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Alcoa Third Quarter Results Missed Expectations; Reaffirms Aluminium Forecasts

Alcoa Third Quarter Results Missed Expectations; Reaffirms Aluminium Forecasts
Oct 09, 2015 By Simon Herrmann Tags: AWC

Lightweight metals producer Alcoa (NYSE:AA) has report third quarter results overnight. ASX listed company Alumina Ltd (ASX:AWC) owns 40% of each of the Alcoa entities.

Alcoa’s net income was US$44 million (~A$60.5m), below analyst’s expectations. Total revenue declined 11% year-on-year to US$5.6 billion. Revenue from aerospace, automotive and Alumina sales rose 10%, however divestitures, closures and market headwinds caused the overall fall.

In its announcement Alcoa stated that its portfolio delivered “solid results in the face of strong market and currency headwind.” Chairman and Chief Executive Officer of Alcoa also blamed the difficult environment, however ensured shareholders that the Company will “continue to be laser focused on the things we can control.”

Much of the decline was due to the lower alumina prices but also due to one-off charges totalling US$65 million for restructuring the business. Aluminium prices were down 25 per cent from last year to $1,901 a metric ton.

Alumina Chief Executive Officer Peter Wasow said: “The alumina segment which includes the bauxite mining business was able to maintain its strong margins in the third quarter. Lower price were offset by higher shipments, favourable currency movements, a higher proportion of sales on an API-basis and net productivity gains for both mining and refining.” Despite all the positive Mr Wasow also expects lower alumina prices in the upcoming quarter. Alcoa World Alumina & Chemicals, also referred to as AWAC, produced a total of 3.8m tonnes of alumina in the third quarter.

In its forward looking statements Alcoa updated some of its forecast estimates. Whilst Alcoa maintains its global aerospace forecast of 8-9%, it cut its North America as well as Chinese automotive production forecast. The Company reaffirmed its projections of a 6.5% increase in global demand for Aluminium and believes that global demand will double between 2010 and 2020.

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Simon Herrmann Author: Simon Herrmann Oct 09, 2015

Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.

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