(Updates with analyst’s comment in fourth paragraph.)
By Sonja Elmquist April 10 (Bloomberg) -- Alcoa Inc., the largest U.S. aluminum producer, reported an unexpected first-quarter profit after orders rose and it closed higher-cost smelting capacity. Net income fell 69 percent to $94 million, or 9 cents a share, from $308 million, or 27 cents, a year earlier, New York- based Alcoa said today in a statement. Profit excluding restructuring costs and other items was 10 cents a share, compared with the 4-cent loss that was the average of 19 analysts’ estimates compiled by Bloomberg. Sales rose to $6.01 billion from $5.96 billion, beating the $5.77 billion average of 12 estimates. Alcoa has curtailed older plants in North America and Europe while proceeding with an $11 billion joint venture in Saudi Arabia that it says will be the world’s most efficient integrated aluminum production plant. The earnings were “driven by higher-than-expected profitability from every operating segment,” Brian Yu, an analyst at Citigroup Inc. in San Francisco who estimated a 6- cent loss, said in a note. “Good cost control likely played a major role.” Alcoa, traditionally the first company in the Dow Jones Industrial Average to report quarterly earnings, rose 5.4 percent to $9.82 at 6:18 p.m. in New York in after-hours trading. The stock dropped 48 percent in the year through the close of regular trading today, the biggest decline on the DJIA.
Alumina Cuts
Despite the plant closures, Alcoa’s production of primary aluminum rose 5.2 percent to 951,000 metric tons in the first quarter. U.S. and Canadian aluminum producers’ shipments of extruded products, such as pipes and rods, rose 13 percent in the year through March 20 compared with the same period a year earlier, The Aluminum Association said April 9. The company in January announced the shuttering of plants in the U.S., Spain and Italy, cutting 531,000 tons of aluminum capacity. Alcoa also said last week it will reduce its output of alumina, the raw material used to make aluminum, by 390,000 tons. The company made the cutbacks after a decline in aluminum prices, which are down 23 percent on the London Metal Exchange in the past 12 months. The metal averaged $2,219 a ton on the LME in the first quarter, 12 percent less than a year earlier. Chief Executive Officer Klaus Kleinfeld said in January he plans to move Alcoa to the 41st percentile on the aluminum industry’s so-called production cost curve by 2015, from 51st.
‘Aggressive Strategy’
“We are successfully executing on our aggressive strategy to move down the cost curve in our upstream business and drive to record profitability in our midstream and downstream business,” Kleinfeld said in today’s statement. Alcoa isn’t the only aluminum producer to have curtailed output this year. Norway’s Norsk Hydro ASA shut a 60,000-ton line at its Kurri-Kurri smelter in Australia and cut 180,000 tons at a German plant in January. Oleg Deripaska, the CEO and largest shareholder of Russia’s United Co. Rusal, said in December that falling metal prices may prompt smelters to shut down 3 million tons of capacity globally. The company got about about one-third of its revenue in 2011 from smelting aluminum. Its flat-rolled segment, which produces metal used in autos and aircraft, and engineered products unit, which makes items including bolts, fasteners and turbine blades, generated 53 percent of sales last year.
For Related News and Information: Alcoa company news: AA US CN BN Alcoa employee data: AA US FA10 Top commodity stories: CTOP Most-read metals stories: MNI MET
--Editors: Simon Casey, Charles Siler
MHM Price at posting:
74.5¢ Sentiment: ST Buy Disclosure: Held
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