Alcoa rebounds in second quarter

Alcoa (AA-N), the world’s largest aluminum company, turned in a respectable second-quarter earnings report that reflected successful company-wide cost-cutting efforts.

For the second quarter, Alcoa posted net earnings of US$232 million (US27 cents per share) on revenues of US$5.2 billion, down from the US$307-million (US35-cent) profit generated on revenues of US$6.0 billion during the second quarter of 2001.

During the quarter, the company shipped 1.33 million metric tonnes of aluminum products, up slightly from the year-ago period.

Alcoa says that its automotive, commercial-transportation and industrial-products markets all showed strength, as did its building, construction, packaging and consumer markets.

On the down side, the company says it continues to suffer from weakness in the aerospace and industrial gas-turbine markets.

At the end of the second quarter, Alcoa had achieved US$492 million in annualized cost savings, almost half way towards its goal of generating US$1 billion in annualized savings in 2003.

“Despite essentially flat aluminum prices, we achieved higher profits driven by improving shipment levels, and on-going control of costs and operating expenses through continuing deployment of the Alcoa Business System,” said Chairman and CEO Alain Belda in a release. “If economic trends solidify, we should continue to see improving profitability over the second half of the year, even at current aluminum prices.”

The second quarter represents a bit of a turnaround from Alcoa’s first-quarter, when the company returned a profit of US$218 million on revenues of US$5 billion, as well as from the desultory fourth quarter when the company recorded its first quarterly loss (US$142 million) in eight years.

Alcoa notes that once its restart of its Intalco smelter Ferndale, Wash., is complete, the company will have 540,000 tonnes of idled aluminum-production capacity out of a base capacity of 4.1 million tonnes.

Looking at Alcoa’s balance sheets, the company ended the second quarter with a whopping US$5.9 billion in goodwill on its books, up almost US$200 million from a year earlier.

On top of that, Alcoa’s current liabilities added up to US$4.7 billion (compared with US$7 billion in current assets) while its total liabilities rang in at US$16.7 billion.