Thump! Clang! Those were the sounds of aluminum producer Alcoa
Last week, Alcoa announced a program of salary freezes, employee layoffs, asset sales, and capex cuts. This week, it posted a loss of $1.19 billion, or $1.49 a share. Those figures are dramatically lower compared to net income of $632 million, or $0.75 a share, in the year-ago quarter. This year's results included a series of restructuring, impairment, and special charges totaling $708 million, or $0.88 a share. Revenue dropped to $5.68 billion, from $7.03 billion in the final quarter of 2007.
The primary culprits behind the far-from-inspiring numbers were a 35% slide in aluminum prices during the quarter alone, and a 56% drop since midyear. The rapid reduction was tied to falling demand for the metal, largely from the automotive, commercial-transportation, and building sectors. Those deteriorating conditions appeared to be primarily responsible for the pending departure of the CEO of Norway's aluminum producer Norsk Hydro
Alcoa CEO Klaus Kleinfeld just joined the company in May, so he's clearly entitled to a certain amount of honeymoon protection, especially since he's already boosted the company's share of primary aluminum production. Nevertheless, he did say that the aluminum industry has been caught in a "perfect storm of historic proportions."
Of course, aluminum isn't the only metal to get pounded lately. Next week we'll likely be told about an expected quarterly loss at miner Freeport-McMoRan
But what should we do about Alcoa now? My response is simple: absolutely nothing. I'm an avid sailor, but even I know better than to go out in the middle of a perfect storm.
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