By Surojit Chatterjee: Subscribe to Surojit's RSS feed
October 7, 2010 9:36 PM EDT
Alcoa Inc. (NYSE.AA) kicked off the earnings season for the components on the Dow Jones Industrial Average, Thursday, by reporting a sharp dip in third quarter profit but beat the Street estimate and also improved its topline.
Alcoa, the largest aluminum producer in the U.S., said its net profit fell nearly 21 percent to $61 million or $0.06 per share in the third quarter from $77 million or $0.08 per shate in the year ago period.
Excluding one-time items, profit was $0.09 per share, topping analysts' average estimate of $0.05 per share.
Sales climbed over 15 percent to $5.23 billion from $4.52 billion in the year ago period, the company said.
The company said demand for the metal was driven by countries such as China, Brazil, India and Russia. "In countries such as China, Brazil, India and Russia, more and more people are moving into the middle class, driving demand in building and construction, transportation, and packaging," Alcoa CEO Klaus Kleinfeld said in a statement.
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The company was, however, hit rising raw material costs and its earnings were dragged by sharp foreign exchange fluctuations, especially in Australia and Europe, where it smelts aluminum and refines alumina, a raw material used to make the metal.
Looking ahead, Alcoa said it expects markets to strengthen during the quarter and raised its full-year outlook for aluminum consumption to 13 percent growth from a July forecast of a 12 percent gain
Market analysts welcomed the financial results as Alcoa's performance is a key indicator of the metal industry in particular and the economy in general as it supplies a variety of manufacturers, including the auto and aerospace industries.
According to new York-based Dahlman Rose & Co. analyst Anthony Rizzuto, Alcoa will continue to do well in future months primarily due to weakness in dollar that improves the purchasing power of countries with stronger currencies.
"We've already seen metal prices performing better, and I expect that inertia will continue through the end of the year," Rizzuto told Bloomberg.
Shares of Pittsburgh, Pennsylvania-based Alcoa were up 2.79 percent at $12.20 after the market closed.
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