Thursday 20 October 2016

Alcoa profit falls; demand seen growing faster than supply

Published 12/04/2016 | 08:46

Trimming costs: Alcoa (Photo by Jeff Swensen/Getty Images)
Trimming costs: Alcoa (Photo by Jeff Swensen/Getty Images)

Metals company Alcoa reported a lower quarterly profit, with results hurt by low commodity prices, the strong U.S. dollar and plant closures or divestments, but the company's top executive said he expected aluminum demand to grow faster than supply this year.

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Alcoa also lowered its 2016 outlook for global sales in the aerospace industry, and its shares fell 5 percent in after-hours trading.

Alcoa will split in two in the second half of this year.

The company's traditional smelting business will retain the Alcoa name, while a new firm named Arconic will retain the added-value aerospace and automotive business involving strong, light alloys that the company has worked hard to build in recent years.

But that traditional business has been hurt by slumping aluminum and alumina prices. Alcoa Chief Executive Klaus Kleinfeld told Reuters in an interview that the company expects global aluminum demand to grow by 5 percent this year, while supply should increase by 2 percent.

"That should create additional price support" for aluminum, he said.

He added that the company's closure or sale of some smelters was a way to "achieve the profitability that we want to get to."

Alcoa said it now expects global sales in the aerospace industry to grow in a range of 6 to 8 percent this year. That is down from its last forecast in the fourth quarter of 2015 of growth between 8 and 9 percent.

Kleinfeld said he was confident in this outlook, citing long order backlogs for the airline industry.

The company said it expects global automotive production to grow between 1 and 4 percent this year.

The New York-based company posted first-quarter net profit of $16 million or 0 cents per share, down from $195 million or 14 cents per share a year earlier.

Analysts on average had expected earnings per share for the quarter of 2 cents.

Excluding one-time items, the company said earnings per share totaled 7 cents.

Revenue for the quarter fell 15 percent to $4.95 billion from $5.82 billion a year earlier. Analysts had expected revenue for the quarter of $5.14 billion.

In after-hours trading, Alcoa shares were down 5 percent at $9.26.


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