Energy costs, weak dollar hurt Alcoa

Aluminum producer Alcoa Inc. said Monday that first-quarter profit was half that of a year ago, as higher energy costs and a weak dollar offset a surge in the metal’s price.

The results, the first by a member of the Dow industrials this earnings season, missed expectations by 5 cents a share. But Wall Street looked beyond the profit shortfall and currency issues to focus on the rising price of aluminum, and the shares recovered after briefly declining in after-hours trading.

“It looks like a pretty solid quarter,” said Bruce Zaro, chief technical strategist of Delta Global Advisors in Boston. “Everybody knows the dollar has been weakened, and that’s one of the most difficult things, especially for the commodity makers, to estimate how that’s going to impact the numbers at the end of the quarter.”

The price of aluminum on the London Metal Exchange slipped below $2,500 per metric ton at the beginning of the year but has risen since February. On Monday it gained $17 to $2,970.

“I think the fundamentals for aluminum could be quite strong over the next couple of years,” said Brian Hicks, co-manager at U.S. Global Resources fund. “That’s the way we’re looking at it. We’re not so focused on near-term quarterly results.”

Alcoa reported net income of $303 million, or 37 cents a share, compared with $662 million, or 75 cents, in the same quarter last year. Income from continuing operations, excluding restructuring and tax impacts, was $361 million, or 44 cents a share.

That fell below analysts’ average earnings forecast of 49 cents a share, according to Reuters Estimates.

Revenue fell to $7.4 billion from $7.9 billion a year earlier, Alcoa said. Analyst expectations were for revenue of $7.4 billion.

Alcoa shares edged slightly higher in after-hours trade after dropping more than 2% on the initial earnings report. The stock fell $1.56 to $37.44 during regular trading.

The company said earnings were “compressed” by higher raw material and energy costs and the effect of a weaker U.S. dollar. “Currency negatively impacted results by $68 million or 8 cents per share on a sequential basis, as the U.S. dollar deteriorated against most major currencies.”

Chief Executive Alain Belda said market fundamentals remained strong and the company was well-positioned to boost returns when the North American and European economies rebounded.