Alcoa Corporation · NYSE:AA
Alcoa — Q1 2004 Earnings Presentation
36 slides from Alcoa's earnings presentation, Apr 27, 2004
Slide 1: 1st Quarter 2004 Analyst Conference
EXHIBIT 99.2 1st Quarter 2004 Analyst Conference April 22, 2004 New York, NY
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: Richard B. Kelson, Executive Vice President and CFO
Richard B. Kelson Executive Vice President Chief Financial Officer
Slide 4: 1st Quarter Highlights
1st Quarter Highlights ?Highest level of revenue since 2Q 2001 COGS sequential improvement to less than 78% of sales ?Income from operations up sequentially and year-over-year ?5 out of 6 segments up on a year-over-year basis ?Continued ROC improvement to 8.7% annualized
Slide 5: 1st Quarter Highlights (continued)
1st Quarter Highlights (continued) ?Strong start toward new 2006 cost challenge ? Continued disciplined capital spending ? Substantial completion of the divestiture program ?Debt to capitalization ratio within target range
Slide 6: Safety
Safety ?LWD Incident Rate ??Continued strong performance in 1Q 2004 Rate (injuries per 200,000 hrs.) fewer incidents in 1Q 2004 vs. 2003 0.99 0.81 0.77 0.75 0.49 35 0.46 0.46 0.36 0.23 0.18 0.16 0.19 0.16 0.15 0.12 0.09 0.075 0.07 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002* 2003 1Q
Slide 7: 1st Quarter 2004 Financial Overview
1st Quarter 2004 Financial Overview In Millions 1Q04 4Q 03 Fav/(Unfav) LME 3-Month Average ($/MT) $ 1,667 $ 1,522 $ 145 Sales $ 5,696 $ 5,532 $ 164 Cost of Goods Sold $ 4,438 $ 4,435 ($ 3) % of Sales 77.9% 80.2% 1.3% SG&A $ 344 $ 346 $ 2 % of Sales 6.0% 6.3% 0.3% Restructuring and Other Charges ($ 3
Slide 8: 1st Quarter Market Conditions Global View
1st Quarter Market Conditions Global View ?Market Conditions Revenue by Market Primary Products 24% Industrial Products 5% Other (Distr., IGT, Tele) 7% Building & Construction 10% Commercial Transportation 6% Packaging 26% Aerospace 9% Automotive 13% Change from Change from 1Q 03 4Q 03 Realized Pric
Slide 9: Alumina & Chemicals
Alumina & Chemicals Alignment: Bauxite mining, alumina refining Markets: Intersegment Revenue 3rd Party Revenue ATOI Performance: + 38% LME + 4% 1Q03 2Q03 3Q03 4Q 03 1Q 04 ATOI LME Current Business Conditions: Positives LME-based pricing contracts driving higher realizations Jamaica upgrade at full
Slide 10: Primary Metals
Primary Metals Alignment: 4.0 million mt of smelting capacity, with 562 kmt currently idled Markets: Intersegment Revenue 3rd Party Revenue ATOI Performance: +16% $ Millions LME Cent/Lb 200 +15% 180 74 140 68 100 62 1Q03 2Q03 3Q03 4Q 03 1Q 04 ATOI LME Current Business Conditions: Positives LME price
Slide 11: Flat Rolled Products
Flat Rolled Products Alignment: Aluminum sheet and plate for aerospace applications, rigid container sheet for beverage cans, and mill products Markets: Distribution & Other Building & Construction Commercial Vehicle Aero Auto Can Sheet ATOI Performance: +25% $ Millions 75 +23% 1Q03 2Q03 3Q03 4Q 03
Slide 12: Engineered Products
Engineered Products Alignment: Hard and soft alloy extrusions, aluminum forgings, Alcoa Fasteners & Howmet products Markets: Distribution & Other Commercial Vehicle Building & Construction Auto IGT Aero ATOI Performance: $ Millions +112% 70 +88% 1Q03 2Q03 3Q03 4Q03 1Q04 Current Business Conditions:
Slide 13: Packaging & Consumer
Packaging & Consumer Alignment: Reynolds consumer products, closures, food packaging, flexible packaging, and packaging graphics design Markets: Flexible Packaging & Other Food Packaging Consumer Products Closures ATOI Performance: $ Millions -33% 60 -32% 1Q03 2Q03 3Q03 4Q03 1Q04 Current Business Co
Slide 14: Other
Other Alignment: Alcoa Fujikura, residential building products and automotive structures Markets: Tele Building & Construction Auto Commercial Vehicle ATOI Performance: +100% $ Millions 20 +3% 1Q03 2Q03 3Q03 4Q03 1Q04 Current Business Conditions: Positives Seasonal improvement in residential buildin
Slide 15: Outlook Summary
Outlook Summary 2Q ‘04 Outlook Positives • LME prices remain high • Seasonal upturn in packaging and consumer • Seasonal upturn in residential building and construction • Brisk end market demand for flat rolled products and engineered products Negatives • Minimal alumina spot exposure • Stronger AUD
Slide 16: Return on Capital
15.9 16.1 15.5 15.5 8.7 7.8 7.6 7.0 6.4 7.7 7.0 4.3 3.9 3.9 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 To p Quintile S &P Ind us tria ls Alc o a ROC Alc o a Qua rte r Annua lize d All indicators are based on the Bloomberg ROC Methodology. 1Q 03 Quarter Annualized ROC excludes $47 million after-tax cumulative eff
Slide 17: Bernt Reitan, Group President, Primary Products
Bernt Reitan Executive Vice President – Alcoa Group President, Primary Products
Slide 18: Agenda
Agenda ?Biography ?Alumina and Smelting Operations ??Safety ??Customer Value ??Manufacturing Excellence ?Market Outlook ?Growth Opportunities
