Slide 1: 1st Quarter Earnings Conference
1st Quarter Earnings Conference April 11, 2016 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 April 11, 2016 4
Slide 5: Delivering Solid Performance, Strong Productivity – Separation on Track
Delivering Solid Performance, Strong Productivity – Separation on Track 1Q 2016 Overview Arconic Segments (Value-Add) Revenue $3.3B down 2.2% YoY: 6.7% revenue increase predominantly related to acquisitions, offset by 8.3% decline from metal and foreign exchange and 0.6% revenue decline from dives
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer April 11, 2016 6
Slide 7: Income Statement Summary
Income Statement Summary Prior Year Sequential $ Millions, except aluminum prices and per-share amounts 1Q15 4Q15 1Q16 Change Change Realized Aluminum Price ($/MT) $2,420 $1,799 $1,793 ($627) ($6) Revenue $5,819 $5,245 $4,947 ($872) ($298) Cost of Goods Sold $4,443 $4,404 $4,041 ($402) ($363) COGS %
Slide 8: Special Items
Special Items Income Statement $ Millions, except per-share amounts 1Q15 4Q15 1Q16 Segment Classification Net Income (Loss) $195 ($701) $16 Net Income (Loss) per Diluted Share $0.14 ($0.55) $0.00 Restructuring and Other Restructuring-Related ($158) ($287) ($63) Corporate/All Charges/COGS Tax Items (
Slide 9: Adjusted Earnings Down on Lower LME, API and Regional Premiums
Adjusted Earnings Down on Lower LME, API and Regional Premiums Net Income excluding Special Items ($ Millions) $363 -$283 $232 -$9 -$8 -$80 $108 -$87 $8 $4 -$32 1Q 15 Metal API Currency Volume Price / Productivity Energy Raw Cost 1Q 16 Price Mix Materials Increases / Other Market Performance Cost He
Slide 10: GRP: Productivity and Auto Uplift Offset Headwinds
GRP: Productivity and Auto Uplift Offset Headwinds 1Q16 Actual and 2Q16 Outlook – Global Rolled Products 1st Quarter ATOI Results 1st Quarter Business Highlights EBITDA/MT up 12% YoY excluding impact to secure alternative metal supply at 1Q 151 4Q 15 1Q 16 Warrick 3rd Party Revenue ($ Millions) 1,
Slide 11: EPS: Strong Productivity and Benefits From Acquisitions
EPS: Strong Productivity and Benefits From Acquisitions 1Q16 Actual and 2Q16 Outlook – Engineered Products and Solutions 1st Quarter ATOI Results 1st Quarter Business Highlights 1Q 151 4Q 15 1Q 16 Revenue growth of 15% year-over-year driven by acquisitions, partially offset by pricing pressure, in
Slide 12: TCS: Strong Productivity Offsets Market Headwinds
TCS: Strong Productivity Offsets Market Headwinds 1Q16 Actual and 2Q16 Outlook – Transportation and Construction Solutions 1st Quarter ATOI Results 1st Quarter Business Highlights 1Q 151 4Q 15 1Q 16 Revenue down 9% year-over-year; attributable to N.A. Heavy Duty Truck and relatively weak Brazilian
Slide 13: Alumina: Pricing Headwinds Continue to Impact Earnings
Alumina: Pricing Headwinds Continue to Impact Earnings 1Q16 Actual and 2Q16 Outlook – Alumina 1st Quarter ATOI Results 1st Quarter Business Highlights 1Q 15 4Q 15 1Q 16 API pricing down 19% sequentially, 40% year over year Production (kmt) 3,933 3,856 3,330 Announced curtailments drive productio
Slide 14: Primary Metals: Profitable Despite Difficult Pricing Environment
