Alcoa Corporation · NYSE:AA
Alcoa — Q1 2021 Earnings Presentation
48 slides from Alcoa's earnings presentation, Apr 15, 2021
Slide 1: 1st Quarter Earnings
1st Quarter Earnings Alcoa Corporation April 15, 2021
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: An excellent quarter on all fronts
An excellent quarter on all fronts Alcoa values, strategic priorities, and key takeaways for 1Q21 1Q21 Takeaways Maintaining safe and profitable operations ▪ Continued stable production and shipments while maintaining COVID-19 precautions and strong safety performance ▪ 1Q21 Net income attributable
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Strong cash position and debt maturity profile
Strong cash position and debt maturity profile Proforma cash, debt maturity profile and liquidity considerations Cash and debt maturity profile ($M) Liquidity considerations Cash balance Maturity profile In March issued $500 million aggregate principal amount of 4.125% senior notes due 2,544 1,500 2
Slide 8: Near net debt target range; U.S. pension funding flexibility
Near net debt target range; U.S. pension funding flexibility Proportional adjusted net debt and pension/OPEB cash funding as of March 31, 2021 Proportional adjusted net debt ($B) Global pension/OPEB funding ($M) Estimated pension/OPEB cash funding, with PFB use 2Q21-FY25 -0.73 Minimum required pensi
Slide 9: Strong first quarter results
Strong first quarter results Quarterly income statement highlights Prior year Sequential M, Except per share amounts 1Q20 4Q20 1Q21 change change Income statement highlights Revenue $2,381 $2,392 $2,870 $489 $478 Net income (loss) attributable to Alcoa Corporation $80 $(4) $175 $95 $179 Diluted earn
Slide 10: Higher metal, alumina prices drive up Adjusted EBITDA
Higher metal, alumina prices drive up Adjusted EBITDA Adjusted EBITDA excluding special items sequential changes, $M 40 3 13 5 521 5 4Q20 1Q21 Change 121 (15) (4) Bauxite $120 $59 $(61) Alumina 97 227 130 361 (8) Aluminum 181 283 102 Segment total 398 569 171 Transformation (8) (11) (3) Intersegment
Slide 11: Cash $2.5 billion, before April debt call and pension funding
Cash $2.5 billion, before April debt call and pension funding Key financial metrics and YTD Cash flow information as of March 31, 2021 Key financial metrics YTD Cash flow information, $M $1,643 Other $46 1Q21 Days 1Q21 YTD Return on working capital (DWC) equity Debt issue $493 25 Days 18.5% 1Q21 Cap
Slide 12: 2021 Outlook
2021 Outlook FY21 Key metrics Income statement excl. special items impacts Cash flow impacts 1Q21 Actual FY21 Outlook 1Q21 Actual FY21 Outlook Bauxite shipments (Mdmt) 12.0 49.0 – 50.0 Pension / OPEB required cash funding $77M ~ $145M Alumina shipments (Mmt) 3.6 14.0 – 14.1 Additional pension fundin
Slide 13: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 14: Aluminum market benefiting from economic recovery
Aluminum market benefiting from economic recovery Aluminum market dynamics and commercial impacts Realized price highest since 2018 Alcoa commercial impacts solid Realized primary aluminum price ($/mt) Aluminum ▪ Value-add product shipments improved ~10% in +614 1Q21 versus 4Q20 2,484 2,141 1,988 2,
Slide 15: China industry reforms driving positive fundamentals
China industry reforms driving positive fundamentals Key drivers of primary aluminum industry fundamentals Supply growth slower in last five years China acts on CO2e reduction goals Global primary aluminum production (Mmt) ▪ 14th Five Year Plan (2021) targets an 18% reduction in carbon intensity per
Slide 16: World-leading portfolio of low carbon products
World-leading portfolio of low carbon products Low carbon aluminum products, sales and outlook Low carbon products and recent sales Low carbon aluminum support factors Growing importance of ESG metrics to end-market ™ ▪ Minimum consumers, governments and investors ™ 50% ™ recycled ▪ Consumers: Incre
Slide 17: Many key strategic actions completed, others progressing
