Slide 1: 2nd Quarter Earnings Conference
2nd Quarter Earnings Conference UPDATE (10/27/16): The original version of this presentation transposed two headings on page 31. July 11, 2016 The correct headings appear herein. 1
Slide 2: Important Information
Important Information 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 include those
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: Klaus Kleinfeld
Klaus Kleinfeld Chairman and Chief Executive Officer July 11, 2016
Slide 5: Alcoa Increasingly Agile; Results Continue to Improve
Alcoa Increasingly Agile; Results Continue to Improve 2Q 2016 Overview Arconic Segments (Value-Add)1 Revenue of $3.5 billion, up 1 percent year-over-year, reflects: • 5 percent revenue increase related to acquisitions, mostly offset by a 4 percent revenue decline predominately from metal price imp
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer July 11, 2016 6
Slide 7: Income Statement Summary
Income Statement Summary Prior Year Sequential $ Millions, except aluminum prices and per-share amounts 2Q15 1Q16 2Q16 Change Change Realized Aluminum Price ($/MT) $2,180 $1,793 $1,849 ($331) $56 Revenue $5,897 $4,947 $5,295 ($602) $348 Cost of Goods Sold $4,663 $4,041 $4,216 ($447) $175 COGS % Reve
Slide 8: Special Items
Special Items Income Statement $ Millions, except per-share amounts 2Q15 1Q16 2Q16 Segment Classification Net Income $140 $16 $135 Net Income per Diluted Share $0.10 $0.00 $0.09 Tax Items $22 ($12) ($44) Income Taxes Corporate Portfolio Transaction Costs (including Separation Costs) ($5) ($17) ($37)
Slide 9: Strong Productivity Partially Offsets Lower Metal and Alumina Prices
Strong Productivity Partially Offsets Lower Metal and Alumina Prices Adjusted Net Income excluding Special Items ($ Millions) $237 -$33 $10 -$52 $250 -$147 $213 -$35 $15 -$58 $26 2Q15 Metal API Currency Volume Price / Productivity Energy Raw Cost 2Q16 Price Mix Materials Increases / Other Market Per
Slide 10: GRP: Productivity and Auto Uplift Offset Headwinds
GRP: Productivity and Auto Uplift Offset Headwinds 2Q16 Actual and 3Q16 Outlook – Global Rolled Products 2nd Quarter ATOI Results 2nd Quarter Business Highlights 2Q15 1Q16 2Q16 EBITDA/MT1 up 11% year-over-year excluding impact to secure alternative metal supply at Warrick (EBITDA $27M, ATOI $17M)
Slide 11: EPS: Strong Productivity and Benefits from Acquisitions
EPS: Strong Productivity and Benefits from Acquisitions 2Q16 Actual and 3Q16 Outlook – Engineered Products and Solutions 2nd Quarter ATOI Results 2nd Quarter Business Highlights 2Q15 1Q16 2Q16 Record revenue; 15% growth y-o-y primarily by acquisitions Growth partially offset by pricing pressure,
Slide 12: TCS: Productivity Offsets N.A. Heavy Truck and Brazil Weakness
TCS: Productivity Offsets N.A. Heavy Truck and Brazil Weakness 2Q16 Actual and 3Q16 Outlook – Transportation and Construction Solutions 2nd Quarter ATOI Results 2nd Quarter Business Highlights 2Q15 1Q16 2Q16 Revenue down 5% year-over-year; attributable to the N.A. Heavy Duty Truck and Brazilian ma
Slide 13: Alumina: Earnings Lifted by Pricing and Performance
Alumina: Earnings Lifted by Pricing and Performance 2Q16 Actual and 3Q16 Outlook – Alumina 2nd Quarter ATOI Results 2nd Quarter Business Highlights 2Q15 1Q16 2Q16 API pricing up 22% sequentially, down 26% year-over-year Production (kmt) 3,977 3,330 3,316 Production down vs. Q1 on Pt Comfort curt
Slide 14: Primary Metals: Benefit from Pricing and Portfolio Actions
