Alcoa Profit Falls on Aluminum-Price Slide
October 08 2015 - 05:10PM
Dow Jones News
Industrial giant Alcoa Inc. on Thursday reported sharply lower
third-quarter profit as the metals company has been closing mines
and cutting smelting capacity in response to lower aluminum prices
brought on by a global glut.
It is Alcoa's first quarterly report since it announced last
month it plans to split operations: one business that would make
parts for cars and planes, and another producing raw aluminum and
its ingredients.
Oversupply, exacerbated by China's economic slowdown, has
battered aluminum prices, which have fallen about 14% since the
beginning of the year to below $1,600 a ton on the London Metal
Exchange, the world's largest venue for metals trading.
The New York-based company, in its typical role as
banner-carrier for quarterly earnings periods, posted a profit of
$44 million, or 2 cents a share, down from $149 million, or 12
cents a share, a year earlier. Excluding restructuring-related
charges and other items, profit was 7 cents a share, down from 31
cents a share a year earlier.
Revenue fell 11% to $5.57 billion.
Analysts surveyed by Thomson Reuters had projected 13 cents a
share on $5.65 billion in revenue.
Shares, down 30% this year, fell 3.7% to $10.60 in late
trading.
With the aluminum market troubled, Alcoa, the world's largest
aluminum company by volume, has been veering off its path as a pure
aluminum producer.
Founded in the late 1880s in Pittsburgh as the Pittsburgh
Reduction Co., it developed its first product in 1889: the
prototype of the aluminum tea kettle. Now based in New York, Alcoa
makes a wide array of products from Reynolds Wrap to aluminum
spaceframes for Ferrari's Gran Turismo vehicles and high-technology
airfoils for jet engines.
Alcoa's smelting division swung to a $59 million loss in the
latest period, compared with a $245 million operating profit in the
year-ago period. The company's average "third-party realized
price," or what it charges outside customers, fell 25% to $1,901 a
metric ton. Alcoa has been cutting its high-cost smelter capacity
around the world.
Meanwhile, the automotive industry's shift to lighter cars to
meet feel-efficiency standards continues to fuel results.
The global rolled products division, which makes sheet for the
auto and beverage-can industries, reported a 10% increase in
operating profit to $62 million, led by automotive sheet
shipments.
With the aerospace market buoyant, Alcoa's been expanding into
hi-tech titanium and nickel alloys for planes. This week, it
announced a billion-dollar deal to supply Airbus Group SE with
fasteners and other parts.
However, operating profit its division known as "engineered
products" fell 2.6% to $151 million, bolstered by acquisitions and
higher volumes.
Alcoa has been particularly bullish about its business
processing bauxite into alumina, which is used to make aluminum. On
Thursday, it reported operating profit surged threefold to $212
million from the year earlier.
Write to Maria Armental at maria.armental@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 08, 2015 16:55 ET (20:55 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
Arconic (NYSE:ARNC)
Historical Stock Chart
From Feb 2024 to Mar 2024
Arconic (NYSE:ARNC)
Historical Stock Chart
From Mar 2023 to Mar 2024