Rolls of aluminium © Bloomberg

Productivity gains enabled Alcoa to report earnings above expectations for the second quarter, helping the US aluminium group offset the weaker price of the metal.

Alcoa’s earnings per share were 15 cents for the three months to June, down from 19 cents in the equivalent period of last year but above the 9 cents average of analysts’ forecasts.

Revenues were in line with expectations at $5.3bn, down 10 per cent from the second quarter of 2015, so the outperformance on earnings all came from lower costs.

Klaus Kleinfeld, chief executive, said: “This shows that the things that we have been saying we are doing are happening.”

Alcoa shares were up about 4 per cent at $10.50 in after-hours trading in New York.

Alcoa is in the process of splitting into two companies: an upstream commodity business producing aluminium and the materials used to make it, and a downstream specialised metals and components group.

After tax operating earnings fell to $150m in the upstream businesses, down 47 per cent compared with the second quarter of 2015, and rose 3 per cent in the downstream operations to $294m.

Profits upstream were squeezed as the selling price of Alcoa’s aluminium dropped 15 per cent compared with the previous year.

However, Mr Kleinfeld argued that the results showed the upstream business was not the “ugly duckling” that it was sometimes portrayed as.

After primary aluminium production fell into a loss in the second half of last year, profits from that division have been growing in 2016, as Alcoa has continued to shut down higher-cost capacity.

Since 2007, it has closed or sold 36 per cent of its refining capacity for alumina, the intermediate material used to make aluminium, and 43 per cent of its smelting capacity, including most recently the Warwick Operations smelter in Indiana.

Mr Kleinfeld said those cuts were pushing Alcoa’s operations down the cost curve and putting it in a better position to compete when the market recovers.

“The moment prices go up, it goes straight to the bottom line,” he said.

The downstream operations, which will be renamed Arconic after the separation, have grown only slowly in what the company describes as a “transition year” for the aerospace industry, with a “careful ramp-up” of production of new aircraft models.

Mr Kleinfeld predicted that the aerospace market would return to double-digit growth next year.

The downstream business has also been hit by a steep fall in demand from the North American truck industry, which is expected to drop by 26-28 per cent this year.

Mr Kleinfeld reiterated an earlier comment that he was “disappointed” by the UK’s referendum to leave the EU. International integration had brought unprecedented stability and prosperity since the second world war, he said, “and we need to remind ourselves of that, and we need to remind ourselves of our responsibility to leave that for future generations.”

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