Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Howmet Aerospace Inc. | d708701d8k.htm |
| EX-99.1 - EX-99.1 - Howmet Aerospace Inc. | d708701dex991.htm |
 1st Quarter Earnings Conference
1
April 8, 2014
[Alcoa logo]
Exhibit 99.2 |
 Cautionary Statement
2
o[Alcoa
logo] This
presentation
contains
statements
that
relate
to
future
events
and
expectations
and
as
such
constitute
forward-looking
statements.
Forward-looking
statements
include
those
containing
such
words
as
“anticipates,”
“estimates,”
“expects,”
“forecasts,”
“intends,”
“outlook,”
“plans,”
“projects,”
“should,”
“targets,”
“will,”
or
other
words
of
similar
meaning.
All
statements
that
reflect
Alcoa’s
expectations,
assumptions,
or
projections
about
the
future
other
than
statements
of
historical
fact
are
forward-looking
statements,
including,
without
limitation,
forecasts
concerning
global
demand
growth
for
aluminum,
end-market
conditions,
supply/demand
balances,
and
growth
opportunities
for
aluminum
in
automotive,
aerospace
and
other
applications,
trend
projections,
targeted
financial
results
or
operating
performance,
and
statements
about
Alcoa’s
strategies,
outlook,
and
business
and
financial
prospects.
Forward-looking
statements
are
subject
to
a
number
of
known
and
unknown
risks,
uncertainties,
and
other
factors
and
are
not
guarantees
of
future
performance.
Important
factors
that
could
cause
actual
results
to
differ
materially
from
those
in
the
forward-looking
statements
include:
(a)
material
adverse
changes
in
aluminum
industry
conditions,
including
global
supply
and
demand
conditions
and
fluctuations
in
London
Metal
Exchange-based
prices
and
premiums,
as
applicable,
for
primary
aluminum,
alumina,
and
other
products,
and
fluctuations
in
indexed-based
and
spot
prices
for
alumina;
(b)
deterioration
in
global
economic
and
financial
market
conditions
generally;
(c)
unfavorable
changes
in
the
markets
served
by
Alcoa,
including
automotive
and
commercial
transportation,
aerospace,
building
and
construction,
packaging,
defense,
and
industrial
gas
turbine;
(d)
the
impact
of
changes
in
foreign
currency
exchange
rates
on
costs
and
results,
particularly
the
Australian
dollar,
Brazilian
real,
Canadian
dollar,
euro,
and
Norwegian
kroner;
(e)
increases
in
energy
costs,
including
electricity,
natural
gas,
and
fuel
oil,
or
the
unavailability
or
interruption
of
energy
supplies;
(f)
increases
in
the
costs
of
other
raw
materials,
including
calcined
petroleum
coke,
caustic
soda,
and
liquid
pitch;
(g)
Alcoa’s
inability
to
achieve
the
level
of
revenue
growth,
cash
generation,
cost
savings,
improvement
in
profitability
and
margins,
fiscal
discipline,
or
strengthening
of
competitiveness
and
operations
(including
moving
its
alumina
refining
and
aluminum
smelting
businesses
down
on
the
industry
cost
curves
and
increasing
revenues
and
improving
margins
in
its
Global
Rolled
Products
and
Engineered
Products
and
Solutions
segments)
anticipated
from
its
restructuring
programs
and
productivity
improvement,
cash
sustainability,
and
other
initiatives;
(h)
Alcoa's
inability
to
realize
expected
benefits,
in
each
case
as
planned
and
by
targeted
completion
dates,
from
sales
of
non-core
assets,
or
from
newly
constructed,
expanded,
or
acquired
facilities,
including
facilities
supplying
auto
sheet
capacity
or
aluminum-lithium
capacity,
or
from
international
joint
ventures,
including
the
joint
venture
in
Saudi
Arabia;
(i)
political,
economic,
and
regulatory
risks
in
the
countries
in
which
Alcoa
operates
or
sells
products,
including
unfavorable
changes
in
laws
and
governmental
policies,
civil
unrest,
imposition
of
sanctions,
expropriation
of
assets,
or
other
events
beyond
Alcoa’s
control;
(j)
the
outcome
of
contingencies,
including
legal
proceedings,
government
investigations,
and
environmental
remediation;
(k)
the
business
or
financial
condition
of
key
customers,
suppliers,
and
business
partners;
(l)
adverse
changes
in
tax
rates
or
benefits;
(m)
adverse
changes
in
discount
rates
or
investment
returns
on
pension
assets;
(n)
the
impact
of
cyber
attacks
and
potential
information
technology
or
data
security
breaches;
and
(o)
the
impact
of
union
disputes,
strikes
or
work
stoppages;
and
(p)
the
other
risk
factors
summarized
in
Alcoa's
Form
10-K
for
the
year
ended
December
31,
2013
and
other
reports
filed
with
the
Securities
and
Exchange
Commission.
Alcoa
disclaims
any
obligation
to
update
publicly
any
forward-looking
statements,
whether
in
response
to
new
information,
future
events
or
otherwise,
except
as
required
by
applicable
law.
Forward-Looking Statements
Non-GAAP Financial Measures
Some
of
the
information
included
in
this
presentation
is
derived
from
Alcoa’s
consolidated
financial
information
but
is
not
presented
in
Alcoa’s
financial
statements
prepared
in
accordance
with
accounting
principles
generally
accepted
in
the
United
States
of
America
(GAAP).
Certain
of
these
data
are
considered
“non-GAAP
financial
measures”
under
SEC
rules.
These
non-
GAAP
financial
measures
supplement
our
GAAP
disclosures
and
should
not
be
considered
an
alternative
to
the
GAAP
measure.
Reconciliations
to
the
most
directly
comparable
GAAP
financial
measures
and
management’s
rationale
for
the
use
of
the
non-GAAP
financial
measures
can
be
found
in
the
Appendix
to
this
presentation
and
on our
website
at
www.alcoa.com
under
the
“Invest”
section.
Any
reference
during
the
discussion
today
to
EBITDA
means
adjusted
EBITDA,
for
which
we
have
provided
calculations
and
reconciliations
in
the
Appendix
and
on
our website. |
 3
Solid results in the first quarter –
Transformation accelerates
1) Excludes gain from sale of Suriname gold mine interest
o[Alcoa
logo] Strong
Operational
Performance
Strong
earnings
(excluding
special
items)
increase
sequentially
–
Downstream:
Record
performance
-
ATOI
up
9%
YoY
–
Midstream:
Earnings
rebound
-
ATOI
nearly
triples
QoQ;
record auto revenue
–
Upstream:
Improved
performance
-
10
consecutive
quarters
;
highest
Alumina
1Q
ATOI
1
since
2011
Productivity:
$250
million
across
all
segments
YoY
1Q 2014 Overview
Accelerating
Portfolio
Transformation
Commissioned
$300
million
Davenport
automotive
expansion
Investing
$40
million
in
value-add
specialty
packaging
facility
in
Brazil
Expanding
proprietary
wheel
facility
in
Hungary
Announced
~$300
million
after
-tax
restructuring
Australia,
U.S.
and
Brazil
smelting
capacity
totaling
421
kmt;
can
sheet
rolling
capacity
of
200
kmt |
 William Oplinger
Executive Vice President and Chief Financial Officer
4
April 8, 2014
[Alcoa logo] |
 Income Statement Summary
5
See appendix for Adjusted Income reconciliation
o[Alcoa
logo] $ Millions, except aluminum prices and per-share
amounts 1Q13
4Q13
1Q14
Prior Year
Change
Sequential
Change
Realized Aluminum Price ($/MT)
$2,398
$2,157
$2,205
($193)
$48
Revenue
$5,833
$5,585
$5,454
($379)
($131)
Cost of Goods Sold
$4,847
$4,708
$4,495
($352)
($213)
COGS % Revenue
83.1%
84.3%
82.4%
(0.7% pts)
(1.9 % pts.)
