Aluminum manufacturer Alcoa swings to 2Q profit, cites improved demand for several products

Alcoa moves to 2Q profit on improved demand

DENVER — Alcoa Inc. said Monday it posted a second-quarter profit as it sold more aluminum in the commercial vehicles, packaging and construction markets.

The Pittsburgh manufacturing giant reported net income of $136 million, or 13 cents share, for the quarter ending June 30. That compared with a loss of $454 million, or 47 cents a share, a year ago.

Revenue rose to $5.19 billion from $4.24 billion.

The second quarter results topped estimates from analysts surveyed by Thomson Reuters. They expected net income of 12 cents per share on revenue of $5.05 billion. Shares rose 2.7 percent in after-hours trading.

Alcoa is one of the first companies to report quarterly earnings. Its performance can provide some insight into developing economic trends because of its varied customer base, from beverage can manufacturers to airplane builders.

The largest U.S. aluminum producer said the improved demand helped offset a 1 percent drop in realized aluminum prices.

“Altogether, everything looked positive,” Argus Research analyst Bill Selesky said in a telephone interview.

Alcoa also forecast global aluminum consumption to increase 12 percent this year, compared with the 10 percent increase it forecast just three months ago.

The automotive markets in both North America and China need more aluminum this year, although the pace of auto sales has slowed recently. By contrast, aluminum sales to the automotive market in Europe, where the economic recovery has been hurt by a financial crisis, will decline as much as 8 percent, Alcoa predicts.

Klaus Kleinfeld, chairman and CEO, believes the demand from consumers and governments for more fuel-efficient cars and trucks presents an opportunity for his company. The U.S. is requiring that 2016 model year vehicles meet fuel efficiency targets of 35.5 miles per gallon combined for cars and trucks, an increase of nearly 10 mpg over current standards. To meet that standard in just six years, Kleinfeld thinks automakers have no choice but to use lighter-weight metals like aluminum in car bodies.

Aluminum is currently used mostly for engine blocks, wheels and transmissions.

“We are currently working intensely with our automotive customers and helping to design the next-generation fuel efficient cars, trucks, as well as buses,” Kleinfeld said.

Beyond automotive, China will account for much of the 2010 growth in consumption, with higher sales in the heavy truck and trailer, beverage can packaging and commercial construction sectors.

In North America, Alcoa sees sales dropping by 23 percent to 27 percent for commercial building and construction. It expects beverage can sales to be flat.

As of 2009, about half of Alcoa’s sales were in the U.S., 27 percent in Europe, 15 percent in the Asian-Pacific region, with the remainder in North and South America.