NEW YORK CITY -- Lower aluminum prices and special charges related to capacity reduction combined with a U.S. probe into offshore bribery, has resulted in deeper losses at Alcoa Inc. (IW 500.53) in the second quarter.
The aluminum producer, the first major industrial company to report quarterly earnings, said it lost $119 million, or 11 cents a share, for the quarter ended June 30, compared to a loss of $2 million in the year-ago period.
The company reported profits of $149 million in the first quarter.
Excluding the charges, Alcoa reported earnings of $76 million or 7 cents per share, 1 cent more than analyst expectations. Revenues came in at $5.85 billion, up from the $5.83 billion forecast.
Alcoa said a drop in aluminum prices compared with the first quarter accounted for a $45 million decline in profits.
Aluminum prices have been under pressure in recent months due to concerns about the Chinese economy and a glut of the metal. Prices of aluminum on the London Metals Exchange have fallen from about $2,100 per ton in early 2013 to about $1,740 a ton currently.
Alcoa said it had undertaken cost-cutting measures that have enabled it to sustain a positive cash flow. It achieved $539 million in "productivity savings" in the first half of 2013 against a $750 million annual target, it said.
"In our value-add businesses we reached another milestone with record profitability in our downstream business while acting decisively to defy the headwinds of falling metal prices in our upstream businesses," said chief executive Klaus Kleinfeld.
"We improved our competitive position by actively restructuring, curtailing, and closing facilities and made progress addressing legacy legal issues."
Alcoa has been slashing output capacity. The company took a $42 million charge for the closure of some smelter capacity in Quebec and an additional $34 million related to closing a smelter in Italy.
Alcoa also took a $37 million charge for restructuring across all businesses.
Finally, the company reported a $62 million charge related to ongoing settlement talks with the U.S. Department of Justice and Securities and Exchange Commission concerning an anti-bribery probe.
Alcoa said the case could lead to an additional charge of up to $200 million. The SEC recently rejected Alcoa's most recent offer of $60 million.
Copyright Agence France-Presse, 2013
