Alcoa earnings exceed estimates after productivity improves

Alcoa Inc., the largest U.S. aluminum producer, posted third-quarter earnings and sales that exceeded analysts’ estimates after reporting improved productivity at its primary metals and engineered-products units.

Alcoa’s net loss was $143 million, or 13 cents a share, compared with net income of $172 million, or 15 cents, a year earlier, the New York-based company said today in a statement. Excluding legal and environmental remediation costs, it had per- share profit of 3 cents. The average of 18 estimates compiled by Bloomberg was for break-even earnings per share. Sales fell to $5.83 billion from $6.42 billion, beating the $5.56 billion average of 10 estimates.

Alcoa, led by Chairman and Chief Executive Officer Klaus Kleinfeld, is trying to boost income from sales of high-value products such as automotive components and bolts and screws used on aircraft to offset declining prices for raw aluminum. The metal traded at a 34-month low in August amid a global oversupply.

“Alcoa’s done a better job than I would have thought given the fairly negative backdrop over the last year,” John Stephenson, who manages $2.7 billion including Alcoa shares at First Asset Investment Management Inc. in Toronto, said in an interview before the earnings. “Engineered products, their value-added products divisions, those are are the bright lights.”

Aluminum shipments to planemakers will grow 16 percent in 2012, compared with 9 percent last year, Lloyd O’Carroll, an analyst at Davenport & Co. in Richmond, Virginia, said in a September report.

Aluminum consumers are paying higher one-time charges, known as premiums, to withdraw metal stored in warehouses monitored by the London Metal Exchange. Midwest premiums were 11.3 cents a pound, or $248 a metric ton, on Oct. 5, according to Metal Bulletin data, a 32 percent increase from a year earlier.

Alcoa is organized into four segments: alumina, which mines bauxite and processes it into the precursor to aluminum; primary metals, which smelts aluminum; flat-rolled products, which makes sheets used in beverage cans as well as airplane wings and car parts; and engineered products and solutions, which makes aerospace fasteners, turbine blades and truck wheels.

(Alcoa scheduled a conference call at 5 p.m. New York time. Click on LIVE <GO> to listen. Dial-in details can be found at EVTS <GO>.)

Bloomberg News

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