Alcoa Reports “Excellent” First Quarter
Alcoa’s recovery continued through the first quarter, as the New York-based aluminum company reported net income of $309 million, up 20 percent from the previous quarter. The company posted a net loss of $201 million during the same quarter in 2010.
First-quarter income from continuing operations was the highest for the company since before the recession in the second quarter of 2008. Similarly, the company’s adjusted EBITDA of $955 million was the best quarterly performance since third-quarter 2008.
"It was an excellent first quarter as we improved profitability across all business segments, set profit records in our midstream and downstream businesses and grew substantially," Alcoa Chairman and CEO Klaus Kleinfeld told investors and analysts during the company’s quarterly conference call.
Revenue for first-quarter 2011 totaled $6.0 billion, an increase of 22 percent over first-quarter 2010 and up 5 percent compared to fourth-quarter 2010.
The improvement over fourth-quarter 2010 was driven by higher realized prices for alumina and aluminum and growing demand for aluminum products in major end markets, along with productivity improvements. These were offset somewhat by a weaker U.S. dollar, along with higher energy and materials costs.
Alcoa reaffirmed the company's projection that global aluminum demand would grow 12 percent in 2011 on top of the 13 percent growth rate in 2010. "Our outlook for the rest of 2011 and beyond remains very positive due to the world's growing population, increasing urbanization, and aluminum's advantages as a light, strong and recyclable material," Kleinfeld said.
End markets showed continued revenue growth in the first quarter, including automotive, up 30 percent; aerospace, up 7 percent; packaging, up 14 percent; industrial products, up 13 percent; and commercial transportation, up 12 percent, compared to the previous quarter. Compared to first-quarter 2010, revenues were up 20 percent in aerospace, up 45 percent in packaging, up 26 percent in building and construction, and up 37 percent in commercial transportation.
Both the company’s Flat-Rolled Products and Engineered Products and Solutions segments turned in record performances for the quarter. Flat-Rolled Products' adjusted EBITDA was a first-quarter record at $173 million. Engineered Products and Solutions set a record for highest-ever adjusted EDITDA margin at 18.4 percent.
Flat-Rolled Products revenue in the first quarter was $1.96 billion, up 32 percent year-over-year and 17 percent sequentially. Growth was driven by stronger pricing in North America and Europe, a better mix of products and higher volumes, somewhat offset by alloying cost pressure and rising regional premiums. Both Russia and China continue to see positive trends, with third-party volumes up approximately 60 percent in Russia and 90 percent in China, compared to first quarter 2010, company officials reported.
Engineered Products revenue in the first quarter totaled nearly $1.25 billion, up 16 percent year-over-year and 3 percent sequentially. Improvements were driven by volume and productivity improvements.
Alcoa expects continued growth in all of its end markets, with auto, heavy truck and industrial gas turbines all up 5 to 10 percent in 2011. However, in North America, can packaging is expected to be flat and commercial building down 4 to 8 percent for the year.
“We expect aerospace to grow 7 percent in 2011, strongly driven by commercial aircraft demand. Boeing and Airbus have backlogs of six years,” Kleinfeld said.
Regional premiums will continue to remain high due to limited scrap availability, an issue that shows no signs of abating. “We’ve seen a pretty strong tightening in the scrap market. That’s one of the reasons we continue to see some people go away from scrap because it’s just not available and they have to go with primary aluminum. It will continue to increase, particularly on the China side, which has a 20 percent recycled content target through 2020,” Kleinfeld added.