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Alcoa's (AA) Disappointing Earnings, Factory Expansion Cloud Guilty Plea to Bribery Charges

By  +Follow January 14, 2014 6:38AM
Tickers Mentioned:

With the early Tuesday announcement of a $300 million expansion of its Davenport, Iowa factory, shares for the $10 billion aluminum giant Alcoa Inc. (AA) got a much-needed lift of just over 2 percent early on in the day’s trading session.

Auto Manufacturers Spurr Aluminum Demand

The announcement was made at the North American International Auto Show in Detroit, Michigan, and is positive news for a company that struggled under the weight of an uncertain global economy for a great deal of 2013. Automobile manufacturers have increasingly been turning to aluminum as “a cost-effective way to improve the performance, safety, durability and fuel efficiency of their vehicles,” according to Alcoa CEO Klaus Kleinfeld, who added that the Davenport upgrade would be the first of three such investments that the company will be making to meet growing demand.

And demand is indeed growing. The automobile industry expects its use of aluminum to increase drastically over the long-term, but the trend is already well underway; by next year, the amount of the metal used in car bodies will quadruple from 2012 levels.

Earnings Disappointment

The news also provides a modest palliative for the fourth quarter and full-year 2013 earnings reports the company released on Friday, Jan 10, that showed revenue off by over 5 percent on a year-over-year basis, with earnings-per-share in the negative by $2.19 on an unadjusted basis, and still shy of analyst expectations when excluding one-time items.

The timing of the previous week’s earnings release was inopportune for the company that appeared to be rallying off of an anemic this past October. All said and done, Alcoa added over 18 percent in 2013, largely thanks to the late-year recuperation, but lost nearly 6 percent last Friday after revealing its balance sheet, sending the stock into negative-performance territory for 2014.

Corruption in the Bahraini Petro-Monarchy

Still, an underwhelming balance sheet can have its uses, and this is particularly so for Alcoa. The company’s reporting is widely, if unofficially, viewed as the signal that earnings season has arrived. Furthermore, given its domestic and global business and clientele, many see its financial performance as a useful gauge of economic conditions.

Indeed, Alcoa’s report last Friday garnered far more attention than an announcement on the same day one of its subsidiaries, Alcoa World Alumina, had agreed to pay $384 million over bribery charges in Bahrain, charges to which it plead guilty.

According to a Jan 10 article from the Financial Times, Victor Dahdaleh, a British-Canadian representative of the firm who just last month managed to avoid a criminal conviction the UK, was involved paying bribes to an advisor to Bahrain’s “Prime Minister”, as well as other members of the gulf nation’s “royal family”.


The murky deal involved a 2004 agreement that solidified a long-term distribution deal with Bahrain’s state-controlled aluminum manufacturer Alba. Offshore bank accounts in various countries were used to cover up kickback payments to Bahraini officials and businessmen, and the whole scheme was premised on the ability to artificially markup the price of aluminum by some $188 million from 2005 to 2009.

The Alcoa World Alumina joint-venture with Alba will pay $223 million in fines and penalties over the next four years in order to settle the charges, and an addition $161 million to settle civil charges brought by the Securities and Exchange Commission for various records-keeping and bribery violations.

