NEW YORK – Alcoa Inc. (AA), the world's biggest aluminum producer, said on Thursday that net income for the quarter rose slightly, as labor problems and the effect of Hurricane Ivan (search) offset high aluminum prices.
The Pittsburgh-based company, which last month warned earnings would lag Wall Street expectations, said net income was $283 million, or 32 cents per share, compared with $280 million, or 33 cents, in the year-ago period.
Income from continuing operations was $298 million, or 34 cents per diluted share, in line with the lowered Wall Street forecasts.
Analyst Lloyd O'Carroll of BB&T Capital Markets said the results were in line with lowered expectations. "Major issues are labor, but they are temporary.
"Once the labor issues are resolved, the outlook is quite favorable," he said, noting that aluminum prices remain high.
Revenue rose 12.5 percent to $5.98 billion over the year-ago period, Alcoa said, but sales were off slightly from the $6.1 billion recorded in the second quarter of this year, due to "lower activity in the company's automotive markets."
As a result of the anticipated sale of its protective packaging business, the company recorded a charge of $16 million, or 2 cents per share, in the third quarter under discontinued operations. The sale is expected to be completed by the end of the year.
In its earnings release, Alcoa said the quarter was negatively affected by a long-running strike at its Becancour, Quebec, smelter and costs associated with the impact of Hurricane Ivan on the Jamalco refinery in Jamaica.
However, the results did not include a previously announced charge for layoffs at the Wenatchee, Wash., smelter since a tentative agreement with the union there.
"Our efforts to tackle higher labor and health care costs in North America lowered profitability," said Chairman and Chief Executive Officer Alain Belda. "We are taking the right approach to ensure competitiveness for the long-term.
"We remain confident that we can achieve $1.2 billion in savings over three years," said Belda.
Last month, Alcoa warned that results would fall short of Wall Street expectations because of plant shutdowns, restructuring costs and weakness in some markets.
Alcoa in September suspended operations at an alumina refinery in Jamaica in anticipation of Hurricane Ivan. Other plant disruptions included the strike at Becancour and an outage at its KAMA packaging facility in Pennsylvania caused by fire.
The automotive, consumer packaging and European fabricated aluminum markets saw softness in the third quarter, while its commercial transportation and aerospace markets continued to gain momentum.
Alcoa also said high energy costs in Europe and North America hurt several businesses, and the increase in prices for petroleum-derived products, like resin, caused higher costs in the packaging businesses.