Alcoa Back On Track
Sydney Morning Herald
Monday October 10, 1994
Alcoa Australia Ltd yesterday demonstrated it was on the path to recovery by posting a strong recovery in third-quarter earnings after a dismal second quarter.
The big aluminium producer, currently 49 per cent-owned by Western Mining Corp and 51 per cent by the Aluminum Co of America, yesterday reported net third-quarter profit had recovered to $72 million. This was up $48 million on the second quarter but still below first-quarter earnings of $76 million.
The directors, led by chief executive, Mr Robert Slagel, described the result - which took earnings to $196.4 million for the first three quarters from the previous nine months' net profit of $300.4 million - as mixed.
Sales revenue for the nine months was $190 million below the same period last year at $1.5 billion, although export revenue was almost steady at $1.3 billion.
"The reduced profit and sales revenue was caused by lower US dollar prices for all products and the stronger Australian currency," the directors said.
They said these negatives were offset by high sales volumes for alumina and chemicals and lower unit production costs for all products except gold where lower ore grades at the company's Hedges mine in Western Australia pushed up operating costs.
The performance remained strong when compared to the rest of corporate Australia, although well short of the previous year's. The return on shareholders' funds over the nine months was 13 per cent on an annualised basis compared with 22.5 per cent for the same period in 1993.
Last month, Alcoa announced it would cut its third-quarter dividend by $40 million to $60 million due to continuing market difficulties.
Although aluminium prices have gathered strength in response to a global pact to cut production by 10 per cent in an attempt to reduce world stockpiles, Alcoa does not expect the benefits to flow through this year.
The company's finance director, Mr Phil Spry-Bailey, said forward sales plus the need to renew currency hedging programs meant the benefits flowing from higher metal prices were yet to impact on Alcoa's bottom line.
"I don't believe there will be much change this year. It will be a difficult fourth quarter," he said.
He said that although the long-term appeared better, the industry still faced a few difficult quarters. Any earnings improvement would depend on"saving or gaining $1 million or $2 million".
© 1994 Sydney Morning Herald
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