By BridgeNews Pittsburgh-based Alcoa Inc. reported its highest-ever quarterly profit as cost cuts more than made up for the economic slowdown, which cut demand by more than 25% in some markets. The world's largest aluminum producer reported first-quarter earnings of $404 million, or 46 cents per share, easily surpassing the 43 cents Wall Street analysts expected. Earnings per share were down only modestly from the 47 cents the company earned a year earlier. Net income in the year-ago quarter was $347 million. During the year, Alcoa increased the number of outstanding shares to 874.2 million from 744.6 million. The net profit rose even though aluminum prices were down by 5%, energy costs were high, and sales volumes fell more than 25% in the distribution, ground transportation, and building and construction markets, Alcoa said. "Alcoa has done a phenomenal job of controlling costs and holding margins in a tough market," says Dan Roling, an analyst with Merrill Lynch. Alcoa is trying to achieve $1.0 billion in annualized cost savings by 2003. It achieved savings of $124 million in the first quarter. Alcoa's decision to take advantage of explosively high power prices in the Pacific Northwest by cutting production and selling power back to local utilities also boosted earnings. The huge amounts of power required to make aluminum represent smelters' most significant cost.