Primary Metals: Profitable Despite Difficult Pricing Environment 1Q16 Actual and 2Q16 Outlook – Primary Metals 1st Quarter ATOI Results 1st Quarter Business Highlights 1Q 15 4Q 15 1Q 16 Realized price flat sequentially Production (kmt) 711 699 655 Announcement and execution of Warrick closure rd
Slide 15: Base Business DWC +4 days Year-over-Year, Acquisitions Add 10 days
Base Business DWC +4 days Year-over-Year, Acquisitions Add 10 days Average Days Working Capital since First Quarter 2011 Acquisitions (10 days) Alcoa ex-Acquisitions (37 days) 47 43 40 40 40 40 36 35 36 34 33 33 34 32 31 32 30 29 30 28 28 37 33 4 days higher YoY from organic business 1Q11 2Q11 3Q11
Slide 16: Seasonal Working Capital Increase Drives FCF to ($681) Million
Seasonal Working Capital Increase Drives FCF to ($681) Million 1Q15, 4Q15 and 1Q16 Cash Flow ($ Millions) 1Q15 4Q15 1Q16 Net Income (Loss) before Noncontrolling Interests $255 ($765) $11 Depreciation, Depletion and Amortization $321 $321 $309 Change in Working Capital ($595) $571 ($469) Pension Expe
Slide 17: Over $700 Million to be Generated by Announced Asset Sales
Over $700 Million to be Generated by Announced Asset Sales 1Q16 Asset Sale Announcements Cash Proceeds Closing DBNG Sell all of Alcoa of Australia’s1 20% minority interest in the Australia Dampier to Bunbury Natural ~$150M Q2 2016 Pipeline Gas Pipeline Western Australia’s principal gas transmiss
Slide 18: Cash on hand at $1.4 Billion
Cash on hand at $1.4 Billion Debt, Net Debt, and Debt-to-LTM EBITDA ($ Millions) Cash Net Debt Debt-to-LTM EBITDA 9,273 9,052 9,069 8,744 8,787 8,246 1,384 1,939 1,919 1,861 1,877 1,437 4.16 3.24 3.28 2.84 2.79 2.47 7,334 6,809 6,910 7,133 7,685 6,883 2011 2012 2013 2014 2015 1Q16 LTM = last twelve
Slide 19: 2016 Aluminum Demand growth at 5% while supply only grows at 2%
2016 Aluminum Demand growth at 5% while supply only grows at 2% Primary aluminum demand and supply by region 2016 Primary Aluminum Demand & YoY Growth (Mt) 2016 Primary Aluminum Supply & YoY Growth (Mt) Russia Global +5% Global +2% 0.9 -0.5% Brazil 1.0 -0.4% 2.2 3.0% Russia 3.7 2.0% Other1 2.2 4.0%
Slide 20: Aluminum Deficit Continues; Projected at 1.1Mmt
Aluminum Deficit Continues; Projected at 1.1Mmt Aluminum fundamentals overview Continue to see global deficit in 2016 Global Inventories at 59 days; -5 days YoY 2016E Aluminum Balance (kmt) Financed Stocks China Incl SRB $3,200 105 Producer Japan Port 98 91 LME Cash 84 China Rest of World 77 $2,700
Slide 21: Alumina Deficit at 1.4Mmt; Refining Curtailments Support Price
Alumina Deficit at 1.4Mmt; Refining Curtailments Support Price Alumina fundamentals overview Continue to see large deficit for 2016 Demand growth at 4% while supply only grows at 1% in 2016 2016E Alumina Balance (kmt) Demand & YoY Growth (Mt) Supply & YoY Growth (Mt) Deficit ROW 52.3 2.7% ROW 50.8 -
Slide 22: Klaus Kleinfeld
Klaus Kleinfeld Chairman and Chief Executive Officer April 11, 2016 22
Slide 23: Aerospace Growth at Lower Pace; Continued Growth in Automotive
Aerospace Growth at Lower Pace; Continued Growth in Automotive Alcoa End Markets: Current Assessment of 2016 vs. 2015 End Market 2016 Growth Global and Regional Commentary • Market Transition given unprecedented level of New Model Introductions Aerospace • Lower Orders for Legacy models + Careful Ra
