Alcoa profit misses on costs, exchange rates

Rising costs took the shine off what was by most measures a strong year for Alcoa Corp.

While the top U. S. alumi num maker’s adjusted f ourth- quarter earnings surged, the profit missed analysts’ estimates amid higher costs for energy and raw materials and unfavourable movements in exchange rates.

Alcoa’s shares surged 92 per cent last year as the prospect of China shutting outdated, illegal and polluting plants helped boost aluminum prices. It was the company’s best annual performance since 1999 and happened during its first year since splitting from parts- maker Arconic Inc. in late 2016.

The fourth- quarter net loss was US$ 1.06 a share, compared with a loss of 68 cents a year earlier, Pittsburgh- based Alcoa said Wednesday in a statement. Earnings excluding one-time items were US$ 1.04 a share, missing the US$1.23 average of 11 estimates compiled by Bloomberg, but better than the 14- cent adjusted profit a year earlier.

Sales climbed 25 per cent to US$ 3.17 billion, still trailing the US$3.29-billion estimate.

Alcoa predicted the global aluminum market turning to a deficit as China follows through on supply- side reforms.

The largest U. S. aluminum producer, which had forecast the global market would be in “relative balance” in 2017, now sees a deficit in 2018 as China continues to curb capacity to meet pollution- control targets.

The global aluminum market is heading to a deficit of as much as 700,000 tonnes this year, Alcoa said in the statement. In October, Alcoa had forecast a range of a 300,000- tonne deficit to a 100,000- tonne global surplus for 2017 due to its expectation of curtailments and increased demand in China.

China will have a surplus of 1.5 million to 1.7 million tonnes of aluminum in 2018, Alcoa said in a presentation. That compares with a projection in October for a surplus of 1.8 million to 2 million in 2017.

Alcoa projects global aluminum demand will rise 4.25 per cent to 5.25 per cent this year, and said its final projection for 2017 is 5.25 per cent.

The earnings statement was released after the close of regular trading in New York, where Alcoa fell 4.9 per cent to US$54.22. The shares have gained 5.8 per cent this year.