Alcoa's quarterly loss smaller than expected

By Steve James

NEW YORK (Reuters) - Alcoa Inc posted a third consecutive quarterly loss on Wednesday, but cost cuts helped the largest U.S. aluminum maker beat Wall Street estimates by a large margin, sending its stock higher.

Chief Executive Officer Klaus Kleinfeld later told analysts there were signs that weak demand for aluminum -- which has prompted production cuts and plummeting metals prices in the last nine months -- might be easing.

"We still have challenging global markets, but there are some pockets of growth," he said, citing such near-term catalysts as China, production curtailments, destocking of aluminum inventories and government stimulus programs.

China will be a near-term importer of aluminum, but Beijing's stimulus programs for its own industry will eventually change the picture, he said on a conference call.

"We don't expect imports (to China) to go on forever," he added.

The Alcoa head said that, although Alcoa still sees a 7 percent decline in global aluminum demand this year, the company expects U.S. auto build rates to rise in the second half of 2009 as carmakers replenish low inventories.

In the beverage can sector, Alcoa expects a "reasonably stable" performance with steady U.S. demand in the summer.

Alcoa, like other metals makers, has pared back operations and cut jobs in the face of weak prices as the poor global economy cut demand from the construction, electronics and auto sectors.

"They (Alcoa) were able to do better than expected from cost savings," said Brian Hicks, co-manager of U.S. Global Investors' natural resources fund. "Year-over-year production is down and down sequentially as well, but it looks like they were able to contain costs."

Kleinfeld said the company has achieved some $1.0 billion in procurement savings through the first half of the year, or about two-thirds of the full-year target. Overhead savings year-to-date are around $270 million, or 134 percent of the full year target for 2009, he said.

Alcoa shares were up nearly 5 percent at $9.92 in post market trading after closing at $9.46.

The second-quarter net loss was $454 million, or 47 cents per share, compared with earnings of $546 million, or 66 cents per share in the same quarter of 2008, the Pittsburgh-based aluminum producer said.

But the loss from continuing operations, was 32 cents per share and, excluding restructuring, the loss was 26 cents. That was better than the 38 cent-loss analysts were expecting, according to Reuters Estimates.

Revenue slumped to $4.2 billion from $7.2 billion a year earlier, as Alcoa curtailed aluminum and alumina production in response to reduced demand.

"It's a beat," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco, who added the results could give the markets a boost. "We're due for a bounce. Markets are oversold."