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Alcoa lost $277M in fourth quarter, but improves from year ago

Joe Napsha
| Monday, Jan. 11, 2010

Alcoa Inc. said today it lost $277 million, or 28 cents a share, in the fourth quarter, largely due to $275 million in restructuring costs.

The good news for Alcoa is that it lost significantly less than the fourth quarter 2008, when it reported a loss of $1.19 billion, or 1.49 a share. Sales for the quarter fell to $5.43 billion, compared to $5.68 billion a year ago.

The company had a net loss of $1.09 billion, or $1.23 a share for the year, compared to a profit of $147 million, or 10 cents a share in 2008. Sales for the year dropped to $18.4 billion, compared to $26.9 billion in 2008.

Alcoa is based in New York and has its operations center in Pittsburgh.

CEO Klaus Kleinfeld said the aluminum industry suffered three blows last year — "a price crash, demand destruction and credit crunch." But, Kleinfeld said the company came out of 2009 stronger than it entered because it reshaped its cost structure and portfolio, and built its cash reserves.

Alcoa's fourth quarter earnings followed a third quarter in which the nation's largest aluminum producer posted net income of $77 million, or eight cents a share. Third quarter sales were $4.6 billion, compared to $4.2 billion for the second quarter.

The third quarter revenues benefited from an increase in prices for primary aluminum to $1,972 per metric ton, from $1,667 per ton in the second quarter.

Alcoa is expected to benefit from an increase in global demand for aluminum. The global demand for aluminum in 2010 will increase about 9 percent, excluding China, but 12.5 percent when China's demands are calculated into the forecast, said aluminum industry expert James Southwood, president of Commodity Metals Management Co. of Marshall.

China's aluminum consumption rose an impressive 34 percent in December, compared to December 2008, but Southwood said that won't last. Aluminum demand in China probably will increase by about 15 percent this year, compared to 2009.

The good news that demand will increase this year, should be considered in the light that 2009 was a very bad year for aluminum, Southwood said.

"We aren't going to get back to 2008 levels until 2011," Southwood said.

The drivers of that growth in aluminum demand will be the transportation industry, including automotive, along with residential construction, Southwood said. The rebound in commercial construction is not likely to occur until the middle of the year, he added.

Alcoa's shares closed today at $17.45, up 43 cents a share, or 2.5 percent. Alcoa released its results after the market closed.

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