By Steve James
NEW YORK (Reuters) - Aluminum producer ALCOA (AA.NY)Inc
Although Wall Street was expecting the loss -- Alcoa's first in six years -- it was bigger than forecast, but revenue was $700 million higher than expected, and the company's stock was little changed after-hours.
"The aluminum industry was caught up in a perfect storm ... prices have never fallen so fast," President and Chief Executive Officer Klaus Kleinfeld told analysts.
He said "if there is a silver lining, it's that we see inventories at our customers very low and we anticipate a drawdown when the industry comes back."
But he said global aluminum consumption was expected to decrease by 2 percent in 2009 to about 36 million tonnes, despite production curtailments by Alcoa and others.
Kleinfeld was also adamant, during a conference call, that Alcoa would not suspend or cut its dividend.
"I'm pretty sure it's on the minds of many, but Alcoa has paid a dividend for 60 years," he said. "We are committed to creating value for shareholders and that's all I have to say."
Jonathan Pavlik, portfolio manager of Stewart Capital, said things could get worse before they improve. "I don't think anything is off the table at this point.
"Some other people are saying they should get rid of the dividend, but as long as the liquidity position remains intact they can leave that in place.
"They made it a point to say their liquidity position is still strong -- they have cash on hand. They reworked some of their revolving credit facilities, and they have minimal debt repayments in 2009, so that would be a positive."
"I think management is very prudent to make all the painful decisions they have made and there probably will be more," said independent analyst John Tumazos.
In its earnings release, Alcoa said the loss was a result of "an historic decline in metal prices," weak end markets and almost $1 billion in restructuring, impairment and other special charges to curtail production, reduce costs and streamline its portfolio. Last week, Alcoa announced it was cutting 13 percent of its global work force, would halve capital spending and sell four businesses.
Asked on Monday where the 15,000 or so job cuts would take place, Kleinfeld said 4,000-5,000 were in North America and 4,400 in Europe, including Russia, with the rest elsewhere.
Alcoa said there was a 35-percent decline in aluminum prices in the fourth quarter and a sharp drop in demand, particularly from the automotive, commercial transportation and building and construction sectors. The strike at Boeing Co
The metal price has fallen some 50 percent since peaking at $3,380 per tonne last July and during the fourth quarter, aluminum dropped from $2,415 on October 1 and was around $1,520 on Monday.
"At current aluminum prices, they're not able to make money at these levels. It wouldn't surprise me to see further production cuts," said Brian Hicks, co-manager of the global resources fund of U.S. Global Investors in San Antonio, Texas.
Alcoa's net loss was $1.19 billion, or $1.49 per share, compared with earnings of $632 million, or 75 cents per share, in the same quarter of 2007. The loss from continuing operations, including charges of $920 million, or 88 cents per share, was $1.16 per share.
Revenue dropped to $5.7 billion from $7.0 billion, as the price of aluminum slumped.
Analysts on average were expecting a loss of 9 cents per share and revenue of $5.061 billion, according to Reuters Estimates. That compares with an estimated loss of 28 cents excluding the restructuring, impairment and special charges.
Alcoa's share price, which was at a 52-week high of $44.76 last May, has plummeted since demand for aluminum fell in the global economic downturn. The shares hit a low of $6.82 on November 20, but have since rallied. On Monday, they closed down 6.94 percent at $10.06 on the New York Stock Exchange.
(Reporting by Steve James; Editing by Andre Grenon, Richard Chang)
