January 12, 2010 / 12:43 AM / 8 years ago

UPDATE 3-Alcoa misses Street estimate, shares fall

5 Min Read

* Operating profit, ex items, misses Street view

* Revenue drops to $5.43 bln, but 18 pct higher than Q3

* Stock dips 5 pct after hours (Adds executive comments, cost details, byline)

By Steve James

NEW YORK, Jan 11 (Reuters) - Alcoa Inc (AA.N) posted a narrower quarterly loss on Monday, but the results fell short of expectations and the aluminum producer's stock fell more than 5 percent.

The company blamed higher power bills, a weak U.S. dollar and costs of temporarily shutting down its smelters in Italy, and said although aluminum prices are climbing, demand from some customers, especially plane makers and the commercial construction sector, was not expected to improve soon.

"For large commercial aircraft, deliveries are expected to decline and airlines are under pressure," President and Chief Executive Klaus Kleinfeld told Wall Street analysts on a conference call to discuss the fourth-quarter results.

"In automotive, we expect production to rebound by 5-10 percent, but production is still below peak levels of '07."

However, he said Alcoa still expects a 10 percent growth in global demand this year for the metal, which is used to make aircraft, cars, beverage cans and kitchen wrap. It said all markets except aerospace, commercial building and construction, and industrial gas turbines improved from the third quarter. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

For a graphic on Alcoa's earnings, click on: link.reuters.com/duv82h ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

"This was a tough year for the aluminum industry -- a price crash, demand destruction, and credit crunch," Kleinfeld said in an earlier statement with Alcoa's financial results.

Alcoa said the net loss was $277 million, or 28 cents per share, compared with a loss of $1.19 billion, or $1.49 per share, in the fourth quarter of 2008.

Excluding charges of 28 cents a share for restructuring, special items and discrete tax items, Alcoa earned 1 cent a share on an operating basis, short of the 6 cents a share expected, on average, by analysts. according to Thomson Reuters I/B/E/S.

Revenue fell to $5.43 billion from $5.68 billion but was 18 percent higher than the third quarter, the Pittsburgh-based company said. Wall Street expected revenue of $4.86 billion

"It appears that costs rose faster than prices," said John Tumazos, president of veryindependentresearch.com.

"Or that some of the cost gains in the first half of 2009 were due to exogenous factors like currency shifts, lower energy prices, lower metal prices and now some of those exogenous factors are going against them while the metal price is going (up) for them."

Chief Financial Officer Chuck McLane said global aluminum prices rose 9 percent in the fourth quarter but that Alcoa was hit by an extra $30 million for power costs and $35 million of negative currency exchanges.

The quarter also included $250 million of charges related to a recent European Commission ruling on electricity tariffs affecting the company's Italian smelters, McLane said.

Kleinfeld said the company was appealing the EC ruling, but that in the meantime it had no alternative but to temporarily shut operations in Italy.

Alcoa's loss followed a narrow profit in the third quarter, which had been preceded by three consecutive quarterly losses for the aluminum company, traditionally the first Dow component to report each quarter.

Aluminum reached a peak of $3,380 per tonne in July 2008. But it slumped 35 percent later as the global economy went into recession and has only slowly risen. On Monday the metal was selling in London at around $2,330.

Alcoa's shares dipped over 5 percent to $16.54 in after-market trade after closing on the New York Stock Exchange at $17.45 on Monday.

Still other investors saw the news as not entirely negative. "The headline number is a little bit disappointing, but as you dig in a little bit deeper it looks as though there is some improvements. It looks like the company is on track to meet many of their (financial) objectives," said Brian Hicks, co-manager of US Global Investors global resources fund. (Editing by Steve Orlofsky)

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