Slide 1: 2nd Quarter Earnings
2nd Quarter Earnings Alcoa Corporation July 19, 2017
Slide 2: Important information
Important information 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-lo
Slide 3: Important information (continued)
Important information (continued) Non-GAAP financial measures This presentation includes unaudited “non-GAAP financial measures” (GAAP means accounting principles generally accepted in the United States of America) as defined in Regulation G under the Securities Exchange Act of 1934. Alcoa Corporati
Slide 4: Roy Harvey, President and Chief Executive Officer
Roy Harvey President and Chief Executive Officer
Slide 5: Solid 2Q17 earnings; strong cash position
Solid 2Q17 earnings; strong cash position 2Q17 Financial results and business updates ▪ Net income of $75 million, or $0.40 per share; excluding special items, adjusted net income of $116 million, or $0.62 per share ▪ Adjusted EBITDA excluding special items1 of $483 million ▪ Cash balance of $954 mi
Slide 6: William Oplinger, Executive Vice President and Chief Financial Officer
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Revenue up 8% sequentially, 23% year on year
Revenue up 8% sequentially, 23% year on year Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 2Q16 1Q17 2Q17 Change Change Realized primary aluminum price ($/mt) $1,854 $2,080 $2,199 $345 $119 Realized alumina price ($/mt) $265 $325 $314 $49 $(11) Reve
Slide 8: Special items total $41 million
Special items total $41 million Breakdown of special items by income statement classification M, Except per share amounts 2Q16 1Q17 2Q17 Income Statement Classification Net (loss) income $(55) $225 $75 Net (loss) income per diluted share1 $(0.29) $1.21 $0.40 Special items $11 $(108) $41 Restructurin
Slide 9: Adjusted net earnings $116 million; adjusted EPS $0.62
Adjusted net earnings $116 million; adjusted EPS $0.62 Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 2Q16 1Q17 2Q17 Change Change Realized primary aluminum price ($/mt) $1,854 $2,080 $2,199 $345 $119 Realized alumina price ($
Slide 10: Positive factors partially offset lower alumina prices
Positive factors partially offset lower alumina prices Adjusted EBITDA excl. special items1 sequential change by key impact area, $M 31 $533 17 15 27 $483 (2) (2) (12) (100) (24) 1Q17 Metal API Currency Volume Price / Net Energy Raw Other 2Q17 Prices Mix Productivity Materials 1. See appendix for ad
Slide 11: Segment EBITDAs total $546 million
Segment EBITDAs total $546 million Adjusted EBITDA1 sequential comparison, $M 1Q17 2Q17 -24% -11% $297 +7% $613 $546 $227 $221 -11% $206 $110 $98 Bauxite Alumina Aluminum Segment Total 2Q17 Segment Adj. EBITDA Margin % 34.0% 20.0% 11.1% 16.0% Change vs. 1Q17, Margin % -4.1% pts -7.1% pts -0.3% pts -
Slide 12: Non-segment costs improve $17 million
Non-segment costs improve $17 million 2Q17 Adjusted EBITDA excluding special items1 breakdown by component, $M 1Q17 2Q17 $ Change Segment total adjusted EBITDA $613 $546 $(67) Transformation & legacy pension/OPEB2 (32) (40) (8) Impact of LIFO and metal price lag (9) 3 12 Other corporate expenses3 (3
Slide 13: Strong cash position of $954 million
