Alcoa (NYSE:AA) today reported income from continuing operations of $94
million, or $0.09 per share, in first quarter 2012, a $287 million
improvement over fourth quarter 2011, led by strong productivity growth
and improved market conditions.
Excluding the impact of special items, income from continuing operations
was $105 million, or $0.10 per share. Special items in first quarter
2012 included the negative impact of mark-to-market changes on certain
energy contracts and restructuring charges primarily related to smelter
curtailments.
First quarter 2012 income from continuing operations compares to fourth
quarter 2011 loss from continuing operations of $193 million, or $0.18
per share, and first quarter 2011 income from continuing operations of
$309 million, or $0.27 per share.
The improvement over fourth quarter 2011 results was driven by strong
productivity improvements across all businesses, higher realized prices
for aluminum, and improved volume and mix. These were offset somewhat by
a lower realized alumina price and higher input costs.
"Performance rebounded strongly this quarter due to our proactive cash
sustainability actions, our relentless focus on profitable growth, and
stabilizing markets," said Klaus Kleinfeld, Alcoa chairman and chief
executive officer.
"We are successfully executing on our aggressive strategy to move down
the cost curve in our upstream businesses, and drive to record
profitability in our midstream and downstream businesses. Challenges
remain in this economy, but we approach them better prepared than ever
before."
Alcoa recorded first quarter 2012 revenue of $6 billion, up slightly
over fourth quarter 2011 and first quarter 2011. A 9 percent drop in the
realized price of aluminum and a 13 percent drop in the realized price
of alumina, year-on-year, were partially offset by higher third-party
shipments in the upstream businesses, better volume and mix in the
midstream business, and improved volume in the downstream business.
Alcoa recorded revenue growth in the first quarter across global end
markets, including industrial products (14 percent), automotive (13
percent), packaging (11 percent), and commercial transportation (11
percent), compared to fourth quarter 2011. Compared to first quarter
2011, revenues were up in commercial transportation (32 percent),
aerospace (15 percent), and automotive (7 percent), while revenues were
down in industrial products (14 percent) and building and construction
(5 percent).
Alcoa is raising its 2012 global growth forecast for the aerospace
market 3 percentage points (13-14 percent), and expects global growth in
the automotive (3-7 percent), commercial transportation (1-5 percent),
packaging (2-3 percent), building and construction (2.5 - 3.5 percent),
and industrial gas turbine (1-2 percent) markets.
Alcoa continues to project a global aluminum supply deficit in 2012 and
reaffirmed its forecast that global aluminum demand would grow 7 percent
in 2012, on top of the 10 percent growth seen in 2011.
First quarter 2012 net income was $94 million, or $0.09 per share,
compared to a net loss of $191 million, or $0.18 per share, in fourth
quarter 2011 and net income of $308 million, or $0.27 per share, in
first quarter 2011. Adjusted EBITDA for the first quarter was $624
million, up 40 percent from fourth quarter 2011, and down 35 percent
from first quarter 2011.
Profitability in Global Rolled Products rebounded in the first quarter
despite continued European weakness, with adjusted EBITDA per metric ton
an all-time high at $430, 83 percent higher than the 10-year average.
Engineered Products and Solutions continued to turn in outstanding
performance, with adjusted EBITDA margin of 19 percent, the highest on
record.
Alcoa's Cash Sustainability Program is on track to deliver against
financial and operational targets in 2012. The Company achieved strong
first quarter productivity growth across all businesses, driven by
process improvements and procurement savings. Alcoa also achieved a
record low in working capital for the first quarter at 32 days, seven
days lower than the previous record set in 2011. Debt-to-capital ratio
stood at 36 percent, while liquidity remained strong with cash on hand
of $1.7 billion.
Capital spending was $270 million in the quarter, compared to $486
million in fourth quarter 2011. Expenditures on the Saudi Arabia joint
venture project were also on track at $71 million. An investment in
working capital to support growth in downstream end markets and
increased cash pension contributions resulted in cash used in operations
of $236 million, and negative free cash flow of $506 million.
As previously announced, Alcoa is curtailing 390,000 metric tons of its
system refining capacity to improve the Company's competitive position
and to reflect updated internal demand following smelting curtailments
announced earlier this year.
Combined with the curtailments and closures of high-cost smelting
capacity, these actions will improve the competitiveness of Alcoa's
Primary Products business and help the Company meet its previously
stated goal of moving down the cost curve 10 percentage points in
smelting and 7 percentage points in refining by 2015.
