Slide 1: 1st Quarter Earnings
1st Quarter Earnings Alcoa Corporation April 24, 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, including Adjus
Slide 4: Roy Harvey, Chief Executive Officer
Roy Harvey Chief Executive Officer
Slide 5: Solid start to Alcoa Corporation's first year
Solid start to Alcoa Corporation's first year Financial results and business update Net income of $225 million, or $1.21 per share; excluding special items, 1Q17 adjusted net income of $117 million, or $0.63 per share Financial Adjusted EBITDA excluding special items1 of $533 million, up 59% vs.
Slide 6: William Oplinger, Chief Financial Officer
William Oplinger Chief Financial Officer
Slide 7: Substantial earnings growth
Substantial earnings growth Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 1Q16 4Q16 1Q17 Change Change Realized primary aluminum price ($ / MT) $1,815 $1,906 $2,080 $265 $174 Realized alumina price ($ / MT) $229 $272 $325 $96 $53 Revenue $2,129 $2,5
Slide 8: Special items led by $120M gain on Yadkin sale
Special items led by $120M gain on Yadkin sale Breakdown of special items by income statement classification M, Except per share amounts 1Q16 4Q16 1Q17 Income Statement Classification Net (loss) income $(210) $(125) $225 Net (loss) income per diluted share1 $(1.15) $(0.68) $1.21 Special items $96 $1
Slide 9: Earnings growth sequentially and year on year
Earnings growth sequentially and year on year Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 1Q16 4Q16 1Q17 Change Change Realized primary aluminum price ($ / MT) $1,815 $1,906 $2,080 $265 $174 Realized alumina price ($ / MT)
Slide 10: Improved market prices drive higher earnings
Improved market prices drive higher earnings Adjusted EBITDA excl. special items1 sequential change by key impact area, $M 148 6 10 $533 (23) (18) (18) (5) (3) 101 $335 4Q16 Metal API Currency Volume Price / Net Energy Raw Other 1Q17 Prices Mix Productivity Materials 1. See appendix for adjusted EBI
Slide 11: Segment profits growing, margins expanding
Segment profits growing, margins expanding Adjusted EBITDA1 sequential comparison, $M 4Q16 1Q17 +74% +44% $297 +36% $613 +8% $206 $425 $171 $152 $102 $110 Bauxite Alumina Aluminum Segment Total 1Q17 Segment Adj. EBITDA Margin % 38.1% 27.1% 11.4% 19.2% Change vs. 4Q16, Margin % +3.3% pts +9.9% pts +2
Slide 12: Combined non-segment costs improved $10 million
Combined non-segment costs improved $10 million 1Q17 Adjusted EBITDA excluding special items1 breakdown by component, $M 4Q16 1Q17 $ Change Segment total adjusted EBITDA $425 $613 $188 Transformation & legacy pension/OPEB2 (36) (32) 4 Impact of LIFO and metal price lag (24) (9) 15 Other corporate ex
Slide 13: Solid cash position with 0.5x net debt to adjusted EBITDA
Solid cash position with 0.5x net debt to adjusted EBITDA Key financial metrics as of March 31, 2017 1Q17 Days Cash Manage cash position Working Capital Optimize working capital $804M 19 Days 1Q17 Capital 1Q17 Maintain assets Expenditures1 Return on Capital2 Invest in return seeking projects
Slide 14: Progress on 2017 outlook
Progress on 2017 outlook FY17 Key metrics Shipments Financial metrics 1Q17 Actual FY17 Outlook Transformation & legacy pension/OPEB $32M ~ $165M 1Q17 FY17 INCOME STATEMENT Actual Outlook Other corporate expenses2 $39M ~ $150M IMPACTS Depreciation, depletion and amortization $179M ~ $750M Bauxite 11.
Slide 15: Roy Harvey, Chief Executive Officer
Roy Harvey Chief Executive Officer
Slide 16: Stable market outlook in 2017
Stable market outlook in 2017 Projected market balances Bauxite (3rd-party Seaborne) Alumina (Smelter grade) Aluminum Outlook Relative balance Relative balance Modest surplus Supply/Demand Balance, million metric tons (Mmt) Global 0 to 6; stockpile growth 0 to 0.8; balanced to surplus 0.3 to 0.7; su
Slide 17: Chinese margins under pressure, supporting outlook
Chinese margins under pressure, supporting outlook Analysis of smelting costs and revenues Changes in costs and revenues Portion of Chinese from Q2 2016 to Q1 2017 Smelting Production Underwater 20% Cost Changes Revenue Changes +$283/t +$303/t +$128/t 11% -$195/t +$175/t +$88/t 1% 0% China RoW 2Q16
Slide 18: Reduced business segments; consolidating locations
Reduced business segments; consolidating locations Streamlined company structure and administrative locations New segment structure Streamlining administrative locations Closing eight administrative offices in the U.S., Europe and Asia over the next 18 months Relocating corporate headquarters to
Slide 19: New long-term executive compensation metrics
New long-term executive compensation metrics Long-term incentive plan (LTIP) overview Metric Three year target Weight Note Normalized Return Increase 200 basis 50% Normalized for commodity prices and on Capital (ROC) points vs. 2016 foreign currency exchange fluctuation Improvement baseline1 Relat
Slide 20: Executing strategy; focused on delivering results
Executing strategy; focused on delivering results Progress on strategic priorities Successfully streamlined organization into three business segments Reduce Complexity Reducing global administrative locations Relocating corporate headquarters to Pittsburgh Delivered $533 million of adjusted
Slide 21: Questions?
