Alcoa’s Diversification, Better Smelter Performance, Led To Strong Quarterly Results

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Alcoa’s second-quarter profit, released yesterday, excluding restructuring costs and other one-time items was 18 cents a share, the New York-based company said, beating the 12-cent average of 17 estimates compiled by Bloomberg. Sales were little changed from a year earlier at $5.84 billion, compared with the $5.65 billion average estimate. Alcoa rose as much as 4.4 percent.

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The primary metals unit, which smelts aluminum, had $97 million in after-tax operating earnings compared with a $32 million loss a year before. That boosted Alcoa’s bottom line, even after the segment’s output shrunk as Chairman and Chief Executive Officer Klaus Kleinfeld shuttered inefficient plants. Profit was unchanged at the global rolled-products business, which Alcoa is expanding.

“There’s much more growth potential for the primary business than for the global rolled business even though management spends a lot more time talking about the global rolled business,” Andrew Lane, an analyst at Morningstar Inc. who has a hold rating on the stock, said in an interview with Bloomberg.

An aluminum smelter for over a century, Alcoa now prefers to call itself a lightweight metals technology company. It has worked to reduce its dependence on the price of raw metal by boosting sales of specialized shapes and alloys. Two weeks ago, Alcoa announced the $2.85 billion purchase of UK aerospace parts maker Firth Rixson Ltd., its biggest takeover in 14 years.

At INR 115.50 ($1.93) per kilogram, the Indian aluminum cash price moved up 0.3 percent on Tuesday, July 8, making it the day’s biggest mover. The 3-month price of aluminum steadied at $1,926 per metric ton following two-days of increases on the LME. The cash price of primary aluminum ended a two-day climb, settling at $1,893 per metric ton on the LME.

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Chinese aluminum prices closed flat for the day. The price of Chinese aluminum scrap saw little movement at CNY 12,250 ($1,974) per metric ton. The price of Chinese aluminum billet held steady at CNY 13,590 ($2,190) per metric ton. The price of Chinese aluminum bar saw essentially no change for the fifth day in a row, remaining around CNY 14,200 ($2,289) per metric ton. The Chinese aluminum cash price held steady around CNY 13,400 ($2,160) per metric ton.

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