Strong cash position of $954 million Sequential quarter cash comparison and cash flows, $M Quarter ending cash balance Free cash flow and change in cash 1Q17 2Q17 +150 Cash Provided From Operations $74 $311 (49) 954 Capital Expenditures (71) (88) 853 804 Free Cash Flow $3 $223 1Q17 2Q17 Cash Provide
Slide 14: Balance sheet strengthens
Balance sheet strengthens Key financial metrics as of June 30, 2017 2Q17 Days Cash ▪ Manage cash position Working Capital ▪ Optimize working capital $954M 18 Days 1H17 Capital 1H17 ▪ Maintain assets Expenditures1 Return on Capital2 ▪ Invest in return seeking projects $159M 6.1% Net Debt-to-LTM Pensi
Slide 15: 2017 Progress and outlook
2017 Progress and outlook FY17 Key metrics Adjusted EBITDA excl. special items Financial metrics 1H17 FY17 1H17 Actual FY17 Outlook Actual Outlook Transformation & legacy pension/OPEB $72M ~ $150M INCOME STATEMENT Adjusted Other corporate expenses3 $65M ~ $150M EBITDA excl. $1.0B $2.1B – $2.2B1 IMPA
Slide 16: Roy Harvey, President and Chief Executive Officer
Roy Harvey President and Chief Executive Officer
Slide 17: Warrick smelter restart announced on July 11
Warrick smelter restart announced on July 11 Warrick smelter partial restart rationale and overview Key information and financial impacts Strategic benefits of an integrated facility ▪ Restarting three of five potlines (161 kmt of ▪ Increase asset utilization 269 kmt), first hot metal in January, 20
Slide 18: Alumina balance outlook improves on higher demand
Alumina balance outlook improves on higher demand Projected 2017 market balances Bauxite (3rd-party seaborne) Alumina (smelter grade) Aluminum Outlook Relative balance Relative balance Modest surplus Supply/Demand Balance, (Mmt) Global 0 to 6; stockpile growth -0.8 to 0; balanced 0.3 to 0.7; surplus
Slide 19: Significant curtailment potential to be realized
Significant curtailment potential to be realized Potential primary aluminum supply impacts from Chinese policy-driven curtailments Policy initiatives Potential capacity at risk Ministry of Environmental Protection (MEP) ▪ Plan issued in 1Q17 MEP1 2.2 Mtpa ▪ Potential 30% reduction in 28 cities durin
Slide 20: Input costs rising with higher metal prices
Input costs rising with higher metal prices Aluminum prices and input cost trends Daily LME aluminum cash prices, $/mt Key raw materials prices, indexed to 2Q16 2,000 160 LME Aluminum Caustic 150 1,900 Coke 140 Pitch 1,800 130 1,700 120 110 1,600 100 1,500 90 1,400 80 Apr-16 Jul-16 Oct-16 Jan-17 Apr
Slide 21: Alcoa’s caustic efficiency is a competitive advantage
Alcoa’s caustic efficiency is a competitive advantage Impact of caustic price movements on Alcoa, ROW and China refineries Caustic price change x Refinery consumption = Refinery cost impact Average caustic price1 ($/dmt) Caustic usage (kg/mt alumina produced) Caustic cost impact ($/mt alumina produc
Slide 22: Executing strategy; focused on delivering results
Executing strategy; focused on delivering results Progress on strategic priorities ▪ Announced partial restart of Warrick smelter to improve operational Reduce Complexity efficiencies ▪ Continuing to streamline throughout the organization ▪ Delivered $483 million of adjusted EBITDA excl. special ite
Slide 23: Questions?
