Tuesday after the bell, aluminum producer Alcoa Inc. (AA) reported a $497 million net loss for the first quarter, hurt by the impact of the economic downturn on its core industrial and commercial markets as well as an historic decline in aluminum prices. The company's quarterly loss per share also came in worse that what analysts had predicted.

The company reported a net loss for the first quarter of $497 million or $0.61 per share, compared to net income of $303 million or $0.37 per share for the year-ago quarter.

This marks the second straight quarterly net loss for Alcoa, which reported a net loss of $1.2 billion or $1.49 per share for the fourth quarter in January.

Loss from continuing operations for the first quarter was $480 million or $0.59 per share, compared to income from continuing operations of $299 million or $0.36 per share in the prior year quarter.

On average, 13 analysts polled by Thomson Reuters expected the company to report a loss of $0.57 per share for the first quarter. Analysts' estimates typically exclude special items.

The company noted that the latest quarter results reflect a gain on the exchange for the Norway operations and a discrete tax benefit, which were essentially offset by restructuring and other charges as well as the exiting of the stake in Shining Prospect.

Alcoa, the first Dow 30 company to report first quarter earnings, said sales for the quarter fell 41% to $4.15 billion from $7.00 billion, which included divested businesses, in the same quarter last year. Six analysts had a consensus revenue estimate of $4.08 billion for the first quarter.

The company blamed the sharp sales drop on the economic downturn that impacted its end markets - automotive, transportation, building and construction and aerospace.

As demand weakened during the quarter in those markets, realized metal prices fell an additional $558 a ton, a 26% percent price decline, resulting in prices that are now about 60% lower than last summer, Alcoa noted.

Prices of aluminum have plummeted to about 69 cents per pound from around $1.50 per pound last summer.

First quarter after-tax operating income or ATOI from the company's Alumina segment fell 79% from a year ago and fell 78% from the prior quarter to $35 million. Alumina production totaled 3,445 kmt in the first quarter, down from 3,870 kmt in the first quarter of last year and down from 3,776 kmt in the fourth quarter.

LME-based pricing declined 34%, which somewhat offset by lower energy costs, productivity gains, and favorable currency impacts.

The company's Primary Metal segment recorded an after-tax operating loss of $212 million for the first quarter, compared to an after-tax operating income of $307 million for the first quarter of last year and an after-tax operating loss of $101 million for the fourth quarter.

The Flat-Rolled Products segment reported an after-tax operating loss of $62 million for the first quarter, compared to an after-tax operating income of $41 million for the year-ago quarter and an after-tax operating loss of $98 million for the prior quarter. The company said lower industrial demand and supply chain adjustments, along with the global economic slowdown, reduced non-can sheet shipments by 20%.

First quarter ATOI for Engineered Products and Solutions segment fell 31% year-over-year but rose 48% sequentially to $96 million.

While our financial performance in the quarter was adversely affected by the economy-driven drop in demand, we launched operational and financial measures that will significantly improve our profitability and cash flow in 2009 and beyond. In fact, they have already begun to have an impact in the first quarter, said Klaus Kleinfeld, President and CEO of Alcoa.

During the quarter, Alcoa launched wide-ranging operational initiatives to reduce costs, increase cash and improve liquidity. In January, the company announced that it would eliminate 13,500 employees, further curtail production and divest four non-core downstream businesses as part of a series of specific actions to save cash, reduce costs and strengthen the company's competitiveness during the economic downturn.

Last month, Alcoa slashed its quarterly dividend by about 82% in a move aimed at saving more than $400 million annually. The company also raised $1.4 billion in cash through successful common stock and convertible notes offerings to further improve its liquidity.

Kleinfeld said, Alcoa responded swiftly to the declines in our end markets and the historic drop in aluminum prices with a holistic program that dramatically re-positions our balance sheet and operational cost structure. The result has been a rapid increase in liquidity during the quarter and significant operational cost savings.

During the first quarter, the company completed temporary curtailments of about 18% of its global smelting output. The company also announced a plan to curtail an incremental 100,000 mtpy in May, bringing total curtailments to about 20% of output.

Alcoa also completed an exchange with ORKLA ASA for the remaining stake in two smelters and an anode plant in Norway for Alcoa's stake in the Sapa soft alloy extrusion joint venture. With the exchange, Alcoa said, it regained the top position of the largest producer of primary aluminum in the world. Alcoa recorded a non-cash after-tax gain of about $130 million from the deal.

The company said changes to procurement practices saved $293 million in the quarter and lower overhead expenses reduced costs by $110 million.

Alcoa also received $500 million of a $1.02 billion payment from Chinalco for exiting its stake in the Shining Prospect venture. The company recorded a non-cash after-tax loss of about $120 million on exiting the investment. Alcoa ended the first quarter with $1.1 billion of cash on hand.

Looking ahead, Kleinfeld said, We also see both near-term and long-term catalysts that should improve the prospects for the aluminum industry.

Current stimulus programs that target infrastructure and energy efficiency will create a demand for the unique characteristics of aluminum - lightweight, strong, durable, recyclable, and conductive. Longer term, the global megatrends of population growth, urbanization, and environmental stewardship will all drive demand for aluminum as the economy improves, he noted.

Alcoa shares, which have traded in a range of $4.97 to $44.77 over the past year, closed Tuesday's regular trading session at $7.79, down 12 cents or 1.52%. The stock is currently losing 22 cents or 2.82% in after hours trading.

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