Alcoa on way to meeting revenue growth goals

Aluminum producer Alcoa is well on the way to reaching its increased revenue growth targets for two of its businesses, Chief Executive Officer Klaus Kleinfeld said.

The company also said production costs should come down when a new Saudi Arabian smelter starts up, and it expects to profit more from a change in its contract pricing system as global metal demand continues to rise.

“On rolled products — we set a target of adding $2.5 billion revenue to the top line by 2013,” he said of the business that produces flat-rolled aluminum for the auto and aviation markets, among others.

“I believe we will get 50 to 60 percent of that revenue growth this year,” Kleinfeld said at the company’s investor day meeting at an Alcoa plant in Davenport, Iowa.

He said much of the growth has been from the auto industry, where new fuel efficiency requirements are driving demand for lighter-weight car and truck bodies. Also, there was sales growth in the aerospace sector, where plane makers have a considerable backlog of orders.

Kleinfeld also said the company expects a boost in its engineered products business, which provides specialized aluminum products for various industries.

“This is an undiscovered gem,” he told an audience that included Wall Street analysts.

“We set a revenue growth target of $1.6 billion by 2013 and I believe we can generate 40 to 45 percent growth in 2011.”

Last year, Alcoa had total revenue of $21 billion, an increase from $18.4 billion in 2009. In the third quarter of 2011, revenue was $6.4 billion, with much of the sales growth coming from autos, commercial transport, packaging and aerospace, the company said.

Tim Reyes, Alcoa’s vice president for global primary products, said aluminum demand growth is accelerating and consumption of the metal is rising at 1.6 times the global gross domestic product rate.

Alcoa still expects a near doubling of aluminum demand in the next 10 years, driven largely by China and emerging markets, he said. To achieve that, demand would have to grow at 6.5 percent per year.