April 12, 2010
Alcoa Reports 1Q 2010 Results
- Loss from continuing operations of $194 million, or $0.19 per share, including restructuring and special charges.
- Restructuring and special charges total $295 million, or $0.29 per share.
- Strong EBITDA performance of $596 million, highest since 3rd quarter 2008.
- Realized aluminum and alumina prices increase 8 and 13 percent, respectively, from 4th quarter 2009.
- Revenues of $4.9 billion; higher realized prices offset by normalized buy/re-sell activity, lower shipments, and actions to improve long-term profitability in rigid packaging.
- Cash Sustainability Program drove $86 million in productivity.
- Debt-to-capital ratio improved to 38.1 percent, 60-basis-points better sequentially.
- Cash on hand of $1.3 billion at end of 1st quarter.
- Net loss for 1st quarter 2010 of $201 million, or $0.20 per share.
NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE: AA) today announced a first quarter 2010 loss from continuing operations of $194 million, or $0.19 per share, which includes restructuring and special charges of $295 million, or $0.29 per share. The results compare to a fourth quarter 2009 loss from continuing operations of $266 million, or $0.27 per share, and a first quarter 2009 loss from continuing operations of $480 million, or $0.59 per share.
The $295 million in first-quarter charges, which are primarily non-cash, relate to:
- Restructuring and environmental costs, primarily from the decision to permanently close two smelters in Badin, North Carolina, and Frederick, Maryland, which were curtailed in August 2002 and December 2005, respectively, totaling $135 million, or $0.13 per share;
- Discrete tax impacts totaling $112 million, or $0.11 per share, primarily as a result of changes in federal health care laws; and
- Special items totaling $48 million, or $0.05 per share, for mark-to-market changes in derivatives and the impact of power outages.
Results from continuing operations in the first quarter 2010 improved $72 million over the fourth quarter 2009, driven by higher realized prices for alumina and aluminum (+13 percent and +8 percent, respectively) and productivity gains, which were partially offset by the impact of LIFO, lower volumes and higher energy costs.
Alcoa continued to produce strong results in cash sustainability initiatives in the areas of overhead, procurement, working capital and capital expenditures. In the first quarter the Company generated $86 million in productivity through the program sequentially, helping to produce strong quarterly EBITDA of $596 million. Cash sustainability efforts helped improve the cost of goods sold as a percentage of sales by 8.2 points from the fourth quarter 2009 to 82.1 percent. The Company is on track to deliver its new increased 2010 annual cash sustainability goals.
“Our performance continued to improve in the first quarter thanks to higher realized prices and strong operational results,” said Klaus Kleinfeld, Alcoa President and Chief Executive Officer. “Most of the special items we reported are non-cash and include proactive decisions to structurally improve the company’s profit potential.
“Our markets are gradually improving and both policy trends and consumer sentiment bode well for aluminum demand. Just a few days ago, the U.S. finalized new rules that require increased fuel efficiency and for the first time set greenhouse gas emissions standards for cars and light trucks. In addition, a growing number of customers are requesting sustainable products. Factors like these play to aluminum’s superior advantages as a light, strong, versatile and infinitely recyclable material.”
Revenues for the first quarter 2010 were $4.9 billion, a 10 percent decrease from the fourth quarter of 2009. Higher realized prices were offset by more normalized buy/re-sell activity compared to the fourth quarter; lower shipments in alumina and primary metals; and the impact of the Company’s strategy to improve long-term profitability in the rigid packaging business. Revenues in the first quarter 2009 were $4.1 billion.
Net loss for the first quarter 2010 was $201 million, or $0.20 per share, which includes the unfavorable impact of $295 million, or $0.29 per share, for restructuring and special charges. Net loss for the fourth quarter 2009 was $277 million, or $0.28 per share, and net loss for the first quarter 2009 was $497 million, or $0.61 per share.
