The Dark Clouds Looming Over Alcoa And Aluminum

Alcoa Inc. (AA), the global leader in the aluminum market, has experienced difficult times despite slight improvements in the past two years. With the housing market crashing in the U.S., many manufacturers of products utilized in new construction, including aluminum, were hurt severely. The effects are still felt today as the weak economy still shows signs of slow growth ahead. However, there is light at the end of the tunnel for Alcoa, and aluminum, with experts predicting a greater demand for aluminum in years to come.

Alcoa posted numbers in 2010 that implied the economy was recovering. Alcoa experienced an increase in sales, up 15.92%, an increase in net income, up 126.6%, and an increase in earnings per share, up 123.58%; increases in these key areas for Alcoa were crucial after the company experienced negative growth in all three areas in 2008 and 2009. Alcoa more than doubled its amount of free cash flows in 2010 compared with 2009 and Alcoa decreased its debt-to-capital percentage by 3.8%, lowering the percentage into its target range set by its management.

Despite a better 2010 and growth in 2011, Alcoa’s 2011 third quarter stumbled slightly compared with its second quarter of 2011, evidence that lower metal prices are still hurting the company. The 2011 third-quarter income from continuing operations was down 47% from the second quarter and revenue was down 3% from the previous quarter as well. The financial results posted by Alcoa reflected the decline in aluminum prices for the third quarter and also indicated that the debt crisis overseas is continuing to have an effect on new construction and shipping. Aluminum plays a vital role in both.