Alcoa Posts Highest Profit in 2 Years on Aluminum

Bloomberg Jan 11--Alcoa Inc., the largest U.S. aluminum producer, reported its highest profit in nine quarters after the price of the metal approached pre-recession levels. The shares fell after sales missed analysts’ estimates.

Net income of $258 million, or 24 cents a share, compared with a net loss of $277 million, or 28 cents, a year earlier, Alcoa said today in a statement. Sales gained 4 percent to $5.65 billion from $5.43 billion, missing the $5.75 billion average estimate of seven analysts in a Bloomberg survey. Alcoa, which advanced 27 percent in the quarter, fell 1.6 percent after the close of regular trading on the New York Stock Exchange.

“This is not a blow-it-out-of-the-park quarter,” Jorge Beristain, an analyst at Deutsche Bank AG in Greenwich, Connecticut, said in a telephone interview. “It’s a reasonably strong quarter.”

The profit is Alcoa’s biggest since the third quarter of 2008, when commodities began to tumble after the bankruptcy of Lehman Brothers Holdings Inc. in September that year. New York- based Alcoa, led by Chief Executive Officer Klaus Kleinfeld, had net losses in 2008 and 2009, its worst run in at least 19 years. It fired more than 20,000 workers and closed plants in the U.S. and Europe during the global economic slowdown.

Alcoa, traditionally the first company in the Dow Jones Industrial Average to post quarterly earnings, declined 27 cents to $16.22 as of 7 p.m. in New York.

Demand Forecast

Fourth-quarter earnings excluding tax benefits and gains on restructuring and derivatives were 21 cents a share, beating the 19-cent average estimate of 15 analysts surveyed by Bloomberg.

Aluminum demand rebounded 14 percent in 2010, the biggest increase since at least 1996, according to data compiled by Bloomberg. Kleinfeld said today in the statement that global consumption will increase 12 percent in 2011.

Aluminum for delivery in three months on the London Metal Exchange averaged $2,365 a metric ton in the fourth quarter, the most since the third quarter of 2008. It traded at $2,541 on Jan. 7, the highest since Sept. 23, 2008, eight days after Lehman filed for bankruptcy. The metal slid 1.2 percent to $2,488 in London today.

“The increase in aluminum prices has more than offset high material and industry costs as well as the impact of a weaker U.S. dollar,” Chief Financial Officer Chuck McLane said in a conference call. “Each of our businesses was able to significantly improve their performance.”

Higher Productivity

Alcoa said demand strengthened in most of its markets and productivity gained. The cost of goods sold declined 7.5 percent to $4.54 billion from $4.91 billion a year earlier.

The company said Jan. 7 it will restore idled production at three U.S. plants, adding 137,000 tons of output this year.

Alcoa, which operates in 31 countries including Brazil, Australia and Canada, sells aluminum in dollars and pays costs in local currencies.

The Australian dollar appreciated 5.8 percent against the U.S. dollar in the fourth quarter, the Canadian dollar advanced 3.1 percent and the Brazilian real gained 1.6 percent. Crude oil prices on the New York Mercantile Exchange were on average 12 percent higher in the quarter compared with a year earlier.

Aluminum output in 2011 will be 43.2 million tons globally, exceeding consumption by 360,000 tons, according to Deutsche Bank estimates. There were 4.37 million tons of aluminum inventories stored in LME-monitored warehouses as of Jan 7, down 5.3 percent from a year ago.