Primary Metals: Benefit from Pricing and Portfolio Actions 2Q16 Actual and 3Q16 Outlook – Primary Metals 2nd Quarter ATOI Results 2nd Quarter Business Highlights 2Q15 1Q16 2Q16 Realized price up 3% sequentially Production (kmt) 701 655 595 Production down 60 kmt following Warrick closure rd 3 Pa
Slide 15: FCF at $55M despite $200M Australian Gas Prepayment
FCF at $55M despite $200M Australian Gas Prepayment 2Q15, 1Q16 and 2Q16 Cash Flow ($ Millions) 2Q15 1Q16 2Q16 Net Income before Noncontrolling Interests $207 $11 $178 Depreciation, Depletion and Amortization $320 $309 $313 Change in Working Capital $44 ($469) $5 Pension Expense in Excess of Contribu
Slide 16: Over $1.2 Billion expected to be Generated by Asset Sales in 2016
Over $1.2 Billion expected to be Generated by Asset Sales in 2016 2016 Expected Asset Sales Cash Proceeds Closing DBNG Sell all of Alcoa of Australia’s1 20% minority interest in the Australia Dampier to Bunbury Natural Gas Pipeline $145M 2Q16 Pipeline Remmele A $70M2 contract manufacturer of med
Slide 17: Strong liquidity, with Cash on hand at $1.9 Billion
Strong liquidity, with Cash on hand at $1.9 Billion Debt, Net Debt ($ Millions) Cash Net Debt 9,273 9,052 9,085 8,744 8,787 8,246 1,939 1,919 1,929 1,861 1,877 1,437 7,334 6,910 7,133 7,156 6,883 6,809 2011 2012 2013 2014 2015 2Q16 Note: Debt amounts for 2011 – 2015 have been updated to reflect the
Slide 18: Demand Growth at 5% While Supply Only Grows at 2.5% in 2016
Demand Growth at 5% While Supply Only Grows at 2.5% in 2016 Primary aluminum demand and supply by region 2016 Primary Aluminum Demand & YoY Growth (Mt) 2016 Primary Aluminum Supply & YoY Growth (Mt) Russia -1.0% Global +5% Global +2.5% Brazil 0.9 1.0 -4.0% 2.1 3.0% Russia 3.7 4.0% Other1 SE Asia 2.2
Slide 19: Aluminum Market Remains in Deficit at 775 kmt
Aluminum Market Remains in Deficit at 775 kmt Aluminum fundamentals overview Continue to see global deficit in 2016 Global Inventories at 54 days; -7 days YoY 2016E Aluminum Balance (kmt) Days 105 Financed Stocks China Incl SRB Producer Japan Port Global 98 91 84 China Deficit Rest of World 77 70 (7
Slide 20: Alumina Market Remains in Deficit at 1.5 Mmt
Alumina Market Remains in Deficit at 1.5 Mmt Alumina fundamentals overview Continue to see large deficit for 2016 Demand growth at 4% while supply only grows at 1% in 2016 2016E Alumina Balance (kmt) Demand & YoY Growth (Mt) Supply & YoY Growth (Mt) Deficit ROW 52.5 3.0% ROW 51.3 -2.2% (1,450) China
Slide 21: Klaus Kleinfeld
Klaus Kleinfeld Chairman and Chief Executive Officer July 11, 2016
Slide 22: Aerospace 2H '16 Improves; Engines Outpace Airframes
Aerospace 2H ’16 Improves; Engines Outpace Airframes Alcoa Current Assessment of Aerospace Market Market Growth(1) Global Commentary Transition year 2016 includes strong 2H Aerospace(1) 2016 FY 1H Large Commercial Aircraft (LCA) deliveries down -1% YoY 2016 FY flat to +3%: Careful ramp-up of n
Slide 23: Continued Growth in Automotive; HDT- N.A. Further Decline, Europe Strength
Continued Growth in Automotive; HDT- N.A. Further Decline, Europe Strength Alcoa End Markets: Current Assessment of 2016 vs. 2015 End Market 2016 Growth Global and Regional Commentary • Production Up: +2.6%YTDMay’16 (7.4M units); Truck up +8.5% YTDMay’16 • Healthy Sales: Up +1.3%YTDJune ’16 , FY 201
Slide 24: Packaging Stable, Commercial B&C and Global Airfoil Markets Grow
Packaging Stable, Commercial B&C and Global Airfoil Markets Grow Alcoa End Markets: Current Assessment of 2016 vs. 2015 End Market 2016 Growth Global and Regional Commentary Packaging • Demand decline: Weakness (-1% to -2%) in Carbonated Soft Drinks (CSD) N.A. -1% to 0% • Moderate growth in Beer Seg
Slide 25: ARCONIC
ARCONIC Innovation, engineered.
