Alcoa reported its third quarter financial results after the markets closed on Thursday. The company kicked off earnings season with $0.07 in earnings per share (EPS) on $5.6 billion in revenue compared to consensus estimates from Thomson Reuters that call for $0.14 in EPS on $5.68 billion in revenue. The same period from the previous year had $0.31 in EPS on $6.24 billion in revenue.
The company reaffirmed its projections that global aluminum demand is expected to increase 6.5% in 2015 and double between 2010 and 2020; so far this decade, global demand growth is tracking ahead of this projection. Alcoa is also projecting a global aluminum deficit for 2016.
In terms of guidance the company did not give any broad strokes on earnings or revenue but it did provide updates for automotive production in different segments and regions. Basically, North America and Europe are forecast to slightly increase auto production while China auto production is expected to decrease. There are consensus estimates of $0.13 in EPS on $5.77 billion in revenue for the fourth quarter and $0.75 in EPS on $23.13 billion in revenue for the full year.
In terms of its segments Alcoa reported:
- Engineered Products and Solutions had after-tax operating income (ATOI) of a record $151 million down 2.6% year over year.
- Transportation and Construction Solutions had an ATOI of $44 million, down $6 million year over year.
- Global Rolled Products had ATOI of $62 million down 10% year over year.
- Alumina had ATOI of $212 million down $3 million sequentially from $215 million, and up $150 million year over year from $62 million.
- Primary Metals had negative ATOI of $59 million, down $126 million sequentially from $67 million, and down $304 million from $245 million.
Klaus Kleinfeld, Chairman and CEO, said:
The third quarter brought economic headwinds and significant volatility in some of our markets. We continue to be laser focused on the things we can control. We have successfully made our Upstream businesses less vulnerable to commodity downswings. We have intensified innovation and growth in the Value-Add businesses, and it shows through the solid underlying performance despite currency movements and market fluctuations. Our productivity performance was strong combined with good cash generation. While we cannot control external factors, we do remain focused on what we can control—making our businesses more resilient.
On the book for the third quarter, the company had $1.74 billion in cash and cash equivalents compared to $1.88 billion at the end of 2014.
After the separation, the innovation and technology-driven Value-Add Company will include Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. In the third quarter, these combined business segments reported revenue of $3.4 billion, ATOI of $257 million, and adjusted EBITDA of $508 million.
Also to consider after the separation, the Upstream Company will comprise five strong business units that today make up Global Primary Products – Bauxite, Alumina, Aluminum, Casting and Energy. In the third quarter, the combined upstream businesses reported revenue of $2.2 billion, and ATOI of $153 million.
Shares of Alcoa closed Thursday up 0.6% at $11.01 on its 52-week trading range of $7.97 to $17.75. Following the release of the earnings report, shares were down 4.3% at $10.54. The stock has a consensus analyst price target of $12.92.
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