Aluminium demand will rise - Alumina

Disappointment about the latest results from US aluminium giant Alcoa flowed through to the Australian market, driving losses in the materials sector, but analysts say the reaction is puzzling. Alcoa reported a fourth quarter net loss of $US277 million ($A298.61 million) overnight, or 28 cents per share, an improvement on a net loss of $US1.19 billion ($A1.28 billion) in the prior corresponding period. Revenue fell from $US5.68 billion ($A6.12 billion) to $US5.43 billion ($A5.85 billion). CMC Markets analyst David Taylor said: 'The result indicated that revenues were growing strongly, and, combined with solid import numbers coming from China, made for a fairly bullish story. 'Despite strong revenues, earnings fell short of expectations and the resources sector took a bit of a hit.' Locally, shares in its joint venture partner Alumina Ltd were down 9.5 cents, or 4.61 per cent, at $1.965 at 1549 AEDT after it said Alcoa's result closed out a difficult year for the aluminium industry. Alcoa, which also is listed in Australia but trades infrequently, was steady at $44.89 after 500 shares changed hands. Alcoa's results came after the US market closed and its shares tumbled six per cent to $16.40 in aftermarket trading, despite the miner saying it was free cash flow positive for the first time since the second quarter of 2008. IG Markets research analyst Ben Potter said the reaction was a surprise. 'The after hours reaction to Alcoa was a little puzzling,' Mr Potter said. 'The market has said it will focus on top line expansion through earnings growth, which Alcoa achieved. 'However, participants chose to focus on the slight EPS (earnings per share) miss and ignore the improved balance sheet.' Mr Potter said the US market's reaction to the Alcoa result on Tuesday would be interesting. Alumina chief executive John Bevan said in a statement on Tuesday that Alcoa's result had been hampered by a weaker US dollar, but improvements in alumina prices had been sustained, with realised US dollar third party prices up 15 per cent on the prior quarter. 'The alumina refineries achieved record third party shipments for the quarter based on strong customer demand, particularly in China,' Mr Bevan said. This left Alumina well-positioned to benefit from expected demand growth in 2010. Alumina will report its 2009 earnings on February 9. Alumina and Alcoa are partners in Alcoa World Alumina and Chemicals, with stakes of 40 per cent and 60 per cent, respectively.