Slide 1: 3rd Quarter Earnings
3rd Quarter Earnings Alcoa Corporation October 14, 2020
Slide 2: Important information
Important information Cautionary statement regarding forward-looking statements This presentation may contain 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
Slide 3: Important information (continued)
Important information (continued) 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
Slide 4: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 5: Delivering performance and improvements amid pandemic
Delivering performance and improvements amid pandemic 3Q20 Financial results and business review ▪ Net loss of $49 million, or $0.26 per share; excluding special items, 3Q20 adjusted net loss of $218 million, or $1.17 per share Financial ▪ Adjusted EBITDA excluding special items of $284 million resu
Slide 6: China leading global demand recovery
China leading global demand recovery Global aluminum market dynamics (Mt) End markets rebounding Demand improving Demand indicators YoY % change IP Construction1 Transportation2 Global primary quarterly demand North America 14 15 16 6 0 -2 Mt -11 -16 -4 -10 -8 1Q20 2Q20 3Q20 -68 Europe 11 -4 -7 -9 -
Slide 7: Setting production records; value-add sales begin rebound
Setting production records; value-add sales begin rebound Segment operational and commercial update Operational update Commercial update YTD production, Mdmt ▪ All mines in full operation ▪ Volume and pricing largely unaffected ▪ Record production year to date year to date +5% Bauxite for Alcoa oper
Slide 8: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 9: Revenues up 10%, Adjusted EBITDA ex. specials up 54%
Revenues up 10%, Adjusted EBITDA ex. specials up 54% Quarterly income statement highlights Prior year Sequential M, Except per share amounts 3Q19 2Q20 3Q20 change change Income statement highlights Revenue $2,567 $2,148 $2,365 $(202) $217 Restructuring and other charges, net $185 $37 $5 $(180) $(32)
Slide 10: Higher metal prices and better performance drive results
Higher metal prices and better performance drive results Adjusted EBITDA excluding special items sequential changes, $M 32 2Q20 3Q20 Change 15 284 117 3 18 (30) Bauxite $131 $124 $(7) (5) (20) Alumina 88 119 31 185 Aluminum (34) 116 150 Segment total 185 359 174 (31) Transformation (10) (11) (1) Int
Slide 11: Cash balance up $159 million YoY excluding debt issuance
Cash balance up $159 million YoY excluding debt issuance Quarterly cash comparison and cash flow information Quarter ending cash balance, $M YTD Cash flow information, $M +$895 $1,884 $1,736 Debt issuance $736 proceeds (net) $736 Change in $1,027 Other $965 working capital $160 $45 Special items $87
Slide 12: Strong working capital management and cash position
Strong working capital management and cash position Key financial metrics and pension/OPEB update Key financial metrics Pension/OPEB update 3Q20 Days 2020 Balance sheet impacts (remeasured at year end) working capital Return on equity ▪ Preliminary asset returns of 3.4% through September 30 22 Days
Slide 13: On target to achieve cash actions totaling ~$900 million
On target to achieve cash actions totaling ~$900 million Impacts of announced FY20 actions, before tax and noncontrolling interest, $M Cash actions Year to date Run rate One time Deferral FY20 Comments Key strategic actions New operating model 60 45 Savings at full run rate Non-core asset sales 200
Slide 14: 2020 Outlook
2020 Outlook FY20 Key metrics Income statement excl. special items impacts Cash flow impacts 2020 YTD 2020 YTD Actual FY20 Outlook Actual FY20 Outlook Bauxite shipments (Mdmt) 36.4 48.0 – 49.0 Minimum required pension/all OPEB funding $149M ~ $190M Alumina shipments (Mmt) 10.5 13.8 – 13.9 Additional
Slide 15: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 16: Alcoa expanding world-leading green products portfolio
Alcoa expanding world-leading green products portfolio SustanaTM products update New low carbon alumina product Carbon emissions curve for alumina refineries ▪ Less than 0.6 CO2e emissions (scope ▪ Minimum 50% recycled content ™ 1 and 2) from bauxite and alumina ▪ Lowest CO2e intensity product and ▪
Slide 17: Continuously strengthening the Company to drive value
