Alcoa Corporation · NYSE:AA
Alcoa — BMO 31st Global Metals & Mining Conference (March 2022)
57 slides from Alcoa's conference presentation, Mar 1, 2022
Slide 1: Investor Presentation February - March 2022
Investor Presentation February - March 2022 1
Slide 2: Cautionary Statement regarding Forward-Looking Statements
Cautionary Statement regarding Forward-Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inclu
Slide 3: Important information
Important information Non-GAAP Financial Measures Some of the information included in this presentation is derived from Alcoa Corporation’s consolidated financial information but is not presented in Alcoa Corporation’s financial statements prepared in accordance with accounting principles generally
Slide 4: Turn raw potential into real progress
Turn raw potential into real progress
Slide 5: An upstream aluminum company built to perform in all cycles
An upstream aluminum company built to perform in all cycles Global operations and summary of business segments Global operations by product Three business segments ▪ First quartile of bauxite cost curve ▪ 48.1Mdmt shipments in 2021 ▪ 88% of shipments to own refineries Bauxite ▪ World’s second larges
Slide 6: Offering the industry's broadest suite of green products
Offering the industry’s broadest suite of green products Summary of Sustana products and position on carbon emissions curves Alcoa Sustana product line Metric tonne of CO2e/mt 7 Alumina ▪ Less than 0.6mt CO2e emissions (scope 1 ▪ Minimum 50% ™ recycled content and 2) from bauxite and alumina 2 ▪ Low
Slide 7: A transformative five years, positioned for more success
A transformative five years, positioned for more success Comparing Alcoa’s key business information 2016 – 2021 Alcoa of 2016 – 2017 Alcoa of today Operations: Operations: ▪ Strong safety culture ▪ Strong safety culture ▪ Headquartered in New York, NY 33% ▪ Headquartered in Pittsburgh, PA ▪ Six busi
Slide 8: Reinvent the aluminum industry for a sustainable future
Reinvent the aluminum industry for a sustainable future
Slide 9: Aluminum price remains strong, inventories declining
Aluminum price remains strong, inventories declining Aluminum price environment and primary aluminum inventory levels Aluminum prices ($/tonne) Global stocks, days of consumption2, Mmt 4,000 110 LME 101 SHFE 100 94 3,500 90 84 82 3,077 80 2022 avg1 3,000 70 (YTD 2/16) 70 67 63 60 58 2,500 2,480 52 2
Slide 10: Aluminum megatrends indicate lagging supply, strong demand
Aluminum megatrends indicate lagging supply, strong demand Aluminum supply and demand market trends Current supply constraints Outlook 2022 – 2030 Primary aluminum supply 2012 – 2022 Global aluminum semis supply/demand, Mmt +1% Secondary growth 10 12 Consumer & Other +6% 2021 Secondary 13 Machinery
Slide 11: Pathways expected to support net zero ambition
Pathways expected to support net zero ambition Potential impact of select R&D programs and strategic actions on Alcoa’s carbon emissions Estimated Alcoa scope 1+2 emissions reductions by segment, CO2e/tonne1 6.2 ▪ Portfolio review and energy transformation – Aluminum deploy renewable energy solution
Slide 12: Capital allocation framework to guide value creation
Capital allocation framework to guide value creation Capital allocation framework considerations Capital allocation framework Maximize value creation Return cash to stockholders: Maintain strong balance sheet ▪ Paid quarterly cash dividend of $0.10/share in 4Q21 through the cycle ▪ Repurchased 3.2 m
Slide 13: The right company, the right industry, the right time
The right company The right industry The world is decarbonizing, and As importantly, Alcoa has technologies under aluminum is part of the solution development that could completely change the industry by lowering costs, improving The right time Alcoa’s great progress over these five efficiencies, re
Slide 14: 4Q21 Financial and other information as presented on January 19, 2022
4Q21 Financial and other information as presented on January 19, 2022 v 14
Slide 15: Finishing a very strong year with a productive fourth quarter
Finishing a very strong year with a productive fourth quarter 5 Finishing a very strong year with a productive fourth quarter Alcoa values, strategic priorities, and key takeaways for 4Q21 4Q21 Takeaways Continued focus on safety initiatives and eliminating serious injuries Net loss attributable to
Slide 16: Quarterly Adjusted EBITDA excluding special items of $896M
Quarterly Adjusted EBITDA excluding special items of $896M Quarterly Adjusted EBITDA excluding special items of $896M Quarterly and full year income statement highlights 7 Pension-related actions 4Q21 Net loss Wenatchee smelter closure San Ciprian smelter curtailment Gain on sale of non-core assets
Slide 17: Favorable alumina, metal prices drive Adjusted EBITDA higher
Favorable alumina, metal prices drive Adjusted EBITDA higher Favorable alumina, metal prices drive Adjusted EBITDA higher Adjusted EBITDA excluding special items sequential changes, $M Energy Volume Price / mix 3Q21 Currency (23) 4Q21 Metal prices API Raw materials Production costs Other (52) (3) (4
Slide 18: Continued strong cash flows support capital returns
Continued strong cash flows support capital returns Continued strong cash flows support capital returns Sequential quarterly and 2021 cash flow information 9/30/21 to 12/31/21 Cash changes, $M 2021 Cash flow information, $M Restricted cash relates primarily to the San Ciprian smelter two year curtai
