Alcoa Corporation · NYSE:AA
Alcoa — Investor Presentation (March 2009)
25 slides from Alcoa's investor presentation, Mar 17, 2009
Slide 1: Presentation March 2009
Exhibit 99 Presentation March 2009
Slide 2: Forward Looking Statements
Forward Looking Statements Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or
Slide 3: Highlights
Highlights Comprehensive plan to optimize cost structure Proposed actions strengthen world class market positions – Bauxite mining #1 Businesses with #1 / #2 – Alumina refining #1 market share will account for 90% of – Smelting capacity #1 Alcoa's overall revenue – Downstream businesses #1 / #2 Broa
Slide 4: Managing Along the Three Strategic Priorities
Managing Along the Three Strategic Priorities Strategic Priority “Downturn Actions” Longer-Term Opportunities Leverage technology Portfolio optimization Market share growth Return focused Value Creation Procurement savings Corporate overhead reduction Accelerated portfolio actions Ongoing business i
Slide 5: Getting Ahead of the Curve
Getting Ahead of the Curve Since July 2008, Alcoa has implemented a number of actions to reduce cost and preserve/strengthen financial flexibility 7/11/08 9/17/08 9/30/08 10/6/08 10/7/08 10/23/08 11/10/08 12/22/08 1/6/09 Today Downsized Suspended Curtailed Downsized Announced Reduced Curtailed Cash-
Slide 6: Managing for Value Creation – Repositioning Alcoa
Managing for Value Creation – Repositioning Alcoa Expanded Action Plans Procurement Overhead Working Capital Capex Reductions Efficiencies Rationalizations Initiatives Leverage market Phase I: Completing Metrics to maintain environment 20% Reduction existing growth and control at the Joint business
Slide 7: Over $2 billion of Procurement Savings
Over $2 billion of Procurement Savings Reduction Targets by Spend Category 2009E 2010E Strategic Raw Material – Alumina and Primary Metals 15% 18% Strategic Raw Material – Flat Rolled Products 7% 2% Indirect – Services 6% 5% Indirect – Maintenance Repair & Overhaul 21% 4% Corporate Services & IT 8%
Slide 8: Procurement Success in Key Inputs
Procurement Success in Key Inputs Alcoa Global Coke Price Alcoa Global Caustic Price ($ / mt) ($ / dry mt) -23% -48% -37% -58% ~$100M ~$300M targeted cost targeted cost savings in savings in 2010 2010 Average Lowest Target Average Lowest Target 2H’08 Price Year-End 2H’08 Price Year-End Achieved 2009
Slide 9: $400M of Savings in Overhead Rationalizations
$400M of Savings in Overhead Rationalizations Streamlined Footprint Headcount reductions ~$400M 100% Consolidation of workflow 80% Benefit reductions rd Renegotiation of 3 party contracts Reduction in travel Elimination of consulting 2008A 2010E 9
Slide 10: 2010 Capital Expenditures of $850M
2010 Capital Expenditures of $850M Total Capex Key Opportunities ($ in millions) Completion of growth initiatives enables -48% capex reductions $3,438 — Juruti bauxite mine — São Luís refining Investments in 1st quartile facilities from -53% 2004-2009 better position Alcoa for the $1,800 upturn — Ju
Slide 11: Working Capital Reduction of $800M
Working Capital Reduction of $800M Targeting Reduction Through Benchmarking Days Reduction Inventory (Days) Total working capital (Days) -28% Accounts Receivable (Days) 100% 72% Dec '08A Dec '09E Accounts Payable (Days) ~$800M increase in cash in 2009 11
Slide 12: Operational Initiatives Strengthen Core Businesses
Operational Initiatives Strengthen Core Businesses Improving global cost positions Alumina and Negotiating power contracts Primary Metals Headcount reductions Lowering raw material costs Leading franchises in challenged end-markets Flat Rolled Products Poised to leverage market positions Rationaliza
Slide 13: Improving Global Cost Positions
Improving Global Cost Positions Cost of Alumina Produced Cost of Aluminum Produced (Cash Cost $ / mt) (Cash Cost $ / mt) 100% 100% -32% -29% -38% -40% 75% 75% 71% 68% 62% 60% 3Q '08A Target 1Q '09E 4Q '09E 3Q '08A Target 1Q '09E 4Q '09E 1Q '09E 1Q '09E Current global cost curve position ~30th ~50th
