Alcoa swings to Q4 loss

Alcoa Inc has recorded a $US1.72 billion impairment charge.

Alcoa Inc swung to a steep fourth-quarter loss as the aluminum maker recorded a $US1.72 billion impairment charge.

Shares fell in after-hours trading, as the adjusted profit Alcoa reported for the latest period wasn't as strong as analysts expected, though the top line exceeded expectations.

For the latest quarter, Alcoa reported a loss of $US2.34 billion, or $2.19 a share, compared with a prior-year profit of $US242 million, or 21 cents a share, a year earlier.

Excluding charges tied to a temporary smelter shutdown, restructuring and asset-sale gains, adjusted earnings from continuing operations fell to four cents from six cents.

Revenue fell 5.3 per cent to $US5.59 billion, as shipments of aluminum products dropped nearly 3 per cent.

Analysts surveyed by Thomson Reuters projected an adjusted profit of six cents a share on $US5.34 billion in revenue.

The cost of goods sold decreased 5.2 per cent, Alcoa reported.

The company's engineered-products-and-solutions unit, which makes fasteners, truck wheels and parts for jet engines, saw operating income climb 20 per cent to $168 million. The primary metals division, which makes raw aluminum, posted a $35 million operating loss, down sharply from the prior-year results that were boosted by an asset-sale gain.

The fourth-quarter results come after Alcoa and a joint venture it controls agreed to pay a combined $US384 million to the United States government to settle bribery allegations tied to a contract with Bahrain's state-controlled aluminum smelter.

Looking ahead, Alcoa projected global demand for aluminum to rise seven per cent in 2014, the same pace the industry benefited from last year. This year, Alcoa sees growth from the aerospace, automotive and building and construction markets, more than offsetting a decline in the industrial gas turbine market because of lower orders.

Alcoa's results have been stung by flagging raw aluminum prices, driven by global oversupply. In response, the company has cut production costs by closing expensive smelters. Alcoa also has focused on making high-strength lightweight aluminum products for cars and planes.

And while Alcoa was dropped from the Dow Jones Industrial Average last year, the company's results are still closely watched, as Alcoa is still among the first major United States firms to report earnings for a new season. Alcoa also is considered a bellwether because it serves a broad range of industries.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles