Alcoa Inc (AA.N) reported a stronger-than-expected increase in third-quarter profit on Wednesday as higher aluminum prices and lower costs drove a recovery in its business unit that produces aluminum.

In an interview, Alcoa Chief Executive Klaus Kleinfeld said the "upstream" raw materials business had its best quarter since the 2008 economic slump. "Our performance this time is more great proof that our strategy is working," he said.

The aluminum company traditionally has been one of the first S&P 500 companies to report quarterly results, and some see it as a bellwether for the broader U.S. economy because it supplies major industries such as auto and airplane manufacturing.

Alcoa's stock rose 2 percent in after-hours trading to $16.42. It is up 50 percent this year, outperforming the market and aluminum prices.

In the third quarter, Alcoa's net income rose to $149 million, or 12 cents a share, from $24 million, or 2 cents, even as it took restructuring charges for smelter closures.

Alcoa's growing business making specialized goods for automotive and aerospace customers has helped offset a weak market for less-processed aluminum. The company has also been working to improve costs.

Third-quarter after-tax operating income in Alcoa's primary metals unit, which houses its aluminum mining, refining and smelting operations, jumped to $245 million from $8 million. It also benefited from an increase in average realized prices to $2,538 a tonne from $2,180.

Alcoa has been shutting higher-cost smelting capacity as its joint venture with Saudi Arabian Mining Co 1211.SE expands. Kleinfeld said the Saudi operation is fully ramped up and already profitable.

Asked if Alcoa would close more smelting capacity, Kleinfeld said the company was still targeting lower costs: "We are not done yet," he said.

RESULTS BEAT MARKET EXPECTATIONS

Excluding special items, Alcoa's earnings jumped to $370 million, or 31 cents a share, in the third quarter, exceeding the 23 cents a share that analysts on average were expecting.

Sales rose to 7 percent to $6.2 billion.

"They beat on earnings, and they beat on revenue, and revenue is a key for investors here. They want to see growth," said Tim Ghriskey, chief investment officer of Solaris Group.

For the second time this year, Alcoa increased its 2014 estimate of production growth for the North America commercial transportation market - an important end market for the company - to a range of 16 to 20 percent from 10 to 14 percent in the second quarter.

After a steep drop, aluminum prices surged 27 percent in the seven months through August to a 18-month peak. They have since given up some gains but are up about 8 percent on the year.

Alcoa's downstream business unit, which has become a bigger contributor to profits, reported record after-tax operating income of $209 million, up 9 percent.