Alcoa Inc has slightly lowered its aluminum demand expectations for the rest of the year largely because of China's economic slowdown.
Alcoa, which makes aluminum for a wide range of businesses, predicted aluminum demand would grow six per cent this year, down from seven per cent in the previous quarter.
Chairman and CEO Klaus Kleinfeld said the main driver was China's slower growth. The world's second-largest economy is investing in infrastructure projects that will help demand but that likely won't begin to show until the end of the fourth quarter, he said.
On Wednesday, Alcoa stock closed down at US$8.71 as the market digested the downward revision.
The revised forecast was released as Alcoa reported a loss of US$143 million in the third quarter largely on hefty one-time charges, but its adjusted results beat Wall Street estimates. It was Alcoa's second consecutive quarterly loss.
Alcoa's loss equalled 13 cents per share. That compares with net income of US$172 million, or 15 cents a share, a year ago.
Excluding US$175 million in charges, Alcoa earned US$32 million, or 3 cents per share.
Analysts surveyed by FactSet forecast break-even results on a per share basis. Such estimates typically exclude one-time items.
Revenue fell to US$5.83 billion from US$6.42 billion, but still beat analysts' expectations.
Kleinfeld told analysts on a conference call that he believes the market is being driven more by concerns about the economy rather than the fundamentals of lower inventories and a balance between supply and demand.
"But currently the market sentiment dominates the pricing," he said. Aluminum prices in the July-through-September quarter dropped 17 per cent.
Among the US$175 million in one-time charges during the quarter was US$40 million for a settlement in a lawsuit.
Alcoa agreed to pay US$85 million in cash to Aluminum Bahrain BSC, or Alba, without admitting liability, to settle the suit.
Alba had alleged that Alcoa and others paid millions of dollars in bribes that resulted in Alba overpaying for raw materials. The two companies agreed on a long-term contract for alumina, a material used to process aluminum. Alba said the settlement released all claims against Alcoa.
Alcoa produces aluminum for a wide range of businesses, from automobiles to appliance makers and energy companies. It is the first company in the Dow Jones industrial average to report quarterly earnings, so investors often watch its results for signs of how earnings may unfold for other companies.
Alcoa has been challenged by the global manufacturing slowdown that cut into demand from many of its customers. Alcoa has curtailed production this year and restructured some of its higher-cost assets to offset falling revenue as a result of slower demand.
In the third quarter, the company continued to see stronger demand from aerospace and automotive customers. But demand was weaker in the commercial transportation, commercial construction and industrial markets.
For the year, it expects growth in the aerospace, automotive, beverage can packaging, commercial construction and industrial gas turbine markets. The commercial transportation business is expected to decline.
Argus Research analyst Bill Selesky said the third-quarter results were solid but he expects the fourth quarter to be somewhat average. And investors will remain worried about aluminum prices, he said.