Alcoa's profit beat fueled by rising alumina prices, shares rise

(Adds CEO quote from conference call, analyst comment, tariff impact; updates shares)

By Sanjana Shivdas

Oct 17 (Reuters) - Top U.S. aluminum producer Alcoa Corp reported a better-than-expected quarterly profit on Wednesday, as a series of supply hits boosted alumina prices.

Shares of the company rose almost 5 percent to $38.49 in after-hours trading, also helped by the announcement of a $200 million share repurchase program.

Alumina prices spiked during the year, largely due to supply disruptions such as lower production at Norsk Hydro's Alunorte, the world's largest alumina refinery, a strike at Alcoa's Australian operations and U.S. sanctions on Russian aluminum giant Rusal.

Chief Executive Roy Harvey said on a post-earnings call with analysts that while increased alumina prices represented an added cost, the company benefited from strength in third-party alumina sales.

Third-party alumina sales, or supplies to other smelters, surged 54.4 percent to $1.10 billion in the third quarter, the company said.

Alcoa said it had a net benefit of $27 million in the third quarter from U.S. tariffs as they helped push up the Midwest regional premium.

President Donald Trump in March imposed tariffs on imported aluminum aimed at boosting domestic aluminum makers against the backdrop of overcapacity in China.

The tariffs, which came into force in June, also extended to products from allies such as the European Union and Canada.

Alcoa in August asked the U.S. Commerce Department to exempt from tariffs its purchases of 40,000 metric tons of aluminum from Canada, and is awaiting the government's response.

Excluding certain items, Alcoa earned 63 cents per share, easily topping expectation of 36 cents, according to I/B/E/S data from Refinitiv.

Peter Ward, an analyst at Renaissance Macro Research, said the quarter was "okay" given the competitive challenges in the market. "The Street had recently cut estimates way too much."

The company tightened its 2018 adjusted earnings before interest, tax, depreciation and amortization (EBITDA) forecast to range between $3.1 billion and $3.2 billion, raising its midpoint slightly, compared with its previous expectation of $3.0 billion and $3.2 billion.

Net loss attributable to Alcoa was $41 million, or 22 cents per share, in the third quarter ended Sept. 30, compared with a profit of $113 million, or 60 cents per share, a year earlier.

The results include a charge of $160 million mainly from the transfer of certain of the company's U.S. pension and retirement benefits.

Revenue rose 14.4 percent to $3.39 billion, topping analysts' average estimate of $3.31 billion.

(Reporting by Sanjana Shivdas in Bengaluru; Additional reporting by Vibhuti Sharma in Bengaluru; Editing by Sriraj Kalluvila)

2018-10-18 00:45:14

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