Marking the beginning of yet another reporting season, aluminum producer Alcoa Inc. (AA) is scheduled to announce first-quarter results after the market closes on Tuesday. The economic crisis has led to a sharp decline in prices for the company's products, and Alcoa's repot card is expected to reflect a loss for the period.
The New York-based company involves in the technology, mining, refining, smelting, fabricating and recycling of aluminum. The company's products include precision castings, and aerospace and industrial fasteners. Its products are used in aircraft, automobiles, commercial transportation, building and construction, oil and gas, defense, and industrial applications, all of which have been hurt by the economic turmoil.
When Alcoa reports earnings later in the day, on average, 12 analysts polled by Thomson Reuters expect the company to lose $0.57 per share for the first quarter. Analysts' estimates typically exclude special items. Revenues are estimated to be $4.08 billion. In the year-ago period, the company posted earnings of $0.37 per share on revenues of $7.38 billion.
For the previous quarter, the company reported a net loss of $1.19 billion or $1.49 per share, which marked the first quarterly net loss for Alcoa in six years. That compared with net income of $632 million or $0.75 per share in the same period of 2007. Sales for the quarter dropped 19% to $5.69 billion from $7.03 billion.
The company said last month in a regulatory filing that it would report a loss for the quarter ending March 31, as economic downturn continues to impact its business. Further, the company reduced its quarterly dividend to save about $400 million of cash annually. Alcoa also revealed an offering of about $1.1 billion in common stock and convertible notes to improve its cost structure and liquidity.
In the filing Alcoa said the economic conditions have materially and adversely affected pricing of and demand for aluminum, alumina and aluminum products. Alumina prices - which are closely linked to aluminum prices - have continued to decline in the first quarter of 2009. We now anticipate those prices to be down approximately 34% versus the fourth quarter of 2008. We expect to report lower alumina production of approximately 350 thousand metric tons in the first quarter of 2009 as compared to the fourth quarter of 2008 as a result of production curtailments, the company said.
In February, Alcoa said it was exiting the Shining Prospect special purpose vehicle formed together with Chinalco to purchase shares in Rio Tinto plc (RTP, RIO.L). Alcoa also said it would take a loss related to the exiting of its investment in the prospect, which is expected to impact the first-quarter results by about $120 million.
Among other events during the quarter, Alcoa last month reached an agreement with the New York Power Authority or NYPA that would save hundreds of jobs at its smelters in Massena, New York in the near-term and preserve hundreds more under its planned long-term modernization project at the plant. The company operates two smelters in Massena.
The agreement allows the West Plant to remain operational at its current employment level and to retain more than 250 of the about 420 East Plant employees during the temporary curtailment of about 120,000 mtpy at the plant which will begin in May. Due to the 60% decline in aluminum prices since last summer, Alcoa was considering curtailing operations at both Massena East and West smelters, which would have resulted in elimination of about 1,100 jobs.
In January, the aluminum producer had announced elimination of 13,500 employees and an additional 1,700 contractor jobs this year, further production curtailment, divestment of four non-core downstream businesses and lower capital spending for 2009, all aimed at tackling the economic crisis.
AA is currently trading at $7.55, down $0.36 or 4.55% from the previous close. During the quarter, the stock moved in the range of $4.97-$12.44.
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