Alcoa misses estimate as Brazil drought hits production

2018-01-18

Jan. 17, 2018 - Aluminum producer Alcoa Corp's profit and revenue both missed market estimates for the fourth quarter as a drought in Brazil hit bauxite production and higher power prices in Spain boosted expenses, the company said on Wednesday.

Alcoa's shares, which closed up 1.3 percent in the regular session, fell nearly 6 percent in after-hours trading.

The company said the drought in Brazil led to an acute water shortage that not only hit its bauxite business, but also affected profits from its hydropower system in the country.

Bauxite is usually covered by an several layers of rock and clay, which must be removed in crushing or washing plants before being processed.

"We have lower-than-expected global alumina segments due to weather delays and difficulties with shipload," Chief Executive Roy Harvey said on a call with analysts, noting the results were about $50 million lower than the company's expectations.

So, while Alcoa's alumina shipments increased in the quarter, the production issues meant it could not take full advantage of improved alumina and aluminum prices.

The company's revenue rose 25.1 percent to $3.17 billion in the fourth quarter ended Dec. 31.

Its net loss widened to $196 million from $125 million a year earlier, including due to a $22 million charge related to the newly enacted U.S tax reforms.

On an adjusted basis, Alcoa earned $1.04 per share.

Analysts on average were expecting the New-York-based company to post a profit of $1.22 per share and revenue of $3.29 billion.

Alcoa said it does not expect the U.S tax reforms to have a material impact on 2018 results and forecast a non-operating income charge of about $20 million in the current quarter due to a new plan to lower its pension obligations by $35 million.

The company said it would freeze salaried defined benefit pension plans of U.S. and Canadian employees, effective Jan, 1, 2021, with about 800 affected employees transitioned to country-specific defined contribution plans.

"... to reduce our liabilities, change is necessary," Harvey said.