Planes, auto demand help Alcoa results beat Wall Street view

PITTSBURGH, Wed Oct 10, 2012 – Stronger demand for aluminum products from airplane and automobile producers helped Alcoa Inc.’s third-quarter profit before one-time charges beat Wall Street’s expectations, offsetting weak aluminum prices and worries about China’s slumping economy.

But, even with its strong downstream business, Chairman and CEO Klaus Kleinfeld said the company had noticed a “slight slowdown” in some regions and end markets.

As a result, Alcoa lowered its global aluminum consumption outlook to 6 percent growth from 7 percent previously for 2012. “The main driver for this is China,” Kleinfeld told Wall Street analysts on a conference call on Tuesday.

China’s aluminum demand growth was 11 percent in the first half of the year, he said, but “we believe this is going to come down in the second half to 7 percent.

“I’m pretty confident given the already announced China stimulus package which is going into the ground … (it) will be picking up speed but this is probably going to take until the end of the fourth quarter,” he said.

Kleinfeld was bullish about Alcoa’s downstream businesses, noting that the aerospace and automobile markets were coming back strongly from the recession.

“Global aerospace remains solid,” with a backlog of 8,500 planes, or eight years work, he said. “In autos, we are seeing an increase of 11 to 15 percent (annual) growth in North America.”

Airplane maker Boeing Co., truck builder Navistar International Corp. and other manufacturers have been using more engineered aluminum parts from Alcoa to lighten the weight of planes and vehicles.

Making aluminum bolts, wheels, aircraft fuselages and other components for these customers is proving more lucrative for Alcoa than just supplying basic aluminum of which the price has dropped to near two-year lows.

Alcoa’s core metal-making business is struggling to make a profit.

Low aluminum price seen hurting Alcoa profit

NEW YORK, Fri Jul 6, 2012 – Aircraft and automobile makers may be using more aluminum, but as long as the metal’s price remains near two-year lows, Alcoa Inc. will struggle, analysts said on Friday.
The average earnings estimate has been cut over the past week from 15 cents per share and Wall Street now expects Alcoa to post only a 5-cent per share second-quarter profit on Monday, according to Thomson Reuters I/B/E/S. That compares with 32 cents per share in the same quarter last year.
With an overhang of high inventories and a 20-percent drop in prices since March, many aluminum producers are losing money. Benchmark three-month London Metal Exchange aluminum stood at $1,903 a tonne on Friday – hovering above the $1,880 low of June 2010.
After a surprise profit in the first quarter, Alcoa’s Chief Executive Officer Klaus Kleinfeld painted a rosy picture of improving demand from the aerospace and auto industries, which are using more aluminum to reduce weight and improve fuel efficiency.
“Aerospace helps them, but it’s only 14 percent of their earnings,” said analyst Charles Bradford, of Bradford Research in New York. The auto market is an even smaller percentage of Alcoa’s business.
Alcoa’s core is its upstream business – mining bauxite, refining it to produce alumina, which is smelted into aluminum. And with raw material and power costs rising and aluminum prices depressed because of over-supply, Bradford saw little relief.
Tony Rizzuto, managing director of Dahlman Rose & Co, cut his second-quarter Alcoa estimate to 3 cents per share from 7 cents per share, citing the aluminum price.
“Although we continue to like the performance of the company’s downstream businesses, we expect the shares to remain pressured as long as LME aluminum prices remain at depressed levels,” he said.
Nomura analyst Curt Woodworth lowered his estimate from 5 cents per share to break-even on weaker aluminum prices. “The rise in aluminum physical premiums has helped to offset a fall in spot prices, but we feel it is likely a short-term phenomenon, given the overcapacity,” he said.

Alcoa stock up on unexpected first-quarter profit

NEW YORK, Wed Apr 11, 2012 – Shares in Alcoa Inc. rose 7 percent on Wednesday, a day after the aluminum company posted a first-quarter profit instead of a loss Wall Street was expecting.

The late-Tuesday results from Alcoa, a Dow component company, helped lift stocks after five days of losses that had brought down the benchmark Standard & Poor’s 500 index more than 4 percent.

Analyst Tony Rizzuto, of Dahlman Rose & Co, raised his full-year 2012 earnings estimate for Alcoa to 50 cents per share from 40 cents per share following Tuesday’s results.

Alcoa reported income from continuing operations of $94 million, or 9 cents per share, while analysts had expected a loss of 4 cents per share.

“We are encouraged by these results, but are remaining somewhat cautious with our estimates until we see a sustained follow-through in performance,” Rizzuto wrote in a research note.

“If productivity and operational gains can be maintained, we believe the market will begin to look more favorably at the shares,” he said of Alcoa stock, which has dropped over 50 percent since reaching a year-high of $18.19 in April last year.

In morning trading on the New York Stock Exchange, Alcoa shares were 7 percent higher at $9.96.

Aluminum slump has Alcoa staring at quarterly loss

NEW YORK ― Alcoa Inc., the largest U.S. aluminum producer, could end up posting a fourth-quarter loss due to a dizzying drop in the metal’s price in the last six months as the euro zone debt crisis and an economic slowdown in China hurt demand growth.

At least five Wall Street analysts cut earnings estimates in the last week and 18 slashed their full-year 2011 estimates since September for Alcoa, which will announce results on Monday after the market closes.

Analyst Bridget Freas of Morningstar in Chicago noted that Alcoa’s fortunes are tied very closely to the price of aluminum, which fell 6 percent in the fourth quarter.

“We have seen a weakening trend in the last few months and it will show in the results,” she said. “Most analysts are blaming what has happened with the LME (London Metals Exchange) price and we ended the year on a low point.”

The price of aluminum fell 18 percent, from $2,470 per tonne at the end of 2010 to $2015 last week. Traders cited the euro zone crisis and China’s economic slowdown for hurting prospects for demand growth that send the metal on a downward track after May.

And that, says Wall Street, can only hurt Alcoa’s bottom line.

“They had a pretty weak quarter and should come in around the break-even mark,” said Freas, who does not give a quarterly estimate. Her full-year estimate of 80 cents per share is unchanged, she said, since she has already factored in the lower metal price.

“They still face high raw material costs , but the biggest driver (of Alcoa’s results) is the price of aluminum.

“They will not be posting the kind of results (they did) at second-quarter levels,” Freas said.

Alcoa reorganizes midstream Global Rolled Products businesses

NEW YORK ― America’s biggest aluminum producer Alcoa Inc. said it plans to reorganize its midstream Global Rolled Products businesses to tap growth opportunity in emerging markets.

The business will now focus on five global markets — aerospace, ground transportation, packaging, consumer electronics and defense.

“We believe even better returns are possible by changing from a regional approach to a market approach,” said CEO Klaus Kleinfeld.

The company said the shift to a market-based structure is effective immediately.

The new organization will focus on China, Russia, Brazil and the Middle East, the company said in a statement.