Alcoa - Earnings Kickoff

Golly, forgot Alcoa (the big earnings kick-off):

Bloomberg:

Alcoa Inc., the largest U.S. aluminum producer, reported third-quarter profit that topped analysts’ estimates and raised its 2010 global consumption forecast to a 13 percent increase on higher demand in China, Brazil and India.Earnings excluding certain items were 9 cents a share, topping the 5-cent average estimate of 16 analysts surveyed by Bloomberg. Net income fell to $61 million, or 6 cents a share, from $77 million, or 8 cents, a year earlier, New York-based Alcoa said today in a statement. Sales climbed 15 percent to $5.3 billion.

Alcoa smelts aluminum and refines alumina, a raw material used to make the metal, in Australia, Europe and Brazil. The Australian dollar climbed 15 percent against its U.S. counterpart in the third quarter, the second-largest gain among a basket of 16 major currencies tracked by Bloomberg. The euro was third, strengthening 11 percent, while the Brazilian real climbed 7 percent.

Alcoa loses $75 million of annual net income for every 10 percent increase in the Australian dollar, the company said in a presentation today. It also said it loses $40 million for a 10 percent increase in the euro. 

• Revenue up 2% sequentially, 15% versus 3Q’09;
• Adjusted EBITDA of $602 million, 11% Margin;
• Free Cash Flow of $176 million;
• Debt balance reduced by $491 million, extended debt maturity profile;
• Debt to Capital of 35.7%, 270 basis points lower sequentially (a page one stat, go bondholders!!!!!)

 Swing in working capital driving change in cash flow.


While the 3rd Q is typically strong, the company is doing many of the right things to get their act together.

Bonds:  10yr AA (BBB-/Baa3 - outlook neg at both) trades 300/290.  Might be worth a look, no?