This summary is based on the first quarter fiscal 2008 earnings call conducted by Alcoa Inc. (AA: chart) on April 7, 2008.
Chairman & CEO: Alain Belda
Executive VP & CFO: Charles McLane
President & COO: Klaus Kleinfeld
Director, Investor Relations: Greg Aschman
Key Investors Issues
- The earnings per share dropped to 37 cents as against 74 cents in the prior year.
- Quarterly revenue fell 7% over the prior year to $7.38 billion.
- Alcoa completed a major portion of the packaging divestiture at the end of February, which generated proceeds of $2.5 billion with another $200 million expected in the Q2.
First Quarter Fiscal 2008 Financial Highlights
The first quarter 2008 income from continuing operations was $303 million, or 37 cents per share versus $624 million, or 74 cents per share in prior year.
Excluding restructuring and tax impacts, income from continuing operations was $361 million or 44 cents per share, up 20% on a comparable basis from the prior quarter, which included a favorable restructuring adjustment and tax benefits totaling $323 million or 38 cents per share. First quarter 2007 income from continuing operations excluding restructuring and tax impacts was $691 million, or 79 cents.
Three of four business segments achieved significant after-tax operating income (ATOI) increases from the fourth quarter of 2007, with segment ATOI up 42% excluding packaging. Earnings for the first quarter were compressed by higher input and energy costs, and the impact of a weaker U.S. dollar. Currency negatively impacted results by $68 million or 8 cents per share on a sequential basis, as the U.S. dollar deteriorated against most major currencies.
Net income for the quarter was $303 million, or 37 cents. Net income was $632 million, or 75 cents in the fourth quarter of 2007 and $662 million, or 75 cents in the first quarter of 2007.
Revenues for the quarter were $7.4 billion, flat from the previous quarter.
The quarterly revenue was a 6% increase excluding the revenue of the packaging and consumer business, which was sold in February 2008. Fourth quarter 2007 revenues were $7.4 billion, and revenues were $7.9 billion in the first quarter of 2007.
Cost of goods sold, as a percent of revenues, was 79.9%, a 340 basis point improvement versus the fourth quarter of 2007.
The company funded numerous growth investments in the quarter.
This includes the new Juruti bauxite mine and Sao Luis refinery in Brazil; the strategic investment with Chinalco in Rio Tinto plc; and the acquisition of two aerospace fastening companies.
- In the quarter, capital expenditures were $748 million, 60 percent of which was devoted to growth projects.
- The company repurchased approximately 14 million shares in the first quarter of 2008 under its approved share re-purchase authorization. That now brings the firm’s share repurchase program up to 9.2% against Board authorized level of 25%.
- The debt-to-capital ratio stood at 31.5 percent at the end of the quarter, within the company’s target range. The company''s 12-month trailing ROC stood at 10.7% at the end of the first quarter 2008, following significant growth investments. Excluding investments in growth, the company’s ROC was 13.5%.
- The company completed a major portion of the packaging divestiture at the end of February, which generated proceeds of $2.5 billion with another $200 million expected in the second quarter.
The completion of the packaging divestiture makes a comparison between the two periods difficult.
The sequential impact excluding the packaging segment is as follows:
- Revenue increased $400 million or 6%.
- Cost of goods sold and SG&A as a percent of sales were down 400 and 60 basis points respectively.
- Segment ATOI increased 42% with engineered products and solutions having a record quarter.
- The financial adjustment for packaging can be found under both the restructuring and the effective tax rate lines. The operating effective tax rate for the quarter excluding the adjustment would stand at approximately 29%.
Performance Analysis of Segments
