Alcoa posts 4Q profit driven by strong demand, higher prices; results top forecasts

MarketsAssociated Press

Strong demand for autos and airplanes along with higher aluminum prices helped Alcoa Inc. beat expectations for the fourth quarter.

Alcoa reported net income of $159 million, reversing a big loss a year earlier, and revenue rose 14 percent. Both figures topped Wall Street forecasts, and the company's shares rose in after-hours trading.

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Alcoa has been closing unprofitable aluminum smelters and shifting more of its focus to making products for cars, planes and heavy machinery.

During the fourth quarter, the New York-based company completed the purchase of Firth Rixson, which makes alloy parts for jet engines, and announced the acquisition of Germany's Tital, whose titanium castings are used in aircraft engines and frames. Those deals will raise Alcoa's standing in making alloy parts that are lightweight yet can withstand high heat and pressure.

Alcoa sees continued growth in aluminum demand — 7 percent more in 2015. CEO Klaus Kleinfeld said he doesn't fear that the global economy will weaken enough to threaten that forecast.

Kleinfeld said that end markets for Alcoa's rolled aluminum and engineered aluminum products segments — including aerospace, North American auto sales, and heavy trucks — all look strong, and the company continues to expect strong demand from China.

The so-called upstream or commodity business — alumina and primary metals — boosted its operating income by more than $400 million, helped by higher aluminum prices and by closing unprofitable smelters.

"All of our groups are performing extremely well," Kleinfeld said in an interview.

Alcoa's restructuring isn't complete, he said, adding that the company still wants to cut its alumina- and aluminum-production expenses.

The fourth-quarter income equaled 11 cents per share, and compared with a year-ago loss of $2.19 per share, or $2.34 billion, which included $1.73 billion in write-downs.

Excluding restructuring costs and other special items, Alcoa said it earned 33 cents per share. Analysts surveyed by Zacks Investment Research expected 26 cents per share. Revenue climbed to $6.38 billion, topping analysts' forecast of $6.02 billion.

Alcoa is no longer in the Dow Jones industrial average, but it is still among the first big U.S. corporations to report quarterly financial figures. That, and its reach into so many industries, makes Alcoa's results the unofficial opening of earnings season.

Before the report was released, Alcoa shares rose 6 cents to close at $16.17. After more than an hour of late trading, they were up 20 cents to $16.37. The shares gained 49 percent in 2014 and 2 percent so far this year.


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