Monday, October 11, 2010

Alcoa Reports 3Q Earnings

Alcoa reported 3rd Quarter earnings on Thursday beating analyst estimates for adjusted earnings per share. Income from continuing operations came in at $61 Million or $.06 per share, and revenue increased 15% versus 3Q'09. Adjusted EBITDA was $602 Million with an 11% EBITDA margin. This rise in revenue can be attributed to higher volumes in the aerospace and construction industries. LME aluminum prices still continue to hurt Alcoa's bottom line but cost cutting strategies have helped offset these price effects.

Alcoa still remains extremely healthy in terms of cash flow. FCF remained high at $176 Million, and debt to cap was 270 bp lower at 35.7%. Alcoa also reduced their debt by $491 Million and extended their debt maturity profile.

Looking forward UASBIG expects LME Aluminum prices to rise in accordance with global economic growth. Alcoa is positioned very well to take advantage as the market for Aluminum continues to recover, but can also survive if these prices continue to lag, as evidenced by the past 3 quarters. Our main and only concerns are fears of deflation and stagnant economic growth. Aside from these concerns we still believe that Aloca remains a great position in our portfolio.

-Thomas Boeje

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