(Adds forecasts and context on automotive aluminum)
April 8 Alcoa Inc reported a decline in
first quarter adjusted profit on Tuesday as aluminum prices
dropped. But earnings came in ahead of analysts' expectations,
and the aluminum producer's shares rose in trading after the
After-tax operating income rose in the company's "engineered
products and solutions" segment, which sells cast metal products
like auto parts, to $189 million from $173 million.
"The news was certainly better than the street anticipated.
The top line was slightly below estimates, but the bottom line
was significantly better," said Stephen Massocca, fund manager
at Wedbush Morgan in San Francisco.
Stubbornly low prices have weighed on Alcoa and other
aluminum producers, and it has been pushing to lower expenses by
shutting down higher-cost smelting capacity.
Alcoa's downstream segment, which sells products like truck
wheels and aircraft fuselages, has lately been more profitable
than its upstream businesses of mining bauxite, refining into
alumina and smelting alumina to produce aluminum.
The company, which is based in New York but has operations
around the world, said recent expansion projects in Iowa and
Tennessee should increase its revenue from automotive sheet six
fold from 2013 to more than $1.3 billion in 2018.
Automakers' demand for aluminum is growing rapidly as they
seek to improve fuel efficiency, developing vehicles like Ford
Motor Co's aluminum-intensive next generation F-150
pickup truck, unveiled in January.
In the short term, engineered products and solutions is
targeting after-tax earnings of $200 million or more in the
second quarter, Chief Financial Officer William Oplinger said on
a call with analysts and investors.
Alcoa said it now expects the global aerospace market to
grow by between 8 and 9 percent in 2014, up from the 7 to 8
percent band it forecast in January, on the back of strong
demand for both large commercial aircraft and regional jets and
continued growth in the business jet market.
Alcoa has long been the first S&P 500 company to report
results each quarter, and since aluminum is used by some key
industries, including the automotive, aerospace and construction
sectors, some see it as a bellwether for the earnings season.
But Alcoa's results often diverge from its customers, which
has led some to question how much it says about the market as a
In February Alcoa said it would close the Point Henry
smelter and rolling mills in Australia. In March, the company
said it would shut another 147,000 tonnes of smelting capacity
Net loss for the first quarter was $178 million, 16 cents a
share, compared with net income of $149 million, or 13 cents, a
Excluding $276 million in restructuring charges and other
special items, earnings fell to $98 million, or 9 cents a share,
from $121 million, or 11 cents. Sales fell to $5.45 billion from
Analysts had been expecting earnings of 5 cents a share on
revenue of $5.55 billion, according to Thomson Reuters I/B/E/S.
Its shares rose 2.4 percent to $12.83 in aftermarket trading
(Reporting by Allison Martell and Cameron French in Toronto,
and Nicole Mordant in Vancouver; Editing by Cynthia Osterman)