Alcoa shares rise after 4Q profit jump

Alcoa Inc. shares rose Thursday, a day after the world's third-largest aluminum maker posted a 76 percent profit increase for the fourth quarter as gains related to the pending sale of its consumer and packaging businesses offset lower prices.

The Pittsburgh-based company said after the markets closed Wednesday that it earned $632 million, or 75 cents per share, for the three months ended Dec. 31, up from $359 million, or 41 cents per share, a year earlier.

The earnings included restructuring and tax gains totaling $323 million, or 38 cents per share, mostly from the company's recent agreement to sell the packaging and consumer units.

Lower metal prices and the exclusion of results from a soft alloy extrusion business, which is now part of a joint venture, pulled down quarterly revenue to $7.39 billion from $7.84 billion last year.

The earnings amounted to 37 cents a share excluding the gains and exceeded Wall Street predictions. Analysts surveyed by Thomson Financial, on average, were looking for earnings of 33 cents per share. Those forecasts typically exclude one-time items. Revenue also beat analysts' expectations of $6.92 billion.

Alcoa shares rose 43 cents, or 1.3 percent, to $31.68 in morning trading Thursday. Its shares have traded in a 52-week range of $29.21 to $48.77.

Alcoa is the first member of the Dow Jones industrials to report fourth-quarter financial results.

Alain Belda, Alcoa's chairman and chief executive, said revenue for 2007 set an all-time record, growing to $30.75 billion from $30.38 billion the previous year. Income from continuing operations and cash generation also reached record levels, he said.

During the year, the company faced higher material, energy and currency exchange costs but continued to invest in its largest capital improvement program to date, he said.

Alcoa pumped money into new plants, expanded production at others, modernized operations, renegotiated long-term power agreements and built new energy facilities to ensure access to power at competitive rates during the year, Belda said.

It remained focused on growth markets such Brazil, China and Russia, though progress in Russia has been disappointing, he said.

Alcoa's profit for 2007 increased 14 percent to $2.56 billion, from $2.25 billion in 2006.

The aluminum market last year was "very strong, with total world consumption increasing 10 percent," Belda said in a conference call with reporters and analysts. "For 2008, we are projecting similar growth."

The coming growth is expected to be concentrated in developing countries such as China and India while North America enters a cyclical decline in its construction and housing markets and Europe shows only modest growth, he said.

In December, Alcoa said it was selling its packaging and consumer businesses for $2.7 billion cash to Rank Group Ltd., a private New Zealand company. The deal is expected to close by the end of the first quarter.

The businesses to be sold include Alcoa's Closure Systems International, Flexible Packaging, Consumer Products, and Reynolds Food Packaging units. They include the Reynolds Wrap foil brand.

Alcoa's Closure Systems makes plastic and aluminum packaging closures for food, drink and personal care products, while its Flexible Packaging unit makes pouch and blister packaging, shrink labels and foil lids for drug, food and other uses.

The Consumer Products unit makes Reynolds Wrap and private label foil and food wraps, while the Reynolds Food Packaging unit makes foil, film and food containers for food service, supermarket, agricultural and other markets.

Mark Liinamaa, a Morgan Stanley analyst who recommends buying Alcoa stock, said Alcoa's gains had more than offset weakness in its flat-rolled segment, which was worse than expected.

"They're doing what they said they were going to do, and that's good news," he said.

But Charles Bradford of Bradford Research/Soliel Securities said Alcoa "did a lot of juggling" in its reporting of the quarterly results. "If you look at almost all their segments, they were down."

"What happened, very basically, was the metal price came down and the metal price came down a lot," he said. "And that's the story."

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