| Business

Larger text Larger text Smaller text Smaller text | Order Photo Reprints

Alcoa reports improved profit; beats estimates

Email Newsletters

Click here to sign up for one of our email newsletters.

On the Grid

From the shale fields to the cooling towers, Trib Total Media covers the energy industry in Western Pennsylvania and beyond. For the latest news and views on gas, coal, electricity and more, check out On the Grid today.

'American Coyotes' Series

Traveling by Jeep, boat and foot, Tribune-Review investigative reporter Carl Prine and photojournalist Justin Merriman covered nearly 2,000 miles over two months along the border with Mexico to report on coyotes — the human traffickers who bring illegal immigrants into the United States. Most are Americans working for money and/or drugs. This series reports how their operations have a major impact on life for residents and the environment along the border — and beyond.

By John D. Oravecz
Tuesday, July 8, 2014, 4:27 p.m.

Alcoa Inc.'s emphasis on higher-margin businesses such as aerospace and heavy-duty truck wheels contributed to improved second-quarter net income.

And its traditional aluminum production segment, which had been a drag on results, turned a profit because of cost cuts, higher regional price premiums and strong demand.

Engineered products, which includes the aerospace segment where Alcoa announced the $3 billion acquisition of a jet-engine components maker two weeks ago, had record operating profit.

“Management's tone has been they are transforming the company, now we are seeing some performance that backs that up,” said Andrew Lane, analyst with Morningstar Inc. in Chicago.

Lane said the key for the quarter was improved performance of Alcoa's primary metals segment, the result of smelting capacity closings this year and in 2013.

“Smelting had been a detractor from the company's performance, and now it is a significant contributor to net income,” Lane said.

To cut costs in the commodity aluminum segment, Alcoa idled 147,000 metric tons of smelting capacity in Brazil. It also signed letter of intent to sell its stake in a bauxite mine and alumina refinery in Jamaica.

Since 2007, Alcoa said it reduced smelting capacity by 1.2 million metric tons, or 28 percent. In the first quarter, reductions also were announced in Australia and Massena, N.Y.

CEO Klaus Kleinfeld said the second-quarter results posted Tuesday “prove Alcoa's transformation is in high gear. Our strategy of building a lightweight multi-material innovation powerhouse and a highly competitive commodities business is driving compelling and sustainable shareholder value.”

The aluminum maker said it earned $138 million, or 12 cents a share, on revenue of $5.8 billion, up 7 percent from the first quarter but down slightly from a year ago.

The results included $78 million in expenses to reduce costs of its commodity aluminum business, mainly from closing high-cost smelting capacity. Excluding those expenses, Alcoa earned 18 cents a share, compared to an estimate of 12 cents by analysts surveyed by First Call. Analysts expected revenue of $5.6 billion

A year ago, Alcoa reported a net loss of $119 million, or 11 cents a share.

Shares closed at $14.85, up 11 cents, before the company reported. The stock has gained 39.7 percent so far this year.

The company said operating profit in the engineered products segments hit $204 million, as profit margin rose to 23.1 percent. Alcoa moved further into the aerospace portion of that segment with the acquisition of U.K.-based Firth Rixson Ltd., a leading jet-engine component company.

Alcoa said the deal will boost annual aerospace revenue by 20 percent to about $4.8 billion, as the company continues to diversify its business beyond its mining and aluminum smelting roots. Firth Rixson will double Alcoa's average engine content in key programs, and Kleinfeld called the deal a “major milestone” in Alcoa's transformation.

Alcoa will pay $2.35 billion in cash and $500 million in stock to Firth Rixson's owner, private equity firm Oak Hill Capital. Firth Rixson has operations in the United States, Asia and Europe.

The company said it completed an expansion at its Davenport, Iowa, plant, which will produced aluminum sheet for the automotive market, and an expansion in Alcoa, Tenn., is also on track.

Automakers are turning to aluminum as they gear up to meet the government's 54.5 mpg target by 2025 with lighter-weight materials and will switch to full-scale production using aluminum in their best-selling vehicles.

The New York-based company employs about 2,000 in the Pittsburgh area — at its corporate operations center on the North Shore, the Alcoa Technical Center in Upper Burrell, and Traco Co., a window manufacturer in Cranberry.

John D. Oravecz is a staff writer for Trib Total Media. He can be reached at 412-320-7882 or

Subscribe today! Click here for our subscription offers.



Show commenting policy

Most-Read Business Headlines

  1. Kennametal profits drop more than half in fiscal fourth quarter
  2. GNC sales, profits slip in second quarter
  3. Range Resources cuts workforce 11%
  4. Post-Gazette offers voluntary buyouts in bid to avoid layoffs
  5. Muni bond funds stressed
  6. PPG puts brand 1st in strategy to reach commercial paint market
  7. U.S. Steel CEO expects rebound
  8. Plastics propel Bayer’s 2Q earnings
  9. EPA ordered to ease limits on cross-border air pollution that involves Pennsylvania
  10. United Airlines hack coincided with incursion into government employee data
  11. Gold continues to fall further out of favor with investors