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Curt mentioned this morning radio speculation that the failure to meet
revenue estimates could set Alcoa up for a takeover. The problem as I
see it is that the firms in the metal processing sector large enough
to take over Alcoa are Chinese, Russian or Indian/European. M


Alcoa Drops After Revenue Trails Estimates as Dollar Weakens (1)
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By Colin McClelland


April 12 (Bloomberg) -- Alcoa Inc., the largest U.S. aluminum
producer, fell in New York trading after reporting first-quarter sales
that missed analysts’ estimates as the dollar weakened.

Alcoa declined 56 cents, or 3.2 percent, to $17.21 yesterday after the
close of regular New York Stock Exchange trading. The company’s sales
increased 22 percent from a year earlier to $5.96 billion, Alcoa said
yesterday in a statement. That trailed the $6.06 billion average
estimate of eight analysts in a Bloomberg survey.

Alcoa, traditionally the first company in the Dow Jones Industrial
Average to report quarterly results, said its earnings were curbed by
a weaker U.S. dollar, and higher energy and raw-material costs.

“The issue gets down to currency,” Chuck Bradford, president of
Bradford Research, said in a telephone interview from New York. “They
took a significant hit in the strong loonie, the Aussie dollar and the
real.”

Alcoa operates in 31 countries, selling aluminum in U.S. dollars and
paying costs in local currencies. The Canadian dollar has advanced 4.8
percent against its U.S. counterpart in the past 12 months while the
Brazilian real gained 11 percent. In Australia, where the company
generated 14 percent of its revenue last year, second to the U.S., the
currency appreciated about 12 percent.

German Trading

Alcoa traded at $17.23 in Frankfurt as of 10:05 a.m. local time today,
3 percent below the close in New York.

First-quarter net income of $308 million, or 27 cents a share,
compared with a loss of $201 million, or 20 cents, a year earlier, the
New York-based company said in the statement. Profit excluding
restructuring costs and other one-time items was 28 cents a share,
topping the 27-cent average estimate of 14 analysts surveyed by
Bloomberg.

Some costs for materials, such as caustic soda used in the processing
of bauxite, are increasing following the earthquake and tsunami in
Japan, Chief Financial Officer Chuck McLane said on a conference call
to discuss the earnings.

“We are seeing increasing tightness in the Asian caustic market,”
McLane said. “Due to this disruption as well as the continuing unrest
in the Middle East, we expect to see higher input costs for fuel oil.”

Crude-oil prices on the New York Mercantile Exchange averaged 20
percent more in the first quarter than a year earlier.

‘Cost Control’

“They beat on the bottom line with a lower top-line number, which
suggests their cost control was better than expected,” John
Stephenson, a portfolio manager at First Asset Investment Management
Inc. in Toronto, said yesterday in an e- mailed response to questions.
“Primary metal and sheet product prices have risen since March, so
second-quarter earnings should be even better.”

Aluminum prices have advanced 11 percent in the past year in London
because of improving demand for the metal, which is used in
construction, autos and beverage cans. Alcoa said its average realized
price for aluminum rose 15 percent from a year earlier to $2,682 a
metric ton.

The company reiterated its forecast that global aluminum demand will
grow 12 percent this year.

“Our outlook for the rest of 2011 and beyond remains very positive,”
Chief Executive Officer Klaus Kleinfeld said in the statement.