Alcoa kicked off earnings season Tuesday, reporting a $143 million third quarter loss and sales that were 9 percent below year-ago levels.
The loss reflected several one-time charges, including a $40 million pretax charge for a lawsuit settlement announced Tuesday. Excluding those items, Alcoa earned 3 cents per share vs. the break-even performance Wall Street analysts were expecting. Sales of $5.8 billion were above the $5.6 billion analysts forecast.
Aluminum prices were 17 percent below year-ago levels while shipments increased 3 percent.
In the year-ago quarter, Alcoa reported net income of $172 million, or 15 cents per share, on sales of $6.4 billion.
The results were disclosed after Wall Street closed. Alcoa shares finished Tuesday at $9.13, up 1 cent. They are up 6 percent this year.
The $40 million pretax charge related to the settlement of a 4-year-old lawsuit brought by Aluminium Bahrain BSC. The Bahrain company alleged it was overcharged $400 million for raw materials because Alcoa steered bribes through a middleman who is facing criminal charges in Britain.
Alcoa, which admitted no wrongdoing, had recorded a $45 million charge in the second quarter related to the lawsuit. The company said it could face additional aftertax charges of $25 million to $30 million depending on the outcome of investigations by the U.S. Department of Justice and the Securities and Exchange Commission, which are also investigating the bribery allegations.
Aluminium Bahrain, also known as Alba, alleged the bribes came through a Canadian and British businessman, Victor Dahdaleh, who faces criminal charges in London and who is not part of the settlement.
It's unclear whether the settlement will have any effect on a criminal probe of Alcoa's dealings with Alba by the Department of Justice and the SEC. A department spokesman declined comment. Alcoa would only reiterate a July statement that it has been "in dialogue" with the agencies and that any settlement would be material to its financial results.
Tuesday's settlement is also accompanied by a new pact under which Alcoa will sell alumina, the raw material aluminum is made from, to Alba under terms neither company would detail. Alba operates what it has characterized as the world's biggest smelter.
Alcoa said the contractual alumina price was pegged to a price index for the raw material. Alba characterized the sales agreement as having a value that, combined with the $85 million in cash, placed the settlement's total worth at $447 million.
In a statement issued by Alba, Chairman Mahmood Hashim Al-Kooheji called Tuesday "an historic day in our long campaign to recover losses suffered by Alba over more than 20 years." Alba's top lawyer on the case, Mark MacDougall of Washington, D.C., gave credit to Bahraini officials who pressed the case.
In a separate statement, Alcoa wrote that the settlement "represents the best possible outcome and avoids the time and expense of complex litigation."
Because racketeering lawsuits entail the possibility of triple damage awards, Alcoa faced a potential liability topping $1 billion if Alba were able to prove all of its claims.
Alba had accused various Alcoa subsidiaries, allegedly guided from the company's headquarters, of paying Mr. Dahdaleh $13.5 million in commissions that were then passed on to top Alba officials as bribes. Those officials then signed on to have Alba pay inflated prices to Alcoa subsidiaries, the lawsuit said.
The two sides submitted to U.S. District Court a stipulation dismissing claims against Alcoa, its executive William Rice and Alcoa World Alumina LLC.
The sole remaining defendant in the lawsuit is Mr. Dahdaleh. His criminal trial on related charges is scheduled for April in British court.