Higher Costs Cut Into Profit at Alcoa
Aluminum manufacturer Alcoa Inc. on Monday said third-quarter profit edged up 2% as lower aluminum prices and higher energy costs cut into profitability.
Alcoa’s net income rose to $289 million, or 33 cents a share, from $283 million, or 32 cents, a year earlier.
The results include a gain of 4 cents a share from the sale of railroad assets.
Sales grew to $6.57 billion, up 13% from $5.81 billion. Revenue for the first nine months of the year was $19.5 billion, a 13% increase from the same period in 2004.
The results surpassed the expectations of analysts surveyed by Thomson Financial, who had forecast 29 cents a share. That was down from an earlier estimate of 43 cents a share, which came after the company warned recently that third-quarter profit would be 27 cents to 31 cents a share.
Alcoa, the world’s largest aluminum producer, said it faced falling aluminum prices and higher costs, particularly in energy and raw materials, during the quarter. Those costs were $578 million higher year over year, the company said. Seasonal weakness in Europe and in automotive markets also hurt business.
“We have an aggressive productivity program, but it has not offset the impact of escalating costs in energy and raw materials and the speed at which they are flowing through,” said Alain Belda, Alcoa’s chairman and chief executive.
The company has been restructuring to trim costs.
By the end of the third quarter, Alcoa had eliminated more than 1,400 positions -- part of a plan announced in the second quarter to cut 8,100 jobs and $195 million in expenses.
Shares of Alcoa fell 38 cents to $22.66 before the earnings release, then gained 53 cents in after-hours activity.
The company’s fortunes could fall further as it had “excluded the effect of the hurricanes, especially Rita, that had to have hit them,” said Charles Bradford of Bradford Research/Soleil Securities in New York. “Also, the price of natural gas went up,” he said.
“These are things that you can’t control and that do affect your results,” he added.
