Alcoa gives positive aluminum outlook

Mon Jan 9, 2012 6:23pm EST
 
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By Steve James and Ernest Schuyder

(Reuters) - Alcoa Inc (AA.N: Quote) posted a fourth quarter loss due to a steep plunge in aluminum prices, but its revenue beat expectations and the company gave a positive outlook for global demand for the metal, especially in the aerospace and automotive markets.

The largest U.S. aluminum producer forecast 7 percent growth in global aluminum demand this year and said cutbacks in production will result in a global supply deficit of 600,000 tons in 2012.

Alcoa added that its growth projection was ahead of the 6.5 percent rate required to meet the company's forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011, while prices fell 18 percent.

"The commentary for the year ahead, in terms of the aluminum market expected to be in deficit, that's a positive, and certainly in line with our view that you will see more supply come out of the market if metal prices stay at these low levels," said Kuni Chen, managing director of CRT Capital Group.

Shares of Alcoa edged higher in extended trading, after gaining 2.9 percent ahead of the results on the New York Stock Exchange. Analysts had expected the Pittsburgh-based company to post a loss after it announced last week that it would cut 12 percent of its smelting capacity due to the plunge in prices.

But they said revenue came in better than they expected, which was a good sign for aluminum demand.

The first company in the Dow Jones industrial average .DJI to report results, Alcoa said revenue rose 6 percent to $6 billion even as the price of aluminum fell 6 percent in the fourth quarter. The average analyst estimate was for revenue of $5.7 billion, according to Thomson Reuters I/B/E/S.

Alcoa posted a loss from continuing operations of $193 million, or 18 cents per share, compared with a profit of $172 million, or 15 cents per share in the same quarter of 2010.   Continued...