BENTONVILLE, Ark. (Reuters) - Metals company Alcoa Inc (NYSE:AA) reported a quarterly profit that missed expectations due to plunging primary aluminum prices on Wednesday, but revenues topped estimates on an ongoing drive to reduce reliance on the company's legacy commodity business.
The New York-based company has been investing in more advanced aerospace and automotive products while selling off some of its more traditional yet costly smelting facilities.
Three-month aluminum prices have slumped almost a quarter since September, weighed down by the global surplus, and have hovered close to or below the cost of production for a big portion of global capacity. Prices hit six-year lows of $1,630 per tonne on Wednesday, as concerns about China's stock market crash spread to commodities markets.
During a conference call with analysts, Alcoa raised its global forecast for the global aluminum surplus.
Supply is expected to outpace global demand by 760,000 tonnes this year, some 400,000 tonnes higher than Alcoa's previous forecast, William Oplinger, chief financial officer and executive vice president, said on a conference call to discuss the second-quarter results.
Alcoa said organic growth in its aerospace, automotive and alumina businesses, plus acquisitions offset declines caused by the divestment of lower-margin businesses as well as the decline in aluminum prices.
The company's recent acquisitions in high-value product lines included titanium supplier RTI International Metals Inc (NYSE:RTI), which has around 80 percent its business focused in the aerospace and defense sectors. Alcoa said on Wednesday it hopes to complete the acquisition by the end of July.
Chief Executive Officer Klaus Kleinfeld told Reuters that the lower aluminum prices represented a "tough headwind," but the lower costs and less dependence on smelting facilities had mitigated the impact.
"On the commodity side it is what it is, we can't influence what prices are going to do," he said. "What we can influence is where we are on the cost curve and we will continue to work on it."
Alcoa reported a quarterly net profit of $140 million, up more than 1 percent from $138 million a year earlier. Profit per share slipped to 10 cents from 12 cents, reflecting an increase in the shares outstanding.
Excluding special items, the company reported earnings per share of 19 cents. Analysts had expected of 23 cents per share.
The special items included $143 million in charges related to restructuring Alcoa's business portfolio.
Revenue for the quarter was $5.9 billion, compared with $5.84 billion a year earlier. Analysts had expected revenue of $5.79 billion.