Boosted by tariffs, Alcoa profits strong in 4Q

Alcoa swung to a profit in the fourth quarter and raked in $227 million in profits in 2018 as higher aluminum prices and more demand at its U.S. smelters helped the company’s finances.

The company also forecast a growing global deficit of aluminum in 2019, which could continue to support higher prices this year, according to the North Shore-based aluminum producer full-year earnings report Wednesday.

Net income of $227 million translated to $1.20 per share for investors, up from $217 million, or $1.16 per share, in 2017.

Excluding one-time items, the Pittsburgh-based company reported adjusted net income of $675 million, or $3.58 per share, up from $563 million, or $3.01 per share, the year before.

The company was bolstered by revenue for the year that reached $13.4 billion, an increase of 15 percent from 2017, due mostly to higher realized prices for alumina and aluminum products.

In the fourth quarter, Alcoa soared above Wall Street expectations. The company’s adjusted earnings per share of 66

cents was more than double the 32 cents per share predicted by financial analysts surveyed by Zacks Investment Research.

“Our 2018 results reflect how we’ve made Alcoa stronger,” Roy Harvey, Alcoa’s president and CEO, said in a statement. “We’ve built upon the progress we made since our launch, and by executing our strategic priorities to reduce complexity, drive returns and strengthen the balance sheet, we’re now better positioned to thrive through market cycles.”

Alcoa has been aided by U.S. tariffs that penalize foreign imports of steel and aluminum imposed by the Trump administration in March 2018. A report by the Economic Policy Institute last month found the U.S. aluminum industry announced investments to restart or expand at 26 facilities across the country, promising to spend $3.4 billion and create more than 3,000 jobs.

The restart and expansion of four smelters will boost U.S. aluminum production by 67 percent in 2018, the report found.

In October, the company said tariffs had helped its overall business — despite having Canadian operations that had suffered as a result of the import penalties.

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.

Last month, Alcoa announced it would cut production in half at its Quebec smelter, which has been rocked by a yearlong labor dispute and has been subject to higher costs due to tariffs.

Alcoa is projecting a global aluminum deficit ranging between 1.7 million and 2.1 million metric tons, up from 1.7 million metric tons seen in 2018. That supply-demand imbalance could support aluminum prices for the next year.

At the same time, it lowered its expectations for global demand to increase 3 percent to 4 percent this year, slower than the 4 percent seen in 2018 and the slowest demand growth rate in a decade.

Alcoa shares jumped nearly 3 percent in midday trading Thursday. The company’s stock price has lost 50 percent of its value in the last year, as investors parse how the U.S. tariffs will play out.