Continuously strengthening the Company to drive value 3Q20 program update and achievements Current programs 3Q20 update Key strategic ▪ 3Q20 SG&A down $19 million YoY New operating model Portfolio review Non-core asset sales actions ▪ Intalco curtailed, Bécancour restart complete ▪ On October 8, dec
Slide 18: Operating well through pandemic; positioning for future
Operating well through pandemic; positioning for future Key takeaways • Act with integrity Improving the company in a transparent and respectful manner • Operate with excellence Drive results and Implementing our strategy and deliver returns to improving operationally and financially; stockholders o
Slide 19: Appendix
Appendix
Slide 20: Superior bauxite and alumina assets, solid smelter portfolio
Superior bauxite and alumina assets, solid smelter portfolio 2020 Cost curve and business position Bauxite Alumina Aluminum 1st Quartile 1st Quartile 2nd Quartile ▪ World’s second largest bauxite ▪ Largest alumina refiner and largest ▪ Top 10 global aluminum smelter miner, with a first quartile cost
Slide 21: Strengthening the Company, 2017-2019
Strengthening the Company, 2017-2019 Key actions 2017 – 2018 2019 ▪ Revitalized safety program; zero fatalities in 2018 ▪ Continued solid safety performance; zero fatalities ▪ Restarted Portland smelter and Lake Charles calciner ▪ Set annual and quarterly production records ▪ Streamlined business un
Slide 22: Capital allocation framework
Capital allocation framework Capital allocation framework and considerations Maintain liquidity throughout the cycle ▪ $1 billion target for minimum cash balance ▪ Sustaining capital expenditures of ~$340 million, return seeking capital of ~$35 Capital expenditures to sustain and improve operations
Slide 23: Quarterly income statement
Quarterly income statement Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 3Q19 2Q20 3Q20 Change Change Realized primary aluminum price ($/mt) $2,138 $1,694 $1,904 $(234) $210 Realized alumina price ($/mt) $324 $250 $274 $(50) $24 Revenue $2,567 $2,14
Slide 24: Special items
Special items Breakdown of special items by income statement classification – gross basis M, Except per share amounts 3Q19 2Q20 3Q20 Description of significant 3Q20 special items Net loss attributable to Alcoa Corporation $(221) $(197) $(49) Diluted loss per share $(1.19) ($1.06) ($0.26) Special ite
Slide 25: Quarterly income statement excluding special items
Quarterly income statement excluding special items Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 3Q19 2Q20 3Q20 Change Change Realized primary aluminum price ($/mt) $2,138 $1,694 $1,904 $(234) $210 Realized alumina price ($/m
Slide 26: 3Q20 Financial summary
3Q20 Financial summary Three months ending September 30, 2020, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $292 $1,026 $1,609 $5 $(567) - $2,365 Third-party revenue $56 $697 $1,607 $5 - - $2,365 Adjus
Slide 27: 3Q20 Adjusted EBITDA drivers by segment
3Q20 Adjusted EBITDA drivers by segment Adjusted EBITDA excluding special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 2Q20 Currency prices API materials Energy Price/mix Volume costs Other 3Q20 Bauxite $131 (4) 0 0 0 (0) (1) (2) 5 (5) $124 Alumina $88
Slide 28: Aluminum value chain
Aluminum value chain 2020 YTD Alcoa product shipments by segment Bauxite Alumina Aluminum 36.4 Mdmt shipments 10.5 Mmt shipments 2.3 Mmt shipments Third Party Intersegment 0% 13% Intersegment 30% 70% 87% Third Party 100% Intersegment Third Party 28
Slide 29: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 3Q20 production cash costs Alumina refining Input Inventory Pricing FY20 Annual Cost Cost Flow Convention Sensitivity Conversion Bauxite Caustic Soda 5 - 6 Months Quarterly, Spot $10M per $10/dmt 34% 33% Quarterly, 85% with Natural Gas 1 mon
Slide 30: 2020 Business information
2020 Business information Estimated annual Adjusted EBITDA sensitivities $M AUD BRL CAD EUR ISK NOK LME API Midwest Europe Japan + 0.01 + 0.10 + 0.01 + 0.01 + 10 + 0.10 Segment + $100/mt + $10/mt + $100/mt + $100/mt + $100/mt 0.711 5.381 1.331 1.171 137.701 9.141 Bauxite (4) 3 Alumina 119 (18) 8 (1)
Slide 31: Currency impacts on Adjusted EBITDA
