Alcoa omen puzzles analysts

DISAPPOINTMENT about the latest results from US aluminium company 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), an improvement on the net loss of $US1.19 billion in the same quarter last year. Revenue fell from $US5.68 billion to $US5.43 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, closed down 10?, or 4.9 per cent, at $1.96 after it said Alcoa's result closed out a difficult year for the aluminium industry. Alcoa's results came after the US market closed and its shares tumbled 6 per cent to $US16.40 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 he was surprised by the strength of the negative sentiment towards Alcoa. ''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.'' Alumina chief executive John Bevan said 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 previous quarter. ''The alumina refineries achieved record third-party shipments for the quarter based on strong customer demand, particularly in China,'' Mr Bevan said. He said Alumina was well placed to benefit from an expected increase in demand later this year.