Alcoa Halts Noncritical Capital Expenditures After 52% Drop in Net Income

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Researched by Industrial Info Resources (Sugar Land, Texas)--Alcoa (NYSE:AA) (New York, New York), one of the world's largest aluminum producers, reported on October 7 that its net income for the third quarter dropped 52% year over year from $555 million to $268 million. The company attributes its losses to several reasons, including the current state of the economy and market volatility, Chief Financial Officer Charles McLane said. On a year-over-year basis, market prices for coke, caustic, fuel oil and natural gas rose between 40% and 100%, he said. "I can assure you, we don't take solace in the fact that everyone is experiencing the same type of pain," he said. "From internal benchmarking to external benchmarking to alternate sources and the substitution of materials to contracting our capacity to match the economic environment in all of our businesses, we will leave no stone unturned in order to remain competitive in this difficult environment."

Capital expenditures in the third quarter stood at $877 million, McLane said. He said Alcoa is halting noncritical capital expenditures for now. However, he said the company will continue to work on two major projects that total nearly $2.2 billion in Brazil: the Sao Luis alumina refinery expansion and the grassroot Juruti bauxite mine. The company aims to put the projects into operation in 2009. Industrial Info has been tracking both projects since December 2005. As part of our International Project Database, Industrial Info is tracking 34 active Alcoa projects, including Juruti and Sao Luis, with a combined total investment value of $8.61 billion.

"Volatile financial and commodity markets, along with weak macroeconomic conditions and end markets, are presenting significant challenges," McLane said. "We are committed to manage through this downturn while taking every opportunity to position ourselves for the future."

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