MONTREAL, April 24 - Alcan Inc. beat analysts' expectations on Tuesday with a 32 percent surge in first-quarter profit that the company attributed to higher primary aluminum prices and better pricing, product mix and volumes in its downstream businesses.
Alcan, the world's second-largest maker of primary aluminum, said it earned $591 million, or $1.60 a share, up from $453 million, or $1.21 a share, a year earlier.
On a fully diluted basis, profit was $1.59 a share, against $1.20 a share a year earlier.
Analysts had expected earnings of $1.48 a share, before exceptional items.
Alcan shares, which have risen some 25 percent over the past six months, rose C$2.46, or 4 percent, to C$64.80 on the Toronto Stock Exchange and $2 to $56.83 on the New York Stock Exchange on Tuesday.
Alcan's second-quarter revenue rose 15.7 percent to $6.42 billion from $5.55 billion. The company's ingot prices rose about 15.5 percent in the quarter from a year earlier.
Dick Evans, president and chief executive, said all four of the company's key business groups posted stronger results.
"Each business is up year over year and sequentially as well, so it is quite broad-based," he told Reuters.
Demand for aluminum is robust globally, except for the United States, with brisk business from a number of industrial sectors, he added.
"Aerospace is strong, electrical products are strong and in China, it's across the board," Evans said.
LOW ALUMINUM INVENTORIES
Alcan raised its forecast for both world supply and demand for primary aluminum this year. Overall, however, it still expects a market surplus of about 200,000 tonnes, or 0.5 percent of world supply, compared with a deficit of 162,000 tonnes in 2006.
It expects consumption to rise by 8.9 percent in 2007, compared with 6.9 percent last year. Supply is forecast to increase about 10 percent, compared with 6.4 percent in 2006. Aluminum inventories on the London Metal Exchange are expected to remain at historically low levels of about 5.5 weeks.
For the second quarter, Alcan sees stronger results from the first quarter in its bauxite and alumina business and packaging group.
Evans told analysts during a conference call that he expects the expanded capacity at the Gove alumina refinery to begin contributing to profits late in the second quarter.
Alcan expects comparable primary aluminum profits, sequentially from the first quarter, and a slight decline in profit for its engineered products business.
Alcan's cashflow from operations surged to $582 million in the first quarter from $362 million a year earlier.
Evans said he expects the figure to hit $3.5 billion to $4 billion this year, well above the $3 billion record of 2006.
The $1.8 billion expansion of Alcan's Kitimat smelter may get back on track if British Columbia regulators approve a revised agreement on the company's sales of surplus power from it generating station in the area to BC Hydro, Evans said. Alcan expects to propose a revised power pact within weeks.
Meanwhile, while Alcan benefited from higher metal prices from a year earlier, costs for key inputs such as purchased electricity, coke and pitch also increased.
The Canadian dollar, which has rallied sharply in recent days against the U.S. dollar, adds to operating costs, as much of Alcan's primary aluminum is produced in Canada.
"We have been learning to live with a stronger Canadian dollar, and that means a continued focus on productivity in Canada," Evans said.
($1=$1.12 Canadian)
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