Alcoa, which has curtailed metal production by more than 20 percent and cut its workforce by about 30 percent since the economic downturn began a year ago, said there are signs that key markets are stabilizing and it expects global consumption to rise by 11 percent in the second half of this year.
But Chief Executive Officer Klaus Kleinfeld said metal prices and demand had not yet improved enough to restart smelter production that had been cut back.
We believe that current prices are not conducive to any restart, he said when asked on a conference call with Wall Street analysts.
Kleinfeld said although the beverage can market was expected to remain stable, the aerospace market would continue flat, commercial building and construction was in decline and the market for industrial gas turbines was weakened.
Although the U.S. cash-for-clunkers program had stimulated the auto industry this summer, sales fell off in September, he said.
Kleinfeld said Alcoa's reduction of its global workforce to 63,000 from 97,000 a year ago helped reduce costs as the company encountered a challenging environment that included unfavorable currency rates and energy prices.
Wall Street had expected another loss for the aluminum producer but Alcoa said its third-quarter net earnings were $77 million, or 8 cents per share, compared with earnings of $268 million, or 33 cents per share in the same quarter of 2008.
The bullish news from the first member of the Dow Jones Industrials <.DJI> to report results for the latest quarter was likely to boost Wall Street when the markets open on Thursday.
It's a pretty big improvement. For once it looks like the cost-cutting initiatives have really taken hold, and the company has really streamlined itself during these softer economic times, said Brian Hicks, portfolio manager at U.S. Global Investors in San Antonio.
This is the type of company that provides the raw material people need to meet production demands. It's a good measure of where we stand (with) the economy, said Marc Pado, U.S. market strategist at Cantor Fitzgerald & Co in San Francisco.
Alcoa attributed the positive results to cost savings and an increase in aluminum prices. Kleinfeld said the company's cash sustainability initiatives to reduce costs by $2 billion by 2010 had exceeded targets and reached $1.6 billion.
Excluding restructuring and one-time items, the profit was $39 million, or 4 cents per share -- smashing analysts' average forecast of a loss of 9 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell to $4.6 billion from $7.00 billion a year earlier, but was 9 percent higher than the second quarter and higher than analysts' average estimate of $4.55 billion, according to Thomson Reuters I/B/E/S.
During the third quarter, the London Metals Exchange price for aluminum rose 16 percent to $1,890 per metric ton. Alcoa said its realized prices for primary aluminum in the third quarter rose to $1,972 per metric ton from $1,667 in the second quarter. On Wednesday the LME three-month price was $1,850.
Alcoa stock rose 86 cents to $15.06 after closing at $14.20 on the New York Stock Exchange.
(Reporting by Angela Moon, Carole Vaporean, Ernest Scheyder and Caroline Valetkevitch in New York and Braden Reddall in San Francisco; Editing by Gary Hill)