Slide 24: HDT – N.A.: Further Decline, Strength in Europe; Packaging Stable
HDT – N.A.: Further Decline, Strength in Europe; Packaging Stable Alcoa End Markets: Current Assessment of 2016 vs. 2015 End Market 2016 Growth Global and Regional Commentary • Declining Production: Down 19.0% YTD Feb’16 at 40.4k vs. 49.9k trucks Heavy Duty Truck • Weak Freight Growth: Freight tonmi
Slide 25: Commercial B&C and Global Airfoil Market Continue to Grow
Commercial B&C and Global Airfoil Market Continue to Grow Alcoa End Markets: Current Assessment of 2016 vs. 2015 End Market 2016 Growth Global and Regional Commentary Building and • Non-Residential Contracts Awarded: +4.7% in Feb. (mean of 12-month rolling average) Construction N.A. • Architectural
Slide 26: Future Arconic: GRP and TCS on 3-Year Target; EPS New 2016 Goal
Future Arconic: GRP and TCS on 3-Year Target; EPS New 2016 Goal 1Q16 Arconic Performance and 2016 Goals 3rd Party Revenue2($B) EBITDA (%, $/MT) 1Q 2016 Highlights 2Q 2016 Outlook 2016 Goal 6.1 6.0-6.2 • Revenue $1,397M; auto shipments up 38% • ATOI up 5-7% YoY • Strong productivity; $3741 EBITDA/MT
Slide 27: EPS 2016 Goal: $6.0-6.2B Revenue, 21%-22% EBITDA Margin
EPS 2016 Goal: $6.0-6.2B Revenue, 21%-22% EBITDA Margin 2016 EPS Revenue ($B) and EBITDA (%) Overview New Revenue Target of $6.0B to $6.2B1 New EBITDA Target of 21% to 22%1 $1,260M to $7.2B $6.0B to $1,360M $6.2B $260M $1,110M to $2.5B FX (~ -$0.2B) $1.9B $360M $5.3B $161M Productivity (~ +$400M
Slide 28: Firth Rixson: Improvement Underway; 2016 EBITDA Margin 14%-16%
Firth Rixson: Improvement Underway; 2016 EBITDA Margin 14%-16% 2015-2016 EPS Firth Rixson Revenue ($B) and EBITDA ($M,%) Overview Q1 ’16 Actuals: $237M Revenue; 14.3% EBITDA Q1 ’15 Actuals: $232M Revenue; 11.6% EBITDA Revenue $1.0 to Productivity (~ +$55M) $1.1B EBITDA o Operational Improvement $0
Slide 29: ATEP Ahead of Integration Plan, Delivering 17-19% EBITDA Margin in 2016
ATEP Ahead of Integration Plan, Delivering 17-19% EBITDA Margin in 2016 2014-2016 EPS ATEP Revenue ($M) and EBITDA ($M,%) Overview Pre-Acquisition: EBITDA Margin of ~14% Post-Acquisition: EBITDA Margin of 17%-19%2 Revenue Revenue $810M – EBITDA Accelerated Capture of Synergies is 1 year ahead EBITDA
Slide 30: GRP Shifting to Higher Margin Led by Automotive Growth
GRP Shifting to Higher Margin Led by Automotive Growth GRP Profitability and Auto Growth Shifting to a Higher Margin Product Mix GRP Growing Auto Revenue EBITDA/MT GRP Automotive Sheet Revenue Indexed % change $M 162% 180 Aero, Transportation +62% & Industrial 133% $1,300 140 100% GRP +17% $956 52%
Slide 31: Productivity Programs Achieved $364M of $1,200M Target through Q1'16
Productivity Programs Achieved $364M1 of $1,200M Target through Q1’16 Alcoa Gross Productivity Program Q12016 Future Arconic Achieved $179M of $650M Target Future New Alcoa Achieved $175M of $550M Target 2016 Productivity 2016 Productivity $ Millions $ Millions $650M Business Business $98M $27M Prog
Slide 32: New Alcoa: Driving Down Cost Curve in 2016, Meeting 3-Year Targets
