Alcoa Inc. ushered in earnings season by reporting a three per cent profit rise despite slumping revenue.

The aluminium producer's sale of a stake in a Chinese aluminium company helped lift its results.

Still, company shares fell about $1.52, or nearly four per cent, to US$38.20 early yesterday.

The sale and other cash-generating moves helped lead Alcoa, the first Dow Jones component to report third-quarter earnings, to expand its stock repurchase programme to 25 per cent of its outstanding shares.

Alcoa posted earnings of US$555 million, or 63 cents per share, for the period ended September 30, up from US$537 million, or 61 cents per share, during the same period last year.

The company said its earnings were weighed down by charges from asset sales and restructuring, higher petroleum and energy costs, and other expenses.

Quarterly revenue slid

Quarterly revenue slid more than 3.0 per cent, to US$7.39 billion from $7.63 billion last year. Contributing to the decline was the exclusion of Alcoa's soft-alloy extrusion business - part of a joint venture.

The results fell short of Wall Street expectations. Analysts polled by Thomson Financial had predicted earnings of 65¢ per share on US$7.40 billion in revenue.

In a conference call with analysts and reporters, Alcoa's chairman and chief executive, Alain Belda, said a seasonal slowdown in Europe, the softening of key U.S. markets, pressure from energy costs, the weakening dollar, and lower metal prices weighed on the results.

But the company continues to focus on improving productivity, gaining market share and introducing new products, he said.

"We certainly had a significant amount of activity and challenges in this quarter," he said.

Authorised repurchase

Alcoa's board on Monday authorised the repurchase of up to 25 per cent of the company's outstanding common stock - about 217 million shares worth about US$8.6 billion.

That broadened an earlier plan to buy back 10 per cent of the company's shares.

Alcoa had bought back 43 million shares, or about 5.0 per cent, by the end of the third quarter under the previous plan.

Healthy cash flows helped spur the latest buyback programme. Last month, Alcoa announced the sale of its nearly 7.0 per cent stake in Aluminum Corporation of China Ltd., also known as Chalco, for US$2 billion, tenfold its initial investment in 2001 of less than US$200 million.

For the first three quarters of the year, Alcoa set all-time records for revenue, earnings, earnings per share and cash from operations, Belda said.

The company's net profit totalled $1.93 billion, or $2.20 per share, in the first nine months of 2007.

- AP