By midday, shares for Alcoa were up by about 1.66 percent to $10.26 a piece.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for AA
Stock Wire
31 Oct 14 16:21:33
Alcoa Provides Notice of Pendency and Proposed Settlement of Shareholder ... $AA http://t.co/lH4qndWf14
31 Oct 14 16:00:05
Media Sentiment
31 Oct 14 15:34:51
$AA received a new alert. Find out why at http://t.co/5udYd0Ofs6 #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 508
31 Oct 14 15:32:39
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31 Oct 14 15:31:25
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Stock Moo
31 Oct 14 15:02:45
$aa: Alcoa Provides Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions http://t.co/2U7hDPVdvO
James P Worthy
31 Oct 14 14:32:06
$AA Alcoa Earnings Preview http://t.co/gpNMDmNbYE
Stocks News&Markets
31 Oct 14 14:25:18
$AA - Current Report Filing (8-k) http://t.co/EnXDoDpBg1
Instrumental Data
31 Oct 14 14:22:40
ALCOA INC. $AA 8-K now available
Stocks News&Markets
31 Oct 14 14:16:19
$AA - Alcoa Provides Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions http://t.co/Clse6UcaB2
BV Basic Materials
31 Oct 14 14:15:08
$AA Alcoa Provides Notice of Pendency and Proposed Settlement of Shareholder Derivative Actions.. http://t.co/fOXF6RxsIY
Stock Relay
31 Oct 14 13:41:10
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31 Oct 14 13:04:35
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Hit The Bid Radio
31 Oct 14 13:02:43
$AA We are on our way to $25 I say by April and I hope as well considering I am in the Calls for that month. Good luck people. Happy Boo day
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31 Oct 14 13:01:32
$AA I believe all markets are manipulated but really, man oh man how they tried to shake people out this the last couple of days. Criminal
v2 Ratings
31 Oct 14 12:43:35
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31 Oct 14 12:41:08
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Trent Blair
31 Oct 14 11:32:28
RT @FutureMeDead: $AA Alcoa Elliott Wave Analysis. Clean 5 waves up. Expect a correction. http://t.co/I4i5Zn3W54
Kevin B. Bantz
31 Oct 14 10:41:20
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Shiraz Lakhi
31 Oct 14 10:10:50
Biggest % Gainers in MINING sector in Last 52 Weeks $CENX $LSG $AA $RIC $AKS ++ (click "View") http://t.co/y4JCeZRGPo
31 Oct 14 10:00:02
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Stock Relay
31 Oct 14 09:58:59
$ILMN P/E Ratio Click Here: http://t.co/U8TCMus963 Also See: $SBUX $NUGT $MMM $AA ~
Hit The Bid Radio
31 Oct 14 09:50:09
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31 Oct 14 09:41:29
$GE Chart $GE Most recent stock chart and technical analysis. $LVS $TSLA $TNA $ARR $AA $PEJ http://stockcharts http://t.co/4YWeOBVT9V
Investing Philosophy
31 Oct 14 09:36:36
RT @SAlphaTrending: Realty Income: What's Your Preference? http://t.co/s4SJeE3Mip $AA $DD $JPM $KMB $TGT $USB $WFC $O
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31 Oct 14 09:33:38
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Seeking Alpha
31 Oct 14 09:30:02
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Investors Hangout
31 Oct 14 08:56:23
jim50: $AA High Date=Oct-30-2014 Open=16.17 High=16.36 http://t.co/cvl08VR3zB
Investors Hangout
31 Oct 14 08:56:13
jim50: $AA High Date=Oct-30-2014 Open=16.17 High=16.36 http://t.co/FBYr4x2V2H
Quantpost Basic Mats
31 Oct 14 08:53:26
$AA $DD News: "Realty Income: What's Your Preference? $AA $DD $JPM $KMB $TGT …" http://t.co/kazC6GOVeN Board view: https://t.co/eINynLJMz9
Quantpost Financial
31 Oct 14 08:53:24
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Quantpost Service
31 Oct 14 08:53:24
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Seeking Alpha
31 Oct 14 08:53:20
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31 Oct 14 08:52:33
$AA High Date=Oct-30-2014 Open=16.17 High=16.36 Low=15.83 Close=16.22 Volume=17857100 http://t.co/n91YQWzsaE
31 Oct 14 08:34:10
$KO > 48% yesterday. $AA 27% today. http://t.co/QKYRO2yCoP
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31 Oct 14 07:35:53
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31 Oct 14 07:25:05
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Future Tech Investor
31 Oct 14 07:07:07
$AIV chart $F $GM $MBLY $FB $GE $X $BA $LMT $HPQ $TXN $RTN $AA $JPM $BAC $WFC $YHOO $C $NFLX $CMG $TTM $FLEX $YY $DDD http://t.co/L1XP9B8C7N
Future Tech Investor
31 Oct 14 07:03:10
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31 Oct 14 06:52:32
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31 Oct 14 06:47:03
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31 Oct 14 06:25:33
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Stock Relay
31 Oct 14 05:11:31
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31 Oct 14 04:10:09
Alcoa : Assigned Patent http://t.co/p3umrATday $AA
By  +Follow January 14, 2014 6:38AM



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