There's not much evidence of a significant market upturn

Peter Ward Lehman Brothers

A 46% fall in profits during the first three months of 2002 followed a near 75% drop during the last three months of 2001.

The drops mark the firm's troubled position which follows an eight year period without any falls in quarterly profits.

Alcoa blamed a sharp fall in aluminium demand for the fall in earnings to $218m (�152m) for the January to March period, down from $404m during the first quarter of 2001.

Aluminium prices have slumped from $2.13 per pound in the last quarter of 2001 to $1.80 per pound in the first quarter of 2002.

Analysts had predicted the fall in profits. Alcoa's shares gained 2.7% following the results.

Tough times ahead

Alcoa Chairman and chief operating officer Alain Belda warned that the tough times were not over yet.

"The near-term operating climate remains challenging, and we continue to focus on managing what is in our control," he said.

"There's not much evidence of a significant market upturn," agreed Lehman Brothers analyst Peter Ward.

But longer term, Mr Belda saw some brighter lights.

Aluminium prices have started to pick up since Christmas due to rising demand from the car industry and other manufacturers.

"As demand for aluminium strengthens, we will capture the efficiencies generated by last year's strategic restructuring."

"Alcoa continues to do a great job with the variables under its control, which means hitting cost reduction targets and keeping their capital expenditures under control," said Mr Ward.