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Alcoa posts US$1.2b Q4 loss

IN a dismal prelude to the earnings season, Alcoa Inc reported a quarterly loss of US$1.19 billion late Monday, days after the aluminum giant announced cuts due to sinking prices and demand for the metal.

Alcoa, the world's third-largest aluminum company, said it expects to emerge a stronger company when the world economy stabilizes, but offered no specific forecast for the possible start of a recovery.

The Pittsburgh-based company's loss highlighted the severe impact of the economic downturn on key aluminum markets, such as the auto and construction industries. Prices of the metal, used in everything from cars and aircraft to window frames and beer cans, have fallen steeply along with other commodities since mid-2008. Analysts don't expect a rebound before mid-2009.

Alcoa, the first component of the Dow Jones industrial average to post results and considered a bellwether of earnings to come, said fourth-quarter revenue sank 19 percent to US$5.7 billion from US$7 billion in the year-earlier period.

To cope with diminishing demand, Alcoa last week announced plans to lay off about 13 percent of its global workforce by the end of 2009, further reduce production and spending, and sell four of its subsidiaries. Alcoa said it expected to save US$450 million annually as a result of the cutbacks.

"The aluminum industry is caught up in a perfect storm of historic proportions," Klaus Kleinfeld, Alcoa's president and chief executive, said in a conference call. "The price has never before fallen so fast. As demand disappears, inventories are building and prices are decreasing."

Lower demand

The company said the results were driven by a 35-percent price decline in the quarter - a 56-percent decline from July - and sharply lower demand, particularly from the automotive, commercial transport and building and construction sectors.

Aluminum demand in the United States, which accounts for about 18 percent of the global market, has been falling for months, pushed down by declines in the residential housing and automotive markets. The Census Bureau said new home sales in November slumped over 35 percent from the same month in 2007. Auto sales in the US dropped 36 percent in December from a year ago.

Among Alcoa's customers are auto makers such as General Motors Corp and Ford Motor Co and aircraft manufacturers Boeing Co and Airbus SA.

Alcoa's loss equaled US$1.49 cents per share in the quarter ended December 31. During the same period a year earlier, the company earned US$632 million, or 75 cents per share, helped by restructuring and tax gains.


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