Selling,
General
Administrative,
Other
$251
$255
$236
($15)
($19)
SGA % Revenue
4.3%
4.6%
4.3%
0.0
% pts
(0.3 % pts.)
($27)
($10)
$25
$52
$35
Restructuring and Other Charges
$7
$2,111
$461
$454
($1,650)
Effective Tax Rate
27.4%
(15.6%)
28.1%
0.7 % pts
43.7 % pts.
Net Income (Loss)
$149
($2,339)
($178)
($327)
$2,161
Net Income (Loss) Per Diluted Share
$0.13
($2.19)
($0.16)
($0.29)
$2.03
Income
per Diluted
Share excl
Special Items
$0.11
$0.04
$0.09
($0.02)
$0.05
Other (Income) Expense, Net |
 Special Items
1) Total restructuring-related charges of $296 million expected to be
approximately 55 percent cash, 45 percent non-cash See appendix for
Adjusted Income reconciliation 6
o[Alcoa
logo] $ Millions, except per-share amounts
4Q13
1Q14
Income Statement
Classification
Segment
Net Loss from Continuing Operations
($2,339)
($178)
Net Loss Per Diluted Share
($2.19)
($0.16)
Restructuring-Related
1
($302)
($296)
Restructuring/COGS/
Other Expenses (Income), Net
Corporate /
Primary Metals/
GRP
Tax Items
($361)
$22
Income Taxes
Corporate
Saudi Arabia Smelter Potline
($9)
($13)
COGS/
Other Expenses (Income), Net
Primary Metals
Massena
Fire
$5
$0
COGS
Primary
Metals/EPS/Corp
Goodwill Impairment
($1,719)
$0
Goodwill Impairment Charge
Corporate
Mark-to-Market Energy Contracts
$7
$0
Other Expenses (Income), Net
Corporate
Surgold
Gain
$0
$11
Other Expenses (Income), Net
Alumina
Special Items
($2,379)
($276)
Net
Income from Continuing Ops excl Special Items
$40
$98
Net Income
per Diluted
Share excl
Special Items
$0.04
$0.09 |
 Performance more than offsets cost headwinds and market impacts
7
See appendix for Adjusted Income reconciliation
o[Alcoa
logo] |
 LME
drives Y-O-Y earnings decline; net productivity is positive 8
See appendix for Adjusted Income reconciliation
o[Alcoa
logo] |
 9
Any reference in our presentations to EBITDA means adjusted EBITDA, for which we have
provided calculations and reconciliations in the appendix. See appendix for
Adjusted EBITDA reconciliation EPS generates record 1Q ATOI and EBITDA Margin
o[Alcoa
logo] Aerospace
market
remains
strong,
but
impacted
by
lower
U.S.
Defense
spare
parts
demand
Gradual
recovery
in
N.A.
Non-Residential
Construction
continues;
European
market
decline
is
slowing
Stronger
N.A.
Heavy
Duty
Truck
build
rates
partially
offset
by
Europe
Share
Gains
through
innovation
and
productivity
continues
across
all
sectors
ATOI
is
expected
to
increase
4-6%
year-over-year;
first-time
+$200M
ATOI
Revenue
up
3%
sequentially
driven
by
share
gains
across
all
markets
Record
1Q
ATOI
and
EBITDA
margin
1Q
EBITDA
margin
at
22.2%,
up
1.3
percentage
points
year-over-year
Quarterly
ATOI
up
9%
year-over-year
to
$189M
driven
by
productivity
and
strong
Aerospace
and
Commercial
Transportation
demand,
offsetting
unfavorable
weather
impacts
in
North
America
1Q 14
$189
Cost Increases
-$7
Productivity
$19
Price / Mix
$2
Volume
$7
4Q 13
$168
1Q 13
4Q 13
1Q 14
3
rd
Party Revenue ($ Millions)
1,423
1,405
1,443
ATOI ($ Millions)
173
168
189
EBITDA Margin
20.9%
20.3%
22.2%
1
st
Quarter Results
1
st
Quarter Business Highlights
1
st
Quarter Performance Bridge
1Q14 Actual and 2Q14 Outlook –
Engineered Products and Solutions
$ Millions
2
nd
Quarter Outlook |
 10
GRP nearly triples profitability from productivity and higher mill utilization
See appendix for Adjusted EBITDA reconciliation
o[Alcoa
logo] $ Millions
1Q14 Actual and 2Q14 Outlook –
Global Rolled Products
1
st
Quarter Results
1
st
Quarter Business Highlights
1
st
Quarter Performance Bridge
1Q 14
$59
Portfolio
Actions
-$11
Cost
Decreases
$28
Prod-
uctivity
$6
Price / Mix
-$8
Volume
$6
Currency
$2
Metal
$15
4Q 13
$21
Record
automotive
sheet
revenue
–
continued
high
shipments
Pricing
and
volume
pressures
in
Packaging
Productivity
gains
through
strong
focus
on
cost
reduction
Favorable
fixed
cost
absorption
from
higher
mill
utilization
Costs
associated
with
Australia
portfolio
actions
of
$11M
Auto
demand
expected
to
stay
strong
Continued
pressure on packaging prices and volumes
Unfavorable cost impact from business continuity
preparation
ATOI
is
expected
to
increase
~20%
sequentially,
excluding
FX
and
assuming
no
change
in
metal
price
1Q 13
4Q 13
1Q 14
3
rd
Party Revenue ($ Millions)
1,779
1,645
1,677
ATOI ($ Millions)
81
21
59
Adjusted EBITDA/MT
385
185
315
2
nd
Quarter Outlook
Strengthening
demand
for
Industrial;
pricing
pressures
continue
Industrial
volumes
expected
to
strengthen;
continued
pricing
pressures |
 Alumina pricing and productivity drive highest 1Q ATOI since 2011
11
o[Alcoa
logo] $ Millions
1Q14 Actual and 2Q14 Outlook –
Alumina
1
st
Quarter Results
1
st
Quarter Business Highlights
1
st
Quarter Performance Bridge
$18
$8
$37
$9
$92
$70
-$7
1Q 14
Portfolio
Actions
Cost
Inc/RM
Energy
-$4
Prod
-
uctivity
Price
/ Mix
Volume
-$15
Currency
LME
-$24
4Q 13
Sixth
straight
quarter
of
increased
profits;
highest
1Q
ATOI
since
2011,
$74M
before
Surgold
sale
gain
Performance
gains
offset
market
factors
Strong
Alumina
index
(API)
pricing
increases
ATOI
by
$37M
Sale
of
Surgold
generated
$18M
ATOI
65%
of
3
rd
party
shipments
on
spot
or
API
for
2014;
API
pricing
follows
30-day
lag
and
LME
pricing
follows
60-day
lag
Production
decline
due
to
reduction
at
Pocos
refinery
in
Brazil
Gain
from
Surgold
sale
does
not
repeat
Saudi
JV
refinery
pre-operational
costs
increase
$5M
Productivity
gains
will
offset
energy
and
cost
increases,
excluding
Saudi
JV
1Q 13
4Q 13
1Q 14
Production (kmt)
3,994
4,249
4,172
3
rd
Party Shipments (kmt)
2,457
2,578
2,649
3
rd
Party Revenue ($ Millions)
826
832
845
ATOI ($ Millions)
58
70
92
2
nd
Quarter Outlook
-$15
+$19
Market
Performance |
 Primary Metals aggressively executing portfolio actions
12
o[Alcoa
logo] Pricing
to
follow
15-day
lag
to
LME
Volumes
impacted
by
Massena
East
and
Brazilian
curtailments
Saudi JV smelter restart completed
Productivity
gains
will
offset
energy
and
cost
increases
Two
fewer
days
in
the
quarter
reduce
volume
by
$8M
sequentially
Regional
premiums,
mix
and
product
pricing
drive
performance
$70M
higher
than
4Q
Energy
improvements
of
$24M
from
lower
Spanish
power
prices,
partially
offset
by
higher
costs
in
other
regions
Combined
portfolio
actions
and
Saudi
JV
smelter
restart
total
$21M
1Q14 Actual and 2Q14 Outlook –
Primary Metals
1
st
Quarter Business Highlights
2
nd
Quarter Outlook
$ Millions
1
st
Quarter Results
1
st
Quarter Performance Bridge
-$15
Portfolio
Actions
-$14
Saudi
JV/
Massena
-$7
Cost
Inc/RM
Currency
$4
LME
-$25
4Q 13
-$35
1Q 14
Price
/Mix &
Vol.