Slide 26: Future Arconic: Groups on Track to Meet 2016 Goals
Future Arconic: Groups on Track to Meet 2016 Goals 2Q16 Arconic Performance and 2016 Goals 3rd Party Revenue($B) EBITDA (%, $/MT) 2Q 2016 Highlights 3Q 2016 Outlook1 2016 Goal EBITDA/MT of $380, up 11% YoY excluding impact to secure alternative metal supply at Warrick ($27M) 6.0-6.2 ATOI up 5-10
Slide 27: Firth Rixson On Track to 2016 Target
Firth Rixson On Track to 2016 Target 2015-2016 Firth Rixson Revenue ($M) and EBITDA ($M,%) Overview 1st Half Key Drivers Next Steps Revenue $1.0 to EBITDA Impact • Ramp-up production for next- $1.1B EBITDA generation engine platforms Productivity ~ +$27M • Increase Savannah isothermal $935 Markets ~
Slide 28: ATEP (RTI) Delivering Ahead of Integration Plan; On Track to Target
ATEP (RTI) Delivering Ahead of Integration Plan; On Track to Target 2015-2016 ATEP Revenue ($M) and EBITDA ($M,%) Overview 1st Half Key Drivers Next Steps Revenue EBITDA Impact • Continued execution to deliver Productivity ~ +$32M synergies EBITDA Markets ~ +$4M • Share Gains and Market to Adjustmen
Slide 29: Arconic Well Positioned on Next Generation Structures and Engines
Arconic Well Positioned on Next Generation Structures and Engines Indexed Revenue by Major Programs1 Revenue per Aircraft (indexed to B737 NG) Revenue per Jet Engine (Indexed to CFM56) Current generation Current generation New generation New generation GEnx 1B (B787): B787 (CFRP): ~$6.5M ~$740K Rev
Slide 30: Leading Additive Manufacturing in Aerospace
Leading Additive Manufacturing in Aerospace Next generation multi-material solutions: Advancing 3D-printing materials and processes Multi-Materials Leadership Exclusive Advanced Processes Commercialized 3D-Printed Components Metal Powder Expansion Combining Traditional and Additive Technology Alcoa
Slide 31: GRP Benefits from Increasing Aluminization of NA Auto Platforms
GRP Benefits from Increasing Aluminization of NA Auto Platforms UPDATE (10/27/16): The original version of this slide inadvertently NA automotive sheet: Increasing Aluminization of OEM platforms transposed the headings related to automotive hoods and doors. The Al usage is increasing across platform
Slide 32: Alcoa
Alcoa
Slide 33: 7% CAGR in bauxite demand; bright future for Alcoa Bauxite business
7% CAGR1 in bauxite demand; bright future for Alcoa Bauxite business Alcoa mines well positioned with bauxite reserves Bauxite grows strongly, driven by Chinese demand Global bauxite reserves in billions of mt and Alcoa bauxite mines Global 3rd party bauxite consumption in billions of mt Pacific ex-
Slide 34: Our Team has Generated $739M in Productivity and a Record 18K+ Ideas
Our Team has Generated $739M in Productivity and a Record 18K+ Ideas Alcoa Degrees of Implementation Ideas and Gross Productivity Program through Q2 2016 Productivity Procurement Savings Price negotiation 2016 1H Productivity Tracking Ahead of Targets Overhead Reductions 2016 Productivity ($ Milli
Slide 35: Executing Separation – On Course for Second Half of 2016
Executing Separation – On Course for Second Half of 2016 Separation Approximate Timeline and Path to Completion 4Q 2015 1st Half 2016 2nd Half 2016 Form 10 Effectiveness and Final Launched Office the Separation Program Launched New Value-Add Name and Brand and Refreshed Alcoa Brand Board Approva
Slide 36: On Track to Separate into Two Strong Companies
On Track to Separate into Two Strong Companies Alcoa Increasingly Agile; Results Continue to Improve Arconic Gearing for Profitable Growth; Significant Aero, Auto Traction Alcoa Corporation Realizing Benefit of More Competitive Portfolio and Leading Bauxite Position Strengthening Both Companies: $1.
