AP
Alcoa's 3Q profit falls 52 percent
Tuesday October 7, 7:04 pm ET
By Daniel Lovering, AP Business Writer
Alcoa's 3Q profit off 52 pct on lower aluminum prices; halts stock buyback to conserve cash


PITTSBURGH (AP) -- Alcoa Inc., one of the world's largest aluminum producers, on Tuesday reported a 52-percent drop in third quarter profit and said it would conserve cash by suspending its stock buyback program and all non-critical capital projects.

Alcoa, the first component of the Dow Jones industrial average to report earnings, said results were hurt by sharply lower aluminum prices, weaker demand and a charge from curtailing production at a Texas smelter.

As a global economic slowdown crimps demand for virtually every commodity, aluminum prices have dropped 32 percent from an all-time high of high on July 11. They're now trading about $2,250 per metric ton, down from about $3,380 at their peak. Copper, lead, nickel and other metals have also tumbled sharply.

The company, which manufactures aluminum and uses it to make everything from car wheels to jet wing parts, reported earnings of $268 million, or 33 cents per share, for the three months ended Sept. 30. That compared with $555 million, or 63 cents per share, during the same period last year. The latest quarter included a charge of 4 cents per share for the smelter curtailment in Rockdale, Texas, which involved about 660 layoffs.

Shares of Alcoa fell about 56 cents, or 3.4 percent, to $16.15 in after-hours trading on Tuesday. During the third quarter, they slid 34 percent.

Revenue edged down 2 percent to $7.23 billion from $7.39 billion.

Analysts polled by Thomson Financial, on average, expected profit of 50 cents per share on revenue of $7.23 billion. Those estimates typically exclude one-time items.

Klaus Kleinfeld, Alcoa's president and chief executive, said profits were squeezed as aluminum prices and demand declined and costs rose.

Those conditions "will have a greater impact going forward, but will be somewhat mitigated by the easing of energy prices and a stronger U.S. dollar," he said in a statement.

He said Alcoa's suspension of its share buyback program and non-critical capital projects were actions taken "to conserve cash and maximize profitability through very adverse economic conditions."

With the sharp decline in metal prices and increasingly soft demand in key markets, Kleinfeld said Alcoa is making targeted reductions and is adjusting manufacturing capacity to meet demand in rapidly changing markets.