Alcoa swings to a profit, raises demand outlook

The Pittsburgh-based company beat analyst expectations, posting income from continuing operations of $137 million, or 13 cents per share, in the three months ended June 30. That compares with a loss of $312 million, or 32 cents per share, in the same period a year ago.

Analysts polled by Thomson Financial were looking for earnings of 12 cents per share.



Revenue rose to $5.2 billion from $4.2 billion in the quarter. Analysts had expected revenue of $5.05 billion.

Shares of Alcoa (AA, Fortune 500) rose 2.6% to $11.23 in extended trading after closing at $10.94 per share.

Alcoa said stronger sales volume and the impact of internal cost cutting programs, as well as favorable exchange rates and lower energy costs, helped offset a decline in aluminum prices in the quarter.

The company raised its forecast for aluminum consumption to 12% from 10% for 2010 based on improved demand from end-market customers such as automakers and construction companies in China.

Klaus Kleinfeld, Alcoa’s chief executive, said global population growth, particularly in China’s urban centers, will continue to stoke demand for aluminum as a construction material.

In addition, Kleinfeld said he expects automakers to begin using more lightweight aluminum to meet new fuel-efficiency standers in the United States.

“Prospects for Alcoa and aluminum continue to be excellent,” he said.

For the first half of the year, however, Alcoa reported a net loss of $65 million, or 6 cents per share. In the first quarter, Alcoa posted an operating loss of $194 million due to restructuring costs. Sales for the first half were $10.1 billion.

Alcoa is seen as a leading indicator of economic activity since the company operates in more than 30 countries and sells products to a range of industries, including automakers, construction companies and beverage retailers.

Shares of Alcoa have fallen 32% this year, making it the worst performing stock in the Dow Jones industrial average. The company has been hurt by concerns that a slowdown in the global economic recovery could drive down demand for metals.

But the biggest threat to Alcoa, according to Kleinfeld, is renewed volatility in the currency market, not a downturn in the so-called real economy.

“In all of our end markets, if you dig deep you see that there are a lot of very positive indications of a real recovery,” he said.

Alcoa’s report marks the unofficial start of the second-quarter reporting period. While analysts expect corporate profits continued to improve in the quarter, investors are particularly interested in what companies forecast for the rest of the year as economic conditions have moderated.

Four other Dow components are due to report earnings this week, including Intel (INTC, Fortune 500), JPMorgan Chase (JPM, Fortune 500), General Electric (GE, Fortune 500) and Bank of America (BAC, Fortune 500).