Alcoa Corporation · NYSE:AA
Alcoa — Q3 2010 Earnings Presentation
38 slides from Alcoa's earnings presentation, Oct 12, 2010
Slide 1: 3rd Quarter 2010 Earnings Conference
3 Quarter 2010 Earnings Conference October 7, 2010 Alcoa Logo Exhibit 99.2 rd
Slide 2: Forward-Looking Statements
Forward-Looking Statements Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or
Slide 3: Chuck McLane, Executive Vice President and Chief Financial Officer
Chuck McLane Executive Vice President and Chief Financial Officer Alcoa Logo
Slide 4: 3rd Quarter 2010 Financial Overview
3 Quarter 2010 Financial Overview rd Income from Continuing Operations of $61 million, or $0.06 per share. Restructuring and other special items totaled $35 million, or $0.03 per share. Revenue up 2% sequentially, 15% versus 3Q’09 Adjusted EBITDA of $602 million, 11% Margin Free Cash Flow of $176 mi
Slide 5: Revenue Change by Market 3Q'10
Revenue Change by Market 3Q’10 Third Party Revenue Sequential Change Year-Over-Year Change 3% (14%) 10% 10% (2%) 5% 11% (7%) 2% (1%) 6% 24% 9% 49% 18% (24%) (10%) 27% 35% 24% 14% 3% 7% 5% 4% 2% 14% 5% 14% 32% Aerospace Automotive B&C Comm. Transport Industrial Products IGT Packaging Distribution/Oth
Slide 6: Sequential Income Statement Summary
Sequential Income Statement Summary $ Millions 2Q’10 3Q’10 Change Sales $5,187 $5,287 $100 Cost of Goods Sold $4,210 $4,413 $203 COGS % Sales 81.2% 83.5% 2.3 % pts. Selling, General Administrative, Other $208 $232 $24 SGA % Sales 4.0% 4.4% 0.4 % pts. Restructuring and Other Charges $30 $2 ($28) Effe
Slide 7: 3rd Quarter 2010 Restructuring and Special Items
3 Quarter Restructuring and Special Items rd $ Millions After-Tax & Non- Controlling Interests Earnings Per Share Income Statement Classification Segment Restructuring $1 Restructuring Corporate Discrete Tax Items $38 Taxes Corporate Special Items: ($74) Sao Luis Recovery Costs ($23) Cost of Goods S
Slide 8: 3Q 2010 vs. 2Q 2010 Earnings Bridge
3 Quarter 2010 vs. 2 Quarter 2010 Earnings Bridge rd nd Income from Continuing Operations excluding Restructuring & Special Items ($ millions) See appendix for reconciliation $139 ($54) $35 ($28) $13 ($9) $96
Slide 9: Alumina Quarter Highlights and Outlook
Alumina 3 Quarter Highlights 4 Quarter Outlook 3 Quarter Business Conditions 3 Quarter Performance Bridge rd rd rd th 3Q 09 2Q 10 3Q 10 Production (kmt) 3,614 3,890 4,047 3 Party Shipments (kmt) 2,191 2,264 2,423 3 Party Revenue ($MM) ATOI ($MM) - Realized third-party alumina price down 5% - Negativ
Slide 10: Primary Metals Quarter Highlights and Outlook
Primary Metals 3 Quarter Highlights 3 Quarter Business Conditions 4 Quarter Outlook 3 Quarter Performance Bridge rd rd rd th 3Q 09 2Q 10 3Q 10 Production (kmt) 3 Party Shipments (kmt) 3 Party Revenue ($MM) 1,362 1,710 1,688 3 Party Price ($/MT) 1,972 2,309 2,261 ATOI ($MM) (8) - Realized pricing dow
Slide 11: Flat Rolled Products Quarter Highlights and Outlook
Flat Rolled Products 4 Quarter Outlook 3 Quarter Business Conditions 3 Quarter Highlights 3 Quarter Performance Bridge rd rd rd th ATOI $ Millions 3Q 09 2Q 10 3Q 10 Flat Rolled Products, excl Russia, China & Other Russia, China & Other (27) Total ATOI - Higher volumes in Russia, North America, and C
Slide 12: Engineered Products and Solutions Highlights and Outlook
Engineered Products and Solutions 3 Quarter Business Conditions 4 Quarter Outlook 3 Quarter Highlights 3 Quarter Performance Bridge rd rd rd th - Seasonal impact from customer year-end shutdowns - Continued benefits from cash sustainability initiatives $ Millions 3Q 09 2Q 10 3Q 10 3 Party Revenue 1,
Slide 13: 3rd Quarter 2010 Cash Flow Overview
3 Quarter 2010 Cash Flow Overview rd See appendix for free cash flow reconciliation 3Q’10 FCF $176 million $843 million of cash ($ Millions) 3Q'09 2Q'10 3Q'10 Net Income $124 $170 $109 DD&A Change in Working Capital (422) Pension Contributions (33) (22) (26) Taxes / Other Adjustments (349) (262) Cas
Slide 14: We Are Focused on Driving Shareholder Value