Slide 14: Historically Consistent Refining EBITDA / MT Margins
Historically Consistent Refining EBITDA / MT Margins Refining EBITDA / MT $2,638 $2,570 $2,572 $1,900 $1,719 -49% $1,549 $1,312 $1,447 $1,433 $1,362 $1,365 $1,350 8 months $111 $104 $83 $73 $71 $75 $64 $50 $47 $45 $52 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Refining EBITDA / mt Averag
Slide 15: Historically Consistent Smelting EBITDA / MT Margins
Historically Consistent Smelting EBITDA / MT Margins Smelting EBITDA / MT $2,638 $2,570 $2,572 $1,900 $1,719 -49% $1,549 $788 $1,312 $1,447 $1,433 $1,362 $1,365 $1,350 $634 $499 8 months $463 $412 $425 $400 $324 $335 $333 $290 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Smelting EBITDA /
Slide 16: Rolled Products: Strength in Attractive Mid-Stream Sectors
Rolled Products: Strength in Attractive Mid-Stream Sectors Aerospace Sheet, Plate & Packaging/Can Sheet Lithographic Sheet Hard Alloy Marine Plate Automotive Brazing Hard Alloy, Oil & Gas 16
Slide 17: Engineered Products and Solutions Poised for Further Value Creation
Engineered Products and Solutions Poised for Further Value Creation Alcoa Power and Propulsion Alcoa Fastening Systems Annual Growth (04-08) Annual Growth (04-08) Sales 14% p.a. Sales 14% p.a. Net Margin 27% p.a. Net Margin 44% p.a. Sales Net Margin Sales Net Margin 2004A 2008A 2004A 2008A #1 in Tur
Slide 18: Long Term Outlook Remains Positive
Long Term Outlook Remains Positive Aluminum Outlook Aluminum Benefits Mega Trends (1) Aluminum Demand (million mt) (1) Demographics 70 Global population Light • 2006: 6.6 billion 6% CAGR Weight Relative • 2025: 7.9 billion Price • 2050: 9.1 billion High Strength Urbanization 37 Recyclable Population
Slide 19: Financial Plan Enhances Flexibility
Financial Plan Enhances Flexibility Strengthens Balance Sheet and Positions Alcoa to Capitalize on Strategic Opportunities Capital markets transactions 150 million shares of common equity ($860 million at 3/13/09 closing price) $250 million convertible notes Quarterly dividend cut to $0.03 per share
Slide 20: Pro Forma Balance Sheet / Liquidity Overview
Pro Forma Balance Sheet / Liquidity Overview Capitalization Summary Liquidity Snapshot Pro Forma 12/31/2008(1) 12/31/2008(2) Up to $5.2 billion of liquidity $1.9 billion 364-day facility Short-term debt $2,013 $650 $3.3 billion 5-year facility Long-term debt 8,565 8,565 Convertible debt – 250 Manage
Slide 21: Cash Flow and Balance Sheet Impacts Reposition Alcoa
Cash Flow and Balance Sheet Impacts Reposition Alcoa Operational Financial Procurement Efficiencies Equity and Equity-Linked Financings >$2,000M cost savings by 2010 >$1,100M gross proceeds Overhead Rationalizations Dividend Reduction $400M cost savings by 2010 >$400M annual cash savings Capex Reduc
Slide 22: Highlights
Highlights Comprehensive plan to optimize cost structure Proposed actions strengthen world class market positions – Bauxite mining #1 Businesses with #1 / #2 – Alumina refining #1 market share will account for 90% of – Smelting capacity #1 Alcoa's overall revenue – Downstream businesses #1 / #2 Broa
Slide 23: ALCOA
ALCOA
Slide 24: Reconciliation of Refining EBITDA / MT
Reconciliation of Refining EBITDA / MT ($ in millions) Alumina 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 After-tax operating income (ATOI) $318 $307 $585 $471 $315 $415 $632 $682 $1,050 $956 $727 Add: Depreciation, depletion, and 159 161 163 144 139 147 153 172 192 267 268 amortization
Slide 25: Reconciliation of Smelting EBITDA / MT
Reconciliation of Smelting EBITDA / MT ($ in millions) Primary Metals 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 After-tax operating income (ATOI) $372 $535 $1,000 $905 $650 $657 $808 $822 $1,760 $1,445 $931 Add: Depreciation, depletion, and 176 216 311 327 300 310 326 368 395 410 503 am