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$136 million Alcoa profit outearns estimates

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Tuesday, July 13, 2010

Alcoa Inc. said Monday it made a second-quarter profit of $136 million, or 13 cents a share, due to stronger sales, improved productivity and lower energy costs.

The profit compares to a loss of $454 million, or 47 cents a share, for the same quarter a year ago,

New York-based Alcoa, the nation's largest aluminum producer, said its sales for the quarter that ended June 30 rose 6 percent to $5.18 billion, from $4.24 billion in second-quarter 2009. That rise in revenue was driven by a 4 percent increase in aluminum shipments and a 1 percent increase in third-party prices for alumina, which is used to produce aluminum.

Alcoa's second-quarter performance surpassed the prediction of some analysts, who said Alcoa would earn 11 cents a share, and hit the mark for others, who expected Alcoa to reach 13 cents a share.

Alcoa's prospects, and prospects for aluminum, continue to be excellent, CEO Klaus Kleinfeld said. The company's performance is strengthening despite the fact that metals use has been down in the sluggish economy, Kleinfeld said.

Alcoa, which has its corporate center on the North Shore, made money despite a drop of $22 per metric ton in the average price of aluminum on the market, to $2,309 a ton in the quarter.

The second-quarter results reflected the impact of the company's restructuring, which included about 13,500 job cuts worldwide last year and the additional cost of Alcoa's new labor contract with the United Steelworkers. The union represents more than 5,400 employees at 10 locations in the United States.

Signing bonuses for workers covered by the four-year labor agreement, plus work done in preparation for a possible strike, cost Alcoa $13 million in the second quarter, said Charles McLane, the company's chief financial officer.

Looking at the remainder of 2010, Kleinfeld told analysts during an earnings call yesterday that the biggest risk facing Alcoa is the volatility of the financial market, which is reflected in the swings in currency.

The company expects to benefit from the use of aerospace inventory, which will have to be restocked, Kleinfeld said.

Kleinfeld said he was not concerned that China will flood the market with aluminum because the aluminum business is energy-intensive, and energy is a scarce commodity in China.

"They need it (energy) for other things," Kleinfeld said.

Alcoa has about 1,600 employees in Western Pennsylvania, at its corporate center and its Alcoa Technology Center in Upper Burrell.

Alcoa's stock closed yesterday at $10.70 a share, down 7 cents, or 0.64 percent.

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