ALCOA SAYS TARIFFS GOOD FOR BUSINESS
Though U.S. tariffs have taken a bite out of Alcoa’s overall earnings this year, the country’s largest aluminum producer reported betterthan-expected financials in the third quarter and claimed those results got a boost from the ongoing trade wars.
Alcoa reported a third-quarter net loss on Wednesday of $41 million — a loss of 22 cents a share for investors — for the three months ending Sept. 30. That compares with profits of $113 million, or 60 cents a share, reported during the third quarter of 2017.
Excluding one-time items, including a $174 million charge for pension obligations, the North Shore-based company said it earned an adjusted $119 million, or 63 cents a share. That compares to adjusted earnings of $135 million, or 72 cents a share, a year ago. This year’s figures were well above Wall Street analysts’ expectations of 30 cents a share.
The earnings beat helped push up Alcoa’s stock price by 4 percent in after-market trading.
U.S. tariffs on imported aluminum from Canada have been a drag on Alcoa’s earnings since earlier this year — and on investor confidence.
The Pittsburgh company’s stock has lost about a third of its value this year amid depressed prices for aluminum, which continued to fall in the third quarter and pushed down Alcoa’s revenue.
About 28 percent of Alcoa’s aluminum is produced in plants in Canada, according to Bloomberg Intelligence data, so it costs the company more to bring the metal into the United States under the Trump administration’s tariffs. Alcoa has requested an exemption from the 10 percent tariffs on Canadian aluminum imports imposed earlier this year.
In July, the company lowered its 2018 annual earnings expectations
to $3 billion to $3.2 billion, down from $3.5 billion to $3.7 billion. At the time, CEO Roy Harvey called the tariffs a “significant” factor.
Yet the impact of tariffs has been mixed because of the company’s global operations, and, in fact, executives on Wednesday said in an earnings call with analysts that the benefits Alcoa is seeing from the tariffs because of increased demand at its U.S. facilities outweighed the higher costs from its Canadian operations.
Bill Oplinger, chief financial officer, said the company had a net third-quarter benefit of $27 million from the tariffs, compared to a scenario with no tariffs.
Alcoa also announced Wednesday it will shutter two underperforming Spanish smelters. The two smelters, which employ a total of 686 people, make up 6 percent of the company’s global capacity.
The company launched $200 million in share buybacks, with no set expiration date.
“We’ve made Alcoa a much stronger company even as commodity markets remain volatile,” Mr. Harvey said. “We’re pleased to announce a program to return cash to stockholders, and we look forward to improving our company further as 2018 comes to an end.”
Daniel Moore: dmoore@post-gazette.com, 412-263-2743 and Twitter @PGdanielmoore.