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Aluminum prices give Alcoa results a boost

  • Article by: SONJA ELMQUIST
  • Bloomberg News
  • January 8, 2013 - 9:30 PM

NEW YORK - Alcoa Inc., the largest U.S. aluminum producer, reported fourth-quarter sales that exceeded analysts' estimates after the company sold the commodity at a higher-than-expected average price.

Sales fell to $5.9 billion from $5.99 billion, beating the $5.6 billion average of 11 estimates. Net income of $242 million, or 21 cents a share, compared with a loss of $191 million, or 18 cents, a year earlier, the New York-based company said Tuesday in a statement. Profit, excluding a gain on the sale of a power plant and other one-time items, was 6 cents a share, matching the average of 20 estimates compiled by Bloomberg.

"The metal price helped out," said Kuni Chen, an analyst at CRT Capital Group in Stamford, Conn., who recommends buying the shares. "They're meeting their revenue growth goals in the downstream."

Aluminum prices are rising as demand in China and the U.S. increases while record amounts are being shut away in warehouses as part of financing deals. Alcoa, which said Tuesday that global aluminum demand growth will accelerate in 2013, is trying to avoid a downgrade to junk by Moody's Investors Services. The ratings company said Dec. 18 it was reviewing its rating on the company's debt.

Ahead of the quarterly report, Alcoa shares closed Tuesday's regular trading at $9.10, event with the previous day. Shares of Alcoa have declined 0.7 percent in the past 12 months. Alcoa is the first company in the index to report quarterly earnings.

The company's average realized aluminum price in the quarter was $2,325 a ton. Paul Massoud, an analyst at Stifel Nicolaus & Co., expected Alcoa to receive $2,250 per ton for primary aluminum.

"Aluminum prices have gone in their favor in the last quarter," Jorge Beristain, an analyst at Deutsche Bank in Stamford, said this week. "It's got everything to do with the fact that the Chinese economy strengthened in the fourth quarter."

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