Alcoa Inc. expected to post 1Q profit on stronger sales, prices

Alcoa Inc. starts the quarterly earnings season when it reports first-quarter results Monday after the markets close.

WHAT TO WATCH FOR: Whether Alcoa has benefited from more sales of aluminum at higher prices as it copes with rising energy costs.

The Pittsburgh aluminum manufacturing giant expects global aluminum consumption to increase 12 per cent this year and has restarted some operations that were closed when business dried up during the recession.

Business is improving for many of Alcoa's key customers, including the automobile and aerospace industries and manufacturers of long-lasting consumer products such as appliances and electronics.

Aluminum prices rose about 7 per cent in the first quarter, compared with the fourth quarter. So did raw-materials costs, including energy to run refineries and smelters.

Alcoa expects demand for its products to strengthen this year, particularly in growing emerging markets like the Middle East, Latin America and Asia.

WHY IT MATTERS: Alcoa's performance can reflect economic trends because its products reach across a broad range of businesses. Its customer base includes automobile, trucking and aerospace industries, consumer products and construction. Nearly 80 per cent of its sales are in the U.S. and Europe.

WHAT'S EXPECTED: Analysts surveyed by FactSet forecast earnings of 27 cents a share on sales of $6.16 billion.

They expect Alcoa to report improved demand for its products but question if increased raw-materials and transportation costs will offset gains from higher aluminum prices.

In addition, Alcoa has said it expects first-quarter costs of $15 million for scheduled maintenance outages in its alumina division and $10 million to restart U.S. smelters.

Analysts also will look for any indication that demand may pick up in Japan as it rebuilds after last month's devastating earthquake and tsunami.

LAST YEAR'S QUARTER: Alcoa reported a net loss of $201 million, or 20 cents per share, on sales of $4.9 billion. Its share price rose from $15.39 to $17.66 in the quarter.