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2nd-Quarter Profits Fall At Aluminum Maker Alcoa

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Bloomberg News

Published: July 9, 2008

Alcoa Inc., the world's third-largest aluminum producer, said second-quarter profit fell 24 percent as surging costs for energy and materials outpaced metal price increases. The shares rose after profit topped analyst estimates.
Alcoa is the first company in the Dow Jones Industrial Average to report results for the quarter through June. Earnings at Dow Jones companies probably declined an average of 10 percent from the same period a year earlier, according to analyst estimates compiled by Bloomberg.
Chief Executive Officer Klaus Kleinfeld, who took over in May, is seeking long-term power-supply contracts and cheaper sources of energy, which accounts for about a third of the cost of producing aluminum.

Prices also are rising for raw materials, such as chemicals and coal.

"Costs reaccelerated across the global mining and metals industry in the second quarter, and we expect this will be a defining aspect of the industry's results," Fraser Phillips, an analyst at RBC Capital Markets in Toronto, wrote in a note to investors. "Increases in energy, caustic soda and coke should feature prominently in Alcoa's results."

Net income for the quarter fell to $546 million, or 66 cents a share, from $715 million, or 81 cents, a year earlier, New York-based Alcoa said. Sales fell 5.5 percent to $7.62 billion after the company sold its packaging unit.

Excluding a charge of 5 cents a share because of lost production at a refinery in Australia and a smelter in Texas, profit was 71 cents a share, topping the 65-cent average estimate of 17 analysts in a Bloomberg survey.

The shares gained $1.07, or 3.3 percent, to $33.40.

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