Alcoa: Analysts Positive on Good Quarter Results

Shares of Alcoa Inc. (AA) rose Wednesday as analysts had mostly positive things to say about the company's second-quarter earnings, which came in at $0.66 a share.

UBS Securities analyst Brian MacArthur noted that after-tax operating income [ATOI] improved in every one of the company's operating segments compared to the first quarter. The strongest gains came in primary metals, where ATOI rose 39%. He also wrote that Alcoa should benefit from higher volumes (alumina and aluminum) and better pricing in its upstream business in the medium-to-long term, and from better volumes and improved mix and productivity in its midstream and downstream operations.

At Desjardins Securities, analyst John Redstone wrote that costs were slightly higher than he expected across all of Alcoa's divisions. Like others in the industry, the company is facing rising material and freight and energy costs. However, Mr. Redstone noted that cost pressures should moderate going forward.

As usual, aluminum prices remain the key for Alcoa in the future, according to analyst Fraser Phillips of RBC Capital Markets.

He wrote:

With 75% of ATOI coming from the alumina and smelting businesses, continued increases in aluminium prices will be required to drive sustained outperformance of the shares.

Mr. Phillips estimates that the aluminum market will remain in surplus through the second half of 2008. But he believes that China will become a net importer over the next 12-to-24 months, which could drive "significant" increases in prices, especially if there are continuing global power shortages.

He wrote:

Investors with a one-to-two year horizon should begin to build positions in [Alcoa] shares.

Mr. MacArthur rates Alcoa a "buy" with a target of $46.00 a share, while Mr. Redstone also considers it a "buy" with a slightly lower target of $44.70 a share. Mr. Phillips has a "sector perform" rating on the stock and a $44.00 target.

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[Yael Pipano:]

Guinea to replace Alcoa management at bauxite miner
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By: Reuters
Published on 18th July 2008

An interim management committee will take over the running of the world's top bauxite exporter, Guinea's CBG, from US aluminium company Alcoa, the West African country's government said on Friday.

The committee will run Compagnie des Bauxites de Guinee (CBG) until March 2009, the government said in a statement released on Friday after a cabinet meeting on Thursday.

"Regarding the contract for management assistance, it is necessary to choose a new partner after the transitional period," it said. The management agreement with Alcoa had not met the state' expectations, it said.

An Alcoa spokesman had no immediate comment.

CBG is 49-percent owned by the Guinean state and 51-percent owned by the Halco consortium, in which Alcoa and Rio Tinto own 45 percent each and Dadco owns 10 percent.

Guinea's previous government and Halco agreed in April to review CBG's management contract as part of the country's efforts to maximise earnings from its important minerals industry, which included a review of mining contracts.

CBG said in January it expected to produce a record 13,5-million tonnes of bauxite in 2008, up from 12,5-million in 2007, when strikes and unrest hit output.

2008 Jul 20 11:24 AM