Category



Year




2nd Quarter, 2000

Alcoa's Earnings Up 57% From Year-Ago Quarter On a 38% Increase In Revenues

Second Quarter Six Months
2000 1999 % change 2000 1999 % change

Revenues $5,569 $4,033 38 $10,100 $8,017 26
Net Income 377 240 57 732 461 59
Earnings per share .47 .32 47 .94 .62 52
Avg common shares outstanding 805 743 8 780 748 4
(in millions, except per share amounts)

PITTSBURGH, July 10, 2000 - Alcoa today reported net income of $377 million (47 cents per diluted share) for the second quarter of 2000 compared with net income of $240 million (32 cents per share) for the 1999 second quarter. Earnings per share were up 47%.

For the first half of 2000, net income was $732 million (94 cents per share) compared with $461 million (62 cents per share) for the comparable 1999 period - a 59% increase in earnings and a 52% increase in EPS.

"Earnings were up 6% from the first quarter, making the 2000 second quarter Alcoa's eighth consecutive quarter of improved earnings," said Alain Belda, Alcoa CEO. "Despite a 9% decline in LME aluminum prices in the second quarter, higher energy costs and the temporary dilutive effect of acquisitions, earnings continued to improve as a result of our focus on profitable growth and the Alcoa Business System, as well as continued concentration on cost control."

Return on shareholders' equity for the 2000 first half, annualized, was 17% compared with 14.8% in the first half of 1999.

Revenues were $5.6 billion for the 2000 second quarter, compared with $4.0 billion in the year-ago quarter. For the first half of 2000 revenues were $10.1 billion, compared with $8.0 billion in the 1999 period.

Alcoa stated that, at the end of the 2000 second quarter, the company had achieved $884 million in annualized cost savings towards its $1.1 billion target. Announced in mid-1998, this aggressive target is to be achieved by January 1, 2001. The quarterly run rate at the end of the quarter was $221 million, compared with $208 million for the 2000 first quarter. Cost savings would have been higher for the second quarter, but worldwide energy prices were up, particularly for gas and fuel oil. The company remains confident that it will achieve its cost cutting goal.

Recent Acquisitions
Alcoa noted that earnings for the second quarter 2000 included two months of operating results from Reynolds Metals Company and one month of results from Cordant Technologies. Both acquisitions were completed in the second quarter of 2000. Due to accounting requirements, results for the quarter do not include earnings from those Reynolds assets (interests in three alumina refineries and part of one smelter) that Alcoa agreed to sell under the terms of the acquisition. While mildly dilutive at this time, Alcoa expects the Reynolds and Cordant acquisitions to be accretive for the year. "As a result of visiting and examining many Reynolds facilities over the past several months, we have increased our target for cost saving synergies by 50%-- from $200 million to $300 million-- to be achieved by mid-year 2002," said Mr. Belda. "Half of the savings will be realized in the first 12 months. The near-term savings mainly will come from consolidating purchasing worldwide and eliminating duplicate public company activities. Longer-term savings will come from sharing best practices and aligning processes and systems with the Alcoa Business System, resulting in improved cycle time, less waste and reduced inventories. Our focus is on the customer: providing what the customer wants, when it's needed."

Segments Revised
Following are Alcoa's reporting segments, which have been revised to accommodate its new businesses:

» Alumina and Chemicals - Primary activities include bauxite mining and alumina refining. Alumina is sold to internal and external customers worldwide and is also processed into industrial chemicals.


» Primary Metals - This is Alcoa's worldwide smelting system. Alumina from the Alumina and Chemicals segment is used to produce aluminum ingot which is used by a variety of Alcoa fabricating segments as well as sold outside the company. Reynolds smelters have been added to this segment.


» Flat-Rolled Products - The main products here are aluminum sheet and plate. These products include rigid container sheet (RCS) for aluminum beverage cans, sheet and plate for aerospace applications, and mill products for a variety of industrial uses.


» Engineered Products - Products in this segment include hard and soft alloy extrusions - including architectural extrusion businesses - castings, fasteners, forgings and wheels, primarily for aerospace, automotive and distribution markets. The Huck and Howmet businesses acquired under the Cordant acquisition are in this segment as well as Reynolds' wheels business.


» Packaging and Consumer - This segment includes closures, packaging machinery, PET bottle business in Latin America and Reynolds' packaging and consumer businesses. (The Alcoa businesses here were formerly reported as "Other" businesses.)


» Other Businesses - The operations listed here include Alcoa Fujikura, which produces electrical components for the automotive industry, and fiber optic cable and services for the telecommunications industry; Thiokol, which produces rocket propulsion systems; and Alcoa residential building products; and Reynolds' distribution businesses.


Sales and after tax operating income for each segment are available via the Financial Report link below.

Founded in 1888, Alcoa is the world's leading producer of aluminum and alumina, and a major participant in all segments of the industry: mining, refining, smelting, fabricating and recycling. Alcoa serves customers worldwide in the packaging, automotive, aerospace, construction and other markets with a great variety of fabricated and finished products. The company has over 300 operating locations in 36 countries.

Editorial Contact:
Bonita A. Cersosimo
1 412 553 4462


Investor Relations:
Charles D. McLane
1 412 553 2231
Alcoa (NYSE: AA)

Financial Report [14KB]

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