$2
Prod
-
uctivity
$24
Energy
-$26
$62
1Q 13
4Q 13
1Q 14
Production (kmt)
891
866
839
3
rd
Party Shipments (kmt)
705
717
617
3
rd
Party Revenue ($ Millions)
1,758
1,618
1,424
3
rd
Party Price ($/MT)
2,398
2,157
2,205
ATOI ($ Millions)
39
(35)
(15)
Market
Performance
-$21
+$62 |
 Two
day year-over-year improvement in average DWC See appendix for days
working capital reconciliation 13
o[Alcoa
logo] Average Days Working Capital since First Quarter 2009
30
28
31
29
32
30
36
35
34
36
40
40
40
37
44
43
42
47
51
55
37
25 days;
$1.6 Billion |
 1
st
Quarter Cash Flow Overview
14
See appendix for Free Cash Flow reconciliation
o[Alcoa
logo] ($ Millions)
1Q13
4Q13
1Q14
Net
Income
before
Noncontrolling
Interests
$170
($2,310)
($197)
DD&A
$361
$350
$340
Change in Working Capital
($323)
$522
($687)
Pension Contributions
($83)
($108)
($91)
Other Adjustments
($195)
$2,466
$84
Cash from Operations
($70)
$920
($551)
Dividends to Shareholders
($33)
($33)
($33)
Change in Debt
$90
($14)
($14)
Distributions
to
Noncontrolling
Interests
($25)
($29)
($35)
Contributions
from
Noncontrolling
Interests
$15
$0
$20
Other Financing Activities
$0
$11
$72
Cash from Financing Activities
$47
($65)
$10
Capital Expenditures
($235)
($422)
($209)
Other Investing Activities
($50)
($3)
($31)
Cash from Investing Activities
($285)
($425)
($240)
1Q13, 4Q13 & 1Q14 Cash Flow |
 15
See appendix for Net Debt-to-Capital reconciliation
Lowest debt since 3Q 2007; Debt-to-Cap down to target range
762
1,481
1,543
1,939
1,861
1,437
665
1Q14
7,747
7,082
2013
8,319
6,882
2012
8,829
6,968
2011
9,371
7,432
2010
9,165
7,622
2009
9,819
8,338
2008
10,578
9,816
(millions)
Debt to Cap
Net Debt
Cash
38.1%
42.5%
38.7%
34.9%
35.3%
34.8%
35.0%
Debt, Net Debt, and Debt-to-Capital %
o[Alcoa
logo] |
 Aggressive targets drive growth and operational performance in 2014
16
o[Alcoa
logo] 2014 Annual Financial Targets
Deliver
Operational
Performance
Drive Productivity Gains of $850M
Process productivity
Procurement savings
Overhead cost reductions
Invest in the
Future; Actively
Manage the
Base
Build Value-Add with Growth Capital of $500M
Invest in Saudi JV of $125M
Manage Sustaining Capital of $750M
Strengthen the
Balance Sheet
Generate Positive Free Cash Flow
Attain 30%-35% Debt
-to-Capital |
 Robust demand continues; regional premiums at record levels
17
Global Aluminum Demand Growth at
7%
Aluminum Deficit Emerging
Inventory
is Stable
High Regional Premiums
See appendix for full scale charts
o[Alcoa
logo] |
 Klaus Kleinfeld
Chairman and Chief Executive Officer
18
April 8, 2014
[Alcoa logo] |
 Source: Alcoa analysis
19
2014 Market Conditions remain solid
o[Alcoa
logo] North America
China
Global
Europe
8%
to
9%
sales growth
2%
to
3%
sales growth
4%
to
6%
sales growth
8%
to
12%
airfoil market
decline
6%
to
10%
prod growth
8%
to
12%
sales growth
7%
to
9%
sales growth
2%
to
3%
sales growth
2%
to
3%
sales decline
0%
to
4%
prod growth
1%
to
5%
prod decline
2%
to
5%
prod growth
1%
to
2%
sales decline
Aerospace
Automotive
Heavy Truck &
Trailer
Beverage Can
Packaging
Commercial Building
and Construction
Industrial Gas
Turbine
5%
to
9%
prod growth
-1%
to
3%
prod flat/growth
3%
to
4%
sales growth
1%
to
4%
prod growth
-1%
to
3%
prod flat/growth
Alcoa End Markets: Current Assessment of 2014 vs. 2013
|
 More to Alcoa than meets the eye, exciting Value-Add Portfolio
20
Source: Alcoa analysis
1) Based on dollar value. Global commercial vehicle wheel market includes
trucks, trailers and buses o[Alcoa logo]
2013 Alcoa value-add revenue by market ($B)
0.6
Other
1.5
Commercial
Building and
Construction
1.8
Industrial
Products
3.1
Packaging
1.3
Commercial
Transportation
0.8
Automotive
4.0
Aerospace
Revenues: $13.1B
Aerospace |
 Advanced Aerospace Structures
Aluminum
sheet, plate and
extrusions
Aluminum
and
titanium
forgings
Structural castings;
~50%
titanium
, ~30%
aluminum
, and
~20%
nickel alloys
High Performance Engine Investment Castings
Global
leader
in
jet engine airfoils
100%
nickel super alloys
Innovative Fastening Systems
Global
leader
in aerospace
fastening
systems
Both
airframe
and
engine
applications
~40%
titanium
, ~25%
steel
and
~35%
nickel
alloys
43%
$1.74
26%
$1.03
31%
$1.23
$4B Aerospace Portfolio; Multi-material Innovation Leader
21
o[Alcoa
logo] |
 Re-Inventing the Wheel: Lighter & Brighter
22
1) Based on conversion from Standard Steel to Wide-Base Aluminum
o[Alcoa
logo] Most innovative solutions for improved truck fuel efficiency
and lowered maintenance cost
Alcoa’s Innovation Leadership is on a roll
$400
Heavy duty without the “Heavy”
:
Ultra ONE™
New
17% Stronger
Proprietary
MagnaForce™
Alloy
World’s
Lightest
wheel at
40 pounds
47%
Lighter
than
Steel, 18% Lighter
than
avg.
