Tuesday, July 8, 2008

Alcoa profit falls but beats forecasts

ALCOA said today its second-quarter net income dropped 24 per cent as aluminium prices failed to keep pace with climbing costs.

Still, shares rose 4 per cent in after-hours trading as the results beat Wall Street's expectations. Shares were at $US33.65 after hours after the Dow component's stock closed down 3.2 per cent at $US32.33 in regular trading during a general sell-off in the resources sector.
Noting improvement from the first quarter, chief executive Klaus Kleinfeld said that "higher prices for our products and increased volumes more than offset the increased input costs facing the entire industry".
Mr Kleinfeld took over the top job at the largest US aluminium producer in May.
Kicking off the second-quarter earnings season for blue-chip companies, Alcoa reported net income of $US546 million ($573 million), or US66 cents a share, down from $US715 million, or US81 cents a share, a year earlier.
The latest results included US5c a share in costs related to a gas explosion in Australia that disrupted Alcoa's supply of alumina, a key ingredient in making aluminium, and power disruptions at its Rockdale, Texas, smelter because of an unreliable power supply.
Revenue fell 5.5 per cent to $US7.62 billion from $US8.07 billion, which included divested businesses.
Analysts' mean estimates were for earnings per share of US64c on revenue of $US7.36 billion, according to a poll by Thomson Reuters.
Gross margin fell to 20 per cent from 23.4 per cent.
The company shipped 2.76 million tonnes of aluminium products, up 1.3 per cent, while its average realised price per tonne of aluminium rose 6.2 per cent to $US3058. Aluminium prices rose to a four-month high of $US3229 last week on higher oil prices, despite an ample supply of the metal.
Alcoa has been struggling with soaring costs for energy and other raw materials as well as lower demand in North America and Europe, where it has the bulk of its sales. Downturns in the US housing and automotive markets have hurt two of the biggest sectors for metal.
While demand for aluminium remains strong in China, that country produces enough to meet its needs. Markets for aluminium are growing in India, Vietnam and Russia.
In April, Alcoa predicted aluminium consumption would grow 8.5 per cent worldwide in 2008, while consumption in North America was expected to fall 5 per cent.


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