Alcoa’s Profit Slips 6.9% in Quarter
Alcoa Inc. said Tuesday that profit dipped 6.9% in the second quarter amid weaker demand in key sectors, but the world’s largest aluminum producer beat Wall Street estimates.
Alcoa earned $216 million, or 26 cents a share, in the quarter, compared with $232 million, or 27 cents, a year earlier.
However, Alcoa recorded a profit excluding items of 27 cents a share -- beating analysts’ consensus forecast by 3 cents -- thanks to strength in the packaging and residential construction sectors.
Revenue was better than expected, increasing 5.9% to $5.46 billion from $5.16 billion last year.
The company has faced higher energy costs and soft demand, especially in the aerospace and gas turbine industries.
Alcoa shares rose 3.9% in aftermarket trading Tuesday to $26.82. Before the earnings were released, the stock closed at $25.81, up 10 cents, on the New York Stock Exchange.
The company, which makes metal used in such diverse items as food cans and auto parts, has been cutting its workforce to counter a softer industrial market.
Falling ticket prices and fewer airline passengers have led to a decline in new aircraft orders, while the poor credit quality of many energy companies has forced the cancellation or delay of new power plants.
“While we have not seen signs of market improvements, we are well-positioned to reap the benefits of any upturn,” Alcoa Chief Executive Alain Belda said.
The aluminum sector has been cutting costs and looking to consolidate as it deals with a downturn in industrial demand and higher energy costs. On Monday, chief rival Alcan Inc. came back to the table in offering $3.9 billion for French aluminum company Pechiney.
Alcoa said Tuesday that it planned to focus on improving its productivity.
The company said it saved $872 million so far this year and still expected to meet its goal of $1 billion in cost savings by the end of 2003.
The Pittsburgh-based company announced a massive restructuring in January, saying it planned to cut 8,000 jobs, or about 6% of its total workforce. Most of the jobs will be cut this year from Alcoa’s U.S. smelters as well as businesses serving the aerospace, gas turbine and auto industries.
Alcoa, which cut 10,000 jobs last year, had 127,000 employees at the end of 2002.
While overall revenue rose, automotive markets were flat and European demand for fabricated products was weak.
“I am negative on the company and the industry because of weak aerospace demand, the falloff in auto production and rising energy and power costs,” said Argus Research analyst David Kerans. He called the second-quarter results a pleasant short-term surprise.
During the second quarter, the stock rose about 32%, outperforming the benchmark Standard & Poor’s 500 index, which rose about 15% in the same period.
