Frustrations have grown as the stock has suffered over the past couple of years because of weak aluminum prices and slumping demand. But management has been making the best of a bad situation. And after the company reported better-than-expected second-quarter results Monday, there are plenty of signs that the worst is over.
Growth hasn't been sufficient, but management has remained upbeat about the company's prospects, saying recently that it expects 7% growth in demand for aluminum this year. The Street was nonetheless skeptical. Given the state of the aluminum industry, analysts weren't expecting much ahead of the company's second-quarter report. But Alcoa had no plans to disappoint. Revenue fell 2% to $5.85 billion, but that beat Wall Street estimates of $5.82 billion. Again, I've pointed out in the past that betting on this company requires just as much faith in Alcoa's management as on the prospect of the industry recovering. That Alcoa was able exceed sales targets even though aluminum prices dropped 8% from the previous quarter is no small accomplishment and provided another example of why investors should separate the aluminum industry's overall struggles from Alcoa's underlying value. Although the company reported a wider quarterly loss of 11 cents per share. it earned 7 cents per share excluding one-time items, beating estimates by a penny. I expect that many will focus on the loss. But the higher loss included $42 million in charges tied to the closure of facilities. I talked recently about assessing Alcoa based on its after-tax operating income (ATOI) performance. I argued that even though aluminum demand and prices were declining, management was still outperforming the industry on the basis of the company's ATOI performance within each business segment. That proved to be true in the company's Engineering Products and Solutions business, which posted ATOI of $193 million, up 23% year over year and 12% from the first quarter.
Likewise, the ATOI in the alumina business advanced to $64 million from $58 million in the first quarter and from $23 million in the second quarter a year ago. Management figured out ways to extract value as adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) per metric ton was $47, up from $44 in first quarter and up from $31 in the year-ago second quarter.