Alcoa, Inc. reported a loss in the fourth quarter of $2.3 billion Thursday as lower prices of aluminum caused the company to make a write down in the value of its acquisitions that were made more than 10 years ago.
Without those huge charges, Alcoa posted a profit that was still short of Wall Street estimates. Its decline of 5% in revenue was not as severe as analysts predicted.
Shares of the American company dropped 4% in afterhours trading to $10.26. Alcoa is currently struggling with a glut worldwide of aluminum that has created weaker prices.
During the fourth quarter, the company saw average prices of aluminum 7% lower than during the same quarter a year ago. The company idled one-sixth of its entire smelting capacity and is considering more cuts.
The company did say a brighter future was on the horizon in segments that sell aluminum that is rolled and engineered products that accounted for 57% of the revenue for the company during 2013.
Alcoa is expecting that demand will keep rising for products in airplanes made of aluminum and in commercial construction, of which much is driven due to growth in China.
The company predicted that demand overall for aluminum would increase 7% during 2014, the same growth that took place in 2013.
A joint venture that is 60% owned by Alcoa, admitted to taking part in bribing officials from Bahrain, a kingdom in the Middle East, through middleman in London.
Alcoa World Alumina, the affiliate, will payout fines and other penalties in the amount of $223 million for bribing officials from a foreign country, which violates federal law. The parent company also agreed it would pay a $161 million civil penalty for related violations of rules of the Securities and Exchange Commission.
Alcoa, in 2012, settled claims that were related to the bribing by Aluminum Bahrain, which is state-controlled, for over $85 million.
The CFO of Alcoa said the penalties to be paid would be manageable, as they will be made in five payments. Including the plea deal as well as the write downs of the 1998 Alumax and the 2000 Reynolds Metals acquisition because of current lower prices of aluminum, a number of legacy matters are now behind the company, said William Oplinger the CFO.