Cost cutting lifts Alcan

Kicking off Canada’s quarterly earnings season in grand fashion, Alcan (AL-T) has posted higher earnings for the three months ended Sept. 30.

Including non-recurring items and foreign currency translations, third-quarter earnings came to US$191 million (or 59 per share), compared with year-ago earnings US$149 million (46 per share). Revenue between the two periods climbed to US$3.22 billion from US$3.16 billion. Similarly, cash flow from operations rose to US$420 million from US$375 million.

Stripping out the one-time items, earnings come to US$152 million (47 per share), compared with earnings of (37 per share) a year earlier. The one-time items comprise after-tax charges of US$16 million related to an asset impairment charge and increases in legal provisions and an after-tax US$55 million gain on foreign currency.

So far this year, net income (including non-recurring items) comes to US$348 million, off US$10 million from the corresponding period of 2001. On a per-share basis that’s US$1.07 versus US$1.10. Excluding one-time items the per-share figures hit US$1.26 and US$1.28, respectively. Cash flow from operations climbed US$308 million to just less than US$1.1 billion.

Alcan notes that despite significantly lower aluminum prices, the company still managed to achieve improved operating results thanks to both higher sales volumes, ongoing cost-cutting measures and merger-related synergies.

Total third-quarter aluminum volume rang in around 1.13 million tonnes, compared with 1.05 million tonnes a year earlier. The increase is attributed to additional volume from the new smelter in Alma and a larger stake in the Alouette smelter. Both are located in Quebec.

During the quarter, Alcan inked a deal to double to 40% its stake in the 243,000-tonne, low-cost Aluminerie Alouette aluminum smelter in Sept-Iles, Quebec. The company grabbed Anglo-Dutch steel maker Corus Group’s 20% stake for about US$165 million. The company and partners Norsk Hydro and Austria Metall (with 20% apiece), SGF, with 13.33%, and Marubeni, with 6.67% have agreed to a $1.4-billion expansion to double the smelter’s capacity. Work is slated to begin in earnest next year.

Alcan realized US$1,495 per tonne for its ingot products, off 5% from a year earlier. The company’s rolled products realized an average of US$2,316 per tonne, 3% lower than a year ago.

Looking forward, Alcan sees further savings from cost-cutting initiatives, merger synergies and restructuring programs. The savings however are not expected to be enough to fully counter low London Metal Exchange prices for aluminum (currently around US$1,300 per tonne) and an uncertain global economic environment. The company expects fourth-quarter earnings per share (excluding non-recurring items) to ring in between US35-45.

At the end of Sept., Alcan had US$131 million in cash and short-term deposits and 321.3 million shares outstanding.