Alcoa shares tumble (September 20, 2004)

Alcoa (AA-N) shares fell 7.5% to US$30.75 on Sept. 10 after the company warned that third-quarter earnings from continuing operations would likely shrink to US30-35 per share from a previously expected US52 per share.

The world’s second-largest aluminum producer blames most of the shortfall on the following: a strike at its 75%-owned Bcancour smelter in Quebec (Alcan [AL-T] owns the remainder); a fire that led to an outage at its KAMA packaging facility in Hazleton, Penn.; and restructuring charges associated with the costs of closing its Wenatchee, Wash., and Northwood, Ohio, facilities.

Also denting Alcoa’s bottom line are a softness in the automotive, packaging and European end markets and higher input costs, particularly energy in Europe and North America.

“While we are not pleased with the short-term impact the labour issues have had on our bottom line, our actions are aimed at enhanced global competitiveness of our North American operations,” says CEO Alain Belda.

On the plus side, Belda expects the primary aluminum market to continue to experience strong fundamentals, with many of the company’s end markets, particularly commercial transportation and aerospace, showing signs of strength.

Alcoa still expects its profits in the first three quarters of 2004 to be 40% above 2003 levels.

The company will report its full third-quarter earnings after the close on Oct. 7.