Alcoa reports loss on low metal price, weak market
Alcoa Inc (AA-N), the largest U.S. aluminum producer, posted a fourth-quarter loss on Monday but gave a positive outlook for metal demand in the aerospace, construction and other industries, lifting its stock price in after-hours trading.
It forecast seven percent growth in global aluminum demand this year and said production cutbacks will help put the industry into deficit of around 600,000 tonnes this year.
This would help push up pricing of the metal, which fell 18 percent last year, contributing to the company's first loss in nine quarters.
Alcoa expects global growth for aluminum in the aerospace industry of 10 percent to 11 percent, with automotive growing three percent to eight percent, commercial transportation two percent to five percent, packaging two percent to three percent and building and construction growing by four percent to five percent.
It also maintained its forecast for a doubling of aluminum demand by 2020.
Analyst Bridget Freas of Morningstar Inc in Chicago said the results were quite good. "The loss is not the headline. The revenue is actually higher-than-expected. Shipments are still holding up very strong. Demand for aluminum is actually quite strong," she said.
In its earnings release - traditionally the first of the season by a Dow component - Alcoa reported a loss as slumping metal prices forced it to take a charge for cutting back costly production and it cited market weakness, particularly in construction and packaging.
The loss from continuing operations was $193 million US, or 18 cents per share, compared with a profit of $172 million, or 15 cents per share in the same quarter of 2010.
Excluding restructuring and other charges, the loss was $34 million, or three cents per share, the company said.
Revenue rose six percent to $6 billion even as the price of aluminum fell six percent in the fourth quarter and 18 percent in the year.
The three-cent loss was in line with lowered estimates but the revenue beat estimates of $5.7 billion, according to Thomson Reuters I/B/E/S.
Last week, Alcoa said it will cut 12 percent of its global smelting capacity and take action to counter rising raw material costs. It is closing a smelter in Tennessee and curtailing capacity at plants in Texas, Italy and Spain.
Kuni Chen, of CRT Capital Group saidm "It was an in-line quarter, obviously expectations came down pretty sharply coming in to the quarter.
"The commentary for the year ahead, in terms of the aluminum market expected to be in deficit, that's a positive, and certainly in line with our view that you will see more supply come out of the market if metal prices stay at these low levels."