ALCOA gained in European trading yesterday, after the largest US aluminium producer reported second-quarter sales and profit that beat analysts’ estimates and forecast higher global demand, which may signal broader economic growth.
Alcoa gained after saying late on Monday that rising sales of aluminium for packaging and commercial transport helped it report per-share earnings of 13c, exceeding the 11c average estimate of 17 analysts surveyed by Bloomberg. Global aluminium consumption will climb 12% this year, compared with the company’s previous forecast of 10%, Alcoa said.
“It’s a very positive signal for economic growth and the stock market generally,” said John Stephenson, who helps manage C1,65bn (1,6bn) including Alcoa shares at First Asset Investment Management in Toronto.
“Maybe end-use demand has not been destroyed. That’s a very good sign and a great way to start off this second-quarter earnings season.”
Alcoa’s German-traded shares rose 2,9% to 11,19 in Frankfurt. The company, the first in the Dow Jones industrial average to report earnings for the three months to June, fell 0,6% to 10,87 on Monday in New York before the earnings announcement, extending its decline this year to 33%.
Alcoa expects aluminium sales for car uses to increase 3% to 8% this year, while sales for commercial trucks and trailers may gain 12% to 17%, CEO Klaus Kleinfeld said.
“Alcoa is now saying they are seeing faster demand growth and this is good,” Charles Bradford, a partner at New York-based consulting firm Affiliated Research Group, said.
“I would have liked to see them post an even better number, but the industry is still very depressed.”
Alcoa reported second-quarter net income of 136m, or 13c a share, compared with a net loss of 454m, or 47c, a year earlier.
Sales advanced 22% to 5,19bn, exceeding the average estimate of 5,02bn from eight analysts in the Bloomberg survey.
Alcoa still has a long way to go to get back to earnings levels before the 2008 financial crisis. In the 18 months to June 2008, before commodity and stock markets tumbled amid the global economic recession, Alcoa’s profit excluding one-time items averaged 62c a share.
The company was on the road back and saw indications of a recovery in almost all markets this year, Mr Kleinfeld said.
“We are really working very hard to fire on all cylinders,” Mr Kleinfeld said. “Undoubtedly we are not seeing the environment we’ve seen in the past but we see the environment getting better and continuously moving in the right direction.”
Alcoa generated more than half its revenue in the US last year. The country’s economy will have average growth of 2,8% from this quarter to the second quarter of next year, according to the median estimate of 52 economists surveyed by Bloomberg, down 0,1 percentage point from last month.
A decline in aluminium prices since the end of the second quarter was still a source of concern for the third quarter, Mr Bradford said.
Aluminium for delivery in three months increased 39% on average in the second quarter from a year earlier on the London Metal Exchange. The price was still down 15% since March 31 and more than 40% from the July 2008 high, before the global recession cut demand. Bloomberg
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