 |
|
|
|
|
|
10/7/2003
Alcoa's Income From Continuing Operations Rises 40 Percent Over Previous Year's Result
Alcoa today reported third quarter income from continuing operations of $283 million, or $0.33 per diluted share, compared to $229 million, or $0.27 per share, in the second quarter. This quarter's results were a 40 percent improvement over income from continuing operations of $202 million or $0.24 per share in the third quarter last year.
NEW YORK--(BUSINESS WIRE)--Oct. 7, 2003--Alcoa (NYSE:AA)
Highlights of the quarter:
- Income from continuing operations at $283 million, or $0.33 per diluted share, is up 24 percent from the $229 million, or $0.27 per share, in the previous quarter and up 40 percent from the $202 million, or $0.24 per share, in the year-ago quarter
- Gross margin improves to 20.8 percent, strongest in two years; administrative and sales expense down 12 percent from the previous quarter to 5.7 percent of sales
- Cost savings at $23 million in the quarter, bringing the company within $9 million in quarterly cost savings toward its $1 billion goal
- Significant progress on debt reduction with the company's total debt-to-capitalization ratio falling 160 basis points from the previous quarter to 38.8 percent
Net income in the third quarter was $280 million, or $0.33 per share, up 30 percent from the $216 million, or $0.26 per share, in the second quarter, and up from $193 million, or $0.23 per share, in the third quarter of 2002. Both income from continuing operations and net income are measures recognized by Generally Accepted Accounting Principles.
"We achieved a double-digit increase in profitability despite traditional seasonal weakness in the automotive and European markets," said Alain Belda, Chairman and CEO of Alcoa. "Strength in the alumina market and continued focus on productivity and cost control helped deliver the most profitable quarter in two years. As business conditions improve, we are well positioned to drive greater profitability."
Market Overview
Sales were $5.3 billion, up 3 percent over the third quarter of 2002 and down 3 percent on a sequential basis. A robust alumina market helped the company reach its highest level of third party alumina shipments since the first quarter of 2001. Stronger aluminum prices overcame weaker metal shipments, due in part to the disruption at the Alumar smelter in Sao Luis, Brazil. The building and construction and commercial transportation sectors both showed improvement, while European industrial and North American automotive markets demonstrated typical seasonal weakness.
Driving Cost Savings
The company's margins improved from the previous quarter to 20.8 percent, their strongest level in two years. Sales and administrative expense fell 12 percent in the quarter with lower spending across the board.
The company achieved $23 million in cost savings in the quarter and has now achieved $964 million toward its $1 billion cost savings goal set for the end of 2003. The company remains on track to meet that challenge.
The third quarter tax rate of 22 percent includes tax benefits associated with the expiration of a prior international audit period. The tax rate for the fourth quarter is expected to be 30.5 percent.
Strengthening the Balance Sheet
The company has reduced its debt by nearly $1 billion in the past 6 months, cutting its debt-to-capital ratio by 460 basis points. The debt-to-capital ratio now stands at 38.8 percent, 160 basis points lower than the close of the second quarter.
The substantial improvement in the balance sheet was driven by improved profitability, lower working capital, tight control on capital expenditures, and the closing of a previously announced acquisition in South American operations, primarily the facilities of Alcoa Aluminio S.A. in Brazil. Capital expenditures were below last year's level by approximately 33 percent and ran at 70 percent of depreciation.
The fourth quarter will show additional improvement as asset sales are completed. The recently completed sale of the company's Latin American PET packaging business will be reflected in the fourth quarter, and the company continues to pursue its previously announced divestiture of non-core businesses. Proceeds from those sales will be used primarily to pay down debt.
Expanding Low-Cost Facilities
In the quarter, Alcoa continued to seize opportunities to improve its low cost position as a supplier of primary metals and alumina. The company took steps forward on two low-cost greenfield smelter projects, signing memoranda of understanding in both Bahrain and Brunei. It is moving ahead with brownfield alumina expansions at its facilities in Pinjarra, Australia and Suriname.
In addition, the company continued to drive costs down at its U.S. smelters and approved the expansion of a mine operation at Rockdale, Texas that will be a source of low-cost power for its smelter there.
Providing Solutions to Customers
Alcoa continued to strengthen its performance this quarter by developing solutions that add value for its customers. During the quarter, Alcoa's AFL Automotive business was named by Volkswagen of Mexico as the design and development supplier for electrical distribution systems on the 2005 model year Jetta/Bora programs. This follows on the heels of Alcoa being awarded the contract to supply aluminum for the hoods of Ford Motor Company's recently re-designed F-150 pick-up truck. The 2004 F-150 is an all-new version of the country's best-selling truck for the past 25 years and the best-selling vehicle of any type for the past 20 years.
In the Commercial Transportation market, Alcoa's Dura-Bright(R) Wheel Finish received RoadStar magazine's Most Valuable Product Award and the Alcoa Wheels and Forged Products business expanded the availability of Dura-Bright wheels into the wide base line and they are now included in several truck and trailer data books.
And in its consumer products businesses Alcoa's Reynolds(R) consumer products and Presto(R) products were named best in class by retailers throughout North America and by readers of PLBuyer magazine.
Quarterly Analyst Workshop
Alcoa's quarterly analyst workshop will be at 4:00 p.m. EDT on Thursday, October 23, 2003. The meeting will be web cast via alcoa.com. Call information and related information will be available at www.alcoa.com under "Invest."
About Alcoa
Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) foils and plastic wraps, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 127,000 employees in 40 countries. More information can be found at www.alcoa.com
Alcoa Business System
The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.
Forward Looking Statement
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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include (a) the company's inability to complete or to complete in the anticipated timeframe pending divestitures, acquisitions or expansion projects or to realize the projected amount of proceeds from divestitures, (b) the company's inability to achieve the level of cost savings or productivity improvements anticipated by management, (c) unexpected changes in global economic, business, competitive, market and regulatory factors, and (d) the other risk factors summarized in Alcoa's 2002 Form 10-K Report and other SEC reports.
| |
|
|