Slide 19: Biography – Bernt Reitan
Biography – Bernt Reitan ?1980 – 2000 (Elkem ASA) ??1987 – 1988 Senior VP Materials and Technology ??1988 – 2000 Managing Director – Elkem Aluminium ANS ?2000 – Present (Alcoa Inc.) ??2000 President – Alcoa World Chemical ??2001 President – AWAC ??2003 President – Alcoa Primary Metals ??2004 Current
Slide 20: Alumina & Smelting Operations
Alumina & Smelting Operations 27 Smelters 9 Refineries North America: Smelting 2.8M tonnes Refining 2.3M tonnes Latin America: Smelting 0.3M tonnes Refining 2.6M tonnes Europe: Smelting 0.6M tonnes Refining 1.3M tonnes Refinery Smelter Stand-alone bauxite mine Australia: Smelting 0.4M tonnes Refinin
Slide 21: Safety
Safety (per 200,000 hours) Lost Work Day Frequency Rate 0.19 0.14 0.11 0.10 2001 2002 2003 2004Q1 OSHA Recordable Frequency Rate 4.4 2.7 2.2 1.9 2001 2002 2003 2004Q1
Slide 22: Alcoa Primary Products Business Model
Alcoa Primary Products Business Model ?Maximize Value-Added Products for Customers Operational Excellence ?Growth ??Creep capacity ??Brownfield expansions ??Greenfield expansions ??Joint ventures and partnerships
Slide 23: Maximize Value-Added Products for Customers
Maximize Value-Added Products for Customers Total Value-Added Shipments 31% increase in value-added product adds $35M ATOI annually 2001 2002 2003 Q1 2004 Annualized
Slide 24: Operational Excellence via ABS
Operational Excellence via ABS Accelerate improvement through best practice sharing ??Like-technology teams (LTT) in smelting ??Manufacturing and Technology (M&T) Council in refining ?Power of Comparisons Across the System ??Productivity ??Energy consumption efficiencies??Current efficiencies ??Main
Slide 25: Production and Productivity Improvements
Production and Productivity Improvements Alumina Production Improvement Indexed to 2001 1.15 1.11 1.05 1.00 2001 2002 2003 Q1 2004 Alumina Productivity Improvement Indexed to 2001 1.21 1.15 1.03 1.00 2001 2002 2003 Q1 2004 Smelting Production Improvement Indexed to 2001 1.06 1.05 1.02 1.00 2001 2002
Slide 26: Aluminum Supply and Demand
Aluminum Supply and Demand Global Supply and Demand 2003 2004 2005 2006 Global Metal Production Global Metal Consumption Market Surplus or (Deficit) (59) (288) (747) Source: Consensus forecast
Slide 27: Alumina Supply and Demand
Alumina Supply and Demand Global Supply and Demand 2003 2004 2005 2006 Global Metallurgical Alumina Production Global Metallurgical Alumina Consumption (192) (242) (334) (446) Source: Consensus forecast
Slide 28: Unwrought Aluminum Inventories
Unwrought Aluminum Inventories Days of Consumption LME & IAI Inventories LME stocks as of 4/08/04 stand at 19.67 days of consumption IAI unwrought stocks end Feb stand at record low of 24.72 of consumption 350,000 MT drop this year Jan-81 Jan-83 Jan-85 Jan-87 Jan-89 Jan-91 Jan-93 Jan-95 Jan-97 Jan-9
Slide 29: Aluminum has lagged price increases in other metals
Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 HR Steel 187% Copper 180% Stainless 162% Aluminum 120% Aluminum % change Copper % change Stainless % change Hot Rolled Steel % change Aluminum has lagged the price increases in other metals
Slide 30: Aluminum and Alumina Growth
Aluminum and Alumina Growth Future expansion opportunity Refinery Smelter Stand-alone bauxite mine Aluminum Expansion ? Iceland ? Australia ? Bahrain ? Brazil ? Brunei ? Canada ? China Alumina Expansion ? Australia ? Jamaica ? Suriname ? Brazil
Slide 31: For Additional Information, contact
For Additional Information, contact: William F. Oplinger Director, Investor Relations Alcoa Park Avenue New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com
Slide 32: Appendix
Appendix
Slide 33: Income and EPS Information and Reconciliation
Income and EPS Information and Reconciliation In Millions 1Q 04 4Q 03 1Q 03 GAAP Net Income $ 355 $ 291 $ 151 Cumulative Effect of Accounting Change — — $ 47 Discontinued operations—operating loss (income) — $ 4 ($ 3) Discontinued operations—(gain)/loss on divest. ($ 5) $ 45 — GAAP Income from conti
Slide 34: Income and EPS Information and Reconciliation (Continued)
Income and EPS Information and Reconciliation (Continued) In Millions 1Q 04 4Q 03 1Q 03 GAAP Earnings per share $ 0.41 $ 0.33 $ 0.17 Cumulative Effect of Accounting Change Discontinued operations—operating loss Discontinued operations—loss on divestitures GAAP Earnings per share from continuing oper
Slide 35: Notes to Reconciliation
Notes to Reconciliation (1) Alcoa believes that income from continuing operations excluding restructuring and other charges 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 evalu
Slide 36: Reconciliation of Return on Capital
Reconciliation of Return on Capital 1Q 04 4Q 03 3Q 03 2Q 03 1Q 03 Bloomberg 1Q 04 Bloomberg 4Q 03 Bloomberg 3Q 03 Bloomberg 2Q 03 Bloomberg 1Q 03 In Millions Method Annlzd Method Annlzd Method Annlzd Method Annlzd Method Annlzd Net Income $ 1,142 $ 1,420 $ 938 $ 1,164 $ 424 $ 1,120 $ 346 $ 864 $ 353