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Results were driven by a 35% decline in aluminum prices in the quarter (a 56% decline from July) and a sharp drop in demand, particularly from the automotive, commercial transportation, and building and construction sectors. Income from continuing operations in the fourth quarter of 2007 was $638 million, or $0.75 per share, and was $306 million, or $0.37 per share, in the third quarter of 2008.
Net income for the fourth quarter of 2008 was a loss of $1.19 billion, or $1.49 per share, which includes restructuring, impairment and other special charges of $920 million ($212 million is included in discontinued operations), or $1.15 per share, 80% of which is non-cash. Net income for the fourth quarter 2007 was $632 million, or $0.75 per share, and net income for the third quarter of 2008 was $268 million, or $0.33 per share.
“We are taking wide-ranging measures to address the economic downturn,” said Klaus Kleinfeld, president and chief executive officer. “We have streamlined our portfolio to focus on businesses where Alcoa is the recognized leader, curtailed production to adjust to weakened demand, reduced global headcount, and achieved significant savings in key raw materials. By moving quickly to address the market decline, we are using Alcoa’s strategic flexibility and solid liquidity to address the continuing economic uncertainty and emerge even stronger when the economy recovers.”
Discontinued operations for the fourth quarter of 2008 had a loss of $262 million, or $0.33 per share, representing the results of operations for the Electrical and Electronic Solutions business, as well as charges for previously announced headcount reductions and asset impairments related to the intention to sell the business. In the third quarter of 2008, discontinued operations had a loss of $38 million, or $0.04 per share. The Engineered Products and Solutions segment does not reflect the Electrical and Electronic Solutions business in its results for the fourth quarter of 2008 and all prior periods.
Revenues for the fourth quarter of 2008 were $5.7 billion, down from $7.0 billion in the 2008 third quarter and $6.1 billion in the fourth quarter of 2007 after excluding divested businesses. Revenues for the full year 2008 were $26.9 billion, and income from continuing operations was a profit of $229 million, or $0.28 per share, primarily reflecting the impact of restructuring, impairment, and other special charges.
“The improvements we made in 2008 solidified the strategic fundamentals of the company, which provided the flexibility to act swiftly when the economy began to fall and the staying power to maintain our competitive lead through this historic economic downturn,” said Kleinfeld.
During 2008, Alcoa achieved a number of accomplishments that prepared it for the challenges of 2009 and the opportunities of the future. The company secured favorable long-term power commitments for nearly half its smelting capacity. Its downstream business, Engineered Products and Solutions, had record results with a 23% annual increase in after-tax operating income (ATOI). It shaped its portfolio to focus on its strengths, successfully exiting the Packaging and Consumer business and executing a cash-free swap to exit the soft alloy extrusion business and gain ownership of two smelters. For the seventh consecutive year, Alcoa was chosen for the Dow Sustainability Index. In addition, the company enters 2009 with an increase in its short-term debt capacity of almost 60%.
Looking to the future, Kleinfeld said, “Once the economy stabilizes, the global megatrends-demographics, urbanization and environmental stewardship-will all drive opportunities for our core products. Aluminum has the ideal combination of strength, light weight and infinite recyclability to help countries rebuild their infrastructures for the 21st century. We are extremely well-positioned to seize those opportunities.”
ATOI in the Alumina segment was $162 million, a decrease of $44 million, or 21%, from the prior quarter. Slightly lower production resulted from curtailment effects at Point Comfort, which were partially offset by record output in Australia and Sao Luis. Lower market pricing offset favorable impacts from a stronger U.S. dollar, lower energy costs, and benefits associated with the continued recovery from the natural gas disruption in Western Australia. Alcoa is on track to complete its expansion of the Sao Luis refinery and the new Juruti bauxite mine in Brazil. It is expected that those expansions will begin to deliver positive cash flow to the company late in 2009.
Additional details are available at www.alcoa.com.