Alcoa expected to post 2nd-quarter loss

PITTSBURGH - Alcoa Inc., the largest U.S. aluminum producer, is scheduled to report second-quarter results on Wednesday. The following is a summary of key developments related to the period.

OVERVIEW: The aluminum industry has been hit hard by the global recession, and prices of the lightweight metal have fallen sharply over the past year, though they have rebounded modestly in recent weeks.

To cope, Alcoa and other companies have slashed production of the metal, used in items ranging from beer cans to airliners. Since late last year, Pittsburgh-based Alcoa has lowered its aluminum production by about 20 percent as demand has waned.

Alcoa also has undertaken a broad cost-cutting campaign. In June, it announced it had completed the sale of its wire harness and electrical distribution business to California-based Platinum Equity for an undisclosed amount.

Alcoa's chief executive, Klaus Kleinfeld, said in late May aluminum distributors' stockpiles had dropped to historically low levels, but that they were not buying more because demand remained weak.

The company had no immediate plans to restart idled plants, he said, as it has sufficient supplies for the near future. And the global industry may further curb aluminum-making if the market doesn't improve this summer, Kleinfeld added.

BY THE NUMBERS: Wall Street analysts expect Alcoa to post a second-quarter loss of 34 cents per share, on average, according to Thomson Reuters. In the same period a year earlier, Alcoa earned 66 cents per share on revenue of $7.6 billion.

ANALYST TAKE: Alcoa has posted losses for the past two consecutive quarters, and analysts predict another loss in the latest quarter, though narrower than the 59-cent loss reported for the first three months of the year.

Charles Bradford of Affiliated Research LLC said he expects a better result for the second quarter, partly due to lower raw material costs, but that "there's no real sign of a turnaround."

"Demand has been poor in just about any market you look at," he said.

Other analysts point to improving global demand, particularly from China, the world's largest consumer and producer of aluminum. That's because of signs of increasing demand for transportation and, to some extent, consumer goods. But they say rising Chinese aluminum production eventually could outpace that demand.

WHAT'S AHEAD: In a recent report, Barclays Capital analysts wrote, "We see potential for a strong rebound in demand in early 2010 but believe that sustainable price gains will be limited, given the inventory and capacity glut the market is facing over the next 18 months."

STOCK PERFORMANCE: Shares of Alcoa climbed nearly 41 percent during the quarter. In the past 12 months, the stock has ranged from $4.97 to $35.66 per share.

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