Slide 1: 3rd Quarter 2003 Analyst Conference
3 rd Quarter 2003 Analyst Conference October 23, 2003 Exhibit 99.2 New York, NY
Slide 2: 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 actions may differ materia
Slide 3: Richard B. Kelson, Executive VP and CFO
Richard B. Kelson Executive VP and CFO
Slide 4: 3rd Quarter Highlights
Continued improvement in safety performance Income from continuing operations $0.33 per diluted share up from $0.27 in the second quarter and $0.24 a year-ago Gross Margin of 20.8%, highest in two years SG&A down 12% sequentially to 5.7% of sales Continued improvement in balance sheet with debt to c
Slide 5: 3rd Quarter Highlights (continued)
Disciplined capital spending, a 40% or $115 million reduction from prior-year period Cost savings of $23 million, remain solidly on track to meet and exceed the $1.0 billion cost challenge Divestiture of Assets held for Sale on track Sale of Latin America PET packaging business recently completed fo
Slide 6: Safety: LWD Incident Rate
Rate (injuries per 200,000 hrs.) Safety LWD Incident Rate Continued strong performance in 3Q 2003 33 fewer incidents (annualized) in 2003 vs. 2002 * Reynolds, Howmet/Huck included beginning in 2002 ** IVEX, Fairchild, and other 2002/2003 new acquisitions 0.15 0.14 0.075 0.09 0.11 0.81 0.77 0.75 0.46
Slide 7: Financial Overview
3 rd Quarter 2003 Financial Overview In Millions 3Q03 2Q03 Fav/(Unfav) LME 3-Month Average ($/MT) $1,420 $1,380 $40 Sales $5,322 $5,485 ($163) Cost of Goods Sold $4,213 $4,368 $155 % of Sales 79.2% 79.6% 0.4% SG&A $303 $345 $42 % of Sales 5.7% 6.3% 0.6% Effective Tax Rate 21.6% 25.9% 4.3% Minority I
Slide 8: Continued Progress on Debt Reduction
Continued Progress on Debt Reduction Nearly $1 billion debt reduction in last 6 months Debt-to-capital reduced by 460 basis points to 38.8% from 43.4% at end of 1Q 2003 Continued disciplined capital spending, 33% or $282 million year-over-year decline $1 billion remains target for full year 460 Basi
Slide 9: Alumina & Chemicals
Alignment: Bauxite mining, alumina refining and chemicals production Alumina & Chemicals ATOI Performance: 3 rd Party Revenue Intersegment Revenue Markets: Current Business Conditions: Stronger Australian $ would impact margins Spot prices continue high Negatives Positives +27% +22% 3Q02 4Q02 1Q03 2
Slide 10: Primary Metals
Alignment: 3.9 million mt of smelting capacity, with 595 kmt currently idled* Primary Metals ATOI Performance: 3 rd Party Revenue Intersegment Revenue Markets: Current Business Conditions: Alumar electrical outage impact split evenly between 3Q and 4Q Additional expense related to shutdown at Intalc
Slide 11: Flat Rolled Products
Alignment: Aluminum sheet and plate for aerospace applications, rigid container sheet for beverage cans and mill products Flat Rolled Products ATOI Performance: Packaging Auto Aero Commercial Vehicle Building & Construction Distribution & Other Markets: Current Business Conditions: Seasonal slowdown
Slide 12: Engineered Products
Alignment: Hard and soft alloy extrusions, aluminum forgings, Alcoa Fasteners & Howmet products Engineered Products ATOI Performance: Auto Building & Construction Commercial Vehicle Distribution & Other IGT Aero Markets: Current Business Conditions: Continued pressure on IGT Some seasonal weakening
Slide 13: Packaging & Consumer
Alignment: Reynolds consumer products, closures, flexible packaging, and packaging graphics design Packaging & Consumer ATOI Performance: Consumer Products Closures Markets: Current Business Conditions: Flexible Packaging & Other Seasonal weakness in Closures Seasonal strength in Consumer Products N
Slide 14: Other
Alignment: Alcoa Fujikura, residential building products and automotive structures Other ATOI Performance: Auto Building & Construction Tele Commercial Vehicle Markets: Current Business Conditions: Seasonal decline in residential building & construction Higher automotive volumes following model year
Slide 15: Cost Savings on Track to Exceed $1 Billion Goal
We expect to surpass the $1 billion Cost Challenge Quarterly Run Rate in Millions of dollars Cost Savings on Track to Exceed $1 Billion Goal 1Q 01 2Q 01 3Q 01 4Q 01 1Q 02 2Q 02 3Q 02 4Q 02 2Q 03 1Q 03 2003 Goal 3Q 03 Update $9m left to achieve
