Downturn and Rising Raw Material Costs Lead to Alcoa Loss

Alcoa has reported a 27 per cent sequential drop in revenue, resulting in a loss of US$480 million for the first quarter of 2009. This figure, says the company, reflects the impact of the economic downturn on its core industrial and commercial markets as well as an historic decline in aluminium prices. Revenues for the first quarter 2009 were $4.1 billion, down from $5.7 billion in the fourth quarter 2008 and down 36 per cent from revenues of $6.5 billion in the first quarter of 2008 (after excluding divested businesses). The sharp drop in revenue resulted from the impact of the economic downturn on Alcoa’s end markets, including the automotive industry.

“Alcoa responded swiftly to the declines in our end markets and the historic drop in aluminium prices with a holistic programme that dramatically re-positions our balance sheet and operational cost structure,” said company president and CEO Klaus Kleinfeld. “The result has been a rapid increase in liquidity during the quarter and significant operational cost savings. Besides putting us in a strong position to manage through this downturn, we now have the strategic and operational fundamentals in place for Alcoa to emerge even stronger when the economy recovers.

“While our financial performance in the quarter was adversely affected by the economy-driven drop in demand, we launched operational and financial measures that will significantly improve our profitability and cash flow in 2009 and beyond. In fact, they have already begun to have an impact in the first quarter,” added Kleinfeld.

“We also see both near-term and long-term catalysts that should improve the prospects for the aluminium industry,” continued Kleinfeld. “Current stimulus programs that target infrastructure and energy efficiency will create a demand for the unique characteristics of aluminium – lightweight, strong, durable, recyclable, and conductive. Longer term, the global megatrends of population growth, urbanisation, and environmental stewardship will all drive demand for aluminium as the economy improves.”