Alcoa Inc. (AA”>AA) has inked a venture with China Power Investment Corp., one of the largest state-owned power producers in China, to produce high-end aluminum products in China for the growing auto, aerospace, packaging and consumer electronics markets. The terms of the joint venture were not disclosed.
The joint venture will focus on opportunities in the auto industry, aerospace, packaging and consumer electronics market in China.
The two companies signed a letter of intent that sets out the framework for a joint venture. In January, both the companies signed a memorandum of understanding (MoU) in Washington when the Chinese president Hu Jintao paid a state visit to the U.S. The two will work together in overseas and domestic projects.
In July, Alcoa reported adjusted earnings per share of 32 cents in the second quarter of 2011, missing the Zacks Consensus Estimate of 34 cents.
Revenues for the quarter were up 27% year over year to $6.585 billion, outpacing the Zacks Consensus Estimate of $6.434 billion. The increase was due in part to higher alumina shipments, and higher realized pricing for both alumina and aluminum.
The company posted improved profits across all its segments. This was followed by revenue growth of 13% in packaging, 6% in aerospace, 12% in building and construction, 16% in commercial transportation, 9% in industrial products, 8% in industrial gas turbines and 5% in automotive.
The company’s adjusted EBITDA of $1.04 billion was up 44% year over year.
Alcoa reaffirmed its forecast for a 12% growth in global aluminum demand in 2011. Looking ahead, Alcoa projects continued growth in all major end- markets across the globe, including aerospace (7%), automotive (4-8%), commercial transportation (7-12%), packaging (2-3%), building and construction (1-3%), and industrial gas turbines (5-10%).
For the year, Alcoa projects aluminum demand to grow 12% on top of the 13% growth witnessed in 2010. According to Alcoa, aluminum demand would double by 2020 based on a 6.5% annual growth from the 2010 baseline.
Currently, Alcoa has a short-term (1 to 3 months) Zacks #4 Rank (Sell rating) and a long-term (6 months) Neutral recommendation.
Alcoa faces stiff competition from Aluminum Corporation Of China Limited (ACH”>ACH), Rio Tinto plc. (RIO”>RIO) and BHP Billiton Ltd. (BHP”>BHP).
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