Slide 19: Return on equity 33%, Proportional adjusted net debt $1.1B
Return on equity 33%, Proportional adjusted net debt $1.1B Return on equity 33%, Proportional adjusted net debt $1.1B Key financial metrics and days working capital Key financial metrics Days working capital and aluminum pricing Includes $500 million pension funding in 2Q21 Includes $110 million in
Slide 20: U.S. pension gross liability declines 42% in FY21
U.S. pension gross liability declines 42% in FY21 11 U.S. pension gross liability declines 42% in FY21 Summary of annuitizations and other impacts on U.S. qualified pension plans Annuitization process Transferred $1.5 billion in U.S. gross pension liabilities related to ~14,000 pensioners to Athene
Slide 21: 2022 Outlook
2022 Outlook FY21 and FY22 Key metrics Estimate will vary with market conditions and jurisdictional profitability. AWAC portion of FY22 outlook: ~55% of return-seeking capital expenditures and ~65% of sustaining capital expenditures. Net of pending tax refunds. As of December 31, 2021, the environme
Slide 22: Higher prices reflect structural shift in fundamentals
Higher prices reflect structural shift in fundamentals Aluminum and alumina price environment and market commentary 05/20 01/20 07/20 03/21 05/21 01/21 07/21 11/21 09/20 09/21 11/20 03/20 03/22 01/22 2,480 ‘21 avg 1,797 ‘20 avg SHFE LME Aluminum prices ($/tonne) 282 ‘20 avg 329 ‘21 avg W. Australia
Slide 23: 2022 deficit projected as European smelters cut production
2022 deficit projected as European smelters cut production 2021 2022 15 2022 deficit projected as European smelters cut production Primary aluminum market fundamentals 2nd consecutive year of deficits, stocks remain low Global stocks, days of consumption2 Analysts’ view – mean global balance,1 Mmt S
Slide 24: Reached agreement on future of San Ciprián smelter
Reached agreement on future of San Ciprián smelter 16 Reached agreement on future of San Ciprián smelter Details of San Ciprián smelter curtailment agreement and Spanish power market Key points of curtailment agreement 07/20 01/20 04/20 10/20 01/21 04/21 07/21 10/21 01/22 Two year curtailment of sme
Slide 25: 2021 Accomplishments position us well for the future
2021 Accomplishments position us well for the future 17 Highlighting notable 2021 actions 2021 Accomplishments position us well for the future Commercial Operational Future-oriented R&D Financial Made first EcoSourceTM third party alumina shipments Closed debt offering for $500 million of 4.125% not
Slide 26: Key initiatives in 2022
Key initiatives in 2022 Key operational, commercial, financial and technology initiatives in 2022 18 ELYSISTM inert anode solution In 2022, will begin detailed planning to scale-up the supply chain; will commence facility design and engineering Working on the scale-up towards the 2023 demonstration
Slide 27: Capital allocation framework refreshed in November 2021
Capital allocation framework refreshed in November 2021 19 Capital allocation framework refreshed in November 2021 Strong balance sheet: Keep cash balance and net debt at comfortable levels No long-term debt maturities until 2027 Capital expenditures: Sustaining capital expenditures of $356 million
Slide 28: A transformative year; positioned for more success
A transformative year; positioned for more success FY21 Summary 20 Profiting from long position in all three segments Made highest Alcoa Adj. net income and highest Aluminum segment Adj. EBITDA; spot price now ~ $3,000 per tonne Strengthening the company while providing capital returns Reduced adjus
Slide 29: Strengthening the Company
Strengthening the Company Actions to improve Alcoa, 2017 – 2021 2017 – 2020 2021 Issued $500 million aggregate principal amount of 4.125% senior notes due 2029; redeemed in full outstanding $750 million 6.75% senior notes due 2024 and $500 million 7.00% senior notes due 2026 Funded $500 million into
Slide 30: Quarterly income statement
Quarterly income statement For 4Q20 and 4Q21, share equivalents related to employee stock-based compensation were excluded from Diluted average shares as the impact was anti-dilutive given an adjusted net loss attributable to Alcoa Corporation. 23 30
Slide 31: Special items
Special items Breakdown of special items by income statement classification – gross basis 24 31
Slide 32: Quarterly income statement excluding special items
Quarterly income statement excluding special items 25 32
Slide 33: 4Q21 Financial summary
4Q21 Financial summary Three months ending December 31, 2021, excluding special items 26 Includes the Company’s proportionate share of earnings from equity investments in certain bauxite mines, hydroelectric generation facilities, and an aluminum smelter located in Brazil, Canada, and/or Guinea. Amo
Slide 34: 4Q21 Adjusted EBITDA drivers by segment
4Q21 Adjusted EBITDA drivers by segment Adjusted EBITDA excluding special items sequential changes by segment, $M 27 34
Slide 35: Income statement information FY20 and FY21
Income statement information FY20 and FY21 Annual income statement FY20 FY21 28 For FY20, share equivalents related to employee stock-based compensation were excluded from Diluted average shares as the impact was anti-dilutive given an adjusted net loss attributable to Alcoa Corporation. 35
Slide 36: FY21 Financial information
