February 26, 2013 08:00 ET

Aluminum Companies Face Slump in Prices

The Provides Stock Research on Alcoa Inc. and Noranda Aluminum Holding Corp.

NEW YORK, NY--(Marketwire - Feb 26, 2013) - Aluminum industry is going through demand and supply imbalance, where supply surpassed demand, leading to price glut. The impact of the situation is clearly visible on the bottom-line of the leading companies. Noranda Aluminum Holding Corp. (NYSE: NOR) announced higher fourth quarter losses despite posting higher revenue. The depressed pricing exerts pressure on the company's margins. On the other hand, Alcoa Inc. (NYSE: AA) reported better results as it has a more diversified product portfolio. The sector is likely to see an uptick with improvement in the general economy and in specific sectors like auto and machinery.

Access our free reports on Alcoa Inc. and Noranda Aluminum Holding Corp. Traders can also connect to our Wall Street Trading Floor where our research desk and market pros are standing between 8:50 am to 4:15 pm ET at

Noranda Aluminum reported its fourth quarter results and beat revenue expectations. Its revenue stood at $332.9 million, surpassing analysts' estimates of $332.09 million, while the company's EPS was recorded at -$0.12, lagging behind consensus estimate of -$0.03. Noranda's stock is down 20 percent as far as this year is concerned. However, it is expected to pick up on the back of better-than-expected results.

The company is also restructuring its business to curtail costs. Its results suffered due to price squeeze for its products. However, demand is expected to pick up this year and may compensate for the slump in selling price. The company is also looking for alternative sources of financing to cut down its costs. Noranda is also able to put all its upstream plants in full production. While the weakness in aluminum is likely to persist, the company may pull back its profits with proper cost-cutting measures.

Despite the company stock's disappointing performance, Noranda delivers 3.30 percent dividend yield. It recently announced its quarterly dividend of 4 cents per share. The company's dividend payment is deemed to be safe and its stock is also likely to recover in the midterm period.

Alcoa Inc. is one of the leading companies in its segment. However, it is also grappling with weakness in the broader market. It has a global presence and thus is more insulated to regional turbulences. Alcoa also deals in non-aluminum products and blunting the sting of soft aluminum prices. The company still derives three quarter of its revenue from alumina and related metals.

The company's stock is down 3 percent thus far in 2013. However, it recently reported strong results, which may act as a positive catalyst for the stock. The company also announced its quarterly dividend at 3 cents per share, providing value to its investors. For its fourth quarter, the company reported its net income at $242 million, up from net loss of $191 million it had incurred for the previous year quarter.

The company is also aggressively pursuing growth as it signed a new deal with Commercial Aircraft of China Ltd. through its Alcoa Fastening Systems unit. The deal will help the company in boosting its presence in China. Under this agreement Commercial Aircraft of China will buy its supplies from Alcoa. The company also inked a new JV with Australian firm Alumina. The JV is named Alcoa World Aluminum & Chemicals.


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