Cash from operations in the quarter was $199 million and the Company finished the first quarter 2010 with $1.3 billion of cash on hand. The Company’s debt-to-capital ratio stood at 38.1 percent at the end of the quarter, an improvement of 60-basis-points from fourth quarter 2009 and a 250-basis-point improvement from first quarter 2009. Capital expenditures in the quarter were $221 million, with approximately 60 percent related to growth projects.
After-tax operating income (ATOI) in the first quarter was $72 million, an increase of $53 million compared with $19 million in the fourth quarter 2009. The prior period included a tax settlement related to an equity investment in Brazil. A 13 percent increase in pricing and lower costs driven by productivity, were partially offset by a power outage at the Sao Luis refinery and higher Juruti start-up costs. Alumina production in the first quarter declined 31 thousand metric tons (kmt) to 3,866 kmt as the disruption at Sao Luis and maintenance outages in Australia more than offset increases at Point Comfort. Also, third-party shipments declined as more alumina was used to meet internal demand.
ATOI in the first quarter was $123 million, an increase of $337 million from the fourth quarter of 2009, which included $250 million in charges related to the European Commission’s decision on electricity tariffs affecting the Company’s Italian smelters. Higher LME prices and regional premiums, combined with favorable currency movements and lower costs driven by productivity drove the sequential improvement. Third-party realized metal prices increased eight percent over the previous quarter. Primary metal production for the quarter declined 8 kmt to 889 kmt.
ATOI in the first quarter was $30 million, a sequential decrease of $7 million. Lower volumes related to Alcoa’s decision to curtail sales to a North American can sheet customer negatively impacted the segment by $22 million. Improved pricing across many markets, including can sheet, and capacity rationalization to bring costs in line with volumes more than offset the impact of lower can sheet shipments.
Engineered Products and Solutions
ATOI in the first quarter was $81 million, up 42 percent sequentially despite lower sales. Strong productivity gains and a modest improvement in end-market conditions more than offset continued weakness in the building and construction and industrial gas turbines markets.
Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on April 12, 2010 to present the quarter's results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under "Invest.”
Alcoa is the world’s leading producer of primary aluminum, fabricated aluminum and alumina. In addition to inventing the modern-day aluminum industry, Alcoa innovation has been behind major milestones in the aerospace, automotive, packaging, building and construction, commercial transportation, consumer electronics and industrial markets over the past 120 years. Among the solutions Alcoa markets are flat-rolled products, hard alloy extrusions, and forgings, as well as Alcoa® wheels, fastening systems, precision and investment castings, and building systems in addition to its expertise in other light metals such as titanium and nickel-based super alloys. Sustainability is an integral part of Alcoa’s operating practices and the product design and engineering it provides to customers. Alcoa has been a member of the Dow Jones Sustainability Index for eight consecutive years and approximately 75 percent of all of the aluminum ever produced since 1888 is still in active use today. Alcoa employs approximately 59,000 people in 31 countries across the world. More information can be found at www.alcoa.com.
Certain statements in this release relate to future events and expectations and, as such, constitute forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of Alcoa to be different from those expressed or implied in the forward-looking statements. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or aluminum industry conditions generally, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices for primary aluminum, alumina and other products; (b) material adverse changes in the markets served by Alcoa, including automotive and commercial transportation, aerospace, building and construction, distribution, packaging, industrial gas turbine and other markets; (c) Alcoa’s inability to achieve the level of cash generation, cost savings, improvement in profitability and margins, or strengthening of operations anticipated by management from its cash sustainability, productivity improvement and other initiatives; (d) Alcoa's inability to realize expected benefits from newly constructed, expanded or acquired facilities or from international joint ventures as planned and by targeted completion dates, including the new joint venture in Saudi Arabia; (e) significant increases in power or energy costs or the unavailability or interruption of energy supplies for Alcoa’s operations; (f) political, economic and regulatory risks in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies and fluctuations in foreign currency exchange rates and interest rates; (g) outcomes of significant legal proceedings or investigations adverse to Alcoa; and (h) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2009 and other reports filed with the Securities and Exchange Commission.