Currency impacts on Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities ($M, except currencies) Balance sheet revaluation impact Currency annual sensitivity and actual impact +0.01 +0.10 +0.01 +0.01 + 10 +0.10 AUD BRL CAD EUR ISK NOK Total AUD BRL CAD EUR ISK NOK Total 9/30/1
Slide 32: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA for 4Q20 ▪ In the Bauxite segment, Adjusted EBITDA is expected to be flat, primarily due to bauxite trading purchase price ▪ In the Alumina segment, expecting ~$10 million lower due to energy costs and the mix of customer sh
Slide 33: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of September 30, 20201 Estimated financial impacts, $M OPEB Expense impact 2020 Total Segment pension $50 $0.9B U.S. Segment OPEB 5 $0.9 Pension Corporate pension & OPEB 5 U.S. $1.2 Total Total adj. EBITDA
Slide 34: Investments summary
Investments summary Investments listing and income statement location Ownership Carrying Value as of Income Statement Location of Investee Country Nature of Investment4 Interest September 30, 2020 Equity Earnings ELYSISTM Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Alumin
Slide 35: Rigorous standard in place to manage tailings and residue
Rigorous standard in place to manage tailings and residue Tailings and residue impoundments management process and inventory Robust and ongoing management process Inventory of tailings dams & residue storage1 ▪ Established industry-leading standards over 25 years ago; ▪ No Alcoa operated upstream ba
Slide 36: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of September 30, 2020 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2019 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australi
Slide 37: Valuation framework
Valuation framework LTM ending Valuation framework key considerations 9/30/2020 Adj. EBITDA excl. special items Economic value using market multiple of: + Bauxite i. AWAC joint venture, minus small portions of AWAC JV in Aluminum and $507M Transformation + Alumina ii. Ownership in certain mines and
Slide 38: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20 LTM Net (loss) income attributable to Alcoa $(402) $(221) $(303) $(1,125) $80 $(197) $(49) ($469) Add: Net income (loss) attributable to noncontrolling interest 109 74 (52) 272 59 47 29 83 Provision for income taxes 116 95 54 415 8
Slide 39: Free cash flow reconciliation
Free cash flow reconciliation $M 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Cash provided from (used for) operations $82 $174 $262 $(90) $288 $158 Capital expenditures (89) (87) (134) (91) (77) (74) Free cash flow (7) 87 128 (181) 211 84 Contributions from noncontrolling interest 1 20 10 - 16 8 Distributions to
Slide 40: Net Debt reconciliation
Net Debt reconciliation 1Q20 2Q20 3Q20 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $- $- $- Long-term debt due within one year 1 - 1 1 - 1 2 - 2 Long-term debt, less amount due within one year 1,801 31 1,770 1,800 31 1,769 2,538 31 2,5
Slide 41: Days Working Capital
Days Working Capital $M 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 Receivables from customers $684 $596 $546 $570 $402 $516 Add: Inventories 1,767 1,649 1,644 1,509 1,419 1,398 Less: Accounts payable, trade 1,523 1,418 1,484 1,276 1,253 1,360 DWC working capital $928 $827 $706 $803 $568 $554 Sales $2,711 $2,567
Slide 42: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) Reconciliation and calculation information $M 2019 YTD 2020 YTD (Net Loss/Income Attributable to Alcoa + Special Items) X 4/3 ROE % = X 100 Numerator: (Total Assets – Total Liabilities – Noncontrolling Interest)2 Net loss attributable to Alcoa Corporation $(822) $(1
Slide 43: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 2019 YTD 2020 YTD (PBT + net interest3 + special items1) x 4/3 x (1 – fixed tax rate4) ROC % = X 100 Numerator: (Total assets – cash5 – current liabilities + short-term debt) Net loss attributable to Alcoa Corporation $
Slide 44: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FY## Twelve months ending December 31 1H## Six months ending June 30 GAAP Accounting principles generally accepted in the United States of America 1Q## Three months
Slide 45: The Element of Possibility
The Element of Possibility”