Alcoa’s quarterly loss smaller than expected

NEW YORK, July 9 — Alcoa Inc posted a third consecutive quarterly loss yesterday, but cost cuts helped the largest US aluminium maker beat Wall Street estimates by a large margin, sending its stock higher. Chief executive officer Klaus Kleinfeld later told analysts there were signs that weak demand for aluminium — which has prompted production cuts and plummeting metals prices in the last nine months — might be easing. "We still have challenging global markets, but there are some pockets of growth," he said, citing such near-term catalysts as China, production curtailments, destocking of aluminium inventories and government stimulus programmes. China will be a near-term importer of aluminium, but Beijing's stimulus programmes for its own industry will eventually change the picture, he said on a conference call. "We don't expect imports (to China) to go on forever," he added. The Alcoa head said that, although Alcoa still sees a 7 per cent decline in global aluminium demand this year, the company expects US auto build rates to rise in the second half of 2009 as carmakers replenish low inventories. In the beverage can sector, Alcoa expects a "reasonably stable" performance with steady US demand in the summer. Alcoa, like other metals makers, has pared back operations and cut jobs in the face of weak prices as the poor global economy cut demand from the construction, electronics and auto sectors. "They (Alcoa) were able to do better than expected from cost savings," said Brian Hicks, co-manager of US Global Investors' natural resources fund. "Year-over-year production is down and down sequentially as well, but it looks like they were able to contain costs." Kleinfeld said the company has achieved some US$1 billion (RM3.5 billion) in procurement savings through the first half of the year, or about two-thirds of the full-year target. Overhead savings year-to-date are around US$270 million, or 134 per cent of the full year target for 2009, he said. Alcoa shares were up nearly 5 per cent at US$9.92 in post-market trading after closing at US$9.46. The second-quarter net loss was US$454 million, or 47 cents per share, compared with earnings of US$546 million, or 66 cents per share in the same quarter of 2008, the Pittsburgh-based aluminium producer said. But the loss from continuing operations, was 32 cents per share and, excluding restructuring, the loss was 26 cents. That was better than the 38 cent-loss analysts were expecting, according to Reuters Estimates. Revenue slumped to US$4.2 billion from US$7.2 billion a year earlier, as Alcoa curtailed aluminium and alumina production in response to reduced demand. "It's a beat," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco, who added the results could give the markets a boost. "We're due for a bounce. Markets are oversold." The company said the average price of aluminium on the London Metal Exchange in the second quarter was US$1,485 per tonne, a nine per cent increase from the first quarter of 2009, but a 49 per cent decrease from the second quarter of 2008. The economic downturn has affected most of Alcoa's end markets — automotive, commercial transportation, building and construction, and aerospace, it said. In response to the tough times, Alcoa — the first member of the Dow Jones Industrial Average to report — has cut thousands of jobs, slashed its dividend, trimmed spending and raised US$1.3 billion to help it through the slowdown. But yesterday, it said its Juruti bauxite mine in Brazil and the Alumar alumina refining upgrade and expansion are both being commissioned. The first shipment of bauxite from Juruti is expected within the next 90 days. The Alumar refinery has already begun to produce its first alumina and is on target for full produc