Alcoa's Profit Rises 76%, Beats Estimates

123jump.com Staff
10 Jan, 2008
New York City

The world number one aluminum maker

[R]8:00AM New York - Alcoa Inc. reports fourth quarter record net income at $632 million.[/R]

Alcoa Incorporated, the world number one aluminum maker, reported Wednesday fourth quarter net income jumped 76% to $632 million compared with $359 million reported in the year-ago quarter.

Earnings leapt 82% to 75 cents per share from 41 cents per share a year earlier, its biggest gain yet so far. Third quarter earnings stood at $555 million or 63 cents a share.

The figure beat expectations. Analysts surveyed by Thomson Financial had estimated per share earnings of 33 cents on revenues of $6.92 billion.
Included in the earnings are gains from restructuring and tax that amounted to $323 million or 38 cents per share. Alcoa also benefited from the agreement to sell the packaging and consumer divisions.

Alcoa said last year it was selling the packaging and consumer unit to Rank Group Ltd of New Zealand for $2.7 billion. It expected to complete the deal by March-end.

For the quarter, Alcoa said revenues declined 5.1% to $7.4 billion from $7.8 billion a year ago, largely as a result of lower metal prices and the exclusion of a soft alloy extrusion operation. The soft alloy business contributed $560 million to total revenues in 2006.


Income from continuing operations rose 93.2% to $624 million or 74 cents per share from $258 million or 29 cents per share.

Cash from operations in the fourth quarter 2007 was $643 million, bringing full-year cash from operations to more than $3.1 billion, compared to $2.6 billion in 2006. This held Alcoa''s debt-to-capital ratio within its targeted range at 30.2%.

Sectorally, profits at Alumina dropped 5% to $205 million in the fourth quarter while Primary Metals earnings fell 31% to $196 million.

Flat Rolled Products reported fourth quarter loss of $16 million while Extruded and End Products posted profit increase of 23% to $16 million.
Profits from Engineered Solutions were flat at $58 million while that in the Packaging and Consumer division gained 20% to $56 million.

In the year to December 31, 2007 Alcoa said revenues climbed 1% to a record $30.7 billion from $30.4 billion reported in 2006, shaking off higher material input and energy costs, as well as currency volatility.
Net income increased 14% to $2.56 billion, from $2.25 billion in 2006. Per share earnings rose 12.9% to $2.95 from $2.57. Analysts predicted full-year earnings of $2.83 per share.

Alcoa said income from continuing operations rose to 19% to $2.6 billion or $2.95 per share against $2.2 billion or $2.47 per share reported in the year ago quarter.

During the year, the company increased expenditure; it modernized operations; built new plants and energy facilities overseas and renegotiated long-term power agreements. Other investments were made in Brazil, China and Russia.

Alcoa chief executive and chairman, Alain Belda believes the investments will form the rock for continued growth ""for many decades"" to come.

""These actions, combined with portfolio and cash flow management, our share repurchase programme, conservative leverage, and our commitment to sustainability delivered results now, and will continue to generate quality profitable growth for decades,"" said Belda.

In 2007, the Alcoa completed major growth projects, including its first greenfield smelter in 20 years in Iceland, a new anode plant in Mosjoen, Norway, and its third flat-rolled products facility in China (Kunshan).
In China, the company said it expanded the Juruti bauxite mine, the Bohai rolling mill in and the Sao Luis alumina refinery.

Also, Alcoa reported significant progress to extend the life of existing facilities through renegotiating long-term power agreements including those in Massena, NY and Wenatchee, WA. It also continued investments in Brazil including the Serra do Facao hydroelectric project to further increase its self-sufficiency there.

Alcoa is now operating primary aluminum production at a run rate of approximately four million metric tonnes per year.

During the year, Alcoa repurchased 68 million of own shares, leaving nearly 150 million shares or 18% of stock outstanding.

After hours Wednesday, Alcoa stocks gained 4.16% or $1.30 to $32.55. Over the past 52 weeks, the stock has traded in the range $29.21 and $48.77. Analysts polled by Thomson Financial are targeting a one-year price of $44.53.

Alcoa is the world''s largest producer of primary aluminum, fabricated aluminum and alumina facilities.