Restructuring costs weigh down Alcoa 2Q profit
Alcoa Inc. posted flat second-quarter profits Wednesday largely because of restructuring charges from closing high-cost smelters and mines around the world caused by declining global demand and prices for aluminium.
But profit from its business with aerospace and automotive companies was up, highlighting the effectiveness of the company's strategy to focus on higher-value parts for those growing industries.
And a key acquisition in that shift to supplying the aerospace industry — the $1.5 billion purchase of Moon-based titanium-maker RTI International Metals Inc. — is on track to close at the end of this month, Alcoa CEO Klaus Kleinfeld said Wednesday.
“This was a strong quarter and shows that the transformation is right on,” Kleinfeld told analysts on a conference call.
Aerospace revenue jumped 29 percent during the quarter, compared with the same quarter last year, the company said. Shipments of aluminum sheet for cars and trucks rose 200 percent, Alcoa said.
Those gains in value-added products led to organic revenue growth of 12.9 percent, which offset an 11.7 percent drop in revenue caused by closing production facilities.
During the quarter, the company announced closure of a coal mine and power station in Australia, plans to sell operations in Suriname, and shuttering of a smelter in Brazil.
“We really are transforming the company,” Kleinfeld said. “We're building a lightweight multi-material company and creating a globally competitive commodity business.”
Revenue in the quarter was $5.9 billion, up 1 percent from $5.8 billion in the same quarter last year.
Net income in the quarter that ended June 30 was $140 million, or 10 cents per share, compared with $138 million, or 12 cents per share, in the same period a year ago.
Not counting $110 million in one-time charges, primarily because of the facility closures, adjusted net income was $250 million, or 19 cents a share, up 16 percent from a year ago.
The results missed predictions by analysts, who were expecting adjusted net income of $282 million, or 22 cents a share, according to Bloomberg data.
John Tumazos, of Tumazos Very Independent Research in Holmdel, N.J., said recent aluminum price declines hurt Alcoa's results more than expected.
“Given how much the aluminum price fell, they did well not to lose money,” he said.
And the falling prices are likely to weigh heavily on earnings the rest of this year, he said. “There's a good chance they won't make a profit in the third and fourth quarter.”
Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or firstname.lastname@example.org.