Image: Alcoa logo
Keith Srakocic  /  AP
Alcoa, the first component of the Dow Jones industrial average to post results and considered a bellwether of earnings to come.
updated 1/12/2009 6:54:17 PM ET 2009-01-12T23:54:17

Alcoa Inc., the world's third-largest aluminum company, said Monday it lost $1.19 billion during its fourth quarter as prices and demand for the metal plunged in a troubled global market.

Alcoa's loss highlighted the impact of the weakening world economy on key aluminum markets, such as the construction and auto industries. Prices of the metal, used in everything from cars and aircraft to window frames and beer cans, have fallen steeply along with other commodities since mid-2008.

Alcoa, the first component of the Dow Jones industrial average to post results and considered a bellwether of earnings to come, said quarterly revenue sank 19 percent to $5.7 billion from $7 billion in the year-earlier period.

To cope with diminishing demand, Alcoa last week announced plans to lay off about 13 percent of its global work force by the end of 2009, further cut production and spending, and sell four of its subsidiaries. Alcoa said it expected to save $450 million annually as a result of the cutbacks.

Alcoa's loss equaled $1.49 cents per share in the quarter ended Dec. 31. During the same period a year earlier, the company earned $632 million, or 75 cents per share, helped by restructuring and tax gains.

One-time charges in fourth-quarter totaled $920 million, or $1.15 per share.

Analysts, on average, expected the Pittsburgh-based company to lose 10 cents per share during the quarter, according to a survey by Thomson Reuters. Wall Street typically excludes one-time charges in its earnings estimates.

Some analysts have said Alcoa's recently announced production cuts may be insufficient to buoy prices. On Friday, Deutsche Bank analyst Jorge Beristain downgraded the company's stock to "Sell" from "Buy," citing aluminum prices that have dipped below the cost of production.

For the full year, Alcoa lost 9 cents per share on revenue of $26.9 billion. Analysts estimated it would earn $1.40 per share on revenue of $27.6 billion.

Prices of aluminum have plummeted to about 70 cents per pound from around $1.50 per pound last summer, as the global economy slowed and demand for the metal waned. Prices averaged about $1.17 per pound in 2006 and $1.20 per pound in 2007. Some analysts think prices won't rebound until mid-2009.

The latest cuts by Alcoa follow earlier moves to scale back output. Last fall, it announced plans to curtail production by 15 percent due to slowing demand.

Other large aluminum makers also have cut production recently. The world's top aluminum maker, Moscow-based United Company Rusal, planned to trim output by 4 percent, while Aluminum Corporation of China, or Chalco, planned cuts of about 18 percent. Analysts expect further cuts in the first half of 2009.

Aluminum demand in the U.S., which accounts for about 18 percent of the global market, has been falling for months, pushed down by declines in the residential housing and automotive markets. The Census Bureau said new home sales in November were down over 35 percent from the same month in 2007. U.S. auto sales dropped 36 percent in December from a year ago.

Shares of Alcoa sank 75 cents, or 6.9 percent, to close at $10.06. During the quarter, Alcoa's share price fell 47 percent, hitting its lowest level in more than a decade. In 2008, Alcoa shares shed nearly 70 percent of their value.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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