Alcoa Corporation · NYSE:AA
Alcoa — Q3 2012 Earnings Presentation
47 slides from Alcoa's earnings presentation, Oct 9, 2012
Slide 1: 3rd Quarter Earnings Conference
3rd Quarter Earnings Conference October 9, 2012 0
Slide 2: Cautionary Statement
Cautionary Statement Forward-Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements. Forward- looking statements include those containing such words as “anticipates,” “estimates,” “expects,” “forecasts,
Slide 3: Chuck McLane, Executive Vice President and CFO
Chuck McLane Executive Vice President and Chief Financial Officer October 9, 2012 2
Slide 4: 3rd Quarter 2012 Financial Overview
3rd Quarter 2012 Financial Overview Loss from Continuing Operations of $143 million, or $0.13 per share; Excluding impact of restructuring and other special items: • Income from continuing operations of $32 million, or $0.03 per share Revenue at $5.8 billion Adjusted EBITDA of $282 million U
Slide 5: Income Statement Summary
Income Statement Summary Income Statement Summary $ Millions, except per-share amounts 3Q11 2Q12 3Q12 Sequential Actual Actual Actual Change Sales $6,419 $5,963 $5,833 ($130) Cost of Goods Sold $5,290 $5,154 $5,266 $112 COGS % Sales 82.4% 86.4% 90.3% 3.9 % pts. Selling, General Administrative, Other
Slide 6: Restructuring and Other Special Items
Restructuring and Other Special Items Income Statement $ Millions, except per-share amounts 2Q12 3Q12 Segment Classification Loss from Continuing Ops ($2) ($143) Loss Per Diluted Share $0.00 ($0.13) Environmental Reserve ($13) ($120) COGS Corporate Litigation Reserve ($18) ($15) COGS Corporate Reven
Slide 7: 3rd Quarter 2012 vs. 2nd Quarter 2012 Earnings Bridge
3rd Quarter 2012 vs. 2nd Quarter 2012 Earnings Bridge Income from Continuing Operations Excluding Restructuring & Other Special Items ($ millions) 61 3 24 32 55 91 34 3 3 2Q 2012 LME Currency Volume Price Productivity Raw Cost 3Q 2012 /Mix Materials Increases / Other -$94m +$86m -$21m See appendix f
Slide 8: Alumina Q3 Results and Q4 Outlook
Alumina Alumina Q3 Results and Q4 Outlook 3rd Quarter Results 3rd Quarter Business Highlights Higher shipments stemming from prior quarter shipping 3Q 11 2Q 12 3Q 12 delays Production (kmt) 4,140 4,033 4,077 Price/mix driven by stable API pricing despite LME decline 3rd Party Shipments (kmt) 2,2
Slide 9: Primary Metals Q3 Results and Q4 Outlook
Primary Metals Primary Metals Q3 Results and Q4 Outlook 3rd Quarter Results 3rd Quarter Business Highlights 3Q 11 2Q 12 3Q 12 Production decreased due to curtailments in Spain and Italy Production (kmt) 964 941 938 Price/Mix driven by improving regional premiums rd 3 Party Shipments (kmt) 754 74
Slide 10: Global Rolled Products Q3 Results and Q4 Outlook
Global Rolled Products Global Rolled Products Q3 Results and Q4 Outlook 3rd Quarter Results 3rd Quarter Business Highlights 3Q Record ATOI and adjusted EBITDA per metric ton ATOI ($ Millions) 3Q 11 2Q 12 3Q 12 ATOI up 63% YOY quarter Global Rolled Products, excl Russia, China & Other 56 89 89
Slide 11: Engineered Products and Solutions Q3 Results and Q4 Outlook
Engineered Products and Solutions Engineered Products and Solutions Q3 Results and Q4 Outlook 3rd Quarter Results 3rd Quarter Business Highlights Record 3Q ATOI driven by productivity offsetting ($ Millions) 3Q 11 2Q 12 3Q 12 seasonal declines in building & construction and weakness in commercial
Slide 12: 3rd Quarter 2012 Cash Flow Overview
3rd Quarter 2012 Cash Flow Overview 3rd Quarter 2012 Cash Flow Overview ($ Millions) 3Q11 2Q12 3Q12 3Q12 FCF Net Income (Loss) $225 ($19) ($175) ($39) DD&A $377 $364 $366 million Change in Working Capital ($93) ($147) $88 Pension Contributions ($114) ($139) ($163) $1.4 billion Taxes / Other Adjustme
Slide 13: Continued Sustainable Reductions in DWC
