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Alcoa Posts 1st-Quarter Profit as It Trims Costs

Earnings: Net income falls 46% from a year earlier as weak global demand for aluminum keeps prices low.

April 06, 2002|From Reuters

Alcoa Inc., the world's No. 1 aluminum producer, said Friday that it returned to profitability in its first quarter, although earnings fell 46% from a year ago as weak global demand for aluminum kept prices low.

The Pittsburgh-based company, which reported its first quarterly loss in eight years in its fourth quarter, posted net income of $218 million, or 26 cents a share. It earned $404 million, or 46 cents a share, in the first quarter last year.

Revenue fell 19% to $4.98 billion. Sales have declined for three quarters in a row. Alcoa shares closed up $1.12 to $38 on the New York Stock Exchange.

Although the company reported a profit, Alcoa warned that business would remain challenging over the coming months.

"Alcoa is a wonderfully virtuous company producing a commodity that there is just too much of," said John Tumazos, an analyst at Prudential Securities. His comments came just a day after he cut his earning estimates for Alcoa because of signs of low demand and prices in 2002.

Aluminum users are beginning to stockpile inventories to meet a projected improvement in the global economy during the second half of 2002, but analysts are uncertain whether long-term demand growth is sustainable.

To combat the low prices and slow economy, Alcoa has gone on a cost-cutting spree. It said by the end of the quarter it had cut annual costs by $436 million and predicted it would reach its target of $1 billion in cost savings by 2003.

Alcoa's first-quarter results included a one-time net gain of $34 million, or 4 cents a share, related to the adoption of new accounting standards. Excluding the accounting change, Alcoa said it would have earned 22 cents, matching the average estimate of analysts surveyed by Thomson Financial/First Call.

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