Many key strategic actions completed, others progressing Achievements of key strategic actions announced in October 2019 Completed Completed Ongoing New operating model Non-core asset sales Asset portfolio review ▪ Redesigned and ▪ Targeted $500 million to ▪ Signed new power contracts for Portland s
Slide 18: Taking action, delivering results, positioning for future
Taking action, delivering results, positioning for future 1Q21 Summary • Performed consistently and delivered on strategic actions Implemented key strategic actions to improve operationally and financially • Strengthened balance sheet Drive results and Reduced adjusted net debt, eliminated deliver r
Slide 19: Appendix
Appendix
Slide 20: 1Q21 Summary
1Q21 Summary 1Q21 Financial results and business review ▪ Net income of $175 million, or $0.93 per share; excluding special items, 1Q21 adjusted net income of $150 million, or $0.79 per share Financial results ▪ Adjusted EBITDA excluding special items of $521 million ▪ Cash balance at $2.5 billion o
Slide 21: Strengthening the Company
Strengthening the Company Actions to improve Alcoa, 2017 – 2021 2017 – 2020 2021 Operating Safely and Efficiently Optimizing the Portfolio ▪ Issued $500 million aggregate ▪ Revitalized safety program; maintained ▪ Restarted Lake Charles, Portland, Bécancour, principal amount of 4.125% senior compreh
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 ~$375 million, return seeking capital of ~$50 Capital expenditures to sustain and improve operations
Slide 23: Quarterly income statement
Quarterly income statement Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 1Q20 4Q20 1Q21 Change Change Realized primary aluminum price ($/mt) $1,988 $2,094 $2,308 $320 $214 Realized alumina price ($/mt) $299 $268 $308 $9 $40 Revenue $2,381 $2,392 $2,
Slide 24: Special items
Special items Breakdown of special items by income statement classification – gross basis M, Except per share amounts 1Q20 4Q20 1Q21 Description of significant 1Q21 special items Net income (loss) attributable to Alcoa Corporation $80 $(4) $175 Diluted earnings (loss) per share $0.43 ($0.02) $0.93 S
Slide 25: Quarterly income statement excluding special items
Quarterly income statement excluding special items Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 1Q20 4Q20 1Q21 Change Change Realized primary aluminum price ($/mt) $1,988 $2,094 $2,308 $320 $214 Realized alumina price ($/mt)
Slide 26: 1Q21 Financial summary
1Q21 Financial summary Three months ending March 31, 2021, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $243 $1,124 $2,049 $4 $(551) $1 $2,870 Third-party revenue $58 $760 $2,047 $4 - $1 $2,870 Adjuste
Slide 27: 1Q21 Adjusted EBITDA drivers by segment
1Q21 Adjusted EBITDA drivers by segment Adjusted EBITDA excluding special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 4Q20 Currency prices API materials Energy Price/mix Volume costs Other 1Q21 Bauxite $120 0 0 0 0 (1) (2) 1 0 (59) $59 Alumina $97 2 0
Slide 28: Aluminum value chain
Aluminum value chain 1Q21 Alcoa product shipments by segment Bauxite Alumina Aluminum 12.0 Mdmt shipments 3.6 Mmt shipments 0.8 Mmt shipments Third Party Intersegment 0% 12% Intersegment 31% 69% 88% Third Party 100% Intersegment Third Party 28
Slide 29: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 1Q21 production cash costs Alumina refining Input Inventory Pricing FY21 Annual Cost Cost Flow Convention Sensitivity Bauxite Caustic Soda 5 - 6 Months Quarterly, Spot $10M per $10/dmt 27% Conversion 42% Quarterly, 85% with Natural Gas 1 Mon
Slide 30: 2021 Business information
2021 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 + $100/mt 0.771 5.461 1.271 1.211 128.021 8.511 Bauxite (4) 2 Alumina 120 (16) 4 (1)
Slide 31: Currency impacts on Adjusted EBITDA
Currency impacts on Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities ($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 3/31/2
Slide 32: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA for 2Q21 ▪ Sequentially, Adjusted EBITDA in the Bauxite segment is expected to be in line with 1Q21 ▪ The Alumina segment expects one quarter of $20 million higher seasonal maintenance and $5 million higher energy costs ▪ In
