Alcan’s earnings down, revenues up (July 16, 2002)

Despite lower prices for its aluminum products, Alcan (AL-T) still managed to turn in a solid second quarter.

For the period ended June 30, 2002, Alcan posted net income attributable to common shareholders of US$70 million (US22 per diluted share) on sales and operating revenues of US$3.2 billion. This compares with a profit of US$72 million (22) on US$3.2 billion in revenue during the same period last year.

Second-quarter profits were hit particularly hard by US$70-million worth of foreign-currency translation charges plus US$8 million in non-recurring charges.

Shipments of aluminum in all forms totalled 1.1 million tonnes during the second quarter, up slightly from a year earlier.

Alcan notes that aluminum prices were significantly lower between the two periods, but it still managed to achieve improved operating results through slightly higher sales volumes and ongoing cost-cutting measures.

Alcan realized US$1,536 per tonne for its ingot products, down 6% from last year, but up 3% from the first quarter of 2002.

For its rolled products, the company realized US$2,311 per tonne during the second quarter, or 4% lower than the year-ago quarter and 3% above the previous quarter.

Over the first six months of the year, Alcan recorded a profit of US$155 million (48) on revenues of US$6.1 billion, a decline from a profit of US$205 million on revenues of US$6.4 billion during the same period last year.

Total aluminum production remained steady between the two periods at 2.1 million tonnes.

Alcan’s second-quarter performance was relatively better than its chief competitor Alcoa (AA-N), which last week announced second-quarter profits to US$232 million on revenues of US$5.2 billion, down from US$307 million (US35 per share) on revenue of US$6 billion in the second quarter of 2001.

Under new rules of the U.S.’s Financial Accounting Standards Board that took affext July 1, Alcan must no longer amortize its goodwill. As a result, Alcan recorded a US$748-million impairment charge to its opening retained earnings as of Jan. 1, 2002. The writedown is related to Alcan’s merger with Algroup in 2000.

With this goodwill amortization eliminated, Alcan boosted its second quarter earnings by US$0.05 per share and its first-quarter earnings by US$0.06 per share.