Alcan 2Q earnings fall 4 percent

Canadian aluminum maker Alcan (NYSE:AL) Inc. said Tuesday its second-quarter earnings fell 4 percent due to increased energy, raw materials and operating costs. The Montreal-based company, which recently accepted a $38-billion takeover bid by Australian miner Rio Tinto, reports in U.S. dollars. It earned $438 million, or $1.18 per share, compared to $455 million, or $1.21 per share, in the comparable period in 2006. The company had 6.1 million fewer shares outstanding in the 2007 second quarter. But analysts' consensus forecast was for earnings of $1.71 per share, before one-time items, according to Thomson Financial. Operating earnings of $1.62 per share or $603 million compared with $1.48 or $556 million a year earlier, while cash flow from operating activities in continuing operations slipped to $738 million from $771 million. The company said it was negatively affected by a weakened U.S. dollar, which put pressure on operating costs. Total sales, however, were $6.6 billion, up 8.2 percent from the second quarter of 2006 despite a slightly lower aluminum volume. Dick Evans, the company's CEO, said strong Chinese demand growth should underpin current favorable conditions. For 2007, world primary aluminum consumption is forecast to increase by about 10.1 percent, versus 6.9 percent in 2006, driven by high demand in China, representing the fastest rate of global consumption increase since at least 1980. 'At the aluminum industry level, extremely strong Chinese demand growth should underpin ongoing favorable conditions. We continue to expect our financial results to reflect not only these favorable industry conditions, but also Alcan's very strong competitive position,' said Evans in a statement Tuesday. The company's stock rose 60 cents, or 0.62 percent, to $97.40 in regular trading Tuesday. Mining giant Rio Tinto approached Alcan after aluminum producer Alcoa Inc. (AMEX:AA.PR) (NYSE:AA) presented a $28 billion hostile takeover bid in May. Rio Tinto's bid is 65.5 percent higher than Alcan's closing share price before Alcoa's May 4 takeover bid, and nearly 33 percent higher than Alcoa's offer, according to Rio Tinto and Alcan. Evans said he believes the Rio Tinto deal shouldn't be affected by the growing concerns about high-yield debt that have compromised other takeovers. 'One of the many factors that made Rio Tinto a very attractive partner for us in this is that they do have a very, very strong balance sheet,' he said. 'They will have no difficulty raising the $40 billion or so they intend to raise.' The company has given Alcan shareholders until Sept. 24 to accept its tender offer of $101 per share. More than 66 percent of Alcan's voting shares must approve the tender offer for the companies to move forward with the transaction. A merger of the two companies would form the world's largest aluminum producer.