Alcoa Inc., the largest U.S. aluminum producer, reported second-quarter earnings that missed analysts’ estimates after aluminum prices fell amid surging exports from China.
Net income fell to 10 cents per share from 12 cents a year earlier, New York-based Alcoa said in a statement Wednesday. Excluding one-time items, earnings were 19 cents, trailing the 22-cent average of 16 estimates compiled by Bloomberg. Sales gained to $5.9 billion, compared with the $5.81 billion average estimate.
While the company kept its 2015 global aluminum demand growth forecast unchanged at 6.5 percent, it reduced its projection for industrywide sales to the aerospace and Chinese truck markets.
China, the world’s biggest aluminum user, is poised to grow at its slowest pace in a quarter of a century. As the country shifts toward a consumer-driven economy, more of its processed aluminum is making its way overseas. The country is on pace to export record amounts of metal this year, deepening a worldwide glut.
The price of aluminum for delivery in three months on the London Metal Exchange averaged $1,788 a metric ton in the quarter, down 2.7 percent from a year earlier.
Alcoa’s realized metal price comprises both the exchange price and the so-called premium paid by customers to secure physical metal. While premiums were up year on year, they have plunged in recent weeks in the U.S.
That’s because of rising imports, together with ample scrap supply and new commodity-exchange rules intended to speed up metal deliveries from warehouses, according to Jorge Vasquez, managing director at consultancy Harbor Intelligence in Austin, Texas. That signals a growing glut, he said Wednesday in an interview.
“The fundamentals for the entire industry are deteriorating,” Mr. Vasquez said. “In quarter two, you had plummeting premiums and falling aluminum prices.”
After-tax operating income from Alcoa’s primary metals business was $67 million, down from $97 million a year earlier. Earnings from its rolled-aluminum and engineered products segments gained.
Shares of Alcoa rose 0.8 percent to $10.58 at 4:32 p.m. after the close. The stock dropped 5.1 percent in regular trading amid a wider selloff of commodity equities.
Alcoa has closed about 30 percent of its aluminum-smelting capacity since 2007, shutting high-cost plants from Texas to Australia. CEO Klaus Kleinfeld has also bought and built factories to make aluminum shapes and alloys that fetch premium prices. In March, the company agreed to buy Moon-based aerospace supplier RTI International Metals Inc. for about $1.34 billion.
Alcoa’s quarterly report traditionally marks the unofficial beginning of earnings season. This time around, Wall Street forecasters see corporate profits falling 6.5 percent in the second quarter, the most bearish estimate of the current bull market. Even if companies exceed those predictions at the rate they usually do, it won’t be enough to lift profits from last year.
