Alcoa: 84 Percent Decline in Second-Quarter Earnings?

Photographer: Stephen Morton/Bloomberg

Alcoa Inc. (AA), the largest U.S. aluminum producer, is expected to report an 84 percent decline in second quarter earnings, as a result of eighth straight years of surplus global production that drives down the price of the metal. Sonja Elmquist of Business Week reported on this issue.

Profit excluding one-time items will be 5 cents a share, according to the average (AA) of 19 analysts’ estimates compiled by Bloomberg. Analysts have lowered their projections by 44 percent in the past 30 days as aluminum traded near a two-year low on the London Metal Exchange.

While its downstream fabricating business that supplies components to customers such as Ford Motor Co. and Boeing Co. (BA) is profitable, Alcoa’s aluminum-smelting unit is struggling because of lower metal prices. The New York-based company announced in January production-capacity cuts of 12 percent. The primary metals unit will post an $86 million after-tax operating loss, said Brian Yu, a Citigroup Inc. analyst.

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