The chairman of Reynolds Metals Co. the nation's second largest aluminum producer, today predicted a strong year for the company despite prospects of a recession and a drop in sales of domestic cars, which are big aluminum users.
First-quarter profits, released today, increased, and company Chairman David P. Reynolds said he expects a good second quarter for the company. The third and fourth quarters will be affected by a recession, Reynolds told reporters following the company's annual shareholders meeting.
However, aluminum is "in a better position than the economy in general because aluminum has so many energy-saving uses" that will keep it in demand, he said.
For example, domestic and foreign automakers will need more aluminum to make their vehicles lighter and subsequently increase their miles-per-gallon rating, Reynolds said.
"Strength in markets such as aircraft, cans, electrical cable and exports has been offsetting weakness in other markets" such as automobiles, Reynolds said. "Supply and demand are in reasonably good balance and our inventories and our customers' inventories are lean. At this point we think 1980 should be one of the company's better years, with shipments roughly comparable to those in 1979."
Reynolds acknowledged, however, that utilities -- major users of aluminum cable -- "are hurting" and are depressed right now. "But we feel they're coming out of this," Reynolds said.
Domestic automobile production, which uses about 10 percent of the industry's aluminum, Reynolds said, "is off substantially and we felt that." But its other products are offsetting that, Reynolds said.
For example, the Ford Motor Co. said on Tuesday it will close its assembly in Mahwah, N.J. and lay off a total of 15,000 more employes nationally. That will increase auto industry layoffs to 250,000.
Despite a severe drop in housing sales, Reynolds said the company will not be much affected because 85 percent of aluminum used in homes is in home improvement products such as storm windows and other energy-savers.
In addition, Reynolds said he hopes to benefit from the demand for lighter aircraft, more defense weapons and solar heating products that use aluminum. The company has also started marketing a flexible food-packaging pouch that Kraft Foods recently announced it will use, Reynolds added.
For the quarter, Reynolds reported earnings of $52.1 million ($2.70 a share) compared with $38.3 million ($2.00) a year ago. Net sales were $876.2 million compared with $775.7 million and shipments were 332.990 tons, a decrease from 334.400 tons a year ago.