Alcoa profit beats estimates after automakers buy more aluminum

July 9 (Bloomberg) -- Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter earnings and revenue that beat analysts’ estimates after an increase in orders from the auto and aerospace industries.

The company lost $2 million, compared with net income of $322 million a year earlier, New York-based Alcoa said today in a statement. Profit excluding a restructuring charge and other items was 6 cents a share, compared with the 5-cent profit that was the average of 19 estimates compiled by Bloomberg. Sales fell to $5.96 billion from $6.59 billion, exceeding the $5.81 billion average of 11 estimates.

Alcoa, whose customers include Ford Motor Co. and Toyota Motor Corp., is benefiting as car and truck makers are being compelled by regulations to produce lighter vehicles. The U.S. aluminum industry will ship 16 percent more aluminum to automakers in 2012 as car output climbs 11 percent, according to Lloyd O’Carroll, an analyst at Davenport & Co. in Richmond, Virginia. Aircraft manufacturers also face record backlogs as airlines hurry to refurbish aging fleets.

“In their downstream business and midstream business, those two pieces we are seeing margin expansion,” Brian Yu, a San Francisco-based analyst at Citigroup Inc. who recommends holding Alcoa’s shares, said in a July 6 interview. “It’s a sign that, yes, the company is doing some things right.”

Aluminum for delivery in three months on the London Metal Exchange averaged $2,019 a metric ton in the quarter, 23 percent less than a year earlier.

Global aluminum production rose 4.1 percent to 14.9 million tons in the first four months of 2012, beating usage by 623,703 tons, according to data compiled by Bloomberg.

Alcoa is typically the first company in the Dow Jones Industrial Average to report quarterly results. Its earnings haven’t fully recovered since commodity prices tumbled after Lehman Brothers Holdings Inc. filed for bankruptcy at the height of the financial crisis in September 2008.

The company’s competitors have suffered from the decline in aluminum prices. Russia’s United Co. Rusal, the largest producer, saw first-quarter profit slump to $74 million from a restated $451 million a year earlier. The company said in May it’s studying cutting as much as 600,000 tons of smelting output.

Norway’s Norsk Hydro ASA, the fifth-biggest producer, also posted a 90 percent decline in first-quarter earnings and said last month it would shut 120,000 tons of capacity in Australia because of weaker demand and oversupply.

Aluminum prices will average $2,188 a ton in the third quarter, according to the average of 21 analysts’ estimates compiled by Bloomberg. The fourth-quarter price will be $2,275, the data show.

Global aluminum use will rise about 7 percent this year, Alcoa Chief Executive Officer Klaus Kleinfeld said during an April 10 conference call to discuss first-quarter earnings. The company is spending about $300 million to expand auto-parts fabricating capacity at its Davenport plant in Iowa. Alcoa said in May it began a $90 million expansion of a plant in Lafayette, Indiana, to produce of aluminum-lithium alloys used in aircraft.

Bloomberg News

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