Alcoa Corporation · NYSE:AA
Alcoa — Q4 2006 Earnings Presentation
26 slides from Alcoa's earnings presentation, Jan 12, 2007
Slide 1: Quarter 2006 Restructuring Impact
5 th Quarter 2006 Restructuring Impact $M EPS Net Income $359 $0.41 Less: Income from Discontinued Operations Income From Continuing Operations 0.29 Plus: Restructuring and other charges Income From Continuing Operations, excluding restructuring and other charges $644 $0.74
Slide 2: Income from Continuing Operations Quarter Comparison
7 Income from Continuing Operations rd Quarter vs. 4 th Quarter Comparison
Slide 3: Alumina Quarter Highlights
8 4Q vs 4Q 4Q vs 3Q 4Q’06 6% (5%) 2,084 rd Party Shipments (kmt) 2% (3%) 3,790 Production (kmt) 27% (3%) rd Party Revenue ($MM) 42% (4%) ATOI ($MM) Pinjarra production ramp-up offset by Point Comfort decrease Impact of Pinjarra power outage Impact of stronger Australian Dollar Alumina th Quarter Hig
Slide 4: Primary Metals Quarter Highlights
9 th Quarter Highlights 98% 39% ATOI ($MM) 27% 6% 2,766 rd Party Price ($/MT) 33% 15% 1,698 rd Party Revenue ($MM) 4Q vs 4Q 4Q vs 3Q 4Q’06 - 4% rd Party Shipments (kmt) 1% 1% Production (kmt) Primary Metals ATOI Performance st Quarter Outlook th Quarter Business Conditions Higher realized pricing an
Slide 5: Flat Rolled Products
10 Favorable aerospace mix Recovery from 3 rd quarter mill outages Swansea shutdown costs Tax benefit 4Q vs 4Q 4Q vs 3Q 4Q’06 – 29% ATOI ($MM) 22% 1% 2,127 Revenue ($MM) Flat Rolled Products th Quarter Highlights ATOI Performance st Quarter Outlook th Quarter Business Conditions Swansea shutdown cos
Slide 6: Engineered Solutions
11 (4) (3) (5) Other (8) 3Q06 Total Investment Castings, Forgings, Fasteners AFL, Auto Castings and Structures (13) 4Q05 4Q06 Aerospace market remained strong Cleveland strike impact in forgings business Weakness in NA automotive demand AFL tax benefit Engineered Solutions ATOI ($MM) th Quarter Busi
Slide 7: Extruded and End Products
12 (2) (14) Alcoa Custom Extruded Solutions and Other 4Q06 3Q06 4Q05 (2) Total Global Engineered Products, Building & Construction Systems and Russia Favorable mix in hard alloys Lower volume in industrial market Tax benefit Extruded and End Products ATOI ($MM) th Quarter Business Conditions st Quar
Slide 8: Packaging & Consumer
13 (1) (2) (1) Other (4) 3Q06 Total Reynolds Food Packaging and Flexible Packaging Closure Systems and Consumer Products (8) 4Q05 (9) 4Q06 Packaging & Consumer ATOI ($MM) th Quarter Business Conditions st Quarter Outlook Seasonal decrease in Consumer Productivity improvements across the businesses.
Slide 9: Strong Performance Trends
15 Strong Performance Trends Bloomberg ROC* Segment ATOI and Revenue
Slide 10: Sustainability
18 Sustainability – Named to the Dow Jones Sustainability Index – Named one of the most sustainable companies in the world at the World Economic Forum – Ranked 2 nd in the Covalence Ethical Ranking – Ranked 2 nd overall by CERES on Climate Change and Governance
Slide 11: Zero Incident Locations
19 20 Zero Incident Locations Safety 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance
Slide 12: Innovation and Technology
21 22 Innovation and Technology – Bauxite residue neutralization – SMAC (Simultaneous Multi-Alloy Casting) – Reynobond ® with KEVLAR – Dura-Bright ® products 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Perf
Slide 13: Portfolio Management
23 24 Portfolio Management – Sale of Alcoa Home Exteriors – Creation of a soft alloy extrusions joint venture – Review of portfolio continues 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance
Slide 14: Alcoa's Upstream Growth Projects
25 Alcoa’s Share of Nameplate Capacity Refining Smelting Bauxite Alcoa’s Upstream Growth Projects kMT kMT R R R S R S R B Jamalco Suralco Alumar Pinjarra Jamalco EWP Iceland/Mosjoen Juruti Sao Luis 2
Slide 15: Alcoa's Downstream Growth Projects
26 Alcoa’s Downstream Growth Projects – 50% aerospace capacity increase across four locations – Major modernization of the Kofem facility – Continued improvement in our Russia fabricating facilities – Increased strategic presence in China
Slide 16: Alcoa's Presence in Asia-Pacific Region
27 28 29 Alcoa’s Presence in Asia-Pacific Region 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance 2006 Financial Performance – Record income from continuing operations of $2.5b or $2.90 per share - $
Slide 17: Income from Continuing Operations: 2006 vs. 2005 Bridge
30 Income from Continuing Operations 2006 vs. 2005 Bridge
Slide 18: Strong Performance Trends
31 32 Bloomberg ROC Trailing 12 Months Including Growth Capex Bloomberg ROC Trailing 12 Months Excluding Growth Capex Cash from Operations Strong Performance Trends 2007 Outlook – Market Fundamentals – Market Conditions – Portfolio Improvements – Financial Targets
Slide 19: Market Fundamentals
33 Source: Alcoa analysis Market Fundamentals Alumina Surplus or (Deficit) Aluminum Surplus or (Deficit)
Slide 20: 2007 Anticipated Market Conditions
34 2007 Anticipated Market Conditions – Aerospace – Another strong year – Automotive – Increased production in North America and Europe – Commercial Transportation – Decrease in North America due to 2006 pre-buy – Building & Construction – Slight slowing but still healthy growth rates – Industrial P
Slide 21: 2007 Portfolio Improvements
35 2007 Portfolio Improvements
Slide 22: 2007 Financial Targets
36 37 38 39 2007 Financial Targets Tony Thene Director, Investor Relations Alcoa 390 Park Avenue New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com For Additional Information, Contact: * * * * * * * ******************************************* * * * * * * * **
Slide 23: Reconciliation of ATOI to Consolidated Net Income
40 $ 359 (386) (82) (98) (61) (66) $ 927 4Q06 $ 537 (7) (3) (64) (109) (66) (19) $ 780 3Q06 $2,248 $ 744 $ 608 $1,233 $ 224 $ 289 $ 460 $ 260 Consolidated net income (62) (58) Other (1) (5) (6) (22) (30) (9) Discontinued operations (379) (1) (197) (18) (5) (144) (30) Restructuring and other charges
Slide 24: Reconciliation of Return on Capital
41 Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. Reconciliation of Return on Capital 4Q'06 3Q'06 2Q'06 1Q'06 4Q'05 Bloomberg 4Q'06 Bloomberg 3Q'06 Bloomberg 2Q'06 Bloomberg 1Q'06 Bloomberg In Millions Method Annlzd Method An
Slide 25: Reconciliation of Adjusted Return on Capital
42 Return on capital, excluding growth investments is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides greater insight with respect to the underlying operating performance of the company’s productive assets. The company has significan
Slide 26: Reconciliation of Income and EPS excluding Restructuring Charges
43 Reconciliation of Income and EPS excluding Restructuring Charges Income from continuing operations – excluding restructuring and other charges is a non-GAAP financial measure. The following matters should be considered when evaluating this non-GAAP financial measure: Alcoa reviews the operating r