Alcoa posts bigger-than-expected loss
Aluminum giant says fourth-quarter results were hurt by falling metals prices.
NEW YORK (CNNMoney.com) -- Aluminum producer Alcoa Inc. reported a larger-than-expected fourth-quarter loss Monday amid slumping commodity prices and economic weakness.
The Pittsburgh-based company reported a loss from continuing operations of $929 million, or $1.16 per share, that included $708 million, or 88 cents per share, in restructuring, impairment or other special charges.
After taking discontinued operations into account, Alcoa posted a net loss of $1.19 billion, or $1.49 per share, for the three months ended Dec. 31. That compared with net income of $638 million, or 75 cents, a year earlier.
The company's operating loss of 28 cents a share was wider than the 10 cents per share loss expected by analysts surveyed by Thomson Reuters, which usually exclude one-time charges.
Revenue fell to $5.7 billion from $7.39 billion in the year-earlier quarter. The analysts' consensus on revenue was $5.26 billion.
Alcoa's results were driven by a 35% decline in aluminum prices in the quarter and a sharp drop in demand from the automotive, commercial transportation, and building and construction sectors, the company said. A machinist strike at aerospace giant Boeing (BA, Fortune 500) had a $10 million negative effect on the results.
Klaus Kleinfeld, Alcoa's chief executive, said the company is taking "wide-ranging measures" to cope with the economic downturn.
"By moving quickly to address the market decline, we are using Alcoa's strategic flexibility and solid liquidity to address the continuing economic uncertainty and emerge even stronger when the economy recovers," Kleinfeld said in a statement.
Alcoa said it has aggressively managed its cash reserves and has scaled back production to meet falling demand. But the company was noncommittal on the question of eliminating its dividend as a way to cut costs.
Last week, Alcoa said it plans to slash its global workforce by 13%, or 13,500 jobs, by the end of the year to remain competitive during the global economic recession.
Alcoa (AA, Fortune 500), one of the 30 companies that makes up the Dow Jones industrial average, unofficially kicks off the fourth-quarter results reporting period, which is widely expected to be bleak. Overall earnings for the S&P 500 are expected to fall 14.4% from the same period in 2007, according to Thomson Reuters.
On Friday, analysts at Deutsche Bank downgraded Alcoa to "sell" from "hold" and reduced their price target for the stock to $8 a share from $10, citing continued weakness in aluminum prices and the economic slowdown.
"[Deutsche Bank's] revised commodity estimates call for continued low aluminum prices through 2010, which will likely lead to significant net losses for Alcoa," the analysts wrote in a research note.
Aluminum prices on the London Metals Exchange have fallen 56% since July amid a broad decline in commodity prices.
Looking ahead, Alcoa's earnings could fall further, according to Deutsche Bank analyst Jorge Beristain.
"Since fourth-quarter aluminum prices are down another 20% sequentially, we're probably going to see a repeat performance going into the first quarter," Beristain said.
Still, the company expects demand for aluminum to grow over the long term as governments invest more in infrastructure and construction spending increases due to expanding urban populations.
"We are managing our company for maximizing our cash," Kleinfeld said on a conference call with analysts. "Compared to many others, we believe we are absolutely ahead of the curve, and that will definitely show when the economy comes back." 
