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Alcoa expects mostly ‘flat’ third quarter: exec

Keywords: Tags  Alcoa, William Oplinger, quarterly earnings, quarterly outlook, engineered products, rolled products, aluminum, primary metal LME

CHICAGO — Alcoa Inc. expects financial results across its business units to be flat to slightly improved on a sequential basis in the third quarter, assuming no changes in metal prices or foreign exchange rates, executive vice president and chief financial officer William F. Oplinger said.

The Pittsburgh-based aluminum producer’s engineered products and solutions business should benefit from a "gradual recovery" in the North American nonresidential construction market and continued strength in the aerospace market, he said during a conference call with analysts July 8.

But the segment will likely be hurt in the third quarter by a decline in nonresidential construction in Europe and weaker industrial gas turbine demand on the continent, Oplinger said, adding that productivity gains are expected to offset the traditional summer slowdown in Europe.

The engineered products and solutions business recorded after-tax operating income of $193 million in the second quarter, up 22.9 percent from $157 million a year earlier, Alcoa said.

The company’s global rolled products business, hit hard by low metal prices in the second quarter, could be hurt by higher inventories and seasonal shutdowns in the aerospace sector in the third quarter, Oplinger said. But automotive demand should remain strong even as prices and demand for industrial products are likely to be under pressure in both North America and Europe, he added.

The global rolled products group posted after-tax operating income of $79 million in the second quarter of 2013, up 1.3 percent from $78 million in the year-ago quarter, the company said.

On the upstream front, second-quarter alumina prices benefitted from a shift toward indexed pricing, which were "relatively flat" in the quarter even as London Metal Exchange prices declined, Oplinger said. But higher costs associated with the company’s mining operations in Suriname and at two crusher locations in Australia are expected to continue into the third quarter, he added.

Alcoa’s alumina division notched after-tax operating income of $64 million in the second quarter of 2013, nearly triple the $23 million recorded in the same period last year, Alcoa said.

The primary metal business is expected to follow a 15-day pricing lag to the LME in the third quarter, with flat production and increased energy costs because of higher consumer demand in Europe, Oplinger said. In addition, Alcoa expects a $100-million after-tax charge related to potline closures at its Baie-Comeau smelter in Quebec (, May 16), although that charge won’t be run through the primary segment, he said.

Primary metals recorded an after-tax operating loss of $32 million in the second quarter, more than 10 times the year-earlier $3-million after-tax operating loss, Alcoa said.

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