), the largest U.S. aluminum producer, posted a loss of $119
million or 11 cents per share in the second quarter of 2013
compared with a loss of $2 million or break-even per share in the
year-ago quarter. The loss includes $195 million related to
restructuring due to plant closures and legal expense.
Excluding one-time special items, Alcoa earned $76 million or
7 cents a share in the quarter, in line with the Zacks Consensus
Estimate. However, it was ahead of the year-ago earnings of $61
million or 6 cents per share. Productivity gains and strong
performance from Alcoa's Engineered Products business supported
Revenues dropped roughly 2% to $5,849 million from $5,963
million in the year-ago quarter but exceeded the Zacks Consensus
Estimate of $5,744 million. The decline in revenues was due to
weak aluminum prices, offset by strong demand in the aerospace
and automotive end markets. Alcoa continues to see pricing
pressure with London Metal Exchange (LME) cash price falling 8%
sequentially in the reported quarter.
Alcoa reiterated its global aluminum demand growth expectation
of 7% for 2013. Its shares, which are down roughly 9% so far this
year, rose to trade above $8 per share after the market closed
yesterday, partly reflecting the top line beat.
Shipments in the reported quarter were 2.33 million metric tons
on production of 4.16 million metric tons. After Tax Operating
Income (ATOI) was $64 million, up from $23 million in the
year-ago quarter and $58 million in the sequentially
preceding quarter. The second quarter results were driven by
higher Alumina Price Index-based pricing, a favorable impact from
foreign exchange rates, and strong productivity savings, partly
offset by lower LME prices.
Primary Metals -
Shipments in the second quarter were 0.69 million metric tons
versus 0.75 million metric tons a year ago. Production in the
quarter was 0.90 million metric tons, a decrease of 4.7% from the
year-ago quarter. After Tax Operating Loss was $32 million
compared with a loss of $3 million in the year-ago quarter and an
income of $39 million in the prior quarter. The sequential
decline was driven by lower LME prices and higher costs,
including the previously announced maintenance costs related to
power plant outages in Australia and the U.S.
Global Rolled Products -
Shipments in the quarter were 0.50 million metric tons, up 3.7%
year over year. Third-party revenues were $1.88 billion, down
1.9% year over year. The segment posted ATOI of $79 million, up
1.3% year over year but down 2.5% sequentially. The sequential
decline was due to lower metal prices, largely offset by strong
demand from the aerospace, automotive, and packaging
Engineered Products and Solutions -
Shipments in the quarter were 0.058 million metric tons, down
1.7% year over year The segment posted record ATOI of $193
million, up 22.9% year over year and 11.6% sequentially. The
increase was due to higher productivity and volumes across all
Alcoa ended the quarter with cash and cash equivalents of
$1.20 billion compared with $1.71 billion a year ago. Alcoa had a
debt-to-capital ratio of 34.5% in the reported quarter versus
36.1% a year ago.
Alcoa Reducing Smelting Capacity
Alcoa announced its plans to curtail 460,000 metric tons of
smelting due to low metal prices and maintain cost
competitiveness. The company also intends to permanently close
its Fusina smelter in Italy, representing 44,000 metric tons of
smelting capacity. These two closures will reduce the company's
global smelting capacity to roughly 4.1 million metric tons with
13%, or 523,000 metric tons, of smelting capacity idled.
Alcoa remains on track to move down the cost curve and
curtailed capacities in its upstream business. The curtailments
will improve the competitiveness of the company's Primary
Alcoa also announced that it will expand mills in Tennessee
and Iowa that cater to the auto and aerospace industries. Alcoa
completed the expansion of aluminum-lithium capacity at its Kitts
Green facility in the UK and also expanded capacity by 30% at the
Alcoa Technical Center outside Pittsburgh. Alcoa expects its
aluminum-lithium revenues to quadruple over the next six years to
nearly $200 million.
Alcoa remains optimistic for 2013 and expects global demand
for aluminum to increase 7%. The company envisions 9%-10% global
growth in the aerospace sector this year. Alcoa's growth forecast
for other markets are - automotive (1%-4%), commercial
transportation (3%-8%), packaging (1%-2%), building and
construction (4%-5%), and industrial gas turbine (3%-5%).
Alcoa, a prominent player in the mining industry along with
Aluminum Corporation of China Limited
Atlatsa Resources Corporation
BHP Billiton Limited
), is a world leader in production and management of primary
aluminum, fabricated aluminum, and alumina. The company is also
the world's largest miner of bauxite and refiner of alumina.
Alcoa is divesting underperforming assets through its
restructuring program and is aggressively pursuing cost-cutting
actions. Healthy demand in the aerospace market is expected to
drive results going forward.
However, weakness remains in the commercial building and
construction market. In addition, the company continues to
contend with pricing pressure.
Alcoa currently retains a short-term Zacks Rank #4 (Sell).
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