Slide 16: Return on Capital Shows Improvement
Return on Capital Shows Improvement All indicators are based on the Bloomberg ROC Methodology. 1Q 03 Quarter Annualized ROC excludes $47 million after-tax cumulative effect of accounting change due to adoption of FAS 143. 6.4 7.0 7.8 15.5 15.5 14.3 13.8 4.3 3.9 3.9 4.2 4.7 3Q 02 4Q 02 1Q 03 2Q 03 3Q
Slide 17: Divestiture and Technical Update
Divestiture and Technical Update Divestiture Program On track to realize proceeds of $750 million - $1 billion from divestiture program by Q2 2004 Technical Update: Inert Anode Completed testing (3 weeks) in a commercial pot room Continued progress on technology necessary to ensure commercial viabil
Slide 18: Growth Initiatives Continue
Growth Initiatives Continue Alumina Brownfield Expansions Nearing completion of Jamaica 250,000 MT expansion ($115m) Announced Suralco 250,000 MT expansion ($65m total, $36m Alcoa) to be completed by July 2005 Approved Pinjarra 600,000 MT expansion ($270m) to be completed by 2005 Aluminum MOU coveri
Slide 19: Summary
Summary We continue to execute upon our strategy: Earnings and margin improvement Cost savings – driven by ABS and focused cost reduction Balance sheet improvement Continued cash generation through operations, controlled capex and working capital reduction Growth, technology and divestiture initiati
Slide 20: Joseph C. Muscari, Group President - Asia and Latin America
Joseph C. Muscari Executive Vice President Group President - Asia and Latin America
Slide 21: Key Messages
Key Messages Latin America Alcoa has attractive growth opportunities in Latin America Strengthen and grow low-cost primary position Focused downstream operations The recent Aluminio transaction enabled Alcoa to take a large step forward in executing its Latin America strategy Asia Alcoa remains posi
Slide 22: Alcoa's Latin America Business
Alcoa’s Latin America Business Bauxite Mine Refinery Chemicals Smelter Powder Power FRP Extrusions Closures Flexibles AFL Brazil Venezuela Colombia Peru Chile Argentina MRN Alumar Poços Itapissuma Sorocaba Utinga Tubarão Santiago La Plata Alreyven Lima Bogota Alphaville Valencia Itaipava Buenos Aire
Slide 23: Alcoa Strategy in Latin America (I)
Alcoa Strategy in Latin America (I) Focused downstream operations : FRP: Focus on high-value thin foil markets and exports Packaging: Sell PET and Latasa Closures business aligned globally with CSI Extrusions: Leverage low-cost base to grow exports Focus on differentiated segments in the domestic ma
Slide 24: Alcoa Strategy in Latin America (II)
Alcoa Strategy in Latin America (II) Strengthen and grow our low-cost primary position Alcoa’s primary assets in Latin America are among the lowest cost in the system Investments in low-cost hydroelectric power generation assets will secure the position of our smelters over the long-term Securing ad
Slide 25: Brazil's Low-cost Refineries
Source: CRU; Alcoa analysis Production (million mt) Pocos de Caldos Sao Luis Brazil’s Low-cost Refineries Global Average (155 $/mt) Full Operating Cost ($/mt) Global Refining Cost Curve - 2002 Operation Capacity (mt per year) Sao Luis 718,000 Pocos de Caldas 300,000 Total 1,018,000
Slide 26: Brazil's Low-cost Smelters
Brazil’s Low-cost Smelters Pocos de Caldas Sao Luis Source: CRU; Alcoa Analysis Full Operating Cost ($/mt) Production (million mt) Global Smelting Cost Curve - 2002 Global Average (1,095 $/mt) Operation Capacity (mt per year) Sao Luis 199,000 Pocos de Caldas 93,000 Total 292,000
Slide 27: Plan for Energy Self-supply
Current pipeline of projects has attractive economics Capital costs of ~$1,100/MW of assured power Delivered cost of $8 - 10/MWh Project financing Plan for Energy Self-supply Current demand (582MW) Santa Isabel Machadinho Alcoa’s Energy Supply and Demand (MW) Estreito Pai Quere Barra Grande Serra do
Slide 28: Attractive Upstream Growth Opportunities in Brazil
All at attractive low investment cost Attractive Upstream Growth Opportunities in Brazil Mining: Greenfield bauxite mine - Juruti Refining: Brownfield expansion at Alumar Opportunities for further greenfield and brownfield expansions Smelting: Brownfield expansion at Alumar Additional greenfield sme
