(Reuters) – Alcoa Inc’s (AA.N) chief executive officer said on Tuesday the aluminum company would push deeper into the market for more profitable finished products like truck wheels and aircraft fuselages as it reported quarterly results that beat analysts’ expectations.
At the same time, CEO Klaus Kleinfeld said Alcoa was focused on cutting costs and improving the performance of its traditional commodity business, which has been hit by weaker aluminum prices.
Alcoa’s shares rose as much as 2 percent in after-hours trading. The company’s stock price is up nearly 40 percent this year.
“The transformation of Alcoa truly is in high gear and the results show this. Our strategy is working,” Kleinfeld said on a conference call.
Alcoa’s strategy to boost value-added fabricated product output and broaden its footprint in other light-weight materials like nickel, titanium and lithium has partially offset the pain of prolonged weak underlying primary aluminum prices on the London Metal Exchange CMAL3, which have been close to or below breakeven for many smelters over the past year.
Alcoa has idled or permanently closed loss-making smelting capacity as it ramps up its smelter complex in Saudi Arabia, which will be the world’s lowest-cost.
While LME prices have recovered recently, hitting a one-year high of $1,950 per ton on Tuesday, a massive stockpile of metal continues to cast a long shadow over market sentiment.
“They are certainly very aggressively altering their portfolio, becoming less cyclical, less economically sensitive, more value added, more profitable – transforming,” said Tim Ghriskey, chief investment officer of Bedford Hills, New York-based Solaris Asset Management, which owns Alcoa bonds.
On rising truck orders, Alcoa on Tuesday increased its 2014 growth estimate for the North America commercial transportation market to a range of 10 to 14 percent, up from a previous range of 5 to 9 percent in the first quarter.
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