By Allison Martell and Nicole Mordant
Jan 9 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
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
"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
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
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.