Aluminum
Helps
Save
up to
1,400
pounds
per rig¹
Replacing
18
Steel wheels
with
Aluminum
offsets
Annual
Carbon
Footprint
of average
Family of Four
10x
Improved
Corrosion Resistance
No
Mechanical or Chemical
Cleaning
Looks
New
Longer
Investing
to
double
capacity
in
Europe
67%
of 2013
Alcoa Wheel Sales
driven by Proprietary
Technology
Never loses its Shine:
Dura-Bright
®
Lower GHG
emissions
Reduced
operating cost
Improved
fuel efficiency
Increased payload
Customer needs |
 Growth for the long haul, winning out of the gate with Ultra ONE™
23
Source: Alcoa analysis
1) Based on dollar value; Commercial Vehicle Market = Truck, Trailer
& Bus
o[Alcoa
logo] Global commercial vehicle wheel market and customer
conversion to Ultra ONE ™
Undisputed market leader, deep customer reach
Global Commercial Vehicle Wheel Market ($B)
and Penetration Rates¹
Al gaining ground in a growing market
Over
150
fleets
specifying
67,000
Ultra
ONE™
wheels
since introduction
TMC Transportation
converting to
Ultra
ONE™
wheels starting
in 2014
2018
2.7
50%
50%
2014
2.0
60%
40%
2010
1.5
70%
30%
Aluminum
Steel |
 Auto going aluminum: From Audi A100 in 1985…
24
1994 to Today:
~700,000
Aluminum Space
Frame Audi’s
Source: Audi
o[Alcoa
logo] |
 25
Source: IHS
o[Alcoa
logo] As much as 700 lbs. lighter than its predecessor
Accelerates,
brakes,
tows
and resists corrosion
like never before
Source: Ford Motor Company website
2013:
~700,000
F-150s
Produced
“With my background in aerospace and
commercial airplanes,
aluminum
is
the
material of choice
.”
Alan Mulally, President and CEO
Ford Motor Company
CBS News
“The F
-150
establishes
aluminum
as
a
primary
choice
mainstream
auto
use.”
Automotive News
for
“When we put it all together, to have the
truck do what we wanted,
there was
only
one
answer:
aluminum
Raj Nair, VP Global Product Development
Ford Motor Company
Wall Street Journal
“A stamped
aluminum body
can
equal
or
outperform steel
in
overall
strength
,
dent
resistance and
crash protection
…”
The New York Times
…to 2015: going Mass-Market with the Ford F-150
Military - grade aluminum alloys in body and bed
.” |
 *
Total investment relates to rolling mill capability expansion to include auto sheet, building and construction sheet and foil
stock.
Alcoa’s investment portion is
~$95M Capitalizing on our Leading Position as Auto goes Lightweight
26
o[Alcoa
logo] 136
55
14
2012
2025
2015
North America Aluminum Body Sheet
Content Per Vehicle (in lbs)
1,300
580
330
229
166
2018
2015
2014
2013
2012
Projected Alcoa Auto Sheet
Revenues ($M)
Projected aluminum content per vehicle, Alcoa automotive growth projects and Alcoa
auto sheet revenue Increasing Aluminum Intensity
6X Revenue Increase by 2018
~$300M
investment
completed in
4Q 2013
Undergoing
customer
qualifications
~$300M
investment;
completion in
mid-2015
Enables
flexible
production
Positioned to Capture Growth
~$400M
total
investment*; First
auto
coil
by December
2014
to reach over
1MMT by 2025
Source: Ducker Worldwide
~6x
~2.5x
Al
auto
sheet
demand
expected
~10x
~4x |
 Re-Packaging Midstream Portfolio: Shifting mix to Grow Value-Add
Source: Alcoa analysis
1) According to the Brazilian Aluminum Association PE =
Polyethylene 27
o[Alcoa
logo] Aluminum
Inner PE coating
Middle PE coating
Paperboard
Outer PE coating
Bud Light re-closable aluminum bottle, investment in aseptic foil packaging and
closure of Australia RM facilities Alcoa puts a cool twist on a cold
one… Uses Alcoa aluminum sheet
Patented
bottle technology
Licensed by
Anheuser-Busch
Suite of
proprietary Alcoa technology
offers premium aluminum packaging options
for brands
Differentiated
Product:
-
Re-Closable
-
84% lighter
than glass bottle
-
Infinitely
Recyclable
U.S. Al bottle growth
expected
to more than double
by
2015
Material
Expertise
Metal-forming
know-how
Closure
of
two
Australia can sheet
Rolling Mills
200 kmt
closed
by year-end 2014
$40
million
Specialty Packaging
investment in
Brazil
All
additional Capacity
has
been
Fully Committed
Most
Highly
Differentiated
type
of container in
Packaging
7%
annual
growth
rate in
Latin
America
over the
next 3 years
1
…While reducing commodity capacity
…And adds more differentiation to the mix… |
 Upstream Restructuring advances Transformation
(1)
Operating capacity = Alcoa total base capacity less idled capacity
(2)
Announced but not executed
28
-198
After executing
announcements
-253
2012
+61
2,964
-239
2011
-418
+234
2010
1Q 2014
2009
2008
2013
-344
2007
4,121
Tennessee: -215
Massena East: -125
Other: -113
Portland: -15
Fusina: -12
Mosjoen: +188
Lista: +94
Pt. Henry: -190
(2)
Sao Luis: -85
(2)
Massena East: -84
Pocos: -62
(2)
Other: +3
Baie Comeau: -105
Sao Luis: -97
Massena East: -41
Pocos: -34
Other: -3
Spanish system: +27
Portovesme: -150
Spanish system: -90
Other: +1
Massena East: +125
Intalco: +47
Wenatchee: +43
Other: +19
Rockdale: -267
Baie Comeau: -53
Portland: -15
Other: -9
Fusina: -32
Other: +93
Bridge of Total Smelting Operating Capacity
(1)
2007 to 1Q 2014, kmt
-28%
=1,157kmt
o[Alcoa
logo] |
 Saudi Arabia JV Progressing as Planned -
World’s Lowest Cost
29
o[Alcoa
logo] Smelter
Rolling Mill
Mine
Refinery
Phase 1
Phase 2
86%
complete
190 kmt
production in 2013
550 kmt
production in 2014
At
full capacity
in 2014
Lowest cost
smelter
2% point reduction
on the
smelting cost curve
First
hot
coil
in
4Q 2013
First auto
coil in
4Q 2014
First
alumina 4Q 2014
Lowest cost
refinery
2% point reduction
on
the refining cost curve
On track to provide
bauxite in 2014
97%
complete
Saudi Arabia JV construction update
100%
complete
63%
complete |
 Alcoa’s Transformation Accelerates
Building out Alcoa’s Value-Add Businesses;
Capturing growing Demand
Lowering Upstream Cost Base
Accelerating launch of Innovative Products;
Applying the Alcoa Advantage
30
o[Alcoa
logo] |
 o[Alcoa logo] |
 Kelly Pasterick
Director, Investor Relations
Alcoa
390 Park Avenue
New York, NY 10022-4608
Telephone: (212) 836-2674
www.alcoa.com
Additional Information
32
o[Alcoa
logo] |
 Annual Sensitivity Summary
33
Currency Annual Net Income Sensitivity
+/-
$100/MT = +/-
$240 million
LME Aluminum Annual Net Income Sensitivity
Australian $
+/-
$11 million
per 0.01 change in USD / AUD
Brazilian
$
+/-
$ 3 million
per 0.01 change in BRL / USD
Euro €
+/-
$ 2 million
per 0.01 change in USD / EUR
Canadian $
+/-
$ 5 million
per 0.01 change in CAD / USD
Norwegian Kroner
+/-
$ 5 million
per 0.10 change in NOK / USD
o[Alcoa
logo] |
 Revenue Change by Market
2%
3%
(1%)
7%
11%
(14%)
(0%)
(29%)
2%
(12%)
1%
5%
2%
9%
(6%)
(23%)
(9%)
(5%)
2%
(19%)
19%
4%
7%
6%
8%
2%
12%
1%
15%
26%
Aerospace
Automotive
B&C
Comm. Transport
Industrial Products
IGT
Packaging
Distribution/Other
Alumina
Primary Metals
1Q’14 Third-Party Revenue
Sequential
Change
Year-Over-Year
Change
34
o[Alcoa
logo] |
 Special Items
See appendix for Adjusted Income reconciliation.
