Alcoa earnings hurt by low aluminium prices, higher global surplus seen

Metals company Alcoa reported a quarterly profit that missed expectations due to plunging primary aluminium prices, but revenues topped estimates on an ongoing drive to reduce reliance on the company’s legacy commodity business.

The New York-based company has been investing in more advanced aerospace and automotive products while selling off some of its more traditional yet costly smelting facilities.

Three-month aluminium prices have slumped almost a quarter since September, weighed down by a global surplus, and have hovered close to or below the cost of production for a big portion of global capacity. Prices hit six-year lows of US$1,630 per tonne on Wednesday, as concerns about China’s stock market crash spread to commodities markets.

During a conference call with analysts on Wednesday, Alcoa raised its global forecast for the global aluminium surplus.

Supply was expected to outpace global demand by 760,000 tonnes this year, some 400,000 tonnes higher than Alcoa’s previous forecast, William Oplinger, chief financial officer and executive vice-president, said on a conference call to discuss the second-quarter results.

Alcoa said organic growth in its aerospace, automotive and alumina businesses, plus acquisitions, offset declines caused by the divestment of lower-margin businesses as well as the decline in aluminium prices.