Higher metal prices help boost Alcoa Q1

Related tags Quarter Cost Revenue Alcoa

Alcoa has announced a significant jump in sales and profit for it
first quarter on the back of strong steel prices, a sign that
packaging costs will continue to impact many food and beverage
producers, reports Simon Pitman.

Sales in the first quarter rose to $6.289 billion (€4.872bn), up 13 per cent over the first quarter of 2004, and the highest in four years. On a sequential quarter basis, revenue increased 4 per cent, driven by higher primary metal and alumina prices as well as strength in the flat rolled products, extruded products, and engineered solutions segments.

Global steel play Alcoa​ said that income from continuing operations for the first quarter 2005 of $273 million. Net income for the quarter was $260 million. The company added that first quarter 2005 income measures included negative impacts from the tax on Alcoa's sale of its Elkem investment ($39 million); restructuring charges ($25 million); and costs of integrating the recently acquired Russian business ($12 million after tax).

"Underlying business performance improved in the quarter as we captured the benefits of higher metal prices and a stronger economy in North America,"​ said Alcoa Chairman and CEO Alain Belda. "We were able to regain traction on the cost initiative, overcoming cost inflation increases, to deliver savings to the bottom line.

"As we move forward, we will continue to tackle costs, to benefit from strong demand in end markets and the sustained high commodity prices,"​ added Belda. "We are focused on delivering near-term results while we continue to build for the future."

Four of the company's six reporting segments achieved double-digit improvements in profitability over the fourth quarter of last year, but the company's consumer and packaging segment showed the worst performance, slowed by seasonal declines and increased costs.

Despite sales rising from $721 million in the first quarter of 2004 to $771 million in the first quarter of 2005, the Packaging and Consumer Segment ATOI fell to $22 million, down from $35 million in 2004.

The company said the division's performance was due to the seasonal decline in the consumer products business and increased raw material costs, primarily resin. Compared to the same quarter in 2004, cost inflation, particularly raw materials and freight drove profitability lower.

Related topics Processing & Packaging

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