Tags: Alcoa | earnings | estimates | aluminum

Alcoa Earnings Beat Estimates on Jump in Aluminum Premiums

Tuesday, 08 Jul 2014 04:36 PM

Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter earnings and sales that beat analysts’ expectations after an increase in the price of aluminum including regional delivery premiums.

Net income was 12 cents a share, compared with an 11-cent loss a year earlier, the New York-based company said in a statement released after regular stock trading Tuesday. Profit excluding one-time items was 18 cents, beating the 12-cent average of 17 estimates compiled by Bloomberg. Revenue was little changed at $5.84 billion, exceeding the $5.65 billion average estimate. The shares rose as much as 3 percent after the end of regular trading in New York.

Premiums, or the surcharge customers pay on top of benchmark prices, have soared in the U.S. and other regions this year, boosting the all-in price Alcoa and other producers get for their raw metal. Aluminum demand is rising, deliveries of stockpiled metal from warehouses have been delayed, and Alcoa and some of its competitors closed high-cost smelters.

“Aluminum prices are still in an uptrend,” Lloyd O’Carroll, a Richmond, Virginia-based analyst at NorthCoast Research LLC, said in an interview before the results were announced. “We’re seeing the benefit of the production cut announcements.”

While the price of aluminum for immediate delivery on the London Metal Exchange was on average lower in the quarter compared with a year earlier, a higher Midwest premium meant the aggregate price gained 5.6 percent to $2,213 a metric ton, according to data compiled by Bloomberg.

Alcoa Chairman and Chief Executive Officer Klaus Kleinfeld’s shuttering of inefficient smelters has helped to cut costs at the primary metal segment by 12 percent since 2011. The company has also worked to reduce its dependence on the price of raw aluminum by boosting sales of specialized shapes and alloys for customers in growing industries such as aerospace and autos.

Alcoa said June 26 it agreed to purchase U.K. aerospace supplier Firth Rixson Ltd. for $2.85 billion, its biggest takeover in more than 14 years.

Alcoa is the first company in the Standard & Poor’s 500 Index to report earnings. Alcoa’s quarterly reports mark the traditional start of the earnings-report cycle, dating to the decades the company spent in the Dow Jones Industrial Average.

In September, Alcoa was removed from the DJIA after the stock slumped more than 80 percent from its 2007 high. Four months earlier, its credit rating was cut to junk by Moody’s Investors Service after the aluminum price fell amid a global oversupply.

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Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter earnings and sales that beat analysts' expectations after an increase in the price of aluminum including regional delivery premiums.
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2014-36-08
Tuesday, 08 Jul 2014 04:36 PM
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