(Bloomberg) -- Alcoa Corp. shares jumped as much as 10% in late trading as strong alumina prices boosted quarterly earnings to the highest in more than two years.
Alumina futures extended a record rally this week, with the key ingredient for making aluminum surging more than 45% this year amid growing supply constraints. Alcoa earlier this year curtailed its Kwinana refinery in Western Australia, adding to supply disruptions in China, India and Australia. Alumina accounted for almost 30% of the company’s revenue in 2023.
“Alumina tends to be off investors’ radar given pricing is not readily available,” said Timna Tanners, an analyst at Wolfe Research.
Adjusted earnings before interest, taxes, depreciation and amortization in Alcoa’s alumina segment nearly doubled from the second quarter to $367 million. Companywide net income of $90 million was the best performance since the second quarter of 2022.
Alcoa shares jumped as high as $46.30 in after-hours trading. The stock of the Pittsburgh-based company already was up more than 20% this year before the report, helped by rising aluminum and alumina prices.
“Alumina is acutely short currently – it’s a very very tight market, so we have seen alumina prices run up rapidly over the last 90 days,” Chief Executive Officer Bill Oplinger said in a phone interview. “The tightness should persist through the first half of next year.”
Alcoa is projected to generate Ebitda of $1.33 billion in 2024, the average of analysts’ estimates compiled by Bloomberg, following its lowest annual earnings since the company split from its jet- and car-parts business in 2016.
The upbeat shift comes a year after Oplinger took the helm and declared a “cultural change” for Alcoa, which included fast decision-making, operational tweaks and performance improvements. Since last October, the company won conditional permission for its bauxite mines in in Western Australia to keep operating and acquired its Australian joint-venture partner Alumina Ltd.
(Updates with CEO’s comments in sixth paragraph)
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