Continued Sustainable Reductions in DWC Days Working Capital since Fourth Quarter 2008 55 55 Record Low 50 48 3rd Quarter 50 43 44 43 45 41 -5 days 40 39 38 38 35 33 32 33 33 30 30 27 25 20 1Q12 3Q12 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 2Q12 1Q11 3Q11 2Q11 4Q11 10 days 3 days 3 days lower lo
Slide 14: Proven Cash Sustainability Efforts Enhance Liquidity
Proven Cash Sustainability Efforts Enhance Liquidity Income and Liquidity Performance Overview (Loss) Income from Continuing Operations excl. restructuring and other special items Free Cash Flow ($ Millions) ($ Millions) 1,005 761 364 656 317 526 223 165 101 139 96 105 61 176 164 246 39 9 32 87 -34
Slide 15: Continuing to Execute in a Challenging Environment
Continuing to Execute in a Challenging Environment Executing Our Strategy Achieving Targets Delivering Results ■ Significant sequential Positive Free Cash Flow performance improvement in the Productivity $800M upstream ■ Restructuring through executed curtailments Overhead $50M ■ Record 3Q ATOI
Slide 16: Klaus Kleinfeld, Chairman and Chief Executive Officer
Klaus Kleinfeld Chairman and Chief Executive Officer October 9, 2012 15
Slide 17: 2012 Market Conditions
2012 Market Conditions Alcoa End Markets: Current Assessment of 2012 vs. 2011 North America Europe China Global Aerospace 13%-14% sales growth Automotive 11%-15% 4%-9% 4%-7% 4%-8% prod growth prod decline prod growth prod growth Heavy Truck & 2%-4% 8%-11% 18%-21% 7%-9% Trailer prod growth prod decli
Slide 18: Global Aluminum Demand Grows 6% Amid Volatile Environment
Global Aluminum Demand Grows 6% Amid Volatile Environment 2012 Primary Aluminum Consumption (mmt), Annualized Growth (%) and Change (% pts) by Region 2012 Consumption 2012 Growth (vs. 2011) Change in Growth (3Q12 estimate) (3Q12 estimate) (H1 to H2 in % pts.) Russia 0.9 0% Russia 1% 5% Brazil 1.0 6%
Slide 19: Alumina and Aluminum Markets Essentially Balanced
Alumina and Aluminum Markets Essentially Balanced Supply and Demand Analysis 2012E Alumina Supply/Demand Balance (kmt) 2012E Aluminum Supply/Demand Balance (kmt) Surplus Deficit 400 (262) Supply Demand Supply Demand (000 mt) China Rest of World (000 mt) China Rest of World Aug 2012 Annualized Rate 3
Slide 20: Tight Physical Market Drives Record Premiums
Tight Physical Market Drives Record Premiums $ per metric Regional Premiums over time $ per metric ton ton $300 $300 Region End of Q3’12 Europe $290/MT $250 $250 Japan $255/MT Midwest USA $243/MT $200 $200 $150 $150 $100 $100 $50 $50 $0 $0 Source: Alcoa estimates, LME, SHFE, IAI, Marubeni, Platt‟s M
Slide 21: Currently Inventory Levels Are Not Driving the Price
Currently Inventory Levels Are Not Driving the Price Global Inventories vs. LME Price over time Days of LME Price Consumption Days of Days of Days of Consumption Consumption Consumption $3,250 102 days 80 days 75 days 100 LME Price LME Price LME Price $2,686/MT $3,050 $2,214/MT $2,112/MT 90 $2,850 8
Slide 22: LME Price Remains Decoupled From Market Fundamentals
LME Price Remains Decoupled From Market Fundamentals LME Cash versus Quarterly Supply/Demand Balance Supply/ LME Price Demand Price SYNCHRONIZED with fundamentals DECOUPLED 1,700 $3,400 1,500 $3,200 $3,000 1,300 S $2,800 1,100 U R $2,600 900 P L $2,400 U 700 S $2,200 500 $2,000 300 $1,800 100 $1,600
Slide 23: Broad Market Sentiment Continues to Dominate Price
Broad Market Sentiment Continues to Dominate Price Movement in LME Cash Prices After Economic Announcements Sept 13th Sept 12th QE3 German court ruling LME $2,082 2,350 LME $2,075 2,250 Sept 7th 2,150 China stimulus plan LME $1,988 2,050 Sept 6th ECB bond buying program LME $1,963 1,950 10-Sep-12 17
Slide 24: Market Fundamentals Intact; Macro Factors Influence Price
Market Fundamentals Intact; Macro Factors Influence Price Market Effectively Balanced Premiums Remain At Record High Supply and Demand Analysis Regional Premiums Over Time $ per metric $ per metric ton ton 2012E Alumina Supply/Demand Balance (kmt) 2012E Aluminum Supply/Demand Balance (kmt) $300 $300
