Alcoa Reports Loss in Third Quarter > Metal Center News

Alcoa Reports Loss in Third Quarter

Oct. 17, 2012

Alcoa Reports Loss in Third Quarter

Aluminum maker Alcoa, New York, reported a loss from continuing operations of $143 million during its third quarter, a downturn from the $172 million in net income earned in the same quarter last year. This followed a loss of $2 million during the second quarter.

Alcoa cited costs related to environmental remediation of the Grasse River in New York State and the settlement of a civil lawsuit filed by Aluminium Bahrain for the quarterly loss. Without those charges, the company said it would have reported net income of $2 million during the quarter.

Third-quarter 2012 revenue totaled $5.8 billion, down 9 percent compared with third-quarter 2011, primarily due to a 17 percent decline in the realized metal price and 20 percent decline in the realized alumina price, company officials said.

“Markets seem to be driven more by headlines than fundamentals right now, but Alcoa remains focused on the things within our control,” said Klaus Kleinfeld, chairman and CEO, during the company's quarterly conference call with investors and analysts. “We're capitalizing on pockets of strong growth and achieving record profitability in our mid and downstream businesses. We're improving performance in the upstream while optimizing our assets, and across the board we're driving productivity gains.”

Amidst challenging market conditions, Alcoa's upstream businesses achieved significant performance improvement in the third quarter, delivering $98 million of combined sequential operational improvements across the Alumina and Primary Metals segments as higher volume, improved price and mix, and productivity gains more than offset cost headwinds, officials claimed.

In what is traditionally a weaker quarter, Alcoa's midstream and downstream businesses turned in strong performances. Despite weakness in Europe, its Global Rolled Products group achieved record third-quarter operating income of $98 million—up 3 percent sequentially and 63 percent compared to 2011. The sequential increase was mainly driven by improved price and mix, mostly offset by lower volume and increased costs, officials said. The year-on-year improvement was driven by better price and mix, higher volume and strong productivity gains.

Alcoa has moderated its 2012 global aluminum demand forecast to 6 percent, down from 7 percent, due to a second-half slowdown in China. The aluminum market grew 13 percent in 2010, and 10 percent in 2011, and is well ahead of the 6.5 percent compound annual growth rate needed to meet Alcoa's projection of a doubling of aluminum demand this decade.

In Alcoa's global end markets, positive growth continues, particularly in the aerospace market where the company sees 13 to 14 percent year-on-year growth, and in the automotive market, where the company has raised its North American 2012 forecast by 1 percent.

Alcoa's 2012 global growth outlook of 2 to 3 percent for packaging, 2.5 to 3.5 percent for commercial building and construction, and 3 to 5 percent for industrial gas turbine markets remains positive and unchanged. In the heavy truck and trailer market, Alcoa is lowering 2012 growth expectations in anticipation of a slowdown across all major regions.