April 11, 2011

Alcoa Reports 20 Percent Increase in Income from Continuing Operations and 22 Percent Year-on-Year Revenue Growth

  • Income from continuing operations of $309 million, or $0.27 per share; best since second quarter 2008, up 20 percent over fourth quarter 2010 and a $503 million turnaround compared to first quarter 2010
  • Income from continuing operations, excluding a negative impact for special items of $8 million, or $0.01 per share, of $0.28 per share
  • Net income of $308 million, or $0.27 per share
  • Adjusted EBITDA of $955 million, up 22 percent from fourth quarter 2010, up 60 percent compared to first quarter 2010 and best since third quarter 2008
  • Record profitability in midstream and downstream businesses
  • Revenue of $6.0 billion, up 22 percent over first quarter 2010, up 5 percent over fourth quarter 2010 and best revenue since third quarter 2008
  • Strong end market revenue growth, led by double-digit increases in packaging, automotive, commercial transportation and industrial products
  • Company reaffirms 2011 global aluminum demand growth projection of 12 percent


NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE: AA) announced today first quarter 2011 income from continuing operations of $309 million, or $0.27 per share, a 20 percent improvement over fourth quarter 2010, led by improved pricing and growing demand for aluminum in major end markets. Income from continuing operations, excluding a negative impact for special items of $8 million, or $0.01 per share, was $0.28 per share.

First quarter 2011 income from continuing operations was the highest since second quarter 2008, and compares to fourth quarter 2010 income from continuing operations of $258 million, or $0.24 per share, and a first quarter 2010 loss from continuing operations of $194 million, or $0.19 per share. Fourth quarter 2010 income from continuing operations included a $35 million, or $0.03 per share, positive impact for special items, while the loss from continuing operations in first quarter 2010 included a $295 million, or $0.29 per share, negative impact for special items.

Special items in first quarter 2011 included costs associated with restructuring, the acquisition of the aerospace fastener business of the TransDigm group and the acquisition of full ownership of carbothermic aluminum production technology, partially offset by favorable mark-to-market changes on certain power derivative contracts.

Net income for first quarter 2011 was $308 million, or $0.27 per share, compared to net income in fourth quarter 2010 of $258 million, or $0.24 per share, and a net loss in first quarter 2010 of $201 million, or $0.20 per share.

The improvement over fourth quarter 2010 results was driven by higher realized prices for alumina and aluminum and growing demand for aluminum products in major end markets, along with productivity improvements. These were offset somewhat by a weaker U.S. dollar, along with higher energy and materials costs. Alcoa reaffirmed the Company’s projection that global aluminum demand would grow 12 percent in 2011 on top of the 13 percent growth rate in 2010.

"It was an excellent first quarter as we improved profitability across all business segments, set profit records in our midstream and downstream businesses and grew substantially," said Alcoa Chairman and CEO Klaus Kleinfeld. "This was a total team effort.

"Our outlook for the rest of 2011 and beyond remains very positive due to the world's growing population, increasing urbanization, and aluminum's advantages as a light, strong and recyclable material."

Adjusted EBITDA for the first quarter was $955 million, up 22 percent from fourth quarter 2010, up 60 percent from first quarter 2010, and the best quarterly performance since third quarter 2008. Adjusted EBITDA margin improved to 16.0 percent for the quarter, compared to 13.8 percent in fourth quarter 2010 and 12.2 percent in first quarter 2010.

Revenue for first quarter 2011 was $6.0 billion, an increase of 22 percent over first quarter 2010 and 5 percent over fourth quarter 2010.

Third-party pricing increased in the quarter for alumina (15 percent) and aluminum (7 percent) compared to fourth quarter 2010. Third-party pricing also increased compared to first quarter 2010 for both alumina (21 percent) and aluminum (15 percent).

End markets showed continued revenue growth in the first quarter, including automotive (30 percent), aerospace (7 percent), packaging (14 percent), industrial products (13 percent), and commercial transportation (12 percent), compared to fourth quarter 2010. Compared to first quarter 2010, revenues were up in aerospace (20 percent), packaging (45 percent), building and construction (26 percent), and commercial transportation (37 percent).

Both Flat-Rolled Products and Engineered Products and Solutions segments turned in record performance for the quarter. Flat-Rolled Products’ adjusted EBITDA was a first-quarter record at $173 million. Engineered Products and Solutions set a record for highest-ever adjusted EDITDA margin at 18.4 percent.

Alcoa is well on track to meet the Company’s 2011 financial targets, with debt-to-capital ratio improving to 33.6 percent, 130 basis points better than fourth quarter 2010. Capital spending excluding the Ma’aden project was $204 million in the quarter, 14 percent of the 2011 target. Expenditures on the Ma’aden project were also on track at $85 million. An investment in working capital to support continued strong growth in end markets, coupled with higher realized pricing, resulted in cash used in operations of $236 million and negative free cash flow of $440 million.

Segment Information

Alumina

After-tax operating income (ATOI) in the first quarter was $142 million, an increase of 118 percent compared with fourth quarter 2010. Adjusted EBITDA rose to $286 million, a sequential increase of 59 percent. A 15 percent improvement in realized alumina price was partially offset by higher raw material and energy costs, as well as the cost of a labor contract settlement in Australia. Alumina production in the first quarter declined slightly from the previous quarter to 4 million metric tons (mt).

Primary Metals

ATOI in the first quarter was $202 million, an increase of 13 percent over fourth quarter 2010. During the first quarter, improved realized pricing and productivity were offset by higher energy, energy derivative and raw material costs. As previously announced, capacity was restarted at the Massena, Intalco and Wenatchee plants, resulting in $9 million of associated start-up costs. Primary production was down 9,000 mt this quarter, but up slightly on a per-day basis. Adjusted EBITDA per metric ton continues to demonstrate consistent improvement, increasing to $438 per metric ton in the first quarter, up from $436 per metric ton in fourth quarter 2010.

Flat-Rolled Products

Revenue in the first quarter was $1,961 million, up 32 percent year-over-year and 17 percent sequentially. ATOI in the first quarter was $81 million, an increase of 53 percent compared to fourth quarter 2010 and a record first quarter performance. Adjusted EBITDA also came in at a record level of $173 million, up 25 percent sequentially. Sequential ATOI and adjusted EBITDA growth were driven by stronger pricing in North America and Europe, a better mix of products and higher volumes, somewhat offset by alloying cost pressure and rising regional premiums. Both Russia and China continue to see positive trends, with third-party volumes up approximately 60 percent in Russia and approximately 90 percent in China, compared to first quarter 2010.

Engineered Products and Solutions

Revenue in the first quarter was $1,247 million, up 16 percent year-over-year and 3 percent sequentially. ATOI in the first quarter was $130 million, up 15 percent sequentially from fourth quarter 2010, driven by volume and productivity improvements. Adjusted EBITDA margin came in at a record 18.4 percent, up 170 basis points from fourth quarter 2010 adjusted EBITDA margin of 16.7 percent. EPS continues to deliver record results compared to previous years, supported by a strong portfolio of innovative products and productivity improvements.

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