* 2nd qtr results due Monday, July 11, after 1600 EDT
* Analysts expect profit of 34 cts/shr vs year-ago 13 cts
* Aluminum price to push revenue up 20 pct to $6.3 bln
* Currency fluctuations lead cost concerns
By Steve James
NEW YORK, July 7 Alcoa Inc (AA.N), often viewed
as a bellwether of the U.S. economy, is looking at a big jump
in second-quarter profit as a result of soaring aluminum prices
and growing demand, especially from planemakers.
"When you compare year-over-year, the second quarter will
be a lot higher, and most of that is in volume improvement,"
said analyst Bridget Freas, of Morningstar in Chicago.
"Aluminum prices are a lot higher, and the upward trend of
the first quarter reflects improvements in end-markets."
She noted metal prices are 5 or 6 percent higher than in
the first quarter, which was Alcoa's best quarter since the end
Aluminum was selling in a range of $2,500 to $2,600 a tonne
on the London Metal Exchange during the second quarter, up from
$1.977 in the same quarter a year earlier.
"They might have some offsetting factors, such as foreign
currency, which likely will hurt them," Freas said. "But they
have landed some nice deals recently, like Airbus, and they
have done a good job of cleaning up their cost structure."
Fraser Phillips, of RBC Capital Markets, said higher prices
and volumes were certainly driving Alcoa's increased profit,
but costs remain challenging.
"The gains should be partly offset by the negative impact
of currency and higher energy and raw materials costs," he
wrote in a research note.
Phillips said he expected second-quarter profit to improve
to 33 cents a share from 28 cents a share in the first quarter
and 13 cents a share in last year's second quarter. Analysts on
average are expecting 34 cents per share, according to Thomson
Reuters I/B/E/S, with revenue rising more than 20 percent to
Phillips said higher average aluminum prices in the second
quarter should boost profit by 6 cents a share. But currency
movements will have a negative impact, he said, noting the
Australian and Canadian dollars, the Brazilian real and the
euro all strengthened relative to the U.S. dollar, which should
decrease earnings per share by 2 cents.
Profit should also be reduced by about 6 cents per share by
increased energy and raw material costs for alumina -- which is
smelted into aluminum -- as well as primary metals and flat
rolled products, Phillips wrote.
Charles Bradford, of Bradford Research in New York, said
the consensus of Wall Street analysts had come down a little in
recent weeks. "They had a good quarter, but not as good as some
people thought," he said. "Mostly it was due to currency
fluctuations, but they are still driven by the metal price."
Alcoa said its results, due on Monday, July 11, shortly
after the market closes, will recognize an after-tax net charge
of about $30 million on the early retirement of debt
In an interview with Reuters in May, Chief Executive Klaus
Kleinfeld said he expected aluminum prices to keep climbing and
demand for the metal to likely double in the next decade.
He said Alcoa still expects global aluminum demand to grow
by 12 percent this year and to double in the next 10 years as
customers like auto and plane manufacturers use more of the
lighter-weight metal for their products.
Alcoa recently announced a deal worth about $1 billion to
supply its new, lighter aluminum-based alloys for Airbus
commercial aircraft. [ID:nN1E75N06K]
Alcoa said the deal with the European planemaker unit of
EADS EAD.PA calls for aluminum sheet and plate using current
and advanced-generation aluminum alloys, which are lighter and
stronger than traditional metals and composites.
(Reporting by Steve James, editing by Matthew Lewis)