35
Pre-tax, Before NCI
After-tax, After NCI
$ Millions, except per-share amounts
4Q13
1Q14
4Q13
1Q14
Income Statement
Classification
Segment
Net
Loss from Continuing Operations
($1,998)
($274)
($2,339)
($178)
Net Loss Per Diluted Share
($1.87)
($0.25)
($2.19)
($0.16)
Restructuring-Related
($380)
($499)
($302)
($296)
Restructuring/COGS/
Other Expenses
(Income), Net
Corporate /
Primary Metals/
GRP
Tax Items
$0
$0
($361)
$22
Income Taxes
Corporate
Saudi Arabia Smelter Potline
($10)
($13)
($9)
($13)
COGS/
Other Expenses
(Income), Net
Primary Metals
Massena
Fire
$9
$0
$5
$0
COGS
Primary
Metals/EPS/Corp
Goodwill Impairment
($1,731)
$0
($1,719)
$0
Goodwill
Impairment Charge
Corporate
Mark-to-Market Energy Contracts
$14
$0
$7
$0
Other Expenses
(Income), Net
Corporate
Surgold
Gain
$0
$28
$0
$11
Other Expenses
(Income), Net
Alumina
Special Items
($2,098)
($484)
($2,379)
($276)
Net Income from Continuing Ops excl Special Items
$100
$210
$40
$98
Net
Income
per Diluted
Share excl
Special Items
$0.09
$0.19
$0.04
$0.09
o[Alcoa
logo] |
 Composition of Regional Premium Pricing Convention
36
o[Alcoa
logo] 2014E Shipments
Regional Premiums
Estimated Pricing Convention
55%
Midwest
–
Platts
15-day lag
30%
Rotterdam DDP
–
Metal Bulletin
45-day lag
10%
CIF Japan
–
Platts
Month prior to Quarter start
5%
Negotiated
Annual |
 Alcoa smelting closures and curtailments when announced actions are complete
37
(1)
Pocos (62 kmt) and Sao Luis (85 kmt) have been announced, but not fully executed
(2)
Announced, but not executed
o[Alcoa
logo] Location
Year
kmt
Baie Comeau
2008
53
Eastalco
2010
195
Badin
2010
60
Warrick
2010
40
Tennessee
2011
215
Rockdale
2011
76
Baie Comeau
2013
105
Fusina
2013
44
Massena East
2013
41
Massena East
2014
84
Point Henry
(2)
2014
190
Total
1,103
Alcoa smelting capacity closures, since Dec 2007
Location
kmt
Rockdale
191
Sao Luis
(1)
182
Portovesme
150
Pocos
(1)
96
Intalco
49
Wenatchee
41
Aviles
35
Portland
30
La Coruna
25
Total
799
Alcoa smelting capacity curtailments |
 Reconciliation of ATOI to Consolidated Net Income (Loss)
Attributable to Alcoa
o[Alcoa
logo] 38
(in millions)
1Q13
2Q13
3Q13
4Q13
2013
1Q14
Total segment ATOI
$
351
$
304
$
338
$
224
$
1,217
$
325
Unallocated amounts (net of tax):
Impact of LIFO
(2)
5
9
40
52
(7)
Interest expense
(75)
(76)
(70)
(73)
(294)
(78)
Noncontrolling interests
(21)
29
(20)
(29)
(41)
19
Corporate expense
(67)
(71)
(74)
(72)
(284)
(67)
Impairment of goodwill
–
–
–
(1,731)
(1,731)
–
Restructuring and other charges
(5)
(211)
(108)
(283)
(607)
(321)
Other
(32)
(99)
(51)
(415)
(597)
(49)
Consolidated net income (loss) attributable to
Alcoa
$
149
$
(119)
$
24
$
(2,339)
$
(2,285)
$
(178)
|
 Reconciliation of Adjusted Income
39
o[Alcoa
logo] (in millions, except per-
share amounts)
Income (Loss)
Diluted EPS
Quarter ended
Quarter ended
March 31,
December 31,
March 31,
March 31,
December 31,
March 31,
2013
2013
2014
2013
2013
2014
Net income (loss)
attributable to Alcoa
$
149
$
(2,339)
$
(178)
$
0.13
$
(2.19)
$
(0.16)
Restructuring and
other charges
5
302
274
Discrete tax items*
(19)
364
(6)
Other special items**
(14)
1,713
8
Net income
attributable to Alcoa
–
as adjusted
$
121
$
40
$
98
0.11
0.04
0.09
Net income attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of
restructuring and other charges, discrete tax items, and other special items (collectively,
“special items”). There can be no assurances that additional special items will not occur in future periods. To compensate for this limitation, management
believes that it is appropriate to consider both Net (loss) income attributable to Alcoa determined
under GAAP as well as Net income attributable to Alcoa – as adjusted. * Discrete tax items include the following:
•
for the quarter ended March 31, 2014, a net benefit for a number of small items ($6);
•
for the quarter ended December 31, 2013, a charge for valuation allowances related to certain Spain and
U.S. deferred tax assets ($372) and a net benefit for other miscellaneous items ($8); and
•
for the quarter ended March 31, 2013, a benefit related to the reinstatement under the American
Taxpayer Relief Act of 2012 of two tax provisions that were applied in 2013 to Alcoa’s U.S. income tax return for calendar year 2012 ($19).
