Alcoa Inc. said second-quarter profit fell 3.9 percent

Alcoa Inc., the world's second- biggest aluminum producer, said second-quarter profit fell 3.9 percent as costs for shutdowns at two U.S. smelters eroded the benefit of rising metal prices.

Net income dropped to $715 million, or 81 cents a share, from $744 million, or 85 cents, a year earlier, New York-based Alcoa said today in a statement. Profit excluding items topped analysts' estimates by 1 cent. Sales climbed 3.5 percent to $8.07 billion, and profit rose at five of six units from the previous quarter.

Output fell at a Tennessee smelter after lightning struck a power substation in April. The shutdown, combined with losses from a Texas plant, reduced profit by $36 million. The price of aluminum rose 5.5 percent. Only 0.1 percent of Alcan Inc. shares have been tendered in the $27.9 billion hostile takeover bid by Alcoa, led by Chief Executive Officer Alain Belda.

``These were strong numbers considering the Tennessee shutdown and currency effects,'' said Charles Bradford, an analyst at Soleil Securities in New York. ``Profits at aerospace and the rolling businesses all looked a lot better.''

Alcoa was the first company in the Dow Jones Industrial Average to report second-quarter earnings. Profit excluding items was 81 cents a share. The company was forecast to earn 80 cents, the average estimate of eight analysts surveyed by Bloomberg.

Earnings were announced after the end of regular U.S. trading. Shares of Alcoa fell 51 cents to $41.85 at 5:27 p.m., down 1.2 percent from the close of New York Stock Exchange composite business.

Offer Extended

The shares had gained 70 cents to $42.36 at 4 p.m. They have climbed 26 percent in the past year.

Alcoa said it extended its offer for Alcan to Aug. 10 from July 10. All other terms and conditions ``remain unchanged,'' Alcoa said. Only 418,500 Alcan shares of 367.6 million shares outstanding have been tendered in the bid.

``We remain the natural partner for Alcan with the most substantial synergies, and an unparalleled commitment to Canada and Quebec,'' Belda said in the statement.

Alcoa is seeking to buy Montreal-based Alcan, the world's third-largest aluminum producer, to almost double production and get access to cheaper power. OAO Russian Aluminium is the biggest aluminum company by current output.

Costs for the bid reduced second-quarter profit by 2 cents a share, Alcoa said. The company reported a restructuring gain of $21 million, or 2 cents.

Price, Production

The company sold aluminum at $2,879 a metric ton on average in the quarter, up from $2,728 a year earlier. Production rose to 901,000 tons from 882,000 tons, while shipments rose to 565,000 tons from 508,000.

Profit at the engineered-products business rose to $105 million from $100 million, the company said. Profit at the flat- rolled products division rose to $93 million from $79 million.

Buying Alcan would give Belda, 64, control of about 20 percent of the global aluminum market, greater pricing power over customers such and more resources to compete for projects from Iceland to Australia. Belda has spent the past 34 years at Alcoa.

Alcoa ``is at the peak of its cycle now,'' Thomas Winmill, president of Midas Management Corp. in New York, said before earnings were announced. ``Inventories are coming down, and a lot of the problems in the industry have been solved. Alcoa needs these Alcan assets.''

The price of aluminum has doubled in the past five years. Global consumption will probably increase by that amount over the next 15 years, Alcoa had estimated.

Demand by aircraft makers including Boeing Co. is increasing. China, the world's largest user of aluminum, has boosted construction of bridges, skyscrapers and power- transmission lines that use the metal.

New projects will add 15 to 20 cents a share to earnings in 2007, Belda said on a Jan. 9 conference call. The company is closing metal plants from Europe to North America and may shed as many as 6,700 jobs after units failed to meet profit targets.

source:bloomberg.com