Alcoa Reports First-Quarter Results Reflecting Increase in Continuing Operations Income

Alcoa today reported income from continuing operations in the first quarter of $195 million or $0.23 per diluted share compared to a loss from continuing operations of $125 million or $0.15 per diluted share in the previous quarter.

The loss in the fourth quarter of 2002 included restructuring charges, goodwill impairment and losses on divestitures totaling $258 million. (See attached schedule.) Income from continuing operations was $184 million or $0.22 per diluted share in the first quarter of 2002.

"We are focused on managing what is under our control in a challenging business environment," said Alain Belda, Chairman and CEO of Alcoa. "Despite significantly higher energy prices which offset more favorable metal prices, we achieved solid cost savings results from the restructuring undertaken over the last two years as well as synergies from acquired businesses. Every segment of the business demonstrated improved profitability except for Packaging and Consumer, which experienced typical seasonal declines. Given the uncertain economic and geopolitical outlook today, we will keep our focus on controlling costs, improving productivity, and building closer connections to our customers."

Cost Savings

The company achieved $52 million in savings in the quarter. Consistent with Alcoa's approach since its first cost challenge in 1998, the savings number includes the effect of higher benefit costs, but excludes changes in energy prices due to volatility. Energy costs in the first quarter of 2003 were $75 million higher than the fourth quarter 2002 and $110 million higher than first quarter 2002. Benefit costs were $25 million higher than the previous quarter.

The cost savings were driven in large part by accelerating the benefits of prior years' restructurings and the continued implementation of the Alcoa Business System. Despite higher energy and raw material costs, the company's margin improved 110 basis points to 20.3% of sales in the quarter. Alcoa has now achieved $808 million toward its $1 billion cost savings goal by the end of 2003 and remains solidly on track to meet that challenge.


Sales were $5.11 billion up from $5.06 billion in the fourth quarter of last year - and up 4% from $4.9 billion in the first quarter of 2002. Sequentially, higher upstream pricing and the inclusion of Fairchild Fasteners revenues offset seasonal declines in the packaging and consumer markets. While the aerospace, industrial gas turbine and commercial building markets remain soft, the company benefited from aggressive cost cutting in businesses serving those markets. Automotive markets remained strong in the quarter while residential construction weakened due to severe winter weather in the U.S.

Acquisitions and Divestitures

Fairchild Fasteners, a part of Alcoa Fastening Systems since December 2002, has already achieved $19 million in annualized synergies. These savings are excluded from the $1 billion cost challenge. Alcoa continues to pursue the divestiture of non-core businesses announced earlier this year, and expects to use proceeds from those sales to pay down debt.


Alcoa continues to strengthen its performance by developing innovative products that add value for its customers. Introduced last summer, Reynolds Wrap(R) Release(R), an innovative new non-stick foil, has now established a strong presence in the North American market. Almost five million households throughout the United States have already tried Reynolds Wrap(R) Release(R) and almost 50% of these consumers have plans to come back for more -- twice the number of consumers who typically make a repeat purchase of a new product in this market.

Alcoa Dura-Bright(R) wheels continue to gain acceptance in the market and are on track to triple sales from the previous year. Dura-Bright(R) wheels have been used primarily in transit bus and motor home applications, and are now being rapidly adopted in trucks and trailers. They were named as one of the top 50 new products for 2002 by Heavy Duty Trucking magazine.

Alcoa was also selected to supply metallic solutions for regional and business jets to Bombardier.

Accounting Change and Other Items

In the first quarter of 2003, Alcoa adopted Financial Accounting Standard No. 143, "Accounting for Asset Retirement Obligations." The cumulative effect of adopting this standard was a one-time, non-cash charge of $47 million. Including this charge, Alcoa's net income for the quarter was $151 million. Net income in the first quarter of 2002 included a one time, non-cash gain of $34 million upon adoption of FAS No. 142.

Sequentially, the negative impact of foreign currency translation and lower non-operating income were partially offset by higher equity earnings.

About Alcoa

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers.

600450 Alcoa Reports First-Quarter Results Reflecting Increase in Continuing Operations Income

See more news about:

Others also read

Local quality glass producer Emirates Glass Limited has won contracts to supply 68,000 square metres of its high quality EmiCool glass to five major projects in Dubai.
Southwall Technologies Inc. (Nasdaq:SWTX), a global developer, manufacturer and marketer of thin-film coatings for the electronic display, automotive glass and architectural markets, today announced that on Dec. 18, 2003, it secured an agreement for a new bank loan guarantee and equity financing package of up to $7.5 million from Needham & Company, Inc., its affiliates and Dolphin Asset Management.
KUB Malaysia Bhd has accepted an offer from Nippon Sheet Glass Co Ltd (NSG) to acquire its 15% stake in Malaysian Sheet Glass Bhd (MSG) for RM32.6 million in cash, or RM2.68 per share.
Co-Ventures in Glass Containers (CVIGC, Ltd.) of Tampa, Florida, USA and Micro-Tek Canada, Inc. Of Toronto, Canada are excited to announce the beginning of a long term joint venture to combine their extensive experiences and resources to offer the Glass Container Industry globally a best value alternative for all their outsourcing needs in manufacturing, operations and technical assistance agreements, specifically targeted to the smaller manufacturers who have found the larger service companies to be cost and profit prohibitive.The principals of the two companies have found a global need for smaller glass companies who require excellent technical resources to properly compete within the industry without the high costs of employing their own staffs or outsourcing their requirements to the larger service companies whose own operating costs and overhead are substantial.
China's largest automobile glass maker Fuyao Glass Industry Group Co, Ltd, won its case against the dumping ruling of the US Department of Commerce (DOC).
When did the wine industry start using glass bottles, and how did they settle on their current size of 750ml? For the answer to these questions, you have to go back in time - back thousands of years to when wine was first cultivated and enjoyed.

Add new comment