FY21 Financial information FY21 Highlights and annual change impacts Full year financial highlights Adjusted EBITDA excl. special items bridge, $M Portfolio actions 2020 Currency Energy 2021 Metal prices API Raw materials Price/mix Volume Production costs Other (203) (95) (296) (23) (124) 29 36
Slide 37: Aluminum value chain
Aluminum value chain FY21 Alcoa product shipments by segment 48.1 Mdmt shipments 13.9 Mmt shipments 3.0 Mmt shipments Intersegment Third Party 0% Aluminum Alumina Bauxite 30 37
Slide 38: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 4Q21 production cash costs Alumina refining Aluminum smelting Bauxite Fuel Oil Caustic Conversion Natural Gas Materials Alumina Carbon Power 31 38
Slide 39: 2022 Business information
2022 Business information Estimated annual Adjusted EBITDA sensitivities Pricing conventions Regional premium breakdown Average 4Q21 exchange rates 32 39
Slide 40: Currency impacts on Adjusted EBITDA
Currency impacts on Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities ($M, except currencies) Balance sheet revaluation impact Currency annual sensitivity and actual impact Totals may not tie due to rounding 1. Total EBITDA currency impact includes balance sheet revaluation
Slide 41: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA for 1Q22 Alcoa anticipates Adjusted EBITDA and Adjusted net income levels for the first quarter of 2022 to be similar to the fourth quarter of 2021 based on current pricing. Alcoa expects that current metal index price benef
Slide 42: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of December 31, 20211 Estimated financial impacts, $M ROW $0.2 U.S. $0.7 Pension Total $0.3B OPEB Total $0.7B U.S $0.1 GAAP pension funding status as of December 31, 2021 U.S. greater than 95% Worldwide gr
Slide 43: Investments summary
Investments summary Investments listing and income statement location Alcoa Corporation has an investment in a joint venture related to the ownership and operation of an integrated aluminum complex (bauxite mine, alumina refinery, and aluminum smelter) in Saudi Arabia. The joint venture is owned 74.
Slide 44: Alcoa sustainability goals
Alcoa sustainability goals Alcoa strategic long-term sustainability goals, baseline and progress Source: 2020 Sustainability Report 37 44
Slide 45: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of December 31, 2021 Bauxite production, Mdmt Alumina refining, kmt The Company’s proportionate share of earnings from its equity investment in the Saudi Arabian joint venture does not impact adjusted EBITDA. On Nov
Slide 46: Valuation framework
Valuation framework Valuation framework key considerations Business Operations + - = Financial Considerations FY21 Adj. EBITDA excl. special items 39 Dollar amounts reflect Alcoa Corporation’s consolidated balance sheet values as of December 31, 2021. The “Alcoa” percentages exclude amounts attribut
Slide 47: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Alcoa Corporation’s definition of Adjusted EBITDA 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; Researc
Slide 48: Segment Adjusted EBITDA reconciliation
Segment Adjusted EBITDA reconciliation Alcoa Corporation’s definition of Adjusted EBITDA 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;
Slide 49: Adj. net income attributable to Alcoa reconciliation
Adj. net income (loss) attributable to Alcoa reconciliation Adjusted net income (loss) attributable to Alcoa Corporation is a non-GAAP financial measure. Management believes this measure is meaningful to investors because management reviews the operating results of Alcoa Corporation excluding the im
Slide 50: Operational tax reconciliation
Operational tax reconciliation The Company’s non-GAAP financial measures are adjusted for applicable income tax impacts. The non-GAAP income tax provision, which we refer to as our operational tax, is calculated on a full year basis in a manner consistent with our GAAP tax provision except for exclu
Slide 51: Free cash flow reconciliation
Free cash flow reconciliation Free cash flow and Free cash flow less net distributions to noncontrolling interest are non-GAAP financial measures. Management believes that these measures are meaningful to investors because management reviews cash flows generated from operations after taking into con
Slide 52: Net debt reconciliation
Net debt reconciliation 45 Net debt is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management assesses Alcoa Corporation’s leverage position after considering available cash that could be used to repay outstanding debt. When cash exceeds tot
Slide 53: Days working capital reconciliation
Days working capital reconciliation Excludes Warrick rolling mill sales in 4Q20 and 1Q21. Days Working Capital = DWC working capital divided by (Sales / number of days in the quarter). 46 53
Slide 54: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) ROE Reconciliation and calculation information as of December 31, 2021 (Net Loss/Income Attributable to Alcoa + Special Items) (Total Assets – Total Liabilities – Noncontrolling Interest)2 ROE % = (-$170 – $45) ($14,009 – $8,723 – $1,621) 2020 YTD ROE % = X 100 = -5
Slide 55: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Special items exclude interest expense, income taxes, and noncontrolling interest. Denominator calculated using quarter ending balances. Interest expense less interest income. Fixed tax rate of 35%. Defined as cash, cash equivalents, restricted cash and short-term
Slide 56: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order 49 56
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