Alcoa Enjoys Profitable First Quarter > Metal Center News

Alcoa Enjoys Profitable First Quarter

April 18, 2012

New York-based aluminum maker Alcoa returned to profitability in the first quarter, reporting income from continuing operations of $94 million during the first three months of 2012. That was an improvement of $287 million over the previous quarter.

The gain over fourth-quarter results was driven by strong productivity improvements across all businesses, higher realized prices for aluminum, and improved volume and mix, company officials said. These factors were offset somewhat by a lower realized alumina price and higher input costs.

Alcoa’s income in the quarter was down, however, compared to the $309 million earned during first-quarter 2011.

“Performance rebounded strongly this quarter due to our proactive cash sustainability actions, our relentless focus on profitable growth, and stabilizing markets,” said Klaus Kleinfeld, Alcoa chairman and CEO. “We are successfully executing on our aggressive strategy to move down the cost curve in our upstream businesses, and drive to record profitability in our midstream and downstream businesses. Challenges remain in this economy, but we approach them better prepared than ever before.”

Alcoa recorded first-quarter 2012 revenue of $6.0 billion, up slightly compared to both fourth-quarter 2011 and first-quarter 2011. A 9 percent drop in the realized price of aluminum and a 13 percent drop in the realized price of alumina, year-on-year, were partially offset by higher third-party shipments in the upstream businesses, better volume and mix in the midstream business, and improved volume in the downstream business, the company said.

Compared to the previous quarter, Alcoa recorded revenue growth in the first quarter across global end markets, including industrial products, up 14 percent; automotive, up 13 percent; packaging, up 11 percent; and commercial transportation, up 11 percent. Compared to first-quarter 2011, revenues were up 32 percent in commercial transportation, 15 percent in aerospace and 7 percent in automotive, but down 14 percent in industrial products and 5 percent in building and construction.

Alcoa continues to project a global aluminum supply deficit in 2012 and reaffirmed its forecast that global aluminum demand would grow 7 percent in 2012, on top of the 10 percent growth seen in 2011.

As previously announced, Alcoa is curtailing 390,000 metric tons of its system refining capacity to improve the company’s competitive position and to reflect updated internal demand following smelting curtailments announced earlier this year. Combined with the curtailments and closures of high-cost smelting capacity, the company will meet its previously stated goal of moving down the cost curve 10 percentage points in smelting and 7 percentage points in refining by 2015.

In January of this year, Alcoa announced the closure or curtailment of 531,000 metric tons of smelting capacity. Of that, 291,000 represented the permanent closure of capacity in Tennessee and Texas that had been idled since 2009. Another 240,000 metric tons, or 5 percent of Alcoa’s smelting capacity, represented curtailments to be taken in Portovesme, Italy, and La Coruña and Aviles, Spain.