Alcoa Inc posted a third consecutive quarterly loss on Wednesday, but cost cuts helped the largest U.S. aluminum maker beat Wall Street estimates by a large margin, sending its stock higher.
Chief Executive Officer Klaus Kleinfeld later told analysts there were signs that weak demand for aluminum -- which has prompted production cuts and plummeting metals prices in the last nine months -- might be easing.
We still have challenging global markets, but there are some pockets of growth, he said, citing such near-term catalysts as China, production curtailments, destocking of aluminum inventories and government stimulus programs.
China will be a near-term importer of aluminum, but Beijing's stimulus programs for its own industry will eventually change the picture, he said on a conference call.
We don't expect imports (to China) to go on forever, he added.
The Alcoa head said that, although Alcoa still sees a 7 percent decline in global aluminum demand this year, the company expects U.S. auto build rates to rise in the second half of 2009 as carmakers replenish low inventories.
In the beverage can sector, Alcoa expects a reasonably stable performance with steady U.S. demand in the summer.
Alcoa, like other metals makers, has pared back operations and cut jobs in the face of weak prices as the poor global economy cut demand from the construction, electronics and auto sectors.
They (Alcoa) were able to do better than expected from cost savings, said Brian Hicks, co-manager of U.S. Global Investors' natural resources fund. Year-over-year production is down and down sequentially as well, but it looks like they were able to contain costs.
Kleinfeld said the company has achieved some $1.0 billion in procurement savings through the first half of the year, or about two-thirds of the full-year target. Overhead savings year-to-date are around $270 million, or 134 percent of the full year target for 2009, he said.
Alcoa shares were up nearly 5 percent at $9.92 in post market trading after closing at $9.46.
The second-quarter net loss was $454 million, or 47 cents per share, compared with earnings of $546 million, or 66 cents per share in the same quarter of 2008, the Pittsburgh-based aluminum producer said.
But the loss from continuing operations, was 32 cents per share and, excluding restructuring, the loss was 26 cents. That was better than the 38 cent-loss analysts were expecting, according to Reuters Estimates.
Revenue slumped to $4.2 billion from $7.2 billion a year earlier, as Alcoa curtailed aluminum and alumina production in response to reduced demand.
It's a beat, said Stephen Massocca, managing director at Wedbush Morgan in San Francisco, who added the results could give the markets a boost. We're due for a bounce. Markets are oversold.
The company said the average price of aluminum on the London Metal Exchange in the second quarter was $1,485 per tonne, a nine percent increase from the first quarter of 2009, but a 49 percent decrease from the second quarter of 2008.
The economic downturn has affected most of Alcoa's end markets -- automotive, commercial transportation, building and construction, and aerospace, it said.
In response to the tough times, Alcoa -- the first member of the Dow Jones Industrial Average <.DJI> to report -- has cut thousands of jobs, slashed its dividend, trimmed spending and raised $1.3 billion to help it through the slowdown.
But on Wednesday, it said its Juruti bauxite mine in Brazil and the Alumar alumina refining upgrade and expansion are both being commissioned. The first shipment of bauxite from Juruti is expected within the next 90 days.
The Alumar refinery has already begun to produce its first alumina and is on target for full production during the second half of the year. Alumina, refined from bauxite, is smelted into aluminum.
(Reporting by Steve James; additional reporting by Matthew Daily, Braden Reddall, Carole Vaporean, Anna Driver, Caroline Valetkevitch and Chuck Mikolajczak; editing by Andre Grenon)