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Alcoa To Report Q3 Results: Earnings Preview

Alcoa To Report Q3 Results: Earnings Preview
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10/7/2009 3:52 AM ET

Kicking off the third-quarter reporting season, aluminum producer Alcoa, Inc. (AA: Quote) is expected to announce its results for the quarter after the market closes on Wednesday. On average, 15 analysts polled by Thomson Reuters expect the company to lose $0.11 per share for the quarter, its fourth quarterly loss in a row, while revenues are estimated to be $4.55 billion. Analysts' estimates typically exclude special items.

The New York-based company is engaged in the production and management of primary aluminum, fabricated aluminum, and alumina. Its products include precision castings, and aerospace and industrial fasteners.

The economic crisis has negatively impacted the demand for aluminum, as auto and aerospace, two major industries that require the metal, are bleeding. As a result, aluminum producers had to cut prices and slash production.

However, aluminum prices have shown indications of an upward trend in recent months, rising 19% this year on the London Metal Exchange, boosted partly by the stimulus package in China. In the May-July period, the average price of aluminum on the London Metal Exchange was 1,598.83 per metric ton.

On Tuesday, Credit Suisse revised its third-quarter estimate for the company to a loss of $0.10 per share from a loss of $0.20 per share, primarily to reflect higher than expected aluminum prices during the quarter, although partially offset by adverse currency and energy moves.

Yet, it is too early to celebrate, as it is not sure how long the price rise will last. China, the world's largest user of the metal, is reportedly likely to reduce its import of aluminum as the gap between aluminum prices in China and internationally is not sufficient to promote import. This in turn may bring down the price of the metal on the London Stock Exchange to $1,500 a ton by the end of the year.

Alcoa said in July that the economic downturn has affected most of its end markets - automotive, commercial transportation, building and construction, and aerospace. The company has adopted various measures, including job cuts, reduced output and dividend slashing to weather the economic crisis.

For the previous quarter, Alcoa reported a net loss of $454 million or $0.47 per share, compared to net income of $546 million or $0.66 per share for the year-ago quarter. Second-quarter sales dropped 41% to $4.24 billion from $7.25 billion due to lower metal prices as well as curtailment of aluminum and alumina production in response to reduced demand.

AA closed Tuesday's regular trade at $13.89, up $0.47 or 3.50%, on 40.92 million shares. For the past year, the stock traded in the range of $4.97-$18.94.

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by RTT Staff Writer

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