UPDATE 3-Alcoa reports big loss after impairment charge
By Allison Martell and Nicole Mordant
Jan 9 (Reuters) - Alcoa Inc reported a massive quarterly loss on Thursday after recent declines in aluminum prices led to a $1.7 billion non-cash impairment charge on smelter acquisitions.
Shares of the largest U.S. aluminum producer fell 4 percent in after-hours trade after the company posted a profit adjusted for one-time items that fell short of analyst expectations and it issued an outlook for stagnant growth in global aluminum demand.
"If investors were hoping that the new year would bring a somewhat rosier picture for Alcoa, they really aren't seeing or hearing much difference from 2013," said Jonathan Pavlik, a portfolio manager at Stewart Capital in Pittsburgh on the forecasts.
Prices for aluminum - used in the aerospace, construction and automotive industries - have remained stubbornly low because of a massive global surplus of metal.
This has hurt Alcoa's upstream operations, which mine bauxite, refine it into alumina and smelt alumina to produce aluminum. In response, Alcoa has been shutting down higher-cost smelting capacity and focusing on more profitable segments, such as its engineered products business, which sells cast metal items such as wheels and plane fuselages.
"The results were disappointing. Wading through the goodwill impairment and the non-recurring items, we're still looking at a miss of 2 cents," said Stephen Massocca, fund manager at Wedbush Morgan in San Francisco.
Revenue fell 5.3 percent to $5.59 billion in the fourth quarter but topped analysts' average estimate of $5.34 billion, tempering the disappointment among investors.
The results came hours after news Alcoa and a joint venture it controls agreed to pay $384 million to resolve charges under the U.S. Foreign Corrupt Practices Act.
Alcoa said it expected global aluminum demand to grow 7 percent in 2014, consistent with its 7 percent growth in 2013.
The New York-based company sees the aerospace industry growing between 7 percent and 8 percent in 2014, automotive up between 1 percent and 4 percent, and building and construction growth between 4 percent and 6 percent.
Alcoa has long been the first S&P 500 company to report quarterly results.
Because aluminum is used by several major industries, some see it as a bellwether for the broader economy. Even so, the company's performance often diverges from that of its end markets and the economy as a whole.
On Thursday, Alcoa shares dropped to $10.24 in after-hours trade after ending regular trading down 1.3 percent at $10.69.
For the first quarter of 2014, Alcoa expects after-tax operating income in its engineered products business to increase 8 percent to 10 percent from the $168 million it reported in the fourth quarter, Alcoa Chief Financial Officer William Oplinger said on a conference call.
Profitability in Alcoa's global rolled products business, which makes aluminum plate, sheet and foil, is expected to double in the first quarter after it fell 73 percent to $21 million in the fourth quarter due to lower packaging and aerospace volumes, Oplinger said.
In recent quarters these two businesses have proven more profitable than selling less-processed metal into a tough market. They now make up 57 percent of Alcoa's revenue and 80 percent of the profits from its business segments.
Excluding the impairment charge, related to acquisitions made in 1998 and 2000, and other special items, Alcoa group earnings fell to $40 million, or 4 cents a share, from $64 million, or 6 cents, a year earlier.
Net loss attributable to Alcoa was $2.34 billion, or $2.19 a share, compared with income of $242 million, or 21 cents a share, a year earlier.
Analysts, on average, had been expecting earnings of 6 cents a share, according to Thomson Reuters I/B/E/S.