(MENAFN– ecpulse)
Alcoa Inc. reported a larger-than-expected profit on Monday, driven largely by demand from the aerospace and commercial transportation sectors. The U.S. largest aluminum producer still remains optimistic that global demand for aluminum will grow 7 percent this year.
Excluding the impact of restructuring costs and costs tied to a legacy legal matter, Alcoa reported second quarter earnings of $76 million, or 7 cents a share. Analysts had been expecting earnings of 6 cents
Alcoa’s second-quarter net loss widened to $119 million from $2 million a year earlier. The estimates were for net income of $59.3 million.
The unexpected loss came after Alcoa recorded $42 million in expenses related to production cuts at a Quebec smelter. It also took a $62 million charge on a proposed settlement with the Department of Justice over its probe into alleged corruption in connection with alumina sales to Aluminium Bahrain BSC.
The solid demand, driven by the aerospace and commercial transportation sectors, should combine with industry-wide production cuts already in place to reduce a supply glut that has driven down aluminum prices by 13 percent this year.
Alcoa’s engineered products and solutions business saw operating income rise 12 percent from the first quarter, exceeding the 5 percent growth forecast by the company in April. It’s boosting sales at downstream divisions as Chairman and Chief Executive Officer Klaus Kleinfeld tries to reduce reliance on aluminum smelting, which has been hurt by lower metal prices.
Stubbornly low aluminum prices caused by a global surplus and concerns about lackluster demand have weighed on Alcoa`s business of mining bauxite, refining it into alumina and then smelting alumina to produce aluminum. Alcoa and many of its rivals have responded with production cuts and shutdowns.
A component of the Dow Jones Industrial Average for more than 50 years, Alcoa is now by far the smallest company in the index. Its stock price has fallen more than 10 percent over the last 12 months, while the Dow has risen roughly 18 percent.
Alcoa shares were 1.41% higher in premarket trading at $7.92 per share.
Demand Forecast
Alcoa on Monday affirmed its demand forecast, even as it posted a net loss in the second quarter, due to restructuring costs related to plant closures.
Alcoa maintained its estimate that global aluminum demand will rise by 7 percent this year, led by 11 percent growth in China. Demand will exceed supply by 315,000 tons, the company said in presentation slides for the conference call.
Alcoa expects a 9 to 10 percent increase in aluminum demand this year from the aerospace sector, driven by a recent flurry of aircraft orders at the Paris Air Show and an already-large backlog of orders within the aerospace industry. It also sees increased demand from the automotive, commercial transportation and construction industries.
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