Alcoa earnings rise but miss the mark

Aluminum company faces cost pressures and takes charges on asset sales, but increases share buyback authorization.

NEW YORK ( -- Aluminum manufacturer Alcoa reported higher quarterly earnings that fell short of expectations Tuesday.

The company earned $555 million, or 63 cents a share, compared to $537 million, or 61 cents a share in the third quarter a year ago. Analysts surveyed by Thomson First Call were expecting the company to earn 65 cents a share.

Revenue reached $7.4 billion for the quarter, meeting expectations but falling short of the $7.6 billion in revenue reported in the year-ago quarter.

Alcoa (Charts, Fortune 500) said third-quarter results were impacted by lower metal prices, seasonality and softness in the North American markets as well as the exclusion of its soft alloy extrusion business as a result of a joint venture with building systems company Sapa Group in June.

Alcoa also said Tuesday that its board expanded its share buyback program to 25 percent of the company's outstanding common stock, or about 217 million shares, up from a previously authorized 10 percent. About 43 million shares have already been repurchased by the end of the third quarter, the company said.

Under an earlier plan, Alcoa had bought back 43 million shares, or about 5 percent, by the end of the third quarter.

Alcoa said last month that it had sold its nearly 7 percent stake in Aluminum Corporation of China Ltd., also known as Chalco, for $2 billion. Its 2001 initial investment was less than $200 million.

The company also agreed to sell two U.S. soft-alloy extrusion facilities, including one in Florida, and announced plans to close a third plant.

Last week, Alcoa said it expected to take charges totaling $845 million related to the planned sale of two business units: packaging and consumer products, and automotive castings. It also announced plans to restructure a third business, electrical and electronic solutions. The charges include $600 million for the packaging and consumer business that is associated with income tax.

The moves came after Alcoa failed to acquire Alcan Inc. in July after making a $28 billion hostile bid for the Canadian rival, bowing to mining giant Rio Tinto, which offered $38.1 billion in cash.

"The Chalco sale, combined with proceeds from the upcoming sales of our packaging and auto castings businesses, give us a strong balance sheet, increased flexibility to ramp-up share repurchases, and deliver greater shareholder value," Alcoa's chairman and chief executive said in a statement.

Alcoa released the financial results after markets closed. The company's shares rose $1.42, or 3.7 percent, to close at $39.72, then gained 26 cents in after-hours trading.

-from staff and wire reports Top of page