wednesday, 10 october of 2012

Alcoa tops estimates, settles case with Bahrain firm


Alcoa tops estimates, settles case with Bahrain firm

Aluminum maker Alcoa Inc. reported a net loss of $143 million for the third quarter, partly reflecting the costs of settling a four-year legal battle over bribery allegations, but results were modestly better than Wall Street's forecasts.

Pittsburgh-based Alcoa said earlier Tuesday it agreed to a multimillion-dollar settlement of its legal fight with a Bahrain company that alleged it took part in a scheme involving bribery to gain lucrative contracts.

Alcoa will pay $85 million to Aluminum Bahrain BSC, a government-owned manufacturing company also known as Alba, according to both companies. Alba, which has one of the world's largest aluminum smelters, bought raw materials from Alcoa. The settlement also includes $360 million in new contracts for future alumina sales, according to Alba. Alcoa noted it expected to make a profit on the contracts.

Alcoa recorded a third-quarter net loss of 13 cents per share, reflecting the legal settlement, environmental-cleanup costs and other items. That compared with profit of $172 million, or 15 cents a share, a year earlier. Sales declined 9% to $5.83 billion, reflecting lower aluminum prices. The average price charged by Alcoa for aluminum in the latest quarter was $2,222 per metric ton, down 17% from a year earlier.

Excluding $175 million for the legal settlement and other special items, Alcoa reported income from continuing operations of $32 million, or three cents per share, compared with 15 cents per share a year earlier, when it had no special items. Analysts had forecast a break-even result for the latest quarter.

Alcoa also cut its forecast of global aluminum-demand growth for 2012 to 6% from 7%. The company cited slower economic growth in China.

The case settled Tuesday was reopened last year by a federal judge after having been stayed for nearly four years at the request of the U.S. Justice Department. The department is investigating whether Alcoa violated the Foreign Corrupt Practices Act, which prohibits U.S. companies or those that trade on U.S. stock exchanges from paying bribes to foreign officials to gain a business advantage. The U.S. Securities and Exchange Commission is also investigating alleged FCPA violations.

The settlement didn't include an admission of liability, according to Alba's statement.

Alcoa said in its earnings report it might reach a settlement with the Justice Department and the SEC. Justice Department officials didn't return a request to comment on the status of their investigation. An SEC spokeswoman declined to comment.

Alcoa, in a statement on the settlement, said it would recognize a charge of between $25 million and $30 million "in the event that a settlement is reached with the Department of Justice and the Securities and Exchange Commission regarding their investigations."

It said the $85 million payment to Alba would be made in two installments over the span of a year. Alcoa recorded a $40 million charge in the third quarter, in addition to a $45 million charge recorded in the second quarter.

"The settlement with Alba represents the best possible outcome and avoids the time and expense of complex litigation," Alcoa said in the statement. The two companies are "demonstrating a mutual desire to work together going forward," it said.

In a news release, Alba Chairman Mahmood Hashim Al-Kooheji said, "The new leadership of Alcoa is to be commended for this fair and transparent settlement, which marks a turning point for Alba in its legal efforts to recover losses suffered over a long period of time."

The legal agreement stems from an unusual federal-court filing that involved a foreign state-owned company seeking redress in a U.S. civil court.

In April 2008, Alba, whose principal shareholder is an investment arm of the Kingdom of Bahrain, hired U.S. law firm Akin Gump Strauss Hauer & Feld LLP and sued Alcoa in federal court in Pennsylvania, accusing it of violating civil racketeering laws, among other things.

The complaint alleged Alcoa and its agent, Canadian businessman Victor Dahdaleh, conspired to overcharge Alba by hundreds of millions of dollars for the purchase of thousands of tons of alumina, which is used to make aluminum. The suit accuses Alcoa of paying roughly $9.5 million in bribes to Bahrain officials and Alba executives in exchange for the overpayments.

Mr. Dahdaleh didn't participate in the settlement and remains a defendant in Alba's lawsuit. The U.K.'s Serious Fraud Office indicted him on bribery charges tied to the case, and his criminal trial is set to begin in London in April. His attorney didn't return requests to comment.

(Published by WSJ - October 9, 2012)

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