Slide 37: Additional Information
Additional Information Matthew Garth Vice President, Investor Relations and FP&A Alcoa 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 Email: matthew.garth@alcoa.com www.alcoa.com 37
Slide 38: APPENDIX
APPENDIX Advancing each generation. 6] ALCOA 38
Slide 39: Value Add Segment Bridges – 2Q16
Value Add Segment Bridges – 2Q16 EPS Sequential Quarter Bridge GRP Sequential Quarter Bridge $ Millions $ Millions $14 -$2 $180 $10 -$5 $18 -$8 $8 -$19 $162 $1 $68 $1 $68 1Q16 Currency Volume Price / Productivity Cost 2Q16 1Q16 Currency Volume Price / Productivity Cost 2Q16 Mix Increases/ Mix Increa
Slide 40: Upstream Segment Bridges – 2Q16
Upstream Segment Bridges – 2Q16 Alumina Year-over-Year Bridge Primary Metals Year-over-Year Bridge $ Millions $ Millions $215 -$15 $67 $74 -$34 -$165 $10 $41 $64 $1 -$13 $109 $6 $18 -$4 $8 $4 -$15 2Q15 LME API Currency Volume Price / Prod- Energy Cost 2Q16 -$135 $64 Mix uctivity Increases 2Q15 Metal
Slide 41: Revenue Change by Market – 2Q16
Revenue Change by Market – 2Q16 Sequential Year-Over-Year 2Q16 Third-Party Revenue Change Change Aerospace 3% 9% Automotive 3% 6% 26% Brazing 3% (12%) 21% 3% B&C 13% Comm. Transport 2% (21%) Industrial Products 2% (15%) 13% 4% IGT 7% 42% 2% (1%) Packaging 20% 3% 6% Distribution/Other (3%) 14% 12% 6%
Slide 42: Composition of Upstream Production Costs
Composition of Upstream Production Costs Refining Cost Structure Input Cost Inventory flow Pricing Annual ATOI Fuel Oil convention Sensitivity Natural gas 7% Conversion 13% Fuel oil 1 – 2 months Prior month $2m per $1/bbl 44% Caustic 10% Natural gas1 N/A N/A N/A Spot & semi- $6m per Caustic soda 3 -
Slide 43: Special Items
Special Items Pre-tax, Before NCI After-tax, After NCI Income Statement $ Millions, except per-share amounts 1Q16 2Q16 1Q16 2Q16 Classification Segment Income from Continuing Operations $41 $330 $16 $135 Income per Diluted Share - - $0.00 $0.09 Tax Items - - ($12) ($44) Income Taxes Corporate Portfo
Slide 44: Alcoa Upstream Capacity Closed, Sold and Idled
Alcoa Upstream Capacity Closed, Sold and Idled Smelting Capacity Refining Capacity Closed/sold since December 2007 Idled Closed/sold since December 2007 Idled Facility Year kmt Facility Year kmt Facility Year kmt Facility Year kmt Baie Comeau 2008 53 Portland 2008 30 Jamalco (sale) 2014 779 Point Co
Slide 45: Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa
Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa (in millions) 1Q15 2Q15 3Q15 4Q15 2015 1Q16 2Q16 (1) Total segment ATOI $656 $567 $410 $273 $1,906 $291 $444 Unallocated amounts (net of tax): Impact of LIFO 7 36 50 43 136 4 (10) Metal price lag (23) (39) (48) (23) (133)
Slide 46: Reconciliation of Adjusted Income
Reconciliation of Adjusted Income (in millions, except Income Diluted EPS(5) per-share amounts) Quarter ended Quarter ended June 30, March 31, June 30, June 30, March 31, June 30, 2015 2016 2016 2015 2016 2016 Net income attributable to Alcoa $140 $16 $135 $0.10 $0.00 $0.09 Special items(1): Restruc
Slide 47: Reconciliation of Adjusted Income, continued
