Alcoa Meets EPS Forecast On Rise In Revenue, Free Cash Flow Turns Negative

Tyler Durden's picture

Alcoa was expected to generate $(0.03) in EPS in Q4 and so it did. However, it took it 5.99 billion in top line revenue just to not miss traditionally lowered Wall Street estimates. This compares to the $5.7 billion it was expected to make: so there goes your margin. And when one looks at EPS on a purely operational basis, the Company had a loss from operations of $193 million or $(0.18) EPS which included a $74 million benefit from taxes. But of course who cares: after all Alcoa reported "restructuring and other charges" of a whopping $232 million for the quarter, just to make sure everything is apples to oranges. Otherwise the reported $445 million in EBITDA (on $449 million in consensus) would have been more like $200 million. Even so: EBITDA margin dropped from 13.8% in Q4 2010, and 12.8% in Q3 2011, to a measly 7.4% in Q4 2011. Other notable items: CapEx jumped from $325 million in Q3 to $486 million in Q4, meaning that based on the traditional Free Cash Flow definition of EBITDA-CapEx, that used for bond indenture purposes, Alcoa actually burned cash in Q4. Finally, the company forecasts global aluminum demand and supply deficit (probably does not explain why it has been shuttering smelter capacity all around the world) of 7% in 2012- a big drop from recent years. All in all - not quite the right way to start the new year.

So that's the data ex-spin. Here is how management presented it:

4Q 2011 Highlights

  • Loss from continuing operations of $193 million, or $0.18 per share; excluding special items, loss from continuing operations of $34 million, or $0.03 per share
  • Revenue of $6 billion, down 7 percent sequentially, up 6 percent from 4Q 2010
  • Cash from operations of $1.14 billion, up $653 million from 3Q 2011
  • Record low days working capital
  • Free cash flow of $656 million
  • Cash on hand of $1.9 billion
  • 531,000 metric tons of capacity closed or curtailed to improve competitive position
  • Forecasting 7 percent growth in global aluminum demand and a global aluminum supply deficit in 2012

“Alcoa turned in solid performance in a volatile year by responding quickly to changing market conditions and relentlessly managing cash. We stayed focused on growth and took aggressive action to cut costs, improve our competitiveness, and strengthen our balance sheet,” said Alcoa Chairman and CEO Klaus Kleinfeld.

“For 2012, we expect global aluminum demand to grow 7 percent and are forecasting a global deficit in primary aluminum supply.”

Alcoa’s growth projection is ahead of the 6.5 percent rate required to meet the Company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth seen in 2010.

Alcoa also projects that growing demand for aluminum, combined with market-related production cutbacks, will result in a global aluminum industry deficit of 600,000 metric tons in 2012.

Alcoa projects global growth in the aerospace (10-11 percent), automotive (3-8 percent), commercial transportation (2-5 percent), packaging (2-3 percent), and building and construction (4-5 percent) markets.

Net result: AA flat after hours which may be good considering today's run up into the close.

Full earnings here.


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SheepDog-One's picture

Lookin good, bitchez, definite tailwind here we're off to recovery land! No QE needed at all, now lets get busy pumping those futures, boys!

Irish66's picture

not so quick, this has some big implications.

SheepDog-One's picture

Nothing a bit of headline spin wont fix in an instant!

SheepDog-One's picture

I'm sorry sir....I do NOT gamble!

Besides, let me have a bit of fun, I'm just trying out my chops as a CNBC headline writer!

Irish66's picture

Sheep you were on a roll today with all your posts.  I was trying to put you over the edge.

I still can't hire you as a writer, sorry.

lotsoffun's picture

BAC and GS going to rock this week.  can't be any other way.


Chappy's picture

Estimates were $0.20 a share back in October.  Glad to see they were able to meet the substantially lowered expectations.  And somehow this is bullish and the stock is up .8% after hours. Not too negative is the new positive.

SmoothCoolSmoke's picture

AA now RED AH.  Look for a down open tomorrow as the smoke and mirrors clear.

SheepDog-One's picture

Aw darn it, and just when things were lookin so good with huge rise in 'consumer credit' and all. People SHOULD have been buying BEER on credit!

Vampyroteuthis infernalis's picture

(Crappy) Beer will be the only thing they can afford!

J 457's picture

Shutting down a few EU plants as well, now that should really help them dodge recession.

LawsofPhysics's picture

Wow, is it time to sell the news yet?