New Alcoa: Driving Down Cost Curve in 2016, Meeting 3-Year Targets 1Q16 New Alcoa Highlights and 2016 Targets 1Q 2016 Highlights 2Q 2016 Outlook 2016 Targets Reshaping Portfolio: Alumina: 21st Percentile Curtailed 1.2 mmt at Pt. Comfort $/MT Saudi Arabia refinery at 80% of capacity 500 2010: 30t
Slide 33: 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 Launched Office the Separation Program Launched New Value-Add Name and Brand and Refreshed Alcoa Brand Form 10 Effectiveness and Final Board Approva
Slide 34: Successfully Launched Two Strong Brands Ahead of Separation
Successfully Launched Two Strong Brands Ahead of Separation Arconic and New Alcoa branding 34
Slide 35: On Track to Separate into Two Strong Companies
On Track to Separate into Two Strong Companies Pulling All Upstream Levers to Improve Profitability Arconic Geared for Profitable Growth; Significant Aero, Auto Traction Robust Business Improvement Programs to Strengthen Both Portfolios On Track for Completing Separation 2nd Half of 2016 35
Slide 36: 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 36
Slide 37: Advancing each generation. ALCOA
Advancing each generation. 6] ALCOA
Slide 38: Value Add Segment Bridges – 1Q 2016
Value Add Segment Bridges – 1Q 2016 EPS Sequential Quarter Bridge GRP Sequential Quarter Bridge $ Millions $ Millions $46 -$9 $162 $4 $68 $20 -$19 $7 $123 $1 $3 $3 $52 -$1 4Q15 Currency Volume Price / Productivity Cost 1Q16 4Q15 Currency Volume Price / Prod- uctivity Cost 1Q16 Mix Increases/ Mix Inc
Slide 39: Upstream Segment Bridges – 1Q 2016
Upstream Segment Bridges – 1Q 2016 Alumina Year-over-Year Bridge Primary Metals Year-over-Year Bridge $ Millions $ Millions $221 -$20 $187 -$288 -$261 $47 -$5 -$13 $77 -$8 -$24 $8 $14 $6 -$1 -$5 -$10 $15 $34 $70 1Q15 LME API Currency Volume Price / Prod- Energy Cost 1Q16 1Q15 Metal API Currency Volu
Slide 40: Revenue Change by Market - 1Q 2016
Revenue Change by Market - 1Q 2016 Sequential Year-Over-Year 1Q16 Third-Party Revenue Change Change Aerospace 2% 8% Automotive 25% 10% 27% Brazing 7% (4%) 23% B&C 0% (3%) Comm. Transport (14%) (21%) Industrial Products 0% (16%) 11% IGT 27% 52% 4% 2% Packaging (10%) (18%) 3% 6% Distribution/Other 7%
Slide 41: 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 42: 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 C
Slide 43: 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 Total segment ATOI $656 $567 $410 $273 $1,906 $291 Unallocated amounts (net of tax): Impact of LIFO 7 36 50 43 136 4 Metal price lag (23) (39) (48) (23) (133) 1 Interest expense
Slide 44: Reconciliation of ATOI to Consolidated Net Income (Loss) – Supplemental View
Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa(1) – Supplemental View (in millions) 1Q14 2Q14 3Q14 4Q14 2014 1Q15 2Q15 3Q15 4Q15 2015 1Q16 (2) Total segment ATOI $320 $408 $581 $659 $1,968 $656 $567 $410 $273 $1,906 $291 Unallocated amounts (net of tax): Impact of LIF
Slide 45: Reconciliation of Adjusted Income (Loss)
Reconciliation of Adjusted Income (Loss) (in millions, except Income (Loss) Diluted EPS(3) per-share amounts) Quarter ended Quarter ended March 31, December 31, March 31, March 31, December 31, March 31, 2015 2015 2016 2015 2015 2016 Net income (loss) attributable to Alcoa $195 $(701) $16 $0.14 $(0.
