Charges sink Alcan’s quarter

A net non-recurring, after-tax charge of US$446 million combined with lower aluminum prices led Alcan‘s (AL-T) to a net loss of US$357 million during the last three months of 2001.

The loss, which translates into US$1.12 per share, compares with year-ago net income totalling US$10 million (US34 per share). Recent fourth-quarter revenue tallied to US$3.04 billion, compared with US$3.18 billion a year earlier. The decrease is attributed to lower aluminum prices and rolled product shipments, which were partly offset by increased shipments of ingot products.

The latest quarter’s after-tax charge included US$166 million related to the company’s restructuring program aimed at improving annual pre-tax earnings by about US$200 million plus US$37 million arising from its merger with Switzerland’s Alusuisse Group. Also included were: impairment provisions of US$88 million on certain assets and capitalized project costs; a US$167-million charge related to environmental reserves; and a favourable prior-year tax adjustment of $12 million. Favourable foreign currency translation effects chipped in US$16 million to the quarter’s results.

Excluding nonrecurring items and foreign currency translation effects, Alcan’s net income was US$73 million (US22 per share), down from US$132 million (US41 per share) in the corresponding period of 2000.

During the quarter, Alcan produced just less than 1.1 million tonnes of aluminum, virtually unchanged form a year earlier. Average ingot-product realizations fell 6% over the year to US$1,483 per tonne against a 12% drop in the London Metal Exchange price. Rolled product realizations slipped 9% from a year ago to US$2,298 per tonne.

Alcan’s president and CEO Travis Engen said in a prepared statement, “Our operating earnings were good in the face of lower aluminum prices and very challenging business conditions, and ongoing working capital management has contributed to a significant increase in operating cash flow.”

For all of 2001, net income amounted to just US$5 million (or a 1-per-share loss on a fully diluted basis) on revenue of US$12.6 billion, well off the US$618 million (US$2.45 per share) earned on US$9.1 billion in 2000. Common-share dividends rolled along at US60 per share, unchanged from 2000. At the end of 2001, cash and time deposits totalled US$119 million, down from the year-ago US$216 million.

Looking ahead, the company expects first-quarter 2002 earnings (excluding non-recurring items, foreign currency translation effects and goodwill amortization) to ring in between US25 and US35 per share and between US$1.70 and US$2.10 for the entire year. The company also expects business conditions to remain “challenging” for at least the first half of 2002.

Alcan shares were $1.59 higher at $57.19 at midday on Tues., Jan. 22, as the quarterly results beat analyst estimates, which mostly called for a fourth-quarter profit of US18 per share, before charges. At year-end, Alcan had 320.9 million outstanding shares.