Questions? Alcoa Corporation
Slide 24: Appendix
Appendix
Slide 25: 2Q17 Financial summary
2Q17 Financial summary Three months ending June 30, 2017, excluding special items Transformation & Impact from Other Alcoa $M Bauxite Alumina Aluminum3,4 Legacy Pension / LIFO & Metal Corporate Corporation OPEB Costs Price Lag Expenses Total Total revenue1 $288 $1,133 $1,991 $42 - $(595) $2,859 Thir
Slide 26: 2Q17 Adjusted EBITDA drivers by segment
2Q17 Adjusted EBITDA drivers by segment Sequential Adjusted EBITDA change impacts by segment vs. 1Q17, $M Adj. Net Adj. EBITDA Metal Product- Raw EBITDA Segment 1Q17 Prices API Currency Volume Price/Mix ivity Energy Materials Other 2Q17 Bauxite $110 0 0 2 0 (2) (7) 1 0 (6) $98 Alumina $297 5 (98) 20
Slide 27: Aluminum value chain
Aluminum value chain 1H17 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 1.6 31% 100% Aluminum 3rd Party 6.7 87% 69% Alumina 3rd Party 23.1 13% Bauxite 3rd Party 27
Slide 28: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 2Q17 production cash costs Alumina refining Input Inventory Pricing Estimated Annual Fuel Oil Natural Gas Cost Flow Convention Cost Sensitivity 6% 14% Fuel Oil 1 - 2 Months Prior Month $3M per $1/bbl Caustic Conversion 35% 13% Natural Gas1 N
Slide 29: 2017 Business sensitivities
2017 Business sensitivities Estimated annual EBITDA sensitivities $ in millions 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 USD/AUD BRL/USD CAD/USD USD/EUR ISK/USD NOK/USD Bauxite (3) 4 Alumina
Slide 30: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB overview $2.9B Net balance sheet liability 2017 Impacts, $M as of June 30, 2017 Pension OPEB Segments ~50% ~15% OPEB Legacy Operations ~15% ~15% Total U.S. Corporate ~5% - $1.2B $1.2 Pension U.S. $1.4 Total Total Expense ~ $175M $1.7B Pension OPEB ROW $0.3 C
Slide 31: Capacity closed, sold and curtailed
Capacity closed, sold and curtailed Smelting and Refining capacity information as of June 30, 2017 Smelting capacity Refining capacity Closed / Sold since December 2007 Curtailed Closed / Sold since December 2007 Curtailed Facility Year kmt Facility Year kmt Facility Year kmt Facility Year kmt Baie
Slide 32: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 2Q16 1Q17 2Q17 LTM Net (loss) income attributable to Alcoa Corporation ($55) $225 $75 $165 Add: Net (loss) income attributable to noncontrolling interest 43 83 63 162 Provision for income taxes 68 110 99 307 Other expenses / (income), net (23) (100) 6 (199) Interest
Slide 33: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 2Q16 1Q17 2Q17 Cash from operations ($82) $74 $311 Capital expenditures (86) (71) (88) Free cash flow1 ($168) $3 $223 1. Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash f
Slide 34: Net Debt reconciliation
Net Debt reconciliation $M 2Q17 Short-term borrowings $4 Long-term debt due within one year 19 Long-term debt, less amount due within one year 1,418 Total debt 1,441 Less: Cash and cash equivalents 954 Net debt1 $487 1. Net debt is a non-GAAP financial measure. Management believes that this measure
Slide 35: Days Working Capital
Days Working Capital $M 1Q17 2Q17 Receivables from customers $708 $789 Add: Inventories 1,294 1,287 Less: Accounts payable, trade 1,434 1,508 Working Capital $568 $568 Revenue $2,655 $2,859 Number of Days in the Quarter 90 91 Days Working Capital1 19 18 1. Days Working Capital = Working Capital divi
Slide 36: 1H17 Annualized ROC
1H17 Annualized ROC Reconciliation and calculation information $M 1H17 (PBT + Net Interest4 + Special Items) x Two2 x (1 – Fixed Tax Rate5) ROC % = X 100 Numerator: Net income attributable to Alcoa Corporation 300 (Assets – Cash – Current Liabilities + Short Term Debt) Add: Net income attributable t
Slide 37: 2016 Baseline ROC for Long-Term Incentive Plan (LTIP)
2016 Baseline ROC for Long-Term Incentive Plan (LTIP) Reconciliation and calculation information (PBT + Net Interest3 + Special Items) x (1 – Fixed Tax Rate4) $M FY 16 ROC % = X 100 Numerator: (Assets – Cash – Current Liabilities + Short Term Debt) Net loss attributable to Alcoa Corporation (400) Ad
Slide 38: Glossary of terms
Glossary of terms Abbreviations listed in alphabetical 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 39: The Element of Possibility
The Element of Possibility”