BOSTON, Jan. 13 -- Alcoa Inc., the largest U.S. aluminum producer, fell the most since March after quarterly earnings trailed estimates because of a higher number of metals trades that boosted revenue while carrying no profit.

Profit excluding certain items was 1 cent a share in the fourth quarter, trailing the 6-cent average estimate of analysts, New York-based Alcoa reported yesterday. Sales declined 4.5 percent to $5.43 billion.

Revenue exceeded the average estimate of $4.84 billion in a Bloomberg survey, and Alcoa said most of the difference, or about $490 million, came from metal trades that generated no profit. Alcoa had to buy 207,000 tons of aluminum on the open market to satisfy customer purchase agreements while coping with higher costs from energy and currency exchange.

"This is a little disappointing because aluminum prices had been pretty strong for the quarter," said John Stephenson, who helps manage C$1.5 billion ($1.45 billion) including Alcoa shares at First Asset Investment Management in Toronto. "One thing I thought they had done well was turn the corner operationally, but now energy costs are getting away from them and they are buying metal on the open market."

Including some costs the quarterly net loss of $277 million, or 28 cents a share, narrowed from a loss of $1.19 billion, or $1.49, a year earlier, Alcoa said in a statement.

Aluminum Prices

Alcoa, the first company in the Dow Jones Industrial Average to report results for the three months through December, fell $1.93, or 11 percent, to $15.52 at 4:15 p.m. in New York Stock Exchange composite trading, the biggest decline since March 30. The shares increased 43 percent on the New York Stock Exchange last year.

Alcoa's sales benefited from aluminum prices that rose 18 percent in the quarter to $2,230 a ton on the London Metal Exchange. The price Alcoa charged customers for the metal increased 9.3 percent from the previous quarter, the company said.

Alcoa produced 897,000 tons of aluminum, up 1.8 percent from the previous quarter, in addition to the 207,000 tons it bought on the open market. Aluminum resale volume in the fourth quarter was almost triple the 70,000 tons from the prior quarter, the company said.

Resale Volume

Alcoa has to buy and resell aluminum every quarter, Kevin Lowery, a company spokesman, said in a phone interview. "It's a matter of meeting customer commitments," he said.

Alcoa wasn't very clear about why the volume of such trades surged in the quarter, Michael Gambardella, an analyst with JPMorgan Chase & Co., said in an interview yesterday.

"Maybe they had problems with production and had to buy material on the spot market," Gambardella said.

The zero-profit trading volume was equal to about 9 percent of total sales in the quarter.

"Disregard the sales figure," said Charles Bradford, a partner at New York-based Affiliated Research Group LLC. "The reason sales did better than expected is they did trading at no margin. There was a substantial portion of revenue that came from that, much more than improvement versus consensus."

Energy costs increased $23 million in Italy during the quarter, after a European Commission ruling that special electricity tariffs Alcoa received there didn't comply with state-aid rules. Alcoa posted a $250 million charge to idle two smelters in Italy while the company appeals the ruling.

Cost Cuts

Chief Executive Officer Klaus Kleinfeld cut about 21,500 jobs from June 2008 through December 2009 as the deteriorating global economy reduced demand for aluminum. In March, he pledged to eliminate $2.4 billion in annual costs for items from raw materials to transportation, and that target was achieved, he said on a conference call yesterday.

This year, Alcoa is looking forward to a 10 percent improvement in global aluminum demand, led by China, Kleinfeld said on the call.

"We expect to see relative improvement from 2009," Kleinfeld said. "Levels will still be below historic norms, but they are up."