Slide 25: Alumina: Improving Performance Through Margin Focus
Alumina: Improving Performance Through Margin Focus Alumina Performance Overview Adjusted EBITDA per MT Aligning Prices With Market Fundamentals 10-YR Average ~ $67/MT 700 ~40% of CRU Spot 2,570 2,641 2,572 600 2,398 customers on 2,173 Australia Export 2,025 500 API or spot 1,900 1,719 1,664 basis b
Slide 26: Primary Metals: Driving Long-Term Improvements
Primary Metals: Driving Long-Term Improvements Primary Metals Performance Overview Adjusted EBITDA per MT Optimizing Cast House Profitability 10-YR Average ~ $374/MT 2,570 2,641 2,572 $375M 2,398 Margin* 2,173 1,900 2,025 2011 through 1,719 1,664 YTD Sept 2012 1,433 784 Rod 1,350 626 Foundry 336 418
Slide 27: Global Rolled Products: Leveraging Our Strategic Asset Base
Global Rolled Products: Leveraging Our Strategic Asset Base Global Rolled Products Performance Overview Generating Record Adjusted EBITDA per MT 2012 YTD 3rd Party Sales by Market 10-YR Average ~ $235/MT B&C Other 405 Commercial Transport 85% 4% 327 Automotive 5% 2% Utilization 314 273 276 8% 253 24
Slide 28: Engineered Products & Solutions: Continuing to Grow Profitably
Engineered Products & Solutions: Continuing to Grow Profitably Engineered Products and Solutions Performance Overview Setting Record Adjusted EBITDA Margins 2012 YTD 3rd Party Sales By Market Other 20% Automotive 78% 6% 17% 18% IGT 3% Aerospace 15% 7% Utilization 12% 12% 13% 13% 11% 9% 8% Commercial
Slide 29: Regulation and Market Preference Drives Aluminum Demand
Regulation and Market Preference Drives Aluminum Demand Changing Regulations… …Shifting Buying Behavior… …Drive Substitution US Corporate Average Percentage of consumers willing to pay Global Auto Body Sheet Fuel Economy (MPG) more for fuel-efficiency Consumption (KMT) 7.5X 37% of consumers rank inc
Slide 30: Controlling Our Own Destiny in a Challenging Environment
Controlling Our Own Destiny in a Challenging Environment Macro Trumps Ali Fundamentals Delivering Results Capturing Future Growth Demand Solid; Markets ■ Upstream delivers $98M in Lightweighting With Aluminum Effectively Balanced performance improvement Global Auto Body Sheet Consumption (KMT) 2012E
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Slide 32: Additional Information
Additional Information Kelly Pasterick Director, Investor Relations Alcoa 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 www.alcoa.com 31
Slide 33: Annual Sensitivity Summary
Annual Sensitivity Summary LME Aluminum Annual Net Income Sensitivity +/- $100/MT = +/- $220 million Currency Annual Net Income Sensitivity Australian $ +/- $11 million per 0.01 change in USD / AUD Brazilian $ +/- $ 3 million per 0.01 change in BRL / USD Euro € +/- $ 2 million per 0.01 change in USD
Slide 34: Revenue Change by Market
Revenue Change by Market Sequential Year-Over-Year 3Q’12 Third-Party Revenue Change Change Aerospace (2%) 9% 31% 16% Automotive (5%) 2% B&C (1%) (8%) 3% Comm. Transport (13%) (10%) 6% Industrial Products (8%) (16%) 5% IGT 2% (1%) Packaging (1%) (6%) 8% 13% Distribution/Other* (10%) (19%) 2% 2% 14% A
Slide 35: Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa
Reconciliation of ATOI to Consolidated Net Income (Loss) Attributable to Alcoa (in millions) 1Q11 2Q11 3Q11 4Q11 2011 1Q12 2Q12 3Q12 Total segment ATOI $ 555 $ 635 $ 462 $ 241 $ 1,893 $ 296 $ 275 $ 235 Unallocated amounts (net of tax): Impact of LIFO (24) (27) 2 11 (38) – 19 (7) Interest expense (72
Slide 36: Reconciliation of Adjusted Income
Reconciliation of Adjusted Income (in millions, except per- Income (Loss) Diluted EPS share amounts) Quarter ended Quarter ended September 30, June 30, September 30, September 30, June 30, September 30, 2011 2012 2012 2011 2012 2012 Net income (loss) attributable to Alcoa $ 172 $ (2) $ (143) $ 0.15
