Alcoa rebounds in Q2

Costcutting enabled Alcoa (AA-N) to turn a respectable profit in the second quarter.

The world’s largest aluminum producer earned US$232 million (or US27 per share) on revenue of US$5.2 billion during the period, down from US$307 million (US35 per share) on revenue of US$6 billion in the second quarter of 2001.

Also, Alcoa reported achieving US$492 million in annualized cost savings, almost halfway toward its goal of generating US$1 billion in annualized savings in 2003.

The second quarter represents an improvement over the first three months of the year, when the company earned US$218 million on revenue of US$5 billion, as well as a major rebound from the fourth quarter of 2001, when it recorded its first quarterly loss (US$142 million) in eight years.

The April-to-May period saw Alcoa ship 1.33 million metric tonnes of aluminum products, up slightly from the year-earlier period.

The company’s automotive, commercial-transportation and industrial products markets all showed strength, as did its building, construction, packaging and consumer divisions. On the down side, weakness is still evident in the aerospace and industrial gas-turbine markets.

“Despite essentially flat aluminum prices, we achieved higher profits driven by improving shipment levels,” says Chairman Alain Belda, who also cited ongoing control of costs and operating expenses. “If economic trends solidify, we should continue to see improving profitability over the second half of the year, even at current aluminum prices.”

Once the Intalco smelter in Washington state is reactivated, the company will have 540,000 tonnes of idled aluminum-production capacity out of a base capacity of 4.1 million tonnes.

The company ended the second quarter with a whopping US$5.9 billion on its books as goodwill, up almost US$200 million from a year earlier. Current liabilities amounted to US$4.7 billion, compared with US$7 billion in current assets, and total liabilities rang in at US$16.7 billion.