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Alcoa Loss Widens On Charges

Alcoa, Inc. (AA: Quote), the largest U.S. aluminum producer, said Monday after the markets closed that its second quarter net loss widened from last year, due mainly to higher restructuring and other charges.

However, the company's quarterly earnings per share, excluding special items, rose from last year and beat analysts' estimate, helped by productivity gains across all business segments and record performance in Engineered Products and Solutions. The company's quarterly sales fell slightly from last year, but managed to beat analysts' expectations. "Our businesses showed remarkable operating performance in the quarter with solid free cash flow," said Klaus Kleinfeld, Alcoa Chairman and CEO. "In our value-add businesses we reached another milestone with record profitability in our downstream business while acting decisively to defy the headwinds of falling metal prices in our upstream businesses. We improved our competitive position by actively restructuring, curtailing, and closing facilities and made progress addressing legacy legal issues."

Alcoa also reaffirmed its 2013 global aluminum demand growth forecast of 7%.

Alcoa shares are currently losing 0.13% in after hours trading after closing the day's regular trading session at $7.92, up 11 cents or 1.41%. The shares trade in a 52-week range of $7.63 to $9.93.

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. Like other aluminum producers, the company is currently suffering from declining aluminum prices cuased by a glut. Alcoa taken steps to cut costs and reallign production in order to remain competitive. The company has completed its planned closure or curtailment of 531,000 metric tons, or 12%, of its highest-cost system smelting capacity.

Alcoa has further announced the review of 460,000 metric tons of smelting capacity, equal to 11% of its global smelting capacity, for possible curtailment due to low metal prices and to maintain cost competitiveness.

Alcoa's Alumina segment reported an after-tax operating income, or ATOI, of $64 million for the second quarter, a jump of 178% from $23 million in the same quarter last year. Alumina production totaled 4,161 kmt in the second quarter, up from 4,033 kmt in the second quarter of last year.

Primary Metal segment's second quarter after-tax operating loss widened to $32 million from $3 million last year.

Second quarter ATOI for the company's Global Rolled Products segment grew to $79 million from $78 million in the prior year quarter.

Second quarter ATOI from the company's Engineered Products and Solutions segment rose 23% to $193 million from $157 million in the year-ago quarter.

For the second quarter ended June 30, 2013, the company reported a net loss of $119 million or $0.11 per share, compared to a net loss of $2 million or $0.00 per share for the year-ago quarter.

The latest quarter results include $195 million of special items. Alcoa's latest quarter net loss includes $42 million in charges for the closing of the two Soderberg potlines at its Baie-Comeau smelter in Québec, which is part of the 460,000 metric tons of smelting capacity Alcoa has said is under review. The company also announced its intention to permanently close its Fusina smelter in Italy and recorded a $34 million charge. A $37 million charge was taken for restructuring across all business segments. Alcoa also recorded a charge of $62 million in connection with settlement negotiations related to the government investigation of the Alba matter. Excluding special items, adjusted net income for the second quarter was $76 million or $0.07 per share, compared to $61 million or $0.06 per share in the prior year quarter. On average, 17 analysts polled by Thomson Reuters expected the company to earn $0.06 per share for the second quarter. Analysts' estimates typically exclude special items.

Alcoa, the first Dow 30 company to report second quarter earnings, said sales for the quarter fell 1.85% to $5.85 billion from $5.96 billion in the same quarter last year, due mainly to lower London Metal Exchange aluminum prices. Ten analysts had a consensus revenue estimate of $5.83 billion for the second quarter.

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by RTT Staff Writer

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