** Other special items include the following:
•
for the quarter ended March 31, 2014, a tax benefit representing the difference between Alcoa’s
consolidated estimated annual effective tax rate and the statutory rates applied to restructuring and other charges ($72), an unfavorable tax
impact related to the interim period treatment of operational losses in certain foreign jurisdictions
for which no tax benefit was recognized ($56), the write-off of inventory related to the permanent closure of a smelter and two rolling mills in
Australia and a smelter in the United States ($20), an unfavorable impact related to the restart of one
potline at the joint venture in Saudi Arabia that was previously shut down due to a period of pot instability ($13), a gain on the sale of a
mining interest in Suriname ($11), and a loss on the writedown of an asset to fair value ($2);
•
for the quarter ended December 31, 2013, an impairment of goodwill ($1,719), an unfavorable impact
related to a temporary shutdown of one of the two smelter potlines at the joint venture in Saudi Arabia due to a period of pot instability
($9), a net favorable change in certain mark-to-market energy derivative contracts ($7), an
insurance recovery related to the March 2012 cast house fire at the Massena, NY location ($5), and a favorable tax impact related to the interim
period treatment of operational losses in certain foreign jurisdictions for which no tax benefit was
recognized during the nine months ended September 30, 2013 ($3); and •
for the quarter ended March 31, 2013, a net favorable change in certain mark-to-market energy
derivative contracts ($9) and a net insurance recovery related to the March 2012 cast house fire at the Massena, NY location ($5). |
 ($ in millions)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q13
4Q13
1Q14
Net income (loss)
attributable to
Alcoa
$ 938
$ 1,310
$ 1,233
$ 2,248
$ 2,564
$ (74)
$(1,151)
$ 254
$ 611
$ 191
$(2,285)
$ 149
$(2,339)
$ (178)
Add:
Net income (loss)
attributable to
noncontrolling
interests
212
233
259
436
365
221
61
138
194
(29)
41
21
29
(19)
Cumulative effect
of accounting
changes
47
–
2
–
–
–
–
–
–
–
–
–
–
–
Loss (income)
from
discontinued
operations
–
27
50
(22)
250
303
166
8
3
–
–
–
–
–
Provision (benefit)
for income taxes
367
546
464
853
1,623
342
(574)
148
255
162
428
64
312
(77)
Other (income)
expenses, net
(278)
(266)
(478)
(236)
(1,920)
(59)
(161)
5
(87)
(341)
(25)
(27)
(10)
25
Interest expense
314
271
339
384
401
407
470
494
524
490
453
115
112
120
Restructuring and
other charges
(28)
(29)
266
507
268
939
237
207
281
172
782
7
380
461
Impairment of
goodwill
–
–
–
–
–
–
–
–
–
–
1,731
–
1,731
–
Provision for
depreciation,
depletion, and
amortization
1,110
1,142
1,227
1,252
1,244
1,234
1,311
1,450
1,479
1,460
1,421
361
350
340
Adjusted EBITDA
$ 2,682
$ 3,234
$ 3,362
$ 5,422
$ 4,795
$ 3,313
$ 359
$ 2,704
$ 3,260
$ 2,105
$ 2,546
$ 690
$ 565
$ 672
Sales
$18,879
$21,370
$24,149
$28,950
$29,280
$ 26,901
$18,439
$21,013
$24,951
$23,700
$23,032
$ 5,833
$ 5,585
$ 5,454
Adjusted EBITDA
Margin
14.2%
15.1%
13.9%
18.7%
16.4%
12.3%
1.9%
12.9%
13.1%
8.9%
11.1%
11.8%
10.1%
12.3%
Reconciliation of Alcoa Adjusted EBITDA
40
o[Alcoa
logo] Alcoa’s
definition
of
Adjusted
EBITDA
(Earnings
before
interest,
taxes,
depreciation,
and
amortization)
is
net
margin
plus
an
add-back
for
depreciation,
depletion,
and
amortization.
Net
margin
is
equivalent
to
Sales
minus
the
following
items:
Cost
of
goods
sold;
Selling,
general
administrative,
and
other
expenses;
Research
and
development
expenses;
and
Provision
for
depreciation,
depletion,
and
amortization.
Adjusted
EBITDA
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
Adjusted
EBITDA
provides
additional
information
with
respect
to
Alcoa’s
operating
performance
and
the
Company’s
ability
to
meet
its
financial
obligations.
The
Adjusted
EBITDA
presented
may
not
be
comparable
to
similarly
titled
measures
of
other
companies. |
 Reconciliation of Alumina Adjusted EBITDA
41
o[Alcoa
logo] ($ in millions, except
per metric ton
amounts)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q13
4Q13
1Q14
After-tax operating
income (ATOI)
$ 415
$ 632
$ 682
$ 1,050
$ 956
$ 727
$ 112
$ 301
$ 607
$ 90
$ 259
$ 58
$ 70
$ 92
Add:
Depreciation,
depletion, and
amortization
147
153
172
192
267
268
292
406
444
455
426
109
102
97
Equity (income) loss
--
(1)
--
2
(1)
(7)
(8)
(10)
(25)
(5)
4
(1)
2
5
Income taxes
161
240
246
428
340
277
(22)
60
179
(27)
66
14
21
40
Other
(55)
(46)
(8)
(6)
2
(26)
(92)
(5)
(44)
(8)
(6)
(3)
(1)
(28)
Adjusted EBITDA
$ 668
$ 978
$ 1,092
$ 1,666
$ 1,564
$ 1,239
$ 282
$ 752
$ 1,161
$ 505
$ 749
$ 177
$ 194
$ 206
Production
(thousand metric
tons) (kmt)
13,841
14,343
14,598
15,128
15,084
15,256
14,265
15,922
16,486
16,342
16,618
3,994
4,249
4,172
Adjusted EBITDA /
Production ($ per
metric ton)
$ 48
$ 68
$ 75
$ 110
$ 104
$ 81
$ 20
$ 47
$ 70
$ 31
$ 45
$ 44
$ 46
$ 49
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other
expenses; Research and development expenses; and Provision for depreciation, depletion, and
amortization. The Other line in the table above includes gains/losses on asset sales and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this measure
is meaningful to investors because Adjusted EBITDA provides additional information with respect to
Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
|
 ($ in millions, except per
metric ton amounts)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q13
4Q13
1Q14
After-tax operating income
(ATOI)
$
657
$
808
$
822
$
1,760
$
1,445
$
931
$
(612)
$
488
$
481
$
309
$
(20)
$
39
$
(35)
$
(15)
Add:
Depreciation, depletion,
and amortization
310
326
368
395
410
503
560
571
556
532
526
135
128
124
Equity (income) loss
(55)
(58)
12
(82)
(57)
(2)
26
(1)
7
27
51
9
22
28
Income taxes
256
314
307
726
542
172
(365)
96
92
106
(74)
1
(34)
(11)
Other
12
20
(96)
(13)
(27)
(32)
(176)
(7)
2
(422)
(8)
(1)
(6)
–
Adjusted EBITDA
$
1,180
$
1,410
$
1,413
$
2,786
$
2,313
$
1,572
$
(567)
$
1,147
$
1,138
$
552
$
475
$
183
$
75
$
126
Production (thousand
metric tons) (kmt)
3,508
3,376
3,554
3,552
3,693
4,007
3,564
3,586
3,775
3,742
3,550
891
866
839
Adjusted EBITDA /
Production ($ per
metric ton)
$
336
$
418
$
398
$
784
$
626
$
392
$
(159)
$
320
$
301
$
148
$
134
$
205
$
87
$
150
Reconciliation of Primary Metals Adjusted EBITDA
42
o[Alcoa
logo] Alcoa’s
definition
of
Adjusted
EBITDA
(Earnings
before
interest,
taxes,
depreciation,
and
amortization)
is
net
margin
plus
an
add-back
for
depreciation,
depletion,
and
amortization.
