Jan. 13--Alcoa Inc. said Monday that it lost $1.19 billion in the final three months of 2008 -- its first quarterly loss in six years -- because of a sharp drop in demand from the automotive and construction industries and a 35 percent drop in aluminum prices.

"The aluminum industry is caught in a perfect storm of historic proportions" of decreased demand and pricing that plunged 56 percent during the last half of the year, CEO Klaus Kleinfeld said.

It was a downturn the company saw on the horizon earlier in the year, Kleinfeld said. Alcoa, with headquarters in New York and an operations center in Pittsburgh, was the first major aluminum company to begin to curtail production when it started cutting in September, he said.

The global economic downturn pushed Alcoa's fourth-quarter loss to $1.49 a share, including restructuring and other special charges that totaled $920 million, or $1.15 a share. The average estimate in a Bloomberg survey of 14 analysts was for a per-share loss of 5 cents.

The loss showed how much aluminum companies have been battered in the past year -- Alcoa posted net income of $638 million, or 75 cents a share, in the same quarter a year ago. Net income in the July-September quarter in 2008 was still positive, at $268 million, or 33 cents a share. Fourth-quarter sales decreased to $5.68 billion, from $7.03 billion for the fourth quarter in 2007.

Alcoa is the first component of the Dow Jones industrial average to post results and considered a bellwether of earnings to come. Its stock fell 75 cents to close at $10.06.

For the year, Alcoa lost $79 million, or 9 cents a share, compared with a net income of $2.56 billion in 2007, or $2.95 a share. Sales decreased to $26.9 billion, from $29.2 billion in 2007.

The earnings report follows Alcoa's announcement last week of a restructuring that will eliminate more than 15,000 jobs worldwide, institute a hiring and salary freeze, and sell four business units.

Alcoa, the world's third-largest producer, also said it will reduce smelting capacity by 750,000 metric tons, or about 18 percent. The critical element in reducing production, Kleinfeld said, is to have the ability to resume it when necessary.

Other large aluminum makers also have cut production recently. The world's top aluminum maker, Moscow-based United Company Rusal, planned to trim output by 4 percent, while Aluminum Corp. of China, or Chalco, planned cuts of about 18 percent. Analysts expect further cuts in the first half of 2009.

In the short-term, Alcoa and most major aluminum producers have found that demand is dropping faster than anyone ever imagined, said James Southwood, president of Commodity Metals Management Co. in Marshall.

He predicted weak aluminum demand for the next six months. "We have not seen the worst of it, in terms of aluminum," Southwood said.

The 2009 orders are down 50 percent in Japan, 25 percent in North America and 13 percent in China compared to last year, Southwood said.

-----

To see more of The Pittsburgh Tribune-Review or to subscribe to the newspaper, go to http://www.pittsburghlive.com/x/pittsburghtrib/.

Copyright (c) 2009, The Pittsburgh Tribune-Review

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

NYSE:AA, NYSE:ACH,

A service of YellowBrix, Inc.