Alcan earnings slide

With net income slipping 43% in the recent quarter, Alcan Aluminium (AL-T) is warning that a weaker economy may cut into aluminum demand.

For the fourth quarter ended Dec. 31, 2000, the world’s second-largest aluminum producer posted a consolidated net income of US$110 million (or US34 per share) on revenue of US$3.2 billion, down from US$193 million (US87 per share) earned on US$1.9 billion in revenue during the comparable period last year.

The results include US$60 million (US19 per share) in charges relating to the company’s recent merger with Switzerland’s Alusuisse Group, plus US$3 million in unrelated charges.

The higher fourth-quarter revenue, which reflects the inclusion of Alusuisse’s results, were partly offset by lower rolled-product shipments in North America and a decline in ingot product realizations.

Alcan produced 1.1 million tonnes of aluminum in the quarter, compared with 785,000 tonnes a year earlier. Average ingot-product realizations declined 4% over the year to US$1,585 per tonne against a relatively flat London Metal Exchange price.

The picture is brighter for the full year, during which Alcan earned US$618 million (US$2.45 per share) on revenue of US$9.1 billion, up from US$460 million (US$2.06 per share) on US$7.3 billion in 1999. Common-share dividends remained steady in 2000 and 1999 at US60 per share.

The company points to several successes during 2000, including:

– completion of its merger with Alusuisse;

– progress in integrating the merged entity, with US$200 million expected in savings;

– startup of a new aluminum smelter in Alma, Que.;

– the acquisition of Aluminium of Korea and its integration with Alcan Taihan Aluminium; and

– the ramp-up of operations following an expansion of the Pinda rolling mill in Brazil.

“Although we expect that the impact of the weakening economic conditions will affect aluminum demand during the next couple of quarters, Alcan should continue to benefit from strategic actions taken previously and currently in progress,” says William Blundell, Alcan’s interim president and chief executive officer.

Blundell, 73 and an Alcan director, crossed the floor and took the helm at Alcan in mid-January after former president and CEO Jacques Bougie unexpectedly tendered his resignation.

“I’m not a babysitter that’s been sent to represent the board,” says Blundell. “I’m approaching this as a full-time job. I’ve put aside all my other activities in order to give my full energies to this position.

“The one concern that has been expressed — which I think is a legitimate one — is, ‘will we lose momentum on our strategic initiatives during this time?’ And of course the answer is, ‘we hope to accelerate, to pick up the pace.'”

During the quarter, Alcan issued 115.4 million shares in exchange for Alusuisse shares and spent US$167 million repurchasing 5.4 million common shares. At year-end, there were 317.9 million outstanding shares.

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