updated 7/10/2006 7:38:28 PM ET 2006-07-10T23:38:28

Aluminum producer Alcoa Inc. on Monday said second-quarter profit ballooned 62 percent as higher aluminum prices and strong demand from the aerospace and construction industries boosted results.

Net income surged to $744 million, or 85 cents per share, from $460 million, or 52 cents per share, a year ago. The recent results include charges of $35 million, or 4 cents per share, related to the ratification of a U.S. labor contract and the costs of preparing for a potential work stoppage during the quarter.

Revenue rose 19 percent to $7.96 billion from $6.69 billion due to higher aluminum prices and strong demand from aerospace, building and construction, commercial vehicle and can sheet markets.

Analysts polled by Thomson Financial forecast earnings of 86 cents per share on slightly higher sales of $8.01 billion.

Alcoa shares slumped 4.4 percent to $31.95 in late trading after closing the regular session 14 cents lower at $33.41 on the New York Stock Exchange. Alcoa shares have gained about 13 percent so far this year.

“I thought the number was pretty good. There was some people who though the revenue was a little light,” said analyst Charles Bradford of Bradford Research-Soleil Securities Corp. in New York.

“The big issue is the third quarter is going to be a little weaker,” Bradford said.

Traditionally, Bradford said, third quarter results tend to be weaker given that many European markets are closed, a slowdown in automotive markets and a recent decrease in metals pricing — issues also cited by Chairman and CEO Alain Belda in warning analysts not to expect third-quarter results to be as strong.

“Clearly, the correction in the aluminum prices that we’ve seen recently is going to affect the third quarter,” said analyst Victor Lazarovici of BMO Nesbitt, who had expected quarterly income of only 74 cents.

“I can’t see anything in the results that would disappoint other than people were expecting a much stronger surprise.”

Alcoa recorded its highest quarterly profit in the company’s more than 115-year history, Belda said.

“Alcoans have generated another record quarter — delivering today while we continue building for the future,” Belda said. “By creating solutions for our customers and continuously improving productivity, we have driven record top and bottom line performances.”

“We are consistently delivering returns well in excess of the cost of capital, generating cash to fund strategic growth projects, and keeping our balance sheet strong,” he said.

Revenues for the quarter increased 10 percent sequentially to $7.96 billion, the highest quarterly sales in Alcoa’s history, as each of the company’s six global business segments achieved higher volumes, Belda said.

Six-month net income of $1.35 billion was higher than the full-year results in all but fiscal year 2000.

Alcoa is traditionally the first of the Dow Jones industrial average’s 30 large-cap companies to report earnings each quarter.

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