Alcan, Novelis dive on profit warning (January 31, 2005)

Alcan (AL-T) expects fourth- quarter operating earnings to slide by around 30% from the previous quarter, owing to a weaker U.S. dollar, seasonal effects, and higher fuel and energy costs.

Operating earnings in the third quarter totalled US$276 million (or US74 per share); a 30% decrease would translate as US$193 million (US52 per share).

About a third of the decline relates to normal, seasonal effects in the rolled products business, which is now largely included in spinoff company Novelis (NVL-T).

Alcan CEO Travis Engen points out that “forecasts of Alcan’s 2005 earnings do not yet reflect the recent spinoff of Novelis or the potential continuation of higher raw materials costs and a weaker U.S. dollar.”

In related news, Novelis expects its fourth-quarter earnings to include a $65-million non-cash charge related to two rolling assets in Italy. However, the company expects operating earnings to be similar to those of final quarter of 2003

Alcan’s fourth-quarter results are to be announced Feb. 8.