ALCAN INC - 10-Q Quarterly Report

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

1188 Sherbrooke Street West, Montreal, Quebec, Canada H3A 3G2
(Address of Principal Executive Offices and Postal Code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

At August 5, 2004, the registrant had 368,252,509 shares of common stock (without nominal or par value) outstanding.

In this report, all dollar amounts are stated in U.S. dollars and all quantities in metric tons, or tonnes, unless indicated otherwise. A tonne is 1,000 kilograms, or 2,204.6 pounds. The word "Company" refers to Alcan Inc. and, where applicable, one or more of its consolidated subsidiaries.

INTERIM CONSOLIDATED STATEMENT OF INCOME (unaudited)
	Second Quarter		Six Months
Periods ended June 30	2004	2003	2004	2003
(in millions of US$, except per share amounts)
Sales and operating revenues	6,252	3,505	12,330	6,754

Costs and expenses
Cost of sales and operating expenses	4,922	2,838	9,925	5,452
Depreciation and amortization	329	216	669	424
Selling, administrative and general expenses	374	177	782	341
Research and development expenses	58	32	119	61
Interest (note 11)	87	54	181	101
Other expenses (income) - net (note 10)	55	20	56	56
	5,825	3,337	11,732	6,435
Income from continuing operations before income taxes and
other items	427	168	598	319
Income taxes (note 8)	140	144	191	285
Income from continuing operations before other items	287	24	407	34
Equity income	17	11	33	18
Minority interests	(15)	(12)	(26)	(13)
Income from continuing operations	289	23	414	39
Income (Loss) from discontinued operations (note 3)	42	(115)	23	(119)
Income (Loss) before cumulative effect of accounting change	331	(92)	437	(80)
Cumulative effect of accounting change, net of income tax of $17	-	-	-	(39)
Net income (Loss)	331	(92)	437	(119)
Dividends on preference shares	1	1	3	3
Net income (Loss) attributable to common shareholders	330	(93)	434	(122)
Earnings (Loss) Per Share (note 4)
Basic and diluted:
Income from continuing operations	0.78	0.07	1.12	0.11
Income (Loss) from discontinued operations	0.11	(0.36)	0.06	(0.37)
Cumulative effect of accounting change	-	-	-	(0.12)
Net income (Loss) per common share - basic and diluted	0.89	(0.29)	1.18	(0.38)
Dividends per common share	0.30	0.30	0.45	0.45

The accompanying notes are an integral part of the interim financial statements.

INTERIM CONSOLIDATED BALANCE SHEET (unaudited)
	June 30, 2004	December 31, 2003
(in millions of US$)

ASSETS

Current assets
Cash and time deposits	351	778
Trade receivables (net of allowances of $67 in 2004 and $88 in 2003)	3,794	3,128
Other receivables	789	681
Deferred income taxes	39	46
Inventories - Aluminum operating segments
- Aluminum	974	943
- Raw materials	429	398
- Other supplies	356	353
	1,759	1,694
- Packaging operating segment	403	395
- Pechiney	1,505	1,680
	3,667	3,769
Current assets held for sale (note 3)	627	712
Total current assets	9,267	9,114

Deferred charges and other assets	1,618	1,591
Deferred income taxes	849	887
Property, plant and equipment
Cost (excluding Construction work in progress)	21,129	21,882
Construction work in progress	780	645
Accumulated depreciation	(8,734)	(8,216)
	13,175	14,311
Intangible assets (net of accumulated amortization of $99
in 2004 and $86 in 2003)	1,237	1,218
Goodwill	5,360	4,686
Long-term assets held for sale (note 3)	89	141
Total assets	31,595	31,948

The accompanying notes are an integral part of the interim financial statements.

CANADA	Inapplicable
(State or Other Jurisdiction of	(I.R.S. Employer Identification No.)
Incorporation or Organization)

INTERIM CONSOLIDATED BALANCE SHEET (cont'd) (unaudited)
	June 30, 2004	December 31, 2003
(in millions of US$)

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities
Payables and accrued liabilities	5,156	4,964
Short-term borrowings	869	1,764
Debt maturing within one year	445	341
Deferred income taxes	50	86
Current liabilities of operations held for sale (note 3)	680	436
Total current liabilities	7,200	7,591

Debt not maturing within one year	7,879	7,437
Deferred credits and other liabilities	4,090	4,099
Deferred income taxes	1,271	1,702
Long-term liabilities of operations held for sale (note 3)	317	323
Minority interests	341	519

Shareholders' equity
Redeemable non-retractable preference shares	160	160
Common shareholders' equity
Common shares	6,588	6,461
Additional paid-in capital	120	128
Retained earnings	3,598	3,331
Common shares held by a subsidiary	(56)	(56)
Accumulated other comprehensive income	87	253
	10,337	10,117
	10,497	10,277

Commitments and contingencies (note 12)

Total liabilities and shareholders' equity	31,595	31,948

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
	Second Quarter		Six Months
Periods ended June 30	2004	2003	2004	2003
(in millions of US$)

OPERATING ACTIVITIES

Net income (Loss)	331	(92)	437	(119)
Loss (Income) from discontinued operations	(42)	115	(23)	119
Income from continuing operations	289	23	414	-
Adjustments to determine cash from operating activities:
Cumulative effect of accounting change	-	-	-	39
Depreciation and amortization	329	216	669	424
Deferred income taxes	42	40	(4)	74
Equity income, net of dividends	(1)	5	(17)	(2)
Asset impairment provisions	1	9	6	12
Gain on sale of businesses and investments - net	(42)	(51)	(42)	(51)
Stock option compensation	2	2	4	4
Change in operating working capital
Change in receivables	(138)	109	(538)	58
Change in inventories	(11)	(31)	68	(61)
Change in payables and accrued liabilities	21	(46)	247	(30)