Alcoa posts 2Q loss of $454M on weak demand

PITTSBURGH — Alcoa Inc. unofficially opened the earnings season by posting a loss of $454 million, citing continued weak prices and demand for its aluminum products amid the global recession.

But the loss was narrower than expected and the stock moved higher in after-hours trading. Alcoa executives credited the results to the company’s efforts to slash costs and conserve cash in recent months. They pointed to signs that some aluminum markets may be stabilizing, but reiterated an earlier estimate that the aluminum industry will shrink 7 percent this year.

It was Alcoa’s third straight quarterly loss and fresh evidence of slumping orders from key customers in the aerospace, automotive and construction industries. Aluminum makers have struggled since last year with sharply lower orders for the metal used in products ranging from beer cans to jumbo jets.

The weaker demand has driven up stockpiles and depressed prices of the metal, and many aluminum makers have responded by curbing production. Analysts say demand is picking up, but excess supplies will keep prices relatively low in the months ahead.

Alcoa, the first of the Dow Jones Industrial Average companies to post results and a bellwether of industrial health, has scaled back its production by about 20 percent. It has undertaken a campaign to cut costs and raise cash, announcing 13,500 job cuts and the planned sale of four business units earlier this year.

In April, Alcoa said it had agreed to sell a business that makes electrical systems for automobiles to Platinum Equity, a Los Angeles-based private-equity firm, for an undisclosed amount.

Alcoa’s president and CEO, Klaus Kleinfeld, said the company’s ongoing efforts to cut costs and raise cash “are working.”

“Now Alcoa has the staying power and reduced cost base to withstand the most serious downturn in the history of the aluminum industry,” he said in a statement.

Kleinfeld also said Alcoa was well positioned to grow as the broader economy recovers, and that some end markets — such as the U.S. beverage can and auto markets — showed signs of stabilizing.

Still, the largest U.S. aluminum producer, which makes the metal and uses it to manufacture products such as truck wheels and fighter jet parts, is maintaining its forecast of an industrywide contraction of 7 percent this year, he said.

Pittsburgh-based Alcoa’s loss amounted to 47 cents per share for the three months ended in June. During the same period last year, the company earned $546 million, or 66 cents per share.

Alcoa’s loss from continuing operations in the latest quarter was $312 million, or 32 cents per share. Excluding restructuring charges, that loss would have been 26 cents per share.

Revenue tumbled 41 percent to $4.24 billion.

Analysts expected Alcoa to lose 38 cents per share on revenue of $3.93 billion, on average, according to a survey by Thomson Reuters. Wall Street typically excludes one-time charges in its estimates.

Shares of Alcoa gained 44 cents, or 4.7 percent, to $9.90 in after-hours trading following an advance of 5 cents to $9.46 in the regular session. During the quarter, Alcoa stock climbed about 36 percent.

On the Net:

Alcoa Inc.: www.alcoa.com/global/en/home.asp