Alcan’s going south, not earnings

Aluminum company Alcan Inc. is set to end its run as an independent Canadian company by posting some of its best-ever financial results. Operating earnings for the second quarter were the second best in Alcan’s history and its first half-year operating earnings were an all-time record, CEO Dick Evans proudly boasted Tuesday. The Montreal-based company said it earned US$603 million from operations, or $1.62 per share, compared with US$556 million, or $1.48 per share a year earlier. Following a strong first quarter, its operations generated $3.30 per share for the six months ended June 30. The company reports in U.S. dollars. "We have seen not only continued strong fundamentals in the short-term, but in fact an improved market signals for the medium and longer term," he said in what could be the company’s final conference call. A US$38-billion takeover by mining giant Rio Tinto is slated to close in early September. The company has benefited from increasing aluminum prices, which have been pushed by growing demand from China. For 2007, world primary aluminum consumption is forecast to increase by about 10.1 per cent, versus 6.9 per cent in 2006, driven by high demand in China and representing the fastest rate of global consumption increase since at least 1980. The rising value of the Canadian dollar helped diminish overall profit to $438 million in the second quarter, from $455 million a year ago.The surging Canadian and Australian currencies was the main sour note in otherwise strong results, Evans said in an interview. "That is negative, certainly, but when you look at the operating results and the cash results, they were the second-best in our company’s history," he said. Offsetting a weaker U.S. dollar was a rise in the price of U.S.-denominated aluminum prices. Ingot prices increased by 5.8 per cent to US$2,866 per tonne. The prospect of a higher Canadian dollar won’t compromise Rio Tinto Alcan’s future’s profitability, he said. "Obviously, it creates a bit more of a challenge to us from an operating standpoint but we have quite efficient operations and I think with our new combination with Rio Tinto, we’ll be even more efficient as a global producer."