Alcoa reports profit in Q4, forecasts 12 percent demand growth



America’s biggest Aluminum producer Alcoa has projected a 12 percent growth in demand in 2011, driven by the automotive and the aerospace industry. Alcoa made the forecast while presenting its Q4, 2010 results. The New York based company managed to post profit for the same period.

Revenue was recorded at $5.7 billion, while operating profit was recorded at $258 million (£166 million), or 24 cents per share. Net income was also recorded at 24 Cents per share (EPS). This compares with Q4, 2009 when the company recorded a loss of $266 million or 27 Cents a share. The company attributed the result to better price realization, strong demand in most end markets and higher efficiency & productivity.

Alcoa shares dropped by 1.3 percent to $16.24 from its 12 month old high as analysts questioned the basis of Alcoa’s forecast. Some market participants however, attributed the fall to profit booking by investors.

When asked about the growth forecast for this fiscal, Alcoa’s CEO Klaus Kleinfeld said: “Pretty much every one of our end markets is improving”, projecting a 12 percent rise in global Aluminum consumption.

Underlining that the demand growth will come from the emerging markets, he said: “We do not expect the substantial growth to come from the U.S. and Europe. We believe that those emerging economies will accelerate and there the driver pretty much is infrastructure building, and all the other end markets that we are seeing, from automotive to packaging to building and construction”.

Giving details about sector-wise growth, he said the automobile sector will witness demand grow by 5-11 percent while the aerospace industry will grow by around 7 percent.

The real-estate sector, which was badly hit by the slum will witness slow growth at 2-3 percent while Aluminum packaging and beverage can segment will witness a flat 2 percent growth.

“When you look at the monthly contracts awarded and the construction starts …. it looks really like a bottoming out. It is not dropping further”, he said about the construction sector.

“So it could well be, if you take an optimistic perspective, that we might be seeing the bottoming out of this market here in the US”, he added.

Macquarie Research analyst Curt Woodworth termed Alcoa’s projections as “phenomenally strong and probably conservative”.

Other analysts were not convinced about the growth projections with John Tumazos of Veryindependent Research saying: “I don’t think there’s enough Aluminum in the world. In order to get a 12-percent growth rate in 2011, the world auto industry would have to be very strong, and each region of the world would have to be very strong”.

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