Net
margin
is
equivalent
to
Sales
minus
the
following
items:
Cost
of
goods
sold;
Selling,
general
administrative,
and
other
expenses;
Research
and
development
expenses;
and
Provision
for
depreciation,
depletion,
and
amortization.
The
Other
line
in
the
table
above
includes
gains/losses
on
asset
sales
and
other
nonoperating
items.
Adjusted
EBITDA
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
Adjusted
EBITDA
provides
additional
information
with
respect
to
Alcoa’s
operating
performance
and
the
Company’s
ability
to
meet
its
financial
obligations.
The
Adjusted
EBITDA
presented
may
not
be
comparable
to
similarly
titled
measures
of
other
companies. |
 Reconciliation of Global Rolled Products Adjusted EBITDA
43
o[Alcoa
logo] ($ in millions, except
per metric ton
amounts)
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q13
4Q13
1Q14
After-tax operating
income (ATOI)
$ 232
$ 223
$ 232
$ 290
$ 300
$ 317
$ 151
$ (41)
$ (106)
$ 241
$ 260
$ 346
$ 252
$ 81
$ 21
$ 59
Add:
Depreciation,
depletion, and
amortization
167
184
190
200
220
223
227
216
227
238
237
229
226
57
58
58
Equity loss
2
4
1
1
–
2
–
–
–
–
3
6
13
4
4
5
Income taxes
112
90
77
97
135
113
77
14
12
103
98
159
108
39
5
34
Other
(5)
(8)
(5)
1
1
20
1
6
(2)
1
1
(2)
–
(1)
1
(2)
Adjusted EBITDA*
$ 508
$ 493
$ 495
$ 589
$ 656
$ 675
$ 456
$ 195
$ 131
$ 583
$ 599
$ 738
$ 599
$ 89
$ 154
Total shipments
(thousand metric
tons) (kmt)
1,863
1,814
1,893
2,136
2,250
2,376
2,482
2,361
1,888
1,755
1,866
1,943
1,989
468
481
489
Adjusted EBITDA
/ Total shipments
($ per metric ton)*
$ 273
$ 272
$ 261
$ 276
$ 292
$ 284
$ 184
$ 83
$ 69
$ 332
$ 321
$ 380
$ 301
$ 385
$ 185
$ 315
Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin
is equivalent to Sales minus the following items: Cost of goods sold; Selling, general administrative,
and other expenses; Research and development expenses; and Provision for depreciation,
depletion, and amortization. The Other line in the table above includes gains/losses on asset sales
and other nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa’s operating performance and the Company’s
ability to meet its financial obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies. In 1Q14, the Adjusted EBITDA of Global Rolled
Products includes a $13 charge for the write-off of inventory related to the permanent closure of two rolling mills in Australia. Excluding this
charge, Adjusted EBITDA was $167 and the resulting EBITDA per metric ton was $342 for 1Q14.
* |
 Reconciliation of Engineered Products and Solutions
Adjusted EBITDA
44
o[Alcoa
logo] Alcoa’s definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalent
to Sales minus the following items: Cost of goods sold; Selling, general administrative, and other
expenses; Research and development expenses; and Provision for depreciation, depletion, and
amortization. The Other line in the table above includes gains/losses on asset sales and other
nonoperating items. Adjusted EBITDA is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because Adjusted EBITDA provides additional information with respect
to Alcoa’s operating performance and the Company’s ability to meet its financial obligations. The
Adjusted EBITDA presented may not be comparable to similarly titled measures of other companies.
($ in millions)
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
1Q13
4Q13
1Q14
After-tax operating
income (ATOI)
$
126
$
161
$
276
$
382
$
423
$
522
$
311
$
419
$
537
$
612
$
726
$
173
$
168
$
189
Add:
Depreciation,
depletion, and
amortization
166
168
160
152
163
165
177
154
158
158
159
40
40
40
Equity loss
(income)
–
–
–
6
–
–
(2)
(2)
(1)
–
–
–
–
–
Income taxes
57
70
120
164
184
215
138
198
258
297
348
84
79
91
Other
11
106
(11)
(2)
(7)
2
1
–
(1)
(9)
(2)
–
(2)
–
Adjusted EBITDA
$
360
$
505
$
545
$
702
$
763
$
904
$
625
$
769
$
951
$
1,058
$
1,231
$
297
$
285
$
320
Third-party sales
$
3,905
$
4,283
$
4,773
$ 5,428
$
5,834
$
6,199
$ 4,689
$
4,584
$ 5,345
$
5,525
$
5,733
$ 1,423
$
1,405
$
1,443
Adjusted EBITDA
Margin
9.2%
11.8%
11.4%
12.9%
13.1%
14.6%
13.3%
16.8%
17.8%
19.1%
21.5%
20.9%
20.3%
22.2%
|
 Reconciliation of Free Cash Flow
45
o[Alcoa
logo] Free
Cash
Flow
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
management
reviews
cash
flows
generated
from
operations
after
taking
into
consideration
capital
expenditures
due
to
the
fact
that
these
expenditures
are
considered
necessary
to
maintain
and
expand
Alcoa’s
asset
base
and
are
expected
to
generate
future
cash
flows
from
operations.
It
is
important
to
note
that
Free
Cash
Flow
does
not
represent
the
residual
cash
flow
available
for
discretionary
expenditures
since
other
non-discretionary
expenditures,
such
as
mandatory
debt
service
requirements,
are
not
deducted
from
the
measure.
(in millions)
Quarter ended
September 30,
2011
December 31,
2011
March 31,
2012
June 30,
2012
September 30,
2012
December 31,
2012
March 31,
2013
June 30,
2013
September 30,
2013
December 31,
2013
March 31,
2014
Cash from
operations
$ 489
$ 1,142
$ (236)
$ 537
$ 263
$ 933
$ (70)
$ 514
$ 214
$ 920
$ (551)
Capital
expenditures
(325)
(486)
(270)
(291)
(302)
(398)
(235)
(286)
(250)
(422)
(209)
Free cash
flow
$ 164
$ 656
$ (506)
$ 246
$ (39)
$ 535
$
(305)
$ 228
$ (36)
$ 498
$ (760)
|
 Reconciliation of Free Cash Flow, con’t
46
o[Alcoa
logo] Free
Cash
Flow
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
management
reviews
cash
flows
generated
from
operations
after
taking
into
consideration
capital
expenditures
due
to
the
fact
that
these
expenditures
are
considered
necessary
to
maintain
and
expand
Alcoa’s
asset
base
and
are
expected
to
generate
future
cash
flows
from
operations.