Slide 37: Reconciliation of Adjusted Income, continued
Reconciliation of Adjusted Income, continued (in millions) March 31, June 30, September 30, December 31, March 31, 2011 2011 2011 2011 2012 Net income (loss) attributable to Alcoa $ 308 $ 322 $ 172 $ (191) $ 94 (Loss) income from discontinued operations (1) (4) – 2 – Income (loss) from continuing op
Slide 38: Reconciliation of Adjusted Income, continued
Reconciliation of Adjusted Income, continued (in millions) Quarter ended December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2008 2009 2009 2009 2009 2010 2010 2010 2010 Net (loss) income attributable to Alcoa $ (1,191) $ (497) $ (454) $ 77 $ (277
Slide 39: Reconciliation of Alcoa Adjusted EBITDA
Reconciliation of Alcoa Adjusted EBITDA ($ in millions) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q11 2Q12 3Q12 Net income (loss) attributable to Alcoa $ 420 $ 938 $ 1,310 $ 1,233 $ 2,248 $ 2,564 $ (74) $ (1,151) $ 254 $ 611 $ 172 $ (2) $ (143) Add: Net income (loss) attributable to noncont
Slide 40: Reconciliation of Alumina Adjusted EBITDA
Reconciliation of Alumina Adjusted EBITDA ($ in millions, except 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q11 2Q12 3Q12 3Q12 per metric ton YTD amounts) After-tax operating income (ATOI) $ 315 $ 415 $ 632 $ 682 $ 1,050 $ 956 $ 727 $ 112 $ 301 $ 607 $ 154 $ 23 $ (9) $ 49 Add: Depreciation,
Slide 41: Reconciliation of Primary Metals Adjusted EBITDA
Reconciliation of Primary Metals Adjusted EBITDA ($ in millions, except 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q11 2Q12 3Q12 3Q12 per metric ton YTD amounts) After-tax operating income (ATOI) $ 650 $ 657 $ 808 $ 822 $ 1,760 $ 1,445 $ 931 $ (612) $ 488 $ 481 $ 110 $ (3) $ (14) $ (7) Add:
Slide 42: Reconciliation of Global Rolled Products Adjusted EBITDA
Reconciliation of Global Rolled Products Adjusted EBITDA ($ in millions, except 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q11 2Q12 3Q12 3Q11 3Q12 per metric ton YTD YTD amounts) After-tax operating income (ATOI) $ 225 $ 222 $ 254 $ 278 $ 233 $ 178 $ (3) $ (49) $ 220 $ 266 $ 60 $ 95 $ 98 $ 2
Slide 43: Reconciliation of Engineered Products and Solutions Adjusted EBITDA
Reconciliation of Engineered Products and Solutions Adjusted EBITDA ($ in millions) 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3Q11 2Q12 3Q12 3Q11 3Q12 YTD YTD After-tax operating income (ATOI) $ 63 $ 124 $ 156 $ 271 $ 365 $ 435 $ 533 $ 315 $ 415 $ 539 $ 138 $ 160 $ 160 $ 417 $ 475 Add: Depre
Slide 44: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow (in millions) Quarter ended March 31, June 30, September 30, December 31, March 31, June 30, September 30, 2011 2011 2011 2011 2012 2012 2012 Cash from $ (236) $ 798 $ 489 $ 1,142 $ (236) $ 537 $ 263 operations Capital expenditures (204) (272) (325) (486) (270) (291)
Slide 45: Reconciliation of Free Cash Flow, continued
Reconciliation of Free Cash Flow, continued (in millions) Quarter ended December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, 2008 2009 2009 2009 2009 2010 2010 2010 2010 Cash from $ 608 $ (271) $ 328 $ 184 $ 1,124 $ 199 $ 300 $ 392 $ 1,370 operatio
Slide 46: Days Working Capital
Days Working Capital ($ in millions) Quarter ended September 30, June 30, September 30, 2011 2012 2012 Receivables from customers, less allowances $ 1,943 $ 1,575 $ 1,619 * Add: Deferred purchase price receivable – 141 81 Receivables from customers, less allowances, as adjusted 1,943 1,716 1,700 Add
Slide 47: Reconciliation of Net Debt-to-Capital
Reconciliation of Net Debt-to-Capital ($ in millions) Quarter ended September 30, 2012 Cash and Cash Net Debt-to- Debt-to-Capital Equivalents Capital Total Debt Short-term borrowings $ 591 Commercial paper 43 Long-term debt due within one year 540 Long-term debt, less amount due within one year 8,35