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Alcoa recently announced that it generated cash from operations in the second quarter of 2009 of $328 million, a $599 million improvement from the first quarter. This improvement was driven by the company’s wide-ranging financial and operational initiatives to reduce costs, increase cash and strengthen its balance sheet.
The second quarter of 2009 showed a loss from continuing operations of $312 million, or $0.32 per share. Excluding restructuring charges, the loss was $256 million, or $0.26 per share. The loss from continuing operations showed a $168 million improvement in the second quarter of 2009 compared with the first quarter loss from continuing operations of $480 million, or $0.59 per share. Earnings from continuing operations in the second quarter of 2008 were $553 million, or $0.67 per share.
Revenues for the quarter were $4.2 billion, a 2% increase from the first quarter of 2009, but a decrease from $7.2 billion in the second quarter of 2008, as a result of the impact of lower metal prices and the company’s curtailment of aluminum and alumina production in response to reduced demand. The average price of aluminum on the London Metal Exchange in the second quarter of 2009 was $1485 per metric ton (mt), a 9% increase from the first quarter of 2009, but a 49% decrease from the second quarter of 2008.
“Our cash generation initiatives, productivity improvements and portfolio changes are working,” said Klaus Kleinfeld, president and CEO. “Now Alcoa has the staying power and reduced cost base to withstand the most serious downturn in the history of the aluminum industry. Our operational and financial initiatives also provide Alcoa with the focus and flexibility to compete and grow in the most profitable segments of the industry as the economy recovers.”
The company has achieved approximately $1.0 billion in procurement savings through the first half of the year, or approximately two-thirds of the full year target. Overhead savings year-to-date are approximately $270 million, or 134% of the full year target for 2009. In addition, rigorous management of working capital has generated $680 million in cash, or 85% of the 2009 target of $800 million.
Capital expenditures in the quarter were $418 million and are on target to reach the 2009 goal of a nearly 50% reduction from 2008; the capital plan for 2010 calls for a further 50% reduction to $850 million. The Juruti bauxite mine in Brazil and the Alumar alumina refining upgrade and expansion are both in the process of being commissioned. First shipment of bauxite from Juruti is expected to occur within the next 90 days. The Alumar refinery has already begun to produce its first alumina and is on target for ramp-up to full production during the second half of the year. The upgrade and expansion project will increase the output of the refinery from approximately 1.5 mmt to a total production capacity of 3.5 mmt per year for the Alumar consortium.
The company’s debt-to-capital ratio stood at 39.8% at the end of the quarter, an 80-basis-point reduction from the first quarter of 2009. Free cash flow in the quarter was a negative $90 million, but showed a $652 million improvement from the first quarter of 2009. As the company continues to implement its cash generation programs, it finished the quarter with $851 million of cash on hand.
Discontinued operations for the second quarter of 2009 had a loss of $142 million, or $0.15 per share, primarily reflecting the impact of exiting the electrical and electronics solutions business, which was completed in June. The first quarter of 2009 had a loss of $17 million, or $0.02 per share.
The second quarter of 2009 had a net loss of $454 million, or $0.47 per share, compared with a net loss for the first quarter of 2009 of $497 million, or $0.61 per share. Net income in the second quarter of 2008 was $546 million, or $0.66 per share.
Revenues for the first half of 2009 were $8.4 billion, compared to $14.2 billion in the first half of 2008. For the first half of 2009, income from continuing operations showed a loss of $792 million, or $0.89 per share, compared with income of $852 million, or $1.03 per share, in the first half of 2008. The first half of 2009 showed a net loss of $951 million, or $1.06 per share, compared to net income of $849 million, or $1.03 per share, in the first half of 2008.
After-tax operating income (ATOI) for the Alumina segment was a loss of $7 million, a decrease of $42 million from the prior quarter. Production declined 136 thousand mt, or 4% sequentially, mainly due to curtailments at Point Comfort and Suriname. Unfavorable currency and lower LME-based pricing was partially offset by productivity gains.
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