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Tuesday, October 07, 2008
Lower Aluminum Prices Slam Alcoa's 3Q Results
FOXBusiness
Aluminum giant Alcoa (AA) kicked off what is expected to be a dismal earnings season on a gloomy note, reporting a 52% plunge in third-quarter earnings and saying it will halt a stock-buyback plan.
Alcoa earned $268 million in the third quarter, or 33 cents per share, compared with $555 million, or 63 cents per share, a year ago. The company's revenue grew to $7.2 billion from $6.5 billion in the third quarter of 2007.
Analysts polled by Thomson Reuters had been expecting stronger earnings of 50 cents per share on $7.1 billion in sales.
Alcoa's results were weighed down by higher costs, a weakened economy and diving aluminum prices.
The company said it will stop all non-critical capital programs and suspend its share buyback program. Alcoa also said it will make targeted reductions, starting by halting production at its Rockdale, Texas, smelter.
“We have taken action to conserve cash and maximize profitability through very adverse economic conditions," CEO Klaus Kleinfeld said in a statement.
Alcoa warned the margin squeeze due to tumbling aluminum prices will have a greater impact going forward.
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If you've seen TV footage of an active trading pit, you've probably noticed the atmosphere is uproarious and wild. The reason for all the shouting? Open outcry.
On exchange floors that use the open-outcry system, traders shout prices they want to sell while others yell back the price they want to buy at. They also use hand gestures to communicate with each other.
This system has been used for a long time, but is being replaced with modern technology. Some argue electronic exchanges can do the job faster and more accurately. One of the few exchanges that continue to use open outcry is the New York Mercantile Exchange.
