Alcan, Novelis dive on profit warning (January 17, 2005)

Shares in Alcan (AL-T) and recent rolled-products spinoff Novelis (NVL-T) were both off more than 6% in early afternoon trading in Toronto on Jan. 17, after Alcan said that it expects its fourth-quarter operating earnings per share to slide by around 30% from third-quarter levels.

The Montreal-based aluminum giant blames the weakening greenback, negative seasonal effects and higher fuel and energy costs.

Alcan’s third-quarter operating earnings rang at US$276 million (or US74 per share); a 30% decrease would translate to about US$193 million (US52 per share).

“Looking ahead it should be noted that external forecasts of Alcan’s 2005 earnings do not yet reflect the recently completed spin-off of Novelis or the potential continuation of higher raw materials costs and a weaker U.S. dollar,” said Alcan’s CEO Travis Engen in a prepared statement.

Alcan says about a third of the decline relates to normal, seasonal effects in the rolled products business now largely included in Novelis. Novelis’ fourth-quarter results are also expected to include a $65-million non-cash charge related to two rolling assets in Italy. Still, the company expects operating earnings to be similar to those of the year-ago quarter, but off the pace set in the recent third quarter, owing largely to seasonal effects.

Shares in Alcan ended $3.05, or 6%, lower at a new 52-week low of $48.25; Novelis shed $2.27, or nearly 8%, to $26.87. Novelis shares debuted for trading in Toronto at $32.50 per share on Jan.6, and promptly fell 8% to $30.

Alcan’s fourth-quarter results are due out on Feb. 8.

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