We Are Focused on Driving Shareholder Value Responding Rapidly Meeting Targets Driving Results *Procurement reduction of $2.5 billion Overhead reduction of $500 million Capital expenditures of $1.25 billion Days Working Capital reduction of 2 days *Procurement and other productivity Tennessee hot mi
Slide 15: Klaus Kleinfeld, Chairman and Chief Executive Officer
Klaus Kleinfeld Chairman and Chief Executive Officer Alcoa Logo
Slide 16: Market Conditions in 2010
Market Conditions in 2010 Source: Alcoa analysis Alcoa End Markets: Current Assessment of 2010 vs. 2009 Conditions
Slide 17: 2010 Demand Growth Forecast at 13% Versus 2009
1.6 0.9 2010 Demand Growth Forecast at 13% Versus 2009 16.5 1.0 2.9 10% 2010 Projected Primary Aluminum Consumption by Region (in mmt) Russia Brazil Asia w/o China North America Europe China 2009 vs. 2010 Projected Growth Rates 2010 Estimated Consumption -15% -15% -5% 4% -5% 16% *Other 7% -2% *Other
Slide 18: Consumption Driving Inventory Decline & High Premiums
Consumption Driving Inventory Decline & High Premiums 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% Midwest Japan Europe LME at 40 days Non-LME at 19days 59 days of consumption Global Inventories 4 Days Lower vs. 2Q’10 $119 / MT $192 / MT $141 / MT Regional Premiums Near All-Time Highs Global Inve
Slide 19: China Western World 2010 Primary Aluminum Surplus Reduced
China Western World 2010 Primary Aluminum Surplus Reduced By 180 KMT Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI 2010 Annualized Production (thru Aug) 24,090 Demand (23,070) Net Surplus 1,020 Exports to China, Net (200) Net Surplus 2010 Annualized Production (thru July) 16,500 Demand (16,500
Slide 20: 2010 Global Alumina in Balance
2010 Global Alumina in Balance China Western World 2010E Alumina Supply / Demand Balance (in kmt) Source: Alcoa estimates, CRU, CNIA, IAI Balanced 2010 Annualized Production 28,250 Imports from Western World 4,200 Supply 32,450 Demand (32,000) (Deficit) / Surplus 2010 Annualized Production 50,500 Ex
Slide 21: Continued Value Creation From The Alumina Leader
Continued Value Creation From The Alumina Leader Adjusted EBITDA per Metric Ton Alcoa 3 Party Alumina Sales Price % LME Alcoa: The Alumina Leader rd Alumina financial and strategic overview LME Adjusted EBITDA/MT 100% 110% 95% 105% – Sao Luis to reach full capacity by year-end – Record production in
Slide 22: Driving Primary Metal To A New Profitability Level
Driving Primary Metal To A New Profitability Level Adjusted EBITDA per Metric Ton Alcoa: Poised For Profitable Growth Global Leader Power To Grow Lowering Cost (159) 1,549 1,447 1,350 1,433 1,719 1,900 2,570 2,641 2,572 1,664 2,116 YTD Primary Metals financial and strategic overview LME Adjusted EBI
Slide 23: Rolled Products Positioned to Substantially Improve Returns
Rolled Products Positioned to Substantially Improve Returns Adjusted EBITDA & Adjusted EBITDA % Sales YTD 2010 3 Party Sales by Market rd Flat Rolled Products financial and strategic overview Adjusted EBITDA $Millions Adjusted EBITDA % Sales 80% Utilization 11% 11% 11% 10% 9% 9% 6% 5% 3% 4% 9% YTD D
Slide 24: Engineered Products and Solutions: Strong Platform for Profitable Growth
Aerospace 47% EPS Strong Platform for Profitable Growth Adjusted EBITDA & Adjusted EBITDA % Sales YTD 2010 3 Party Sales by Market rd IGT 11% B&C 19% Commercial Transport 13% Automotive 4% Other 6% Engineered Products & Solutions financial and strategic overview Adjusted EBITDA $Millions Adjusted EB
Slide 25: Aggressively Pursuing 2010 Operational Targets
Aggressively Pursuing 2010 Operational Targets Procurement Overhead Total Capex Working Capital 1 2 2 1 $500 $1,250 2010 Cash Sustainability Operational Targets and Actual Performance $ Millions $431 $785 $ Millions $ Millions Days Working Capital $2,500 $2,154 YTD Target YTD Target YTD Target 3Q’10
Slide 26: Alcoa Lives Its Values Every Day
Alcoa Lives Its Values Every Day Sustainability Leadership Best Ever Safety Performance Total Recordable Incident Rate Lost Workday Incident Rate th Consecutive Year Safety Incident Rate History and Significant Accreditations in 2010 Ranked Third of 339 Companies Named to World & North American Inde