It
is
important
to
note
that
Free
Cash
Flow
does
not
represent
the
residual
cash
flow
available
for
discretionary
expenditures
since
other
non-discretionary
expenditures,
such
as
mandatory
debt
service
requirements,
are
not
deducted
from
the
measure.
(in millions)
Quarter ended
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
2008
2009
2009
2009
2009
2010
2010
2010
2010
2011
2011
Cash from
operations
$
608
$
(271)
$
328
$
184
$
1,124
$
199
$
300
$
392
$
1,370
$
(236)
$
798
Capital
expenditures
(1,017)
(471)
(418)
(370)
(363)
(221)
(213)
(216)
(365)
(204)
(272)
Free cash
flow
$
(409)
$
(742)
$
(90)
$
(186)
$
761
$
(22)
$
87
$
176
$
1,005
$
(440)
$
526
|
 Days Working Capital
47
o[Alcoa
logo] Days Working Capital = Working Capital divided by
(Sales/number of days in the quarter). ($ in millions)
Quarter ended
March 31,
June 30,
September 30,
December 31,
March 31,
June 30,
September 30,
December 31,
March 31,
2012
2012
2012
2012
2013
2013
2013
2013
2014
Receivables from customers, less
allowances
$
1,709
$
1,650
$
1,600
$
1,573
$
1,704
$
1,483
$
1,427
$
1,383
$
1,391
Add: Deferred purchase price receivable*
85
144
104
53
50
223
347
339
238
Receivables from customers, less
allowances, as adjusted
1,794
1,794
1,704
1,626
1,754
1,706
1,774
1,722
1,629
Add: Inventories
3,079
3,097
3,051
2,894
2,961
2,949
2,932
2,783
2,974
Less: Accounts payable, trade
2,660
2,594
2,496
2,587
2,656
2,820
2,746
2,816
2,813
Working Capital**
$
2,213
$
2,297
$
2,259
$
1,933
$
2,059
$
1,835
$
1,960
$
1,689
$
1,790
Sales
$
6,006
$
5,963
$
5,833
$
5,898
$
5,833
$
5,849
$
5,765
$
5,585
$
5,454
Days Working Capital
34
35
36
30
32
29
31
28
30
* The deferred purchase price receivable relates to
an arrangement to sell certain customer receivables to several financial institutions on a recurring basis. Alcoa is adding
back this receivable for the purposes of the Days Working Capital
calculation.
** Beginning January 1, 2014, management changed the manner in which Working Capital
is measured by moving from an end of quarter Working Capital to an average quarter
Working Capital. This change will now reflect the
capital tied up during a given quarter. As such, the components of Working Capital for each period presented represent the
average of the ending balances in each of the three months during
the respective quarter. |
 Reconciliation of Net Debt
(in millions)
December 31,
March 31,
2008
2009
2010
2011
2012
2013
2014
Short-term borrowings
$ 478
$ 176
$ 92
$ 62
$ 53
$ 57
$ 53
Commercial paper
1,535
–
–
224
–
–
–
Long-term debt due within
one year
56
669
231
445
465
655
85
Long-term debt, less amount
due within one year
8,509
8,974
8,842
8,640
8,311
7,607
7,609
Total debt
10,578
9,819
9,165
9,371
8,829
8,319
7,747
Less: Cash and cash
equivalents
762
1,481
1,543
1,939
1,861
1,437
665
Net debt
$ 9,816
$ 8,338
$ 7,622
$ 7,432
$ 6,968
$ 6,882
$ 7,082
48
o[Alcoa
logo] Net
debt
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
management
assesses
Alcoa’s
leverage
position
after
factoring
in
available
cash
that
could
be
used
to
repay
outstanding
debt. |
 Reconciliation of Net Debt-to-Capital
49
o[Alcoa
logo] Net
debt-to-capital
is
a
non-GAAP
financial
measure.
Management
believes
that
this
measure
is
meaningful
to
investors
because
management
assesses
Alcoa’s
leverage
position
after
factoring
in
available
cash
that
could
be
used
to
repay
outstanding
debt.
($ in millions)
December 31, 2013
March 31, 2014
Debt-to-Capital
Cash and Cash
Net Debt-to-
Debt-to-Capital
Cash and Cash
Net Debt-to-
Equivalents
Capital
Equivalents
Capital
Total Debt
Short-term borrowings
$
57
$
53
Long-term debt due within
one year
655
85
Long-term debt, less amount
due within one year
7,607
7,609
Numerator
$
8,319
$
1,437
$
6,882
$
7,747
$
665
$
7,082
Total Capital
Total debt
$
8,319
$
7,747
Total equity
13,512
14,374
Denominator
$
21,831
$
1,437
$
20,394
$
22,121
$
665
$
21,456
Ratio
38.1
%
33.7
%
35.0
%
33.0
%
|
 Composition of Upstream Production Costs
Refining Cost Structure
Smelting Cost Structure
1
Natural gas information corresponds to Point Comfort, as Australia is priced on a
rolling 16 quarter average 50
o[Alcoa
logo] |
 2014 global aluminum demand growth continues
51
Source: Alcoa estimates, Brook Hunt, CRU, Harbor
1.0
25.2
6.6
6.4
4.2
2.1
2.0
2.0
1.1
3%
10%
4%
2%
5%
5%
8%
8%
4%
5%
2014E
52.6 mmt
*
Other includes Africa, E.Europe, Latin America ex Brazil, and Oceania
2014 Primary Aluminum Consumption (mmt), Annualized Growth (%)
China
Europe
North America
North Asia
India
SE Asia
MENA
Russia
Brazil
Other *
2.0
2014 demand +7%
World ex China +4%
o[Alcoa
logo] |
 52
Source: Alcoa analysis, Brook Hunt, CRU, CNIA, NBS, Chinese Customs
Alumina surplus persists, global metal deficit emerging
o[Alcoa
logo] 2014E Aluminum Supply/Demand Balance
’000 mt
China
Rest of World
2014 Production
23,800
25,155
2014 Production to be added
3,150
1,300
2014 Capacity to be curtailed
(1,100)
(240)
Total supply
25,850
26,215
Demand
(25,450)
(27,345)
Net Balance
400
(1,130)
2014E Alumina Supply/Demand Balance
’000 mt
China
Rest of World
2014 Production
42,200
54,134
2014 Production to be added
6,800
3,300
2014 Capacity to be curtailed
-
(950)
Imports/(exports)
3,400
(3,400)
Total supply
52,400
53,084
Demand
(51,700)
(51,527)
Net Balance
700
1,557
Supply/Demand Analysis
SURPLUS
2,257
DEFICIT
(730)
4Q13
Surplus
1,996
4Q13
Surplus
106 |
 53
Source: Alcoa estimates, IAI, LME, Marubeni, Shanghai Metal Exchange
Global inventories increase as China stocks rise, ROW declining
o[Alcoa
logo] Global Inventories vs. LME Price Over Time $
|
 Regional premiums move higher
54
Source:
Monthly
average
of
daily
prices
-
Platts
Metals
Week
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
Regional Premiums over time
$ per metric
ton
$ per metric
ton
Region
End of 1Q 14
Europe
$360/MT
Japan
$371/MT
Midwest
USA
$409/MT
1Q 14 vs. 1Q 13
Change
Europe 20%
Japan 33%
Midwest USA 69%
o[Alcoa
logo] |