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Cost-cutting boosts Alcoa's quarterly profits despite lower sales

Alcoa continues to struggle with the global industrial slump and overcapacity in the aluminium industry
Alcoa continues to struggle with the global industrial slump and overcapacity in the aluminium industry

On the brink of its split into two separate companies, aluminium giant Alcoa yesterday posted a drop in third-quarter revenues on lower commodity prices and sluggish business activity. 

Net earnings more than tripled due to cost-cutting efforts as the company continued to absorb the impact of shuttered smelters. 

But investors were still disappointed as profits missed analyst forecasts, and the company's shares sank 9.5% in Wall Street trade. 

Alcoa continues to struggle with the global industrial slump and overcapacity in the aluminium industry. 

That has meant an ongoing drag on sales in its alumna and primary metals business, which will keep the "Alcoa" name when the 128-year  old company splits in two on November 1. 

The company said its revenues dropped 6.5% to $5.2 billion, but net income for the quarter ending September 30 was $166m, compared with $44m the same time a year ago. 

Premium value-added businesses aimed at aerospace and other growing industries - which will be hived off into the new "Arconic" unit - were hit by softness in the North American commercial transportation business. 

Alcoa also cited delays in aerospace industry deliveries. 

Offsetting those problems was a solid performance in its North American automotive industry sales. 

"Fundamentals in key markets remain very solid; commercial aerospace demand is strong with an order book in excess of nine years and the aluminisation in automotive continues," Alcoa's chief executive Klaus Kleinfeld said. 

"We are well positioned to further increase our market position and profitably grow," he added. 

The higher profits reflect a series of cost-cutting measures and moves to cut capacity at less-efficient industrial facilities. 

Alcoa said it has achieved more than $1.1 billion in productivity savings in 2016 so far. 

Earnings translated into 32 cents per share, a cent shy of expectations.