Alcoa surprises Wall Street with first-quarter profit

1 of 2. People leave the Alcoa Business Services Center in Pittsburgh, Pennsylvania in this February 13, 2007 file photograph. Alcoa Inc, the largest U.S. aluminum producer, reported a first-quarter profit that topped Wall Street forecasts as prices for aluminum rose in the early months of 2012. Alcoa shares rose 6 percent to $9.80 in post-market trading.

Credit: Reuters/Jason Cohn/Files

By Steve James

NEW YORK | Tue Apr 10, 2012 5:26pm EDT

NEW YORK (Reuters) - Aluminum producer Alcoa Inc surprised Wall Street with a first-quarter profit after a loss in the fourth quarter of 2011 as global markets improved, especially in the aerospace and automobile sectors.

The results, which beat analysts' forecast for a loss, sent the company's stock up 6 percent to $9.80 in after-hours trading on the New York Stock Exchange.

Alcoa, which makes aluminum for aircraft, cars and beverage cans, raised its 2012 global growth forecast for the aerospace market by 3 percentage points to 13-14 percent and said it expects global growth in the automotive industry of 3-7 percent this year.

The company also projects a global aluminum supply deficit in 2012 and reaffirmed its forecast that global aluminum demand would grow 7 percent in 2012, on top of the 10 percent growth seen in 2011.

Alcoa said income from continuing operations in the first quarter was $94 million, or 9 cents per share, compared with a profit of $309 million, or 27 cents per share in the same quarter last year. Excluding items, income was 10 cents per share.

Revenue rose slightly to $6 billion, Pittsburgh-based Alcoa said. Analysts on average were expecting a loss of 4 cents per share and revenue of $5.77 billion, according to Thomson Reuters I/B/E/S.

"Clearly, they're doing much better downstream, which you'd expect because the metal price was down," said Charles Bradford, an analyst with Bradford Research in New York.

"I was expecting break-even, so I was higher than the average, but if you had told me 10 cents, I never would have believed it."

Results from Alcoa, the first company in the Dow Jones industrial average to report earnings for the March quarter, are considered a bellwether for the rest of the materials sector.

Alcoa saw prices for aluminum rise in the early months of 2012 and Chief Executive Klaus Kleinfeld said the company's performance rebounded strongly in the first quarter on a number of factors including stabilizing markets.

But he said: "Challenges remain in this economy."

Alcoa said the improvement over the fourth quarter was driven by strong productivity improvements across all businesses, higher realized prices for aluminum, and improved volume and mix. These were offset somewhat by a lower realized alumina price and higher input costs, the company said.

A 9 percent drop in the realized price of aluminum was partially offset by third-party shipments in the upstream businesses, better volume and mix in the midstream business, and improved volume in the downstream business, Alcoa said.

Compared to the first quarter of 2011, it said revenue in its commercial transportation business was up 32 percent and aerospace revenue rose 15 percent.

Alcoa's stock price has fallen 46 percent since April 2011 -- mostly on a drop in global aluminum prices -- prompting the company to cut the performance-based element of Kleinfeld's 2011 compensation by 45 percent.

Aluminum prices are down almost 20 percent from a year ago but have been creeping higher, reaching $2,126 per tonne on March 31 from $2,020 on January 1.

The company has already cut back aluminum production and last week said it would reduce production of alumina, a key raw material, by 4 percent.

(Reporting By Steve James; Editing by Bernard Orr)