Alcoa falls as Q4 profit misses consensus expectations

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By Sam Boughedda 

Alcoa (NYSE:AA) shares declined 4% Thursday after the aluminum firm missed profit expectations when it reported its fourth quarter earnings after the close on Wednesday.

Alcoa posted a Q4 loss of $0.70 per share, $0.03 worse than the analyst estimate of a loss of $0.67 per share. Revenue came in at $2.7 billion versus the consensus estimate of $2.66B.

The company said it experienced challenging market conditions during the quarter, which included high costs for raw materials and energy and lower sequential pricing in the Alumina and Aluminum segments in the fourth quarter.

"Last year, global turbulence negatively influenced costs for energy and raw materials, and we saw significant variance on product pricing between the first and second halves of 2022," said Alcoa President and CEO Roy Harvey. "We are taking actions to further improve, and we have the experience, rigor, and skill to drive excellence across our global operations with disciplined cost management."

Looking forward, Alcoa said it sees total alumina shipments to range between 12.7 million and 12.9 million metric tons, a decrease of 0.5 million metric tons from last year due to the partial curtailment of the San Ciprián refinery and lower bauxite quality at the Australian refineries.

Following the release, B Riley analysts told investors in a note that Alcoa "reported 4Q22 adjusted EBITDA (excluding special items) of $29M, below our and consensus estimates of $107M. The miss versus our estimates was primarily driven by higher production costs, along with a $25M charge for ARO obligations at the Alumar refinery."

"Looking ahead, Alcoa expects to benefit from lower natural gas prices in Europe, along with moderating coke prices, but management believes it's too early to have certainty around energy costs beyond 1Q. We now estimate 1Q23 EBITDA of $132M (from $258M) and 2023 EBITDA of $1,264M (from $1,501M), mostly on higher alumina costs. We maintain our Neutral rating with a $42 PT (from $41) as our lower near-term estimates are offset by a slightly higher long-term price deck," added the analysts.

Meanwhile, Citi analysts said the company reported a weak quarter, but prices and costs are trending in the right direction for Q1.

"Alcoa reported adj. 4Q22 EBITDA of $29m vs Citi at $69m – we would consider this only a very modest miss vs $2.7bn of revenues. 1Q23 results will likely include $115m of lower costs in the aluminum segment – mostly Norway energy – but management noted that key inputs remain surprisingly sticky," wrote the analysts.