Alcoa first quarter earnings exceed analysts’ estimates

Strong demand from airplane and car manufacturers boosts profit

Alcoa reported first-quarter earnings that exceeded analysts' estimates. Photo: Getty

Alcoa reported first-quarter earnings that exceeded analysts' estimates. Photo: Getty

Tue, Apr 9, 2013, 09:54

Alcoa, the largest US aluminum producer, reported first-quarter earnings that exceeded analysts' estimates as demand from airplane and car manufacturers increased.

Net income rose to $149 million, or 13 cents a share, from $94 million, or 9 cents, a year earlier, the New York-based company said yesterday in a statement.

Alcoa, traditionally the first company in the Dow Jones Industrial Average to report earnings, has been shifting its focus from the production of the lightweight metal to making valued-added aluminum parts for industry.

Profit in the engineered products and solutions unit, which supplies the aerospace and automotive industries, rose 10 per cent, Alcoa said in the statement.

"There was clear improvement in engineered products," Lloyd O'Carroll, an analyst at Davenport and in Richmond, Virginia, said yesterday by phone. "The aerospace market is strong."

Alcoa traded at €6.38 as of 10.18am in Frankfurt. That's equivalent to $8.33, a 0.7 per cent decline from yesterday's closing price in New York.

Airbus and Boeing are working to meet aircraft orders as US airlines replace the world's oldest fleets. Airbus yesterday broke ground on a new plant in Mobile, Alabama, which will build the A320 neo single-aisle jet.

US light-vehicle sales in March climbed 3.4 per cent to 1.45 million, the best month for the industry since August 2007, according to researcher Autodata. Automakers sold 3.69 million cars and light trucks in the US this year through March, the most in any quarter since the last three months of 2007.

The auto industry is on track to consume 4 percent more aluminum this year as the average North American car adds 14 pounds of the metal in 2013 compared with last year, according to research by Mr O'Carroll.

Alcoa's revenue fell 2.9 per cent to $5.83 billion, missing the $5.88 billion average of 11 estimates.

The company cited lower metal prices and the impact of smelter curtailments in Spain and Italy for the decline in sales. Aluminum for immediate delivery on the London Metal Exchange fell 9.2 per cent this year to close at $1,853 a metric ton yesterday.

"The aluminum price is basically the issue," David Gagliano, a New York-based analyst at Barclays, said yesterday in a telephone interview.

"Downstream was really strong, but it's being offset by the low metal prices recently." Alcoa reiterated its forecast that global aluminum demand will increase 7 per cent this year.

The company estimates surplus production will fall to 155,000 tons in 2013 from an earlier projection of 535,000 tons as Chinese smelters cut output, chief financial officer William Oplinger said yesterday on a conference call to discuss results.

Alcoa is seen to be losing its accuracy as a bellwether for the US stock market. The Standard and Poor's 500 Index has usually followed Alcoa's lead since 2002, rising 2.5 per cent in quarters when the aluminum producer beat the market after earnings, less when it didn't.