Alcoa’s earnings set bullish tone

　　Alcoa provided a healthy start to the corporate earnings season on Monday by raising its outlook for growth in global aluminium consumption this year after stronger-than-expected demand.

　　The US’s biggest aluminium producer – the first company in the Dow Jones Industrial Average to report second-quarter earnings – reported profits for the three months to the end of June slightly ahead of Wall Street expectations.

　　Alcoa’s bullishness confounded some expectations that it would struggle as a result of slowing industrial demand in China and weakness in the US economy.

　　Aluminium is seen as an important indicator of industrial and consumer demand.

　　Prices for delivered aluminium have dropped sharply in the past three months and sit more than 40 per cent below pre-recession highs. But the average price in the second quarter was almost 40 per cent higher than last year.

　　Alcoa said the resilient demand had prompted it to improve its expectations for the pace of growth in consumption around the world to 12 per cent from its previous guidance of 10 per cent.

　　“Prospects for Alcoa and aluminium continue to be excellent,” said Klaus Kleinfeld, chairman and chief executive.

　　The Pittsburgh-based manufacturer said it made a profit of $136m or 13 cents per share in the second quarter, compared with a loss of $454m or 47 cents per share in the same period a year ago. Analysts had been expecting about 12 cents per share.

　　Alcoa’s revenues rose to $5.2bn, up from $4.2bn last year and ahead of forecasts of about $5bn. The company said that during the quarter, there was a 1 per cent increase in third-party prices for alumina – the raw material for aluminium – but that was offset by a 1 per cent fall in realised aluminium prices.

　　“The top- and bottom-line growth was driven by higher volumes from stronger end markets and continued gains from our productivity programmes,” said Mr Kleinfeld.

　　Alcoa’s productivity improvements were largely due to aggressive job-cutting as the company moved quickly to reduce capacity when the downturn took hold.

　　The company was also boosted by a deal with the unions in which its 6,000 US workers agreed to share a larger proportion of their healthcare costs.

　　Alcoa released the earnings statement after markets closed in New York. Its shares were up 3.2 per cent at $11.22 in after-hours trading. Its stock price has fallen by one-third this year – the largest decline of any Dow component.