prices tumbled after Lehman Brothers Holdings Inc. filed for bankruptcy at the height of the financial crisis in September 2008.
The company’s competitors have also suffered from the decline in aluminum prices. Russia’s United Co. Rusal, the largest producer, saw first-quarter profit slump to $74 million from a restated $451 million a year earlier. The company said in May it’s studying cutting as much as 600,000 tons of smelting output.
“The pilot light has kind of gone out on aluminum prices globally,” Jorge Beristain, a Greenwich, Connecticut-based analyst with Deutsche Bank AG, said by telephone today. “said. ‘‘Not a quarter to write home about. It’s not a turnaround-type quarter.’’
Norway’s Norsk Hydro ASA (NHY), the fifth-biggest producer, also posted a 90 percent decline in first-quarter earnings and said last month it would shut 120,000 tons of capacity in Australia because of weaker demand and oversupply.
Aluminum prices will average $2,188 a ton in the third quarter, according to the average of 21 analysts’ estimates compiled by Bloomberg. The fourth-quarter price will be $2,275, the data show.
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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