Alcoa - high taxes

[i4value]

Alcoa is a US aluminum company that is profitable before taxes. But when you look at the profit after tax, the company incurred large losses. The chart below illustrates what I mean. You can see the high tax rates over the past few years.



I have written to the Investor Relations dept for an explanation of the high taxes, but have not received any response so far.

Some has suggested that since Alcoa has some bauxite mining operations, they could be paying royalties based on extraction rather than earnings. Does anyone have any experience with mining companies and/or aluminum companies to provide a good explanation for this?

I am a long-term value investor hunting for underprice companies to invest in. If you want to see some of my insights on other investment opportunities go my summary of US stocks.

[i4value]

I found one simple explanation for this. The company had two segments - Domestic and Foreign. While the Foreign was profitable, the Domestic lost money thereby reducing the overall profits. But even though the Domestic had no taxes, when you calculate the overall tax rate you take to total tax divided by the total profits. The Domestic losses magnified the overall tax rate.

For example, let us say that the profits/(loss) for the Foreign and Domestic was $600 and ($400) respectively resulting in a total profit of $200 . And assumed that the taxes paid was $ 200 and zero for the Foreign and Domestic operations. Then the overall tax rate = 200 taxes /200 profits = 100 %. While it seems like an arithmetic problem, the real question is when will the Domestic ops be profitable

[i4value]

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