Alcoa Inc, America's biggest aluminum producer, posted a big jump in second-quarter profit on Monday, matching Wall Street estimates, partly due to soaring prices for the metal and alumina, its raw material.
But some analysts said a recent softening of aluminum prices might affect the company's third-quarter results and Alcoa's stock slipped 7 cents to $15.84 in after-hours trade on the New York Stock Exchange.
The real issue is going to be looking ahead because the third-quarter aluminum price could be down 5 cents a pound, said Charles Bradford, of Bradford Research in New York.
I think (analysts) are going to have to take the third-quarter estimates down.
Indeed, many analysts had already lowered their estimates for the second quarter as the price of aluminum has slipped in recent weeks. However, Alcoa's earnings matched the consensus of 32 cents, according to Thomson Reuters I/B/E/S.
Revenue rose 27 percent to $6.6 billion, beating Wall Street estimates of $6.3 billion.
But the company said strong demand for aluminum and higher prices were offset by higher energy and materials costs and a weaker U.S. dollar, which makes it more expensive to import raw materials.
The big story here is the beat on the revenue line -- $6.6 billion -- that was certainly ahead of our expectations, said Bridget Freas, an analyst at Morningstar, in Chicago.
Even though they've had a little more cost than expected during the quarter, volumes have improved significantly, Freas said.
On a conference call with analysts, Alcoa's Chief Executive Officer Klaus Kleinfeld said demand growth for aluminum was continuing to grow, especially in the aerospace sector.
Although the economic recovery is uneven, the overall outlook for Alcoa -- and for aluminum -- remains positive, he said, adding that Alcoa still projects global aluminum demand will grow 12 percent this year and will double by 2020.
The aerospace sector has positive momentum and we expect 7 percent aluminum sales growth globally this year.
Kleinfeld said that at this year's Paris Air Show, planemakers Airbus and Boeing received more than double the number of orders than they had expected. There was a backlog of 7,300 aircraft orders around the world, he said, noting that Alcoa recently signed a multi-year contract with Airbus worth about $1 billion to supply aluminum-lithium alloys for aircraft manufacture.
We also have a positive view of the auto industry, -- another big buyer of lighter aluminum to build more fuel-efficient vehicles, said Kleinfeld.
Alcoa expects aluminum sales to the sector to grow by 4 percent to 8 percent globally this year and by 8 percent to 11 percent in North America.
For the heavy truck and trailer industry, Kleinfeld said he sees it growing by a whopping 60 percent to 65 percent in North America this year and by 7 percent to 12 percent globally.
The only dark spot is the building and construction industry, which has not come back in the industrialized world since the 2008 recession.
It's a mix of two worlds -- it's pretty much dead in Europe and North America, where the sector is expected to decline this year, he said. But in China, which is building up its infrastructure, commercial construction demand for aluminum is expected to grow by 10 percent to 12 percent.
In its earnings release, Alcoa -- often viewed as a bellwether of the U.S. economy -- said net earnings were $322 million, or 28 cents per share, compared with $136 million, or 13 cents per share in the same quarter of 2010. The Pittsburgh-based company said income from continuing operations, excluding the negative impact for special items of $38 million, was $364 million, or 32 cents a share.
See graphic: http://r.reuters.com/mac62s
Alcoa's average realized price per metric ton of aluminum rose 23 percent in the second quarter to $2,830 from $2,309 a year earlier. Shipments of aluminum products rose 7 percent to 1.268 million tonnes from 1.182 million.
Aluminum sold in a range of $2,500 to $2,600 a tonne on the London Metal Exchange during the second quarter, up from $1.977 in the same quarter a year earlier. On Monday it was selling at around $2,478, or $1.12 a pound.
Alcoa reported a 7-percent hike in realized prices for alumina -- the raw material from which aluminum metal is smelted. Alumina production in the second quarter increased from the previous quarter to a record 4.1 million metric tons.
(Reporting by Steve James, editing by Bernard Orr)