(By Salman - iStockAnalyst Writer)
Alcoa (NYSE: AA)
Alcoa Inc. engages in the production and management of primary aluminum, fabricated aluminum, and alumina worldwide. It involves in the technology, mining, refining, smelting, fabricating, and recycling of aluminum.
Aluminum maker Alcoa Inc, the first of the 30 companies that make up the Dow Jones industrials is to report second-quarter results, will kick off earnings season on Wednesday.
Analysts currently expect the company to report a second quarter loss of 32 cents a share. The company's results are being viewed by some as an indicator of the country's economic health while others see it as merely an indicator of aluminum prices.
The company has been hit hard by a steep fall in aluminum prices. Commodity prices slumped the most in five decades last year as the global recession reduced demand. The world's largest aluminum producer reported a first quarter net loss of $497 million, or 61 cents a share, compared to a profit of $303 million, or 37 cents a share, generated during the first quarter of 2008. On an adjusted basis, the company posted a loss of 59 cents a share. The loss was Alcoa's second in the past two consecutive quarters and reflected the deterioration in aluminum-intensive industries such as autos, airlines and construction. Quarterly sales tumbled to $4.1 billion in the March quarter, down from $5.7 billion a year earlier.
Though the outlook of aluminum market still remains uncertain, analysts have been encouraged by Alcoa's aggressive cost cutting initiatives. |During the first quarter alone, SG&A declined 11% sequentially. On a year-over-year basis after excluding $34 million of expense in the 2008 first quarter related to the divested patching consumer businesses, SG&A declined 15%. In January,
Alcoa said it would cut 15,000 staff from its global operations – around 13 percent of its total workforce – and in March it went a step further by cutting its dividend for the first time in more than 20 years and promising to cut costs by more than $2.4billion a year. The company slashed the quarterly dividend to 3 cents a share from 17 cents a share which will save the company $430 million of cash on an annual basis. The company exited the Shining Prospect structure which will generate $1 billion in cash proceeds this year. It also raised $1.3 billion in stock and convertible notes. These financial actions significantly improved its liquidity position, strengthened balance sheet and enhanced flexibility.
On the macroeconomic front, the picture remains largely unclear, though signs of a near-term manufacturing recovery are evident. U.S.