Slide 46: Reconciliation of Alcoa Adjusted EBITDA
Reconciliation of Alcoa Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 Net income (loss) attributable to Alcoa $1,233 $2,248 $2,564 $(74) $(1,151) $254 $611 $191 $(2,285) $268 $(322) $195 $(701) $16 Add: Net income (loss) attributable to noncont
Slide 47: Reconciliation of Alumina Adjusted EBITDA
Reconciliation of Alumina Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $682 $1,050 $956 $727 $112 $301 $607 $90 $259 $370 $746 $221 $98 $8 Add: Depreciation, depletion, and amort
Slide 48: Reconciliation of Primary Metals Adjusted EBITDA
Reconciliation of Primary Metals Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $822 $1,760 $1,445 $931 $(612) $488 $481 $309 $(20) $594 $155 $187 $(40) $14 Add: Depreciation, depl
Slide 49: Reconciliation of Upstream Adjusted EBITDA
Reconciliation of Upstream(1) Adjusted EBITDA (in millions) 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $1,658 $(500) $789 $1,088 $399 $239 $964 $901 $408 $58 $22 Add: Depreciation, depletion, and amortization 771 852 977 1,000 987 952 881 725 189 173 165
Slide 50: Reconciliation of Global Rolled Products Adjusted EBITDA
Reconciliation of Global Rolled Products Adjusted EBITDA ($ in millions, except per metric ton amounts) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $278 $233 $178 $(3) $(49) $220 $266 $358 $292 $245 $244 $54 $52 $68 Add: Depreciation, deple
Slide 51: Reconciliation of Engineered Products and Solutions Adjusted EBITDA
Reconciliation of Engineered Products and Solutions Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $183 $237 $351 $465 $321 $355 $436 $484 $569 $579 $595 $156 $123 $162 Add: Depreciation, depletion, and amortiza
Slide 52: Reconciliation of Transportation and Construction Solutions Adjusted EBITDA
Reconciliation of Transportation and Construction Solutions Adjusted EBITDA ($ in millions) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $94 $129 $94 $82 $5 $73 $109 $126 $167 $180 $166 $38 $40 $39 Add: Depreciation, depletion, and amortizat
Slide 53: Reconciliation of Value Add Adjusted EBITDA
Reconciliation of Value Add(1) Adjusted EBITDA ($ in millions) 2008 2009 2010 2011 2012 2013 2014 2015 1Q15 4Q15 1Q16 After-tax operating income (ATOI) $544 $277 $648 $811 $968 $1,028 $1,004 $1,005 $248 $215 $269 Add: Depreciation, depletion, and amortization 387 410 400 402 393 392 414 503 117 137
Slide 54: 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, December 31, March 31, December 31, March 31, 2010 2011 2012 2013 2014 2015 2015 2015 2016 Cash from $2,261 $2,193 $1,497 $1,578 $1,674 $1,582 $(175) $865 $(430) o
Slide 55: Days Working Capital
Days Working Capital ($ in millions) Quarter ended 31-Mar-12 30-Jun-12 30-Sep-12 31-Dec-12 31-Mar-13 30-Jun-13 30-Sep-13 31-Dec-13 Receivables from customers, less allowances $1,709 $1,650 $1,600 $1,573 $1,704 $1,483 $1,427 $1,383 Add: Deferred purchase price receivable(1) 85 144 104 53 50 223 347 3
Slide 56: Days Working Capital
Days Working Capital ($ in millions) Quarter ended 31-Mar-14 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15 30-Jun-15 30-Sep-15(3) 31-Dec-15(3) 31-Mar-16(3) Receivables from customers, less allowances $1,391 $1,401 $1,526 $1,513 $1,487 $1,548 $1,489 $1,428 $1,462 Add: Deferred purchase price receivable(1)
Slide 57: Reconciliation of Net Debt
Reconciliation of Net Debt (in millions) December 31, March 31, 2011 2012 2013 2014 2015 2016 Short-term borrowings $62 $53 $57 $54 $38 $40 Commercial paper 224 – – – – – Long-term debt due within one year 445 465 655 29 21 772 Long-term debt, less amount due within one year 8,542 8,226 7,534 8,704
Slide 58: Reconciliation of Debt-to-Adjusted EBITDA Ratio
Reconciliation of Debt-to-Adjusted EBITDA Ratio ($ in millions) 2011 2012 2013 2014 2015 1Q16* Net income (loss) attributable to Alcoa $611 $191 $(2,285) $268 $(322) $(501) Add: Net income (loss) attributable to noncontrolling interests 194 (29) 41 (91) 125 60 Loss from discontinued operations 3 – –
Slide 59: Reconciliation of RTI International Metals Adjusted EBITDA
Reconciliation of RTI International Metals Adjusted EBITDA* ($ in millions) 2014 1Q15 Net income $31 $5 Add: Net loss attributable to discontinued operations - – Provision (benefit) for income taxes 10 (1) Interest expense 31 8 Interest income - - Other (income) expense, net (2) - Merger-related exp