Slide 33: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of March 31, 20211 Estimated financial impacts, $M OPEB Expense impact 2021 Total Segment pension $20 $0.7B U.S. $0.7 Segment OPEB 5 Pension U.S. Corporate pension & OPEB - Total $1.0 Total adj. EBITDA imp
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 March 31, 2021 Equity Earnings ELYSISTM Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminium
Slide 35: Alcoa sustainability goals
Alcoa sustainability goals Alcoa strategic long-term sustainability goals, baseline and progress Goal Description 2015 Baseline 2020 Progress Zero fatalities and serious injuries (life-threatening, life-altering injury 5 fatal or serious 1 fatal or serious Safety or illness) injuries/illnesses injur
Slide 36: 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 37: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of March 31, 2021 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2020 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia 34
Slide 38: Valuation framework
Valuation framework LTM ending Valuation framework key considerations 3/31/2021 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 $434M Transformation + Alumina ii. Ownership in certain mines and
Slide 39: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q20 2Q20 3Q20 4Q20 FY20 1Q21 Net income (loss) attributable to Alcoa $80 $(197) $(49) $(4) $(170) $175 Add: Net income attributable to noncontrolling interest 59 47 29 21 156 44 Provision for income taxes 80 45 42 20 187 93 Other (income) expenses, net (132) 51 45
Slide 40: Operational tax reconciliation
Operational tax reconciliation $M 1Q20 2Q20 3Q20 4Q20 FY20 1Q21 Provision for income taxes $80 $45 $42 $20 $187 $93 Tax on special items 8 1 3 1 13 - Discrete tax items (1) - 2 25 26 2 Interim tax impacts1 (21) (142) 182 (19) - - Operational tax provision $66 ($96) $229 $27 $226 $95 Operational tax
Slide 41: Free cash flow reconciliation
Free cash flow reconciliation $M 1Q20 2Q20 3Q20 4Q20 1Q21 Cash (used for) provided from operations $(90) $288 $158 $38 $6 Capital expenditures (91) (77) (74) (111) (75) Free cash flow (181) 211 84 (73) (69) Contributions from noncontrolling interest - 16 8 - - Distributions to noncontrolling interes
Slide 42: Net Debt reconciliation
Net Debt reconciliation 1Q20 4Q20 1Q21 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $77 $31 $46 $77 $31 $46 Long-term debt due within one year 1 - 1 2 - 2 745 - 745 Long-term debt, less amount due within one year 1,801 31 1,770 2,463 - 2,463 2,2
Slide 43: Days Working Capital
Days Working Capital $M 1Q20 2Q20 3Q20 4Q20 1Q21 Receivables from customers $570 $402 $516 $471 $587 Add: Inventories 1,509 1,419 1,398 1,398 1,417 Add: Net DWC working capital held for sale2 ̶ ̶ ̶ 129 - Less: Accounts payable, trade 1,276 1,253 1,360 1,403 1,284 DWC working capital $803 $568 $554 $
Slide 44: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) Reconciliation and calculation information $M 1Q20 1Q21 (Net Loss/Income Attributable to Alcoa + Special Items) ROE % = X 100 Numerator: (Total Assets – Total Liabilities – Noncontrolling Interest)2 Net income attributable to Alcoa Corporation $80 $175 Add: Special
Slide 45: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 1Q20 1Q21 (PBT + net interest3 + special items1) x (1 – fixed tax rate4) Numerator: ROC % = X 100 Net income attributable to Alcoa Corporation $80 $175 (Total assets – cash5 – current liabilities + short-term debt) Add:
Slide 46: Rolling results reconciliation
Rolling results reconciliation Rolling as reported versus components retained $M, except shipment data in kmt 4Q19 1Q20 2Q20 3Q20 4Q20 FY20 1Q21 Rolling third-party sales, as reported $295 $279 $277 $294 $297 $1,147 $331 Less divested third-party sales (287) (272) (271) (285) (287) (1,115) (320) Plu
Slide 47: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FOB WA Freight on board Western Australia 1H## Six months ending June 30 FY## Twelve months ending December 31 1Q## Three months ending March 31 GAAP Accounting prin
Slide 48: The Element of Possibility” $
The Element of Possibility” $