Slide 27: Alcoa Is Driving Value Today And Over The Long-Term
Alcoa Is Driving Value Today And Over The Long-Term Alcoa: Driving Value – Repositioned driving growth and profitability – Lean lessons learned in downturn now sustainable practices – Disciplined execution underlies all Alcoa activities – Focus on driving shareholder returns Alcoa Performance Streng
Slide 28: **************** **************** *** **************** **************** **************** **************** ***********…
**************** **************** *** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** **************** *******
Slide 29: Annual Sensitivity Summary
Annual Sensitivity Summary Currency Annual Net Income Sensitivity LME Aluminum Annual Net Income Sensitivity +/- 10% versus USD Australian $ +/- $75 million Brazilian $ +/- $50 million Euro € +/- $40 million Canadian $ +/- $35 million +/- $100/MT = +/- $200 million
Slide 30: Effective Tax Rate
Effective Tax Rate Effective tax rate, excluding discrete tax items is a non-GAAP financial measure. Management believes that the Effective tax rate, excluding discrete tax items is meaningful to investors because it provides a view of Alcoa’s operational tax rate. $ Millions 1Q’10 2Q’10 3Q’10 YTD’1
Slide 31: Reconciliation of ATOI to Consolidated Net Income Attributable to Alcoa
Reconciliation of ATOI to Consolidated Net (Loss) Income Attributable to Alcoa (in millions) 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 Total segment ATOI $ (143) $ (132) $ $ (101) $ (234) $ 306 $ 381 $ 328 Unallocated amounts (net of tax): Impact of LIFO (14) (3) (2) Interest income (1) Interest expense (7
Slide 32: Reconciliation of Adjusted Income
Reconciliation of Adjusted Income (in millions) Quarter ended June 30, September 30, Net income attributable to Alcoa $ 136 $ 61 Loss from discontinued operations (1) – Income from continuing operations attributable to Alcoa Restructuring and other charges (1) Discrete tax items* (16) (38) Special i
Slide 33: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow Quarter ended Nine months ended (in millions) September 30, Cash provided from operations $ $ 891 Capital expenditures (216) (650) Free cash flow $ 176 $ 241 Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to invest
Slide 34: Reconciliation of Alcoa Adjusted EBITDA
Reconciliation of Alcoa Adjusted EBITDA ($ in millions) 3Q10 2010 YTD Net income (loss) attributable to $ 1,484 $ 908 $ 420 $ 938 $ 1,310 $ 1,233 $ 2,248 $ 2,564 $ (74) $ (1,151) $ 61 $ (4) Add: Net income attributable to noncontrolling interests Cumulative effect of accounting changes – (34) – – –
Slide 35: Reconciliation of Alumina Adjusted EBITDA
Reconciliation of Alumina Adjusted EBITDA ($ in millions) 2010 YTD After-tax operating income (ATOI) $ 585 $ 471 $ 315 $ 415 $ 632 $ 682 $ 1,050 $ 956 $ 727 $ 112 $ 236 Add: Depreciation, depletion, and amortization Equity (income) loss (3) (1) (1) – (1) – (1) (7) (8) (7) Income taxes (22) Other (12
Slide 36: Reconciliation of Primary Metals Adjusted EBITDA
Reconciliation of Primary Metals Adjusted EBITDA ($ in millions) 2010 YTD After-tax operating income (ATOI) $ 1,000 $ 905 $ 650 $ 657 $ 808 $ 822 $ 1,760 $ 1,445 $ 931 $ (612) $ 310 Add: Depreciation, depletion, and amortization Equity (income) loss (50) (52) (44) (55) (58) (82) (57) (2) (1) Income
Slide 37: Reconciliation of Flat-Rolled Products Adjusted EBITDA
Reconciliation of Flat-Rolled Products Adjusted EBITDA ($ in millions) 2010 YTD After-tax operating income (ATOI) $ 296 $ 253 $ 225 $ 222 $ 254 $ 278 $ 233 $ 178 $ (3) $ (49) $ 167 Add: Depreciation, depletion, and amortization Equity (income) loss (3) – – – – – Income taxes Other (5) (8) (5) (2) Ad
Slide 38: Reconciliation of Engineered Products and Solutions Adjusted EBITDA
Reconciliation of Engineered Products and Solutions Adjusted EBITDA ($ in millions) 3Q09 2Q10 3Q10 YTD After-tax operating income (ATOI) $ 125 $ 189 $ 63 $ 124 $ 156 $ 271 $ 365 $ 435 $ 533 $ 315 $ 75 $ 107 $ 114 $ 302 Add: Depreciation, depletion, and amortization Equity (income) loss (1) – – – – –