Slide 29: Alcoa is Actively Pursuing Growth in Asia
Alcoa is Actively Pursuing Growth in Asia Asia is expected to comprise 55% of the worldwide Aluminum consumption growth through 2010 Over 50% of Asia’s growth to occur in China Participation in Asia offers tremendous opportunity for global players Deficit today in many high-value products Potential
Slide 30: Growth in China's Primary Capacity Had Modest Impact
Growth in China’s Primary Capacity Had Modest Impact on World Market China’s primary metal supply has moved into slight export surplus Capacity expanded strongly Largely due to expansion of existing facilities Little impact from small high-cost capacity exiting Growth of production was more subdued
Slide 31: China Remains a Net Importer of Aluminum
China Remains a Net Importer of Aluminum Source: CRU, China Customs 5.03 China Metal Balance - 2002 (M Tons) 3.0 3.5 4.0 4.5 5.0 Primary Production Net Primary Export Net Scrap Import Available for Fabrication Net Semi-Fab Import Semi-Fab Consumption
Slide 32: China Consumption Reflects Developing Economic Structure
China Western Industrial Consumption Reflects Developing Economic Structure Share (%) of Demand by Sector China’s consumption of primary aluminum has historically been in sectors which reflect a developing economy: Building and construction to support rapid urbanization Power infrastructure Manufact
Slide 33: Significant Number of Assets and Locations in China
Alcoa Has A Significant Number of Assets and Locations in China Alcoa Locations in China: 2003 Other Alcoa locations Flat Rolled Product Locations Foil - Kunming Foil - Shanghai Sheet and Foil - Bohai Closures - Tianjin Headquarters Beijing Chemicals - Qingdao Sales - Shanghai Sales - Hong Kong Prim
Slide 34: Steady Progress on Implementing Major Projects
We Are Making Steady Progress on Implementing Major Projects Alcoa Shanghai Aluminum Products Installation of a new line to expand foil production capacity by 7,000 mt is progressing well Expect to start production at end of Q1 2004 Bohai Agreed to form a new joint venture with CITIC on the existing
Slide 35: Recap of Key Messages
Recap of Key Messages Latin America Competitive primary position in Latin America today The region remains a focus for growth of our primary business Asia Asia, especially China, is an important element of Alcoa’s growth strategy Established positions in China give Alcoa a good understanding of the
Slide 36: For Additional Information, contact
For Additional Information, contact: William F. Oplinger Director, Investor Relations Alcoa 390 Park Avenue New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com
Slide 37: Appendix
Appendix
Slide 38: Income and EPS Information and Reconciliation
Income and EPS Information and Reconciliation In Millions 3Q 03 2Q 03 3Q 02 GAAP Net Income $280 $216 $193 Discontinued Operations - operating (income) loss $3 - $9 Discontinued Operations - Loss on Divestitures - $13 - GAAP Income from continuing operations $283 $229 $202 Special Items (2): Restruc
Slide 39: Income and EPS Information and Reconciliation (Continued)
Income and EPS Information and Reconciliation (Continued) In Millions 3Q 03 2Q 03 3Q 02 GAAP Earnings per share $0.33 $0.26 $0.23 Discontinued Operations - operating (income) loss - - $0.01 Discontinued Operations - Loss on Divestitures - $0.01 - GAAP Earnings per share from continuing operations $0
Slide 40: Reconciliation of Return on Capital
Reconciliation of Return on Capital Notes: Bloomberg Methodology calculates ROC based on the trailing 4 quarters. ** 1Q2003 Annualized Net Income excludes the cumulative effect of accounting change of $47m in the quarter, or $188m annualized. 3Q 2003 2Q 2003 1Q 2003 Bloomberg 3Q 2003 Bloomberg 2Q 20
Slide 41: Non-GAAP measure notes
(1) Alcoa believes that income from continuing operations excluding charges for restructurings and divestitures is a measure that should be presented in addition to income from continuing operations determined in accordance with GAAP. The following matters should be considered when evaluating this n