Alcoa headquarters on the North Side. The company reaffirmed its forecast that global aluminum demand will increase 7 percent this year. Analyst Charles Bradford said the real issue for Alcoa is that supply is outstripping demand.
By Len Boselovic Pittsburgh Post-Gazette
Alcoa reported a small profit in the third quarter, saying productivity improvements offset lower sales and falling aluminum prices.
The company said it earned $24 million, or 2 cents per share, on sales of $5.77 billion versus a loss of $143 million, or 13 cents per share, and sales of $5.83 billion in the year-ago quarter.
The results included $109 million in after-tax restructuring charges related to shutting down smelters in the face of a glut in aluminum supply. Alcoa said it has idled 274,000 metric tons of high-cost capacity in the last five months.
Excluding those and other one-time items, adjusted net income totaled 11 cents per share, topping the 6 cents per share earnings forecast by analysts.
The average price Alcoa's customers paid for a metric ton of aluminum dropped 2 percent from year-ago levels. The company reaffirmed its forecast that global aluminum demand will increase 7 percent this year.
"Our commodity business delivered better performance in a tougher market environment," chairman and CEO Klaus Kleinfeld said in a prepared statement.
Analyst Charles Bradford said the real issue for Alcoa and other aluminum producers is that supply is outstripping demand.
"It's all metal price, and that looks bad," he said. "There's a lot of capacity in a crummy market."
Alcoa said it had achieved $825 million in productivity achievements through the end of the third quarter, exceeding its $750 million target for the year.
The company said talks to settle a five-year bribery investigation launched by the U.S. Justice Department and the Securities and Exchange Commission continued during the quarter. Alcoa took a $103 million charge in the second quarter based on its offer to settle the Justice Department matter for that amount. The offer was rejected, as was a $60 million proposal the company made to the SEC.
The investigation centers on allegations made by Aluminium Bahrain that it was overcharged $400 million for raw materials because of bribes Alcoa steered through a middle man. Alcoa settled the lawsuit with Aluminium Bahrain last October without admitting any wrongdoing.
Alcoa said Tuesday it could take up to $200 million in additional charges to settle with the Justice Department and that no charges have been taken in connection with the SEC probe.
The results were announced after Wall Street closed. Alcoa shares finished Tuesday at $7.94, down 3 cents. They are off 9 percent this year.