Wednesday, April 8, 2009

Alcoa posts quarterly loss on aluminum slump

NEW YORK (Reuters) - Aluminum producer Alcoa Inc (AA.N) reported a second consecutive quarterly loss on Tuesday, as metal prices and the autos industry slumped and global demand fell in the economic downturn.

In response to the tough times, Alcoa -- the first member of the Dow Jones Industrial Average .DJI to report -- has cut thousands of jobs, slashed its dividend, trimmed spending and raised $1.3 billion to help it through the slowdown.

"There's no doubt in my mind that we are in for a really nasty earnings season," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management. "Alcoa's second consecutive quarterly loss is testament to that. We are in the worse phase of this recession right now."

But on a conference call with Wall Street analysts, Alcoa Chief Executive Officer Klaus Kleinfeld was more upbeat, despite weakness in demand from industries it supplies.

"In the U.S., we are seeing the first signs of markets stabilizing at lower levels," he said.

Auto industry demand is down 18 percent globally and is worse in the United States, he said, "but the U.S. residential (construction) market might see some signs of bottoming out."

But Kleinfeld repeated his forecast that global aluminum consumption will decline 7 percent this year, although he is hopeful government stimulus action will revive metal demand.

Alcoa's first-quarter net loss was $497 million, or 61 cents per share, compared with a profit of $303 million, or 37 cents, in the 2008 quarter, the Pittsburgh-based company said. The loss from continuing operations was 59 cents per share.

Revenue fell 36 percent to $4.1 billion from $6.5 billion a year earlier after excluding divested businesses.

According to Reuters Estimates, the company actually lost 60 cents per share, excluding a write-off and gain from two transactions in the quarter. That missed analysts' estimate for a loss of 55 cents, Reuters Estimates said.


Kleinfeld said in a press statement the steps the company has taken so far to cut costs should significantly improve its profitability and cash flow in 2009 and beyond.

"We also see both near-term and long-term catalysts that should improve the prospects for the aluminum industry," he said. "Current stimulus programs that target infrastructure and energy efficiency will create a demand for ... aluminum.

But Alcoa expects second-quarter alumina production to drop slightly as it cuts refinery production to meet smelter demand. Alumina, refined from bauxite, is smelted into aluminum.

The company also sees continued end market weakness for its flat-rolled products in the aerospace, construction and global transportation sectors in the second quarter.

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