Alcoa Raises Profit Outlook as Tariffs Lift Aluminum Prices
October 17 2018 - 06:56PM
Dow Jones News
By Bob Tita
Alcoa Corp. said higher U.S. aluminum prices from a tariff on
imports and rising sales of the raw materials needed to make
aluminum improved its revenue in the third quarter and drove up its
profit outlook for the year.
The Pittsburgh-based company on Wednesday reported a 14%
increase in third-quarter revenue thanks to higher aluminum prices,
more efficient operations and sharply higher sales of the aluminum
oxide needed to make aluminum. Alcoa's shares were up 3.8% at
$38.10 in after-hours trading.
The company recorded a loss for the quarter because of
previously announced charges for pensions other expenses. Alcoa now
expects adjusted operating earnings of between $3.1 billion and
$3.2 billion, a slight increase on the lower end of the range the
company had forecast in July but in line with analysts'
expectations.
Aluminum prices in the U.S. have climbed this year after the
Trump administration imposed a 10% tariff on imported aluminum in
March. But Alcoa's heavy reliance on aluminum from foreign
smelters, particularly those based in Canada, has limited its
ability to benefit from the tariffs. Just 14% of the aluminum Alcoa
produced last year came from its U.S. smelters.
Alcoa said Wednesday that it paid $19 million in duties in
during the quarter, mostly on aluminum imported from its smelters
in Canada. The company said its U.S. smelters had a benefit of $27
million during the quarter as a result of higher prices on domestic
aluminum because of the tariff. Alcoa said its overall price for
raw aluminum sold in the quarter rose by 10% a ton.
Alcoa recently restarted a portion of its idle smelter in
southern Indiana but has refrained from restarting other curtailed
smelters in the U.S. because of high electricity costs.
The company opposed the Trump administration's blanket tariff on
imported aluminum as a strategy for countering excess aluminum
production in China, which has been blamed for undermining global
aluminum prices in recent years. While Alcoa has criticized Chinese
companies that overproduce, it has also called on the Trump
administration to negotiate reductions with China.
Alcoa reported a 57% increase in the price of aluminum oxide
sold the quarter as a result of the supply disruptions throughout
the world. Alcoa is a major supplier of the feedstock, also known
as alumina, to other aluminum producers.
"We're the world's largest producer outside of China. So while
increased alumina prices represent an added cost for our smelters,
Alcoa benefits overall due to the strength in third-party sales,"
chief executive Roy Harvey told analysts during a conference call
Wednesday.
The company reported a net loss of $41 million for the quarter
ended Sept. 30, or 22 cents per share, compared with a $113 million
profit, or 60 cents a share, during the same quarter last year.
Excluding the charges, earnings per share came in at 63 cents,
above the 36 cents expected by analysts.
Alcoa's third-quarter revenue rose to $3.39 billion compared
with $2.96 billion a year earlier. The company said revenue was 5%
lower from the second-quarter because of lower aluminum prices.
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
October 17, 2018 18:41 ET (22:41 GMT)
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