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Alcoa Posts Surprise Profit

Alcoa Posts Surprise Profit
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4/10/2012 5:45 PM ET

Aluminum producer Alcoa, Inc. (AA: Quote) said Tuesday after the markets closed that its first quarter profit fell 69% from last year, as higher costs and expenses more than offset a small increase in revenue. However, the company's quarterly earnings surprised Wall Street analysts who were expecting the company to report a loss for the quarter.

Alcoa's first quarter profit was also a strong improvement over the company's fourth quarter loss. The company said the latest earnings were led by strong productivity growth and improved market conditions. The company achieved strong first quarter productivity growth across all businesses, driven by process improvements and procurement savings.

The slight increase in the company's quarter revenue was attributable to higher third party shipments in the upstream businesses, better volume and mix in the midstream business, and improved volume in the downstream business, partially offset by a 9% drop in the realized price of aluminum and a 13% drop in the realized price of alumina.

Alcoa recorded year-over-year revenue growth in commercial transportation, aerospace and automotive end markets, while revenues were down in industrial products and building and construction end markets.

"Performance rebounded strongly this quarter due to our proactive cash sustainability actions, our relentless focus on profitable growth, and stabilizing markets," said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. "We are successfully executing on our aggressive strategy to move down the cost curve in our upstream businesses, and drive to record profitability in our midstream and downstream businesses. Challenges remain in this economy, but we approach them better prepared than ever before."

Alcoa shares are currently gaining 5.69% in after hours trading after closing the day's regular trading session at $9.32, down 28 cents or 2.92%. The shares trade in a 52-week range of $8.45 to $17.96.

For the first quarter ended March 31, 2012, the company reported net income of $94 million or $0.09 per share, compared to $308 million or $0.27 per share for the year-ago quarter.

Excluding special items, income from continuing operations for the latest quarter was $105 million or $0.10 per share.

On average, analysts polled by Thomson Reuters expected the company to report a loss of $0.04 per share for the first quarter. Analysts' estimates typically exclude special items.

Alcoa, the first Dow 30 company to report first quarter earnings, said sales for the quarter rose slightly to $6.01 billion from $5.96 billion in the same quarter last year. Analysts had a consensus revenue estimate of $5.77 billion for the first quarter.

First quarter after-tax operating income or ATOI from the company's Alumina segment dropped 306% to $35 million from $142 million a year ago. Alumina production totaled 4,153 kmt in the first quarter, up from 4,025 kmt in the first quarter of last year.

The company's Primary Metal segment reported an after-tax operating income of $10 million for the first quarter, compared to $202 million in the same quarter last year.

The company's Global Rolled Products segment reported an after-tax income of $96 million for the first quarter, up 19% from $81 million in the prior year quarter.

First quarter ATOI from the company's Engineered Products and Solutions segment grew 19% to $155 million from $130 million in the year-ago quarter.

Alcoa also reaffirmed its global aluminum demand growth projection of 7% and a global aluminum supply deficit in 2012.

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.

The company has taken further steps to cut costs and reallign production in order to remain competitive. Alcoa said last week that it will reduce its annual alumina production capacity by 390,000 metric tonnes, or about 2%, or to align production with smelter curtailments announced earlier this year and to reflect prevailing market conditions.

In January, the company said 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.

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by RTT Staff Writer

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