Alcoa Inc, the largest US aluminum producer, reported stronger-than-expected second-quarter earnings on Monday and raised its estimate for global aluminum consumption, sending its shares up 3 percent.
The company, whose results are often viewed as a bellwether of the US economy, cited strength in several industrial sectors — particularly in packaging, commercial transportation and building and construction.
Alcoa chairman and CEO Klaus Kleinfeld told Wall Street analysts that strong industry fundamentals were expected to drive demand for aluminum in the next 10 years with an average growth rate of 6 percent per year.
“You see robust consumption growth in places like China, Brazil, India, modest increases in North America and Europe,” Kleinfeld said.
“There’s a lot of very positive indications there of a real recovery in almost all of these markets,” he said in a conference call. “But I believe that the biggest risk is still the volatility that could potentially come from financial markets.”
Asked about Alcoa’s mid to long-term strategy, he said: “Obviously, we will continue to do cost-cutting, obviously, we will continue to see end markets picking up.
“We will have a seasonal decline ... like we currently see in Europe, for instance. [But] order books — even in Europe — look very good,” he said.
Based on the improved end market demand, Kleinfeld said Alcoa was raising its projection for global aluminum consumption from 10 percent to 12 percent this year.
In another sign of growing optimism about the economy, US railroad CSX Corp posted a 36 percent rise in second-quarter profit, citing sharp increases in shipments of cars and metals.
Meanwhile, Chevron Corp, the second-largest US oil firm, said improved margins at its refineries would offset a drop in oil and gas output to lift second-quarter earnings above the previous quarter.
Chevron’s second-quarter refining, marketing and chemicals results would be “significantly higher” than the previous quarter, the company said in an interim update on Monday.
In its earnings release, Alcoa said net profit was US$136 million, or US$0.13 per share, compared with a loss of US$454 million, or US$0.47 per share in the same quarter last year. Earnings from continuing operations were US$137 million, or US$0.13 per share.
Revenue rose 22 percent to US$5.2 billion, the company said.
Analysts on average were expecting earnings of US$0.11 per share and revenue of US$5.047 billion, according to Thomson Reuters I/B/E/S.
During the quarter, Alcoa said there was a 1 percent increase in third-party prices for alumina — the raw material for aluminum, but that was offset by a 1 percent decrease in realized prices for the metal.
In the past three months, the price of aluminum in London has dropped sharply, from more than US$2,400 per tonne in April to about US$2,000 as weak demand for cars, planes and construction and uncertainty over the strength of the global recovery have weighed on the metal.
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