J 457's picture

Sell now, or just hold in your long-term portfolio until 2019, or so.  It must eventually recover, right??  Or just buy MCD, GMCR, NFLX, and now DNDN.  I here (maybe?) you can't lose.

navy62802's picture

The world is broke. Thus, the world isn't building shit. Thus low demand for raw materials. Not really all that surprising to me.

lotsoffun's picture

i just realized the 'second coming'!  jesus was a carpenter.

votes up??  please??


apu123's picture

Didn't you guys see the headline on CNBCialis, poor earnings are now bullish for stocks because expectations will be lower!  Also Bob Pisani said all of us gloom and doomers will be depressed because no earnings implosion is going ot happen, we can all party like its 1999.

All of this in a worsening EU environment.  These guys can't even come up with new rumors anymore, they just re-hypothecate old ones.  This whole Greek and Italian situation is just like ground hog day, I feel like I have lived through it before.  How long can they keep this thing going?

SheepDog-One's picture

People think it can go on for a long time, however what is needed now is another big reset. No POINT in just 'keeping it going'.

LooseLee's picture

Piss-On-Me is a disgrace to the whole MSM profession. He is a Pollyanna Establishment Shill who does what he does because he is a COWARD. If he had any cahones he would tell it the way it is, but he always embellishes towards the Bulltard line. He will one day have to answer to the masses for not having enough courage to stand up for what is RIGHT and TRUE (ditto for Cramer, Kudlow, Cabrera, and Kernen)...

Caviar Emptor's picture

THey're cutting back 12% of aluminum smelting operations. 

That's traditionally a huge tell on housing and the general economy. 

Can't have a recovery without more aluminum. 

This is a contraction. Layoffs are planned too

SheepDog-One's picture

Usually in a recession you can depend on beer sales going way up, not this time though.

apu123's picture

That's weird, the gas station down from my house will accept EBT for beer so you would think it would be flying off the shelf.  Maybe we have crossed the line and are now in cheap scotch territory?

youngman's picture

I drank a lot of beer this there...burp

Zero Govt's picture

looks like Rothchild and JP Morgan bought into Alcoa at the wrong time ...bad timing and tough tits boys, you'll just have to rig the aluminium market to 'win' back your losses as per your usual biz practices

Jlmadyson's picture

All the lowering of overall expectations came in handy for the headlines. Not enough lowering to cover the base of what is coming however.

John Law Lives's picture

"Alcoa was expected to generate $(0.03) in EPS in Q4 and so it did."

Sure it did... after EPS projections were steadily lowered from $0.21 per share to the current target over the last 90 days:

It must be nice to be able to move the bar lower and lower until you are assured of clearing it so you can claim victory in the press.


Rainman's picture

yah.....Those emergency powers shot caller's got a nice gig

LooseLee's picture

Yup. And the shills on CNBC will one day be held accountable...not to mention the sell-side analysts. It will be a time of glorious justice as those who aided and abetted the raping and pillaging of the average 'Joe' is made to make penance for the sins he has committed! Those reading this KNOW WHO THEY ARE....

chump666's picture

Anyone buying the AA dip 100% deserve to be brutalized by Wall Street sellers.

*Alcoa Inc. (AA), the world's largest aluminum maker, posted a fourth-quarter loss, largely due to slumping prices and charges to curtail high cost production in Italy, Spain and the U.S.


orangedrinkandchips's picture

Hats off to Zero-Hedge and "Tyler".....I mean jeez, I am a sarcastic jackass but he trumps me....which is so refreshing....hilarious even....


exit....stage left

Randall Cabot's picture



Asia Markets Archives | Email alerts

Jan. 9, 2012, 7:56 p.m. EST

Asia stocks up after Alcoa results, Europe talks

By Sarah Turner, MarketWatch

SYDNEY (MarketWatch) — Asian shares gained Tuesday after U.S. aluminium giant Alcoa Inc. released quarterly results and amid some signs of progress in talks to tackle Europe's ongoing debt crisis.   




surf0766's picture

Burning Cash causes global warming!!!!!!!!!!!!!!!!!!

roy10's picture

What's the forecast for Q1?

Yardfarmer's picture

 On whether U.S. stocks are also the 'cleanest dirty shirt':

"They are. But in this case, we have to ask the question. Alcoa is going to be very important as will other firms. To what extent are they being hit on revenue? To what extent can they continue to contain costs? We're going to get lots of information."  Mohammed El Arian

Dorky's picture

Who or what in the world is bidding up Alcoa?

Dorky's picture

Who or what in the world is bidding up Alcoa?