Alcoa Corporation · NYSE:AA
Alcoa — BMO Capital Markets 27th Global Metals & Mining Conference (February 2018)
27 slides from Alcoa's conference presentation, February 2018
Slide 1: BMO Capital Markets 27th Global Metals & Mining Conference
BMO Capital Markets 27th Global Metals & Mining Conference Alcoa Corporation February 2018
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 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: Solid first year as standalone company, just the start
Solid first year as standalone company, just the start Business framework Strategic priorities Keys to Alcoa Global network of world-class assets; well-positioned across market cycles Solid results in 2017; outlook for further improvements in 2018 Improved balance sheet; disciplined and transparent
Slide 5: World class, low cost assets well-positioned for the future
World class, low cost assets well-positioned for the future 2017 Cost curve and business position Bauxite Alumina Aluminum 1st Quartile 1st Quartile 2nd Quartile ▪ World’s second largest bauxite ▪ Largest alumina refiner and largest ▪ Top 10 global aluminum smelter miner, with a first quartile cost
Slide 6: An active, productive 2017; positioned for a strong 2018
An active, productive 2017; positioned for a strong 2018 2017 Review ▪ Set annual production records at our three largest mines, our three largest refineries and at three smelters Segment ▪ Achieved 3rd party sales from all of our major mines operational ▪ Reduced our alumina refining cost curve pos
Slide 7: Capital allocation and other key focus areas for 2018
Capital allocation and other key focus areas for 2018 Business review 2018 Capital allocation framework Disciplined and operator centric focus Maintain liquidity ▪ Revitalize safety systems and culture to Greater than improve performance $1B cash balance ▪ Complete partial restart of Warrick smelter
Slide 8: Alcoa Corporation: a compelling investment
Alcoa Corporation: a compelling investment Strategic priorities Reduce complexity Simplify the business and control costs Drive returns Deliver 2018 adjusted EBITDA outlook1 and invest in high return projects Strengthen balance sheet Position for success across market cycles 1. Outlook provided on J
Slide 9: The Element of Possibility
The Element of Possibility”
Slide 10: Appendix
Appendix Including reconciliations
Slide 11: Market supply/demand information
Market supply/demand information Final 2017 and projected 2018 market balances Bauxite Alumina Aluminum (3rd-party seaborne) (smelter grade) (primary) Final 2017 Balanced Balanced Balanced Global Balance 2018 Outlook Balanced Balanced Deficit 2018 Supply/Demand Balance, Mmt Global 1 to 6; stockpile
Slide 12: 2018 Outlook
2018 Outlook FY18 Key metrics Shipments Adjusted EBITDA excl. special items impacts FY17 Actual FY18 Outlook FY17 Actual FY18 Outlook Bauxite (Mdmt) 47.7 47.5 – 48.5 Adjusted EBITDA excl. special items $2.35B $2.6 – $2.8B1 Alumina (Mmt) 13.7 13.8 – 14.0 Transformation & legacy pension/OPEB $103M ~ $
Slide 13: FY17 Income statement information
FY17 Income statement information Annual income statement Adjusted excl. M, Except realized prices and per share amounts Reported Special items special items Realized primary aluminum price ($/mt) $2,224 $2,224 Realized alumina price ($/mt) $340 $340 Revenue $11,652 $11,652 Cost of goods sold $9,072
Slide 14: 4Q17 Financial summary
4Q17 Financial summary Three months ending December 31, 2017, excluding special items Transformation & Impact from Alcoa Other $M Bauxite Alumina Aluminum3,4 Legacy Pension / LIFO & Metal Corporation Corporate OPEB Costs Price Lag Total Total revenue1 $306 $1,517 $2,148 $15 - $(812) $3,174 Third-par
Slide 15: Aluminum value chain
Aluminum value chain 2017 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 3.4 33% 100% Aluminum 3rd Party 13.7 86% 67% Alumina 3rd Party 47.7 14% Bauxite 3rd Party 15
Slide 16: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 4Q17 production cash costs Alumina refining Input Inventory Pricing Estimated Annual Cost Flow Convention Cost Sensitivity Bauxite Fuel Oil 1 - 2 Months Prior Month $3M per $1/bbl Conversion 32% 37% Natural Gas1 N/A N/A N/A 4% 13% Caustic So
Slide 17: 2018 Business sensitivities
2018 Business sensitivities Estimated annual 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 USD/AUD BRL/USD CAD/USD USD/EUR ISK/USD NOK/USD Bauxite (3) 4 Alumina 119 (16) 6
Slide 18: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB net liability and financial impacts Pension & OPEB net liability, $3.5B Financial impacts, $M Expense impact 2017 2018 OPEB Segment pension $89M ~80% Total Segment OPEB $23M ~5% $1.2B U.S. Legacy operations $36M N/A $1.2 Corporate $13M ~15% U.S. Pension Tota
Slide 19: Investments summary
Investments summary P&L Location Ownership Carrying Value as of of Equity Investee Country Nature of Investment4 Interest December 31, 2017 Earnings Ma’aden Aluminum Company1 Saudi Arabia Aluminum smelter 25.1% Ma’aden Bauxite and Alumina Company1 Saudi Arabia Bauxite mine and Alumina refinery 25.1%
Slide 20: Capacity closed, sold and curtailed
Capacity closed, sold and curtailed Smelting and Refining capacity information as of December 31, 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 B
Slide 21: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 4Q16 3Q17 4Q17 FY17 P&L classification Special items $151 $22 $391 $346 Warrick restart costs - 17 29 46 Cost of goods sold Portland restart power exposure - 3 - 9 Cost of goods sold Rockdale inventory writedown - - 6 6 Cost of goods so
Slide 22: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 4Q16 FY16 3Q17 4Q17 FY17 Net income (loss) attributable to Alcoa Corporation $(125) $(400) $113 $(196) $217 Add: Net income (loss) attributable to noncontrolling interest (4) 54 56 140 342 Provision for income taxes 6 184 119 272 600 Other expenses / (income), net 1
Slide 23: Net Debt reconciliation
Net Debt reconciliation $M 4Q16 4Q17 Short-term borrowings $1 $8 Long-term debt due within one year 21 16 Long-term debt, less amount due within one year 1,424 1,388 Total debt 1,446 1,412 Less: Cash and cash equivalents 853 1,358 Net debt $593 $54 Net debt is a non-GAAP financial measure. Managemen
Slide 24: Days Working Capital
Days Working Capital $M 4Q16 1Q17 2Q17 3Q17 4Q17 Receivables from customers $668 $708 $789 $840 $811 Add: Inventories 1,160 1,294 1,287 1,323 1,453 Less: Accounts payable, trade 1,455 1,434 1,508 1,618 1,898 DWC working capital $373 $568 $568 $545 $366 Sales $2,537 $2,655 $2,859 $2,964 $3,174 Number
Slide 25: 2016 and 2017 Return on Capital (ROC)
2016 and 2017 Return on Capital (ROC) Reconciliation and calculation information (PBT + net interest3 + special items) x (1 – fixed tax rate4) $M 2016 2017 ROC % = X 100 Numerator: (Assets – cash – current liabilities + short term debt) Net income (loss) attributable to Alcoa Corporation (400) 217 A
Slide 26: Glossary of terms
Glossary of terms Abbreviations listed in alphabetical order Abbreviation Description Abbreviation Description % pts Percentage points GAAP Accounting principles generally accepted in the United States of America 1Q## Three months ending March 31 IRR Internal rate of return 2Q## Three months ending
Slide 27: The Element of Possibility
The Element of Possibility”
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