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Alcoa Posts Loss On Charges, Market Weakness

Alcoa Posts Loss On Charges, Market Weakness
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1/9/2012 5:23 PM ET

Aluminum producer Alcoa, Inc. (AA: Quote) said Monday after the markets closed that it swung to a fourth quarter loss, hurt by restructuring charges, lower aluminum prices and continued market weakness. The company's quarterly loss per share, excluding items, matched analyst estimates, while its quarterly sales beat Wall Street expectations.

The company reported a net loss for fourth quarter of $191 million or $0.18 per share, compared to net income of $258 million or $0.24 per share for the year-ago quarter.

This marks the first time Alcoa has reported a quarterly loss since the second quarter of 2009.

Loss from continuing operations for the fourth quarter was $193 million or $0.18 per share, compared to income from continuing operations of $258 million or $0.24 per share in the prior year quarter.

The latest quarter results include $159 million of restructuring-related charges, mainly associated with the closure or curtailment of high-cost smelting production capacity, of which about 60% is non-cash. Another $26 million in charges associated with discrete income tax items and uninsured losses were offset by the positive impact of mark-to-market changes on certain energy contracts and the sale of land in Australia.

Excluding restructuring charges and other special items, loss from continuing operations for the latest quarter was $34 million or $0.03 per share.

On average, analysts polled by Thomson Reuters expected the company to report a loss of $0.03 per share for the fourth quarter. Analysts' estimates typically exclude special items.

Alcoa, the first Dow 30 company to report fourth quarter earnings, said sales for the quarter rose 6% to $5.99 billion from $5.65 billion in the same quarter last year. Fourth quarter sales fell 7% sequentially. Analysts had a consensus revenue estimate of $5.74 billion for the fourth quarter.

The company attributed the sequential decline in fourth quarter revenues mainly to continued European weakness brought on by the sovereign debt crisis and resulting global market uncertainty. Realized pricing declined for both alumina and aluminum.

Fourth quarter after-tax operating income or ATOI from the company's Alumina segment rose 92% to $125 million from $65 million a year ago. Alumina production totaled 4,178 kmt in the fourth quarter, up from 4,119 kmt in the fourth quarter of last year.

The company's Primary Metal segment reported an after-tax operating loss of $32 million for the fourth quarter, compared to after-tax operating income $178 million in the same quarter last year.

The Flat-Rolled Products segment reported an after-tax income of $26 million for the fourth quarter, a decrease of 51% from $53 million in the prior year quarter.

Fourth quarter ATOI from the company's Engineered Products and Solutions segment grew 8% to $122 million from $113 million in the year-ago quarter.

Alcoa was among the companies that were hit most during the recession. The company cut more than 20,000 jobs and closed plants in the U.S. and Europe to tide over the global economic slowdown.

Further, the company said last week that it plans to close or curtail about 531,000 metric tons, or 12% of its global smelting capacity, to cut costs and improve competitiveness. The company said it will permanently close its smelter in Alcoa, Tennessee, which was curtailed in 2009, along with two of the six idled potlines at its Rockdale, Texas smelter.

Alcoa said Monday that it plans to curtail operations at one smelter in Italy, and two plants in Spain. The curtailments represent about 5 percent, or 240 thousand metric tons, of Alcoa's global smelting capacity.

In addition, Alcoa said Monday that it will act fast to reduce the cost of raw materials used by its primary products business and that it will adjust capacity across its global refining system to reflect internal demand as well as prevailing market conditions.

For the full year 2011, the company reported net income of $611 million or $0.55 per share, compared to $254 million or $0.24 per share for the full year 2010.

Income from continuing operations for the full year 2011 was $614 million or $0.55 per share, compared to $262 million or $0.25 per share in 2010. Excluding special items, income from continuing operations for the full year 2011 was $812 million or $0.72 per share.

Sales for the full year 2011 rose to $24.95 billion from $21.01 billion the previous year.

Analysts expected the company to earn $0.75 per share on revenue of $24.65 billion for the full year 2011.

Looking forward to 2012, Alcoa said it expects global aluminum demand to grow 7% and forecast a global deficit in primary aluminum supply.

The company noted that its growth projection is ahead of the 6.5% rate required to meet its forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10% in 2011 on top of 13% growth seen in 2010.

Alcoa also projects that growing demand for aluminum, combined with market-related production cutbacks, will result in a global aluminum industry deficit of 600,000 metric tons this year.

Alcoa shares, which have traded in a range of $8.45 to $18.47 over the past year, closed Monday's regular trading session at $9.43, up 27 cents or 2.89%. The stock is currently gaining a penny in after hours trading.

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by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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