Market demand drives Alcoa to profit

Alcoa Inc said Monday it posted a second-quarter profit as it sold more aluminum in the commercial vehicles, packaging and construction markets.

The Pittsburgh manufacturing giant reported net income of US$136 million, or 13 cents share, for the quarter ending June 30.

That compared with a loss of US$454 million, or 47 cents a share, a year ago.

Revenue rose to US$5.19 billion from US$4.24 billion.

The second quarter results topped estimates from analysts surveyed by Thomson Reuters.

They expected net income of 12 cents per share on revenue of US$5.05 billion.

Alcoa is one of the first companies to report quarterly earnings. Its performance can provide some insight into developing economic trends because of its varied customer base, from beverage can manufacturers to airplane builders.

The largest United States (US) aluminum producer said the improved demand helped offset a one per cent drop in realised aluminum prices.

"Altogether, everything looked positive," Argus Research analyst Bill Selesky said in a telephone interview.

Alcoa also forecast global aluminum consumption to increase 12 per cent this year, compared with the 10 per cent increase it forecast just three months ago.

The automotive markets in both North America and China need more aluminum this year, although the pace of auto sales has slowed recently.

By contrast, aluminum sales to the automotive market in Europe, where the economic recovery has been hurt by a financial crisis, will decline as much as eight per cent, Alcoa predicts.

Klaus Kleinfeld, chairman and CEO, believes the demand fromconsumers and governments for more fuel-efficient cars and trucks presents an opportunity for his company.

The US is requiring that 2016 model year vehicles meet fuel efficiency targets of 35.5 miles per gallon combined for cars and trucks, an increase of nearly 10 mpg over current standards.

To meet that standard in just six years, Kleinfeld thinks automakers have no choice but to use lighter-weight metals like aluminum in car bodies.

Aluminum is currently used mostly for engine blocks, wheels and transmissions.

"We are currently working intensely with our automotive customers and helping to design the next-generation fuel efficient cars, trucks, as well as buses," Kleinfeld said.

Beyond automotive, China will account for much of the 2010 growth in consumption, with higher sales in the heavy-truck and trailer, beverage can-packaging and commercial construction sectors.

In North America, Alcoa sees sales dropping by 23 per cent to 27 per cent for commercial building and construction. It expects beverage-can sales to be flat.

As of 2009, about half of Alcoa's sales were in the US, 27 per cent in Europe, 15 per cent in the Asian-Pacific region, with the remainder in North and South America.

- AP