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Alcoa gives positive aluminum outlook

By Steve James and Ernest Scheyder

(Reuters) - Alcoa Inc posted a fourth quarter loss due to a steep plunge in aluminum prices, but its revenue beat expectations and the company gave a positive outlook for global demand for the metal, especially in the aerospace and automotive markets.

The largest U.S. aluminum producer forecast 7 percent growth in global aluminum demand this year and said cutbacks in production will result in a global supply deficit of 600,000 tons in 2012.

Alcoa added that its growth projection was ahead of the 6.5 percent rate required to meet the company's forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011, while prices fell 18 percent.

"The commentary for the year ahead, in terms of the aluminum market expected to be in deficit, that's a positive, and certainly in line with our view that you will see more supply come out of the market if metal prices stay at these low levels," said Kuni Chen, managing director of CRT Capital Group.

Shares of Alcoa edged higher in extended trading, after gaining 2.9 percent ahead of the results on the New York Stock Exchange. Analysts had expected the Pittsburgh-based company to post a loss after it announced last week that it would cut 12 percent of its smelting capacity due to the plunge in prices.

But they said revenue came in better than they expected, which was a good sign for aluminum demand.

The first company in the Dow Jones industrial average <.DJI> to report results, Alcoa said revenue rose 6 percent to $6 billion even as the price of aluminum fell 6 percent in the fourth quarter. The average analyst estimate was for revenue of $5.7 billion, according to Thomson Reuters I/B/E/S.

Alcoa posted a loss from continuing operations of $193 million, or 18 cents per share, compared with a profit of $172 million, or 15 cents per share in the same quarter of 2010.

Excluding a restructuring charge of $159 million and other items, Alcoa's loss was 3 cents per share, matching the average Wall Street forecast. It was the company's first loss in the last nine quarters.

"Shipments are still holding up very strong. Demand for aluminum is actually quite strong," Morningstar analyst Bridget Freas said. "The loss is not the headline. The revenue is actually higher than expected."

Alcoa said it expects global growth for aluminum in the aerospace industry of 10 percent to 11 percent in 2012, with automotive growing 3 percent to 8 percent. Growth is expected in the transportation, packaging and construction sectors, as well.

Alcoa CEO Klaus Kleinfeld gave a rosy picture of the broader economy, saying he expects global demand for aluminum to continue to rise and double by 2020.

Aluminum demand should grow 12 percent this year in China, a key market for the company, he said on a conference call with Wall Street analysts.

On aerospace, he said: "We now have an increased confidence in the (aircraft) delivery rates because in 2011 the net orders came out to be 2,183 for large commercial aircraft. That's obviously Boeing and Airbus together, second highest in aviation history.

The combined backlog of both firms now is 8.2 years, so I think there is good reason to be optimistic about that market," he said.

For the auto industry, he said it was "another pretty good story with the exception of Western Europe. North America looked in the summer as though we would see a slowdown, but then the fourth quarter came on strong with 13.4 million vehicles."

"We expect this momentum to continue into 2012."

Alcoa's stock rose 3 cents to $9.46 in after-hours trading.

"It's never good to see a loss, but some of this could have been worse," said John Tumazos, an analyst with VeryIndependentResearch.com.

(Reporting By Steve James, Ernest Scheyder and Josephine Mason; Editing by Bernard Orr)

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