Well, it was about time.
I haven't been the only one to notice that the two largest aluminum companies -- Alcoa (NYSE:AA) and Alcan (NYSE:AL) -- were a little slow in joining the commodity bull run. Troubles with execution and the high cost of materials limited these companies' ability to really profit from the increase in aluminum prices and had their stocks lagging the likes of Century (NASDAQ:CENX), Rio Tinto (NYSE:RTP), and BHP Billiton (NYSE:BHP).
Things have gotten better for Alcan. It reported a 7% revenue increase in the recently announced quarter, with volumes up about 3%. There are a few different ways to slice up the earnings side of the equation, but it's pretty clear that margins were much better, and operating earnings jumped significantly from the year-ago period. Even when you consider that some items like technology sales boosted results, it was still a good quarter.
To be fair, some of the improvement came from things well out of management's hands. Natural gas and other input prices have settled down a bit, and the steadily rising price of finished aluminum has certainly been a positive. By the same token, improvement is improvement, and I'm not one to look a gift horse in the mouth.
I'd also note that the company slightly tweaked its estimates for aluminum demand and supply. Management boosted its demand growth forecast for 2006 by 0.2% to 5.1% and its supply growth forecast by 0.1% to 4.1%. It now sees a net deficit of 300,000 tons for the year. China, with its unused capacity, is still a potential bogeyman, but it's not as though there's a huge amount of high-quality capacity just lying fallow around the world.
While price increases in aluminum haven't really kept pace with other basic materials like zinc and copper, I wouldn't just assume that aluminum will race to catch up. But that doesn't mean aluminum prices can't be firm for a while, nor that aluminum producers can't rake in some of the cash flow that other miners and refiners have seen.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