Questions? Alcoa Corporation
Slide 22: Appendix
Appendix
Slide 23: 1Q17 Financial summary
1Q17 Financial summary Three months ending March 31, 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 $289 $1,095 $1,810 $46 - $(585) $2,655 Thi
Slide 24: 1Q17 Adjusted EBITDA drivers by segment
1Q17 Adjusted EBITDA drivers by segment Sequential Adjusted EBITDA change impacts by segment vs. 4Q16, $M Adj. Net Adj. EBITDA Metal Product- Raw EBITDA Segment 4Q16 Prices API Currency Volume Price/Mix ivity Energy Materials Other 1Q17 Bauxite $102 0 0 (3) (10) 1 (1) (2) 0 23 $110 Alumina $171 3 18
Slide 25: Aluminum value chain
Aluminum value chain Product shipments by segment (1Q17 shipments in millions of metric tons) Bauxite Alumina Aluminum 0.8 30% 100% Aluminum 3rd Party 3.2 88% 70% Alumina 3rd Party 11.6 12% Bauxite 3rd Party 25
Slide 26: Composition of production costs
Composition of production costs 1Q17 Production cost information Alcoa alumina refining cost structure Pricing Estimated Annual Fuel Oil Natural Gas Input Cost Inventory Flow Convention EBITDA Sensitivity 6% 14% Caustic Fuel Oil 1 - 2 Months Prior Month $3M per $1/bbl 12% 36% Natural Gas1 N/A N/A N/
Slide 27: 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 28: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB overview $3.0B in unfunded liability 2017 Impacts, $M as of March 31, 2017 Pension OPEB Segments ~50% ~10% OPEB Legacy Operations ~15% ~20% Total U.S. Corporate ~5% - $1.2B $1.2 Pension U.S. $1.5 Total Total Expense ~ $175M $1.8B Pension OPEB ROW $0.3 Cash I
Slide 29: Capacity closed, sold and curtailed
Capacity closed, sold and curtailed Smelting and Refining capacity information 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 Comeau 2008 53 Intal
Slide 30: Prior segment structure and new structure
Prior segment structure and new structure 4Q16 Adjusted EBITDA excluding special items comparison Adjusted EBITDA Prior Adjusted EBITDA New excl. special items, $M structure excl. special items, $M structure Notes Bauxite $102 Alcoa Bauxite $102 Alumina $167 Alcoa Alumina $171 Moved Suralco refine
Slide 31: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Last Twelve $M 1Q16 4Q16 1Q17 Months (LTM) Net (loss) income attributable to Alcoa Corporation $(210) $(125) $225 $35 Add: Net (loss) income attributable to noncontrolling interest (5) (4) 83 142 Provision for income taxes 18 6 110 276 Other expenses / (income), net 39
Slide 32: Net Debt reconciliation
Net Debt reconciliation $M March 31, 2017 Short-term borrowings $3 Long-term debt due within one year 20 Long-term debt, less amount due within one year 1,431 Total debt 1,454 Less: Cash and cash equivalents 804 Net debt1 $650 1. Net debt is a non-GAAP financial measure. Management believes that thi
Slide 33: 2016 Baseline ROC for Long-Term Incentive Plan (LTIP)
2016 Baseline ROC for Long-Term Incentive Plan (LTIP) Reconciliation and calculation information $M For the twelve months ending December 31, (PBT + Net Interest3 + Special Items) x (1 – Fixed Tax Rate4) 2016 ROC % = X 100 (Assets – Cash – Current Liabilities + Short Term Debt) Numerator: Net loss a
Slide 34: 1Q17 Annualized ROC
1Q17 Annualized ROC Reconciliation and calculation information ($ in millions) For the three months ending March 31, 2017 (PBT + Net Interest4 + Special Items) x Four2 x (1 – Fixed Tax Rate5) ROC % = X 100 Numerator: (Assets – Cash – Current Liabilities + Short Term Debt) Net loss attributable to Al
Slide 35: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 1Q16 4Q16 1Q17 Cash from operations $(359) $239 $74 Capital expenditures (86) (146) (71) Free cash flow1 $(445) $93 $3 1. Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews cash
Slide 36: The Element of Possibility
The Element of Possibility”