Reconciliation of Adjusted Income, continued (3) Other special items include the following: • for the quarter ended June 30, 2015, a gain on the sale of land in the United States ($29), a favorable tax impact related to the interim period treatment of operational losses in certain foreign jurisdicti
Slide 48: Reconciliation of Alcoa Adjusted EBITDA
Reconciliation of Alcoa Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 Net income (loss) attributable to Alcoa $1,233 $2,248 $2,564 $(74) $(1,151) $254 $611 $191 $(2,285) $268 $(322) $140 $16 $135 Add: Net income (loss) attributable to noncontro
Slide 49: Reconciliation of Alumina Adjusted EBITDA
Reconciliation of Alumina Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $682 $1,050 $956 $727 $112 $301 $607 $90 $259 $370 $746 $215 $8 $109 Add: Depreciation, depletion, and amor
Slide 50: Reconciliation of Primary Metals Adjusted EBITDA
Reconciliation of Primary Metals Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $822 $1,760 $1,445 $931 $(612) $488 $481 $309 $(20) $594 $155 $67 $14 $41 Add: Depreciation, depleti
Slide 51: Reconciliation of Upstream Adjusted EBITDA
Reconciliation of Upstream(1) Adjusted EBITDA (in millions) 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $1,658 $(500) $789 $1,088 $399 $239 $964 $901 $282 $22 $150 Add: Depreciation, depletion, and amortization 771 852 977 1,000 987 952 881 725 186 165 16
Slide 52: Reconciliation of Global Rolled Products Adjusted EBITDA
Reconciliation of Global Rolled Products Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010(1) 2011(1) 2012(1) 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $278 $233 $178 $(3) $(49) $220 $266 $358 $292 $245 $244 $76 $68 $68 Add: Depreciati
Slide 53: Reconciliation of Engineered Products and Solutions Adjusted EBITDA
Reconciliation of Engineered Products and Solutions Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $183 $237 $351 $465 $321 $355 $436 $484 $569 $579 $595 $165 $162 $180 Add: Depreciation, depletion, and amortiza
Slide 54: Reconciliation of Transportation and Construction Solutions Adjusted EBITDA
Reconciliation of Transportation and Construction Solutions Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $94 $129 $94 $82 $5 $73 $109 $126 $167 $180 $166 $44 $39 $46 Add: Depreciation, depletion, and amortizat
Slide 55: Reconciliation of Value-Add Adjusted EBITDA
Reconciliation of Value-Add(1) Adjusted EBITDA ($ in millions) 2008 2009 2010 2011 2012 2013 2014 2015 2Q15 1Q16 2Q16 After-tax operating income (ATOI) $544 $277 $648 $811 $968 $1,028 $1,004 $1,005 $285 $269 $294 Add: Depreciation, depletion, and amortization 387 410 400 402 393 392 414 503 121 132
Slide 56: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow Year ended Quarter ended (in millions) December 31, December 31, December 31, December 31, December 31, June 30, March 31, June 30, 2011 2012 2013 2014 2015 2015 2016 2016 Cash from $2,193 $1,497 $1,578 $1,674 $1,582 $472 $(430) $332 operations Capital expenditures (
Slide 57: Reconciliation of Net Debt
Reconciliation of Net Debt (in millions) December 31, March 31, June 30, (1) (1) (1) (1) (1) 2011 2012 2013 2014 2015 2016 2016 Short-term borrowings $62 $53 $57 $54 $38 $40 $33 Commercial paper 224 – – – – – – Long-term debt due within one year 445 465 655 29 21 772 774 Long-term debt, less amount