Slide 1: 1st Quarter Earnings
1st Quarter Earnings Alcoa Corporation April 17, 2019
Slide 2: Important information
Important information Cautionary statement regarding forward-looking statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-lo
Slide 3: Important information (continued)
Important information (continued) Non-GAAP financial measures Some of the information included in this presentation is derived from Alcoa’s consolidated financial information but is not presented in Alcoa’s financial statements prepared in accordance with accounting principles generally accepted in
Slide 4: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 5: Solid operating performance; positioning for market cycles
Solid operating performance; positioning for market cycles 1Q19 Financial results and business review ▪ Net loss of $199 million, or $1.07 per share; excluding special items, 1Q19 adjusted net loss of $43 million, or $0.23 per share Financial results ▪ Adjusted EBITDA excluding special items of $467
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Revenue impacted by market prices
Revenue impacted by market prices Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 1Q18 4Q18 1Q19 Change Change Realized primary aluminum price ($/mt) $2,483 $2,358 $2,219 $(264) $(139) Realized alumina price ($/mt) $385 $479 $385 - $(94) Revenue $3,09
Slide 8: Special items total $156M, primarily Spanish curtailments
Special items total $156M, primarily Spanish curtailments Breakdown of special items by income statement classification – gross basis M, Except per share amounts 1Q18 4Q18 1Q19 Description of significant 1Q19 special items Net income (loss) attributable to Alcoa Corporation $195 $51 $(199) Diluted e
Slide 9: Adjusted net loss $43 million, adjusted EPS $(0.23)
Adjusted net loss $43 million, adjusted EPS $(0.23) Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 1Q18 4Q18 1Q19 Change Change Realized primary aluminum price ($/mt) $2,483 $2,358 $2,219 $(264) $(139) Realized alumina price (
Slide 10: Alumina and metal prices lead earnings changes
Alumina and metal prices lead earnings changes Adjusted EBITDA excluding special items sequential changes, $M $770 (1) (77) 45 17 6 $467 (3) (36) (23) (231) 4Q18 Currency Metal API Raw Energy Price / mix Volume Production Other 1Q19 prices materials costs 10
Slide 11: Market factors drive Alumina, Aluminum results
Market factors drive Alumina, Aluminum results Adjusted EBITDA excluding special items breakdown Segment information, $M Total Adjusted EBITDA information, $M 4Q18 1Q19 4Q18 1Q19 Change -46% Segment total $743 $402 $(341) $683 Transformation (1) 2 3 +15% $372 Intersegment eliminations 47 86 39 $110
Slide 12: Cash remains above $1 billion
Cash remains above $1 billion Balance sheet and cash review Quarter ending cash balance, $M Key metrics as of March 31, 2019 1Q19 Days 1Q19 Annualized $(162) working capital Return on capital $1,358 $(96) 35 Days 5.1% $1,196 $1,089 $1,113 $1,022 $1,017 1Q19 Sustaining 1Q19 Return-seeking capital exp
Slide 13: 2019 Outlook
2019 Outlook FY19 Key metrics Income statement excl. special items impacts Cash flow impacts 1Q19 Actual FY19 Outlook 1Q19 Actual FY19 Outlook Bauxite shipments (Mdmt) 11.4 47.0 – 48.0 Minimum required pension/all OPEB funding $34M ~ $300M Alumina shipments (Mmt) 3.3 13.6 – 13.7 Additional pension f
Slide 14: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 15: Aluminum projected to be in deficit in 2019
Aluminum projected to be in deficit in 2019 Projected 2019 market balances, Mmt Production as a percentage of consumption Global Regional World 92 to 94 160% 8 to 12 ex-China Bauxite Surplus -84 to -82 China 58% World Smelter -0.6 to -0.2 99% 0.2 to 1.0 ex-China Grade Surplus Alumina 0.8 to 1.2 Chin
Slide 16: Days of consumption below 2008 level; moving lower
Days of consumption below 2008 level; moving lower Global inventory days of primary aluminum consumption 119 Average change in DoC/year 112 -4 109 111 103 98 95 88 84 -12 Average change in DoC/year 76 70 64 60 59 -11 52 2019 Global deficit: 49 -1.9 to -1.5 Mmt 2004 2005 2006 2007 2008 2009 2010 2011
Slide 17: Production levels reflect improved operational performance
Production levels reflect improved operational performance Production update Average daily production, kmt Recent improvements +6% ▪ Higher levels of operational Bauxite 128 132 stability and reliability through 125 124 124 renewed focus ▪ Productivity improvements through work redesign +2% ▪ Target
Slide 18: Strong foundation; ready for the future
Strong foundation; ready for the future FY19 Path forward Execute strategic priorities Prepare for the future ▪ Continue progress on safety and environment ▪ Maintain trajectory on operational improvements ▪ Deliver lower raw material prices to earnings ▪ Realize benefits at Warrick, Avilés and La C
Slide 19: Questions?
Questions? Alcoa Corporation
Slide 20: Appendix
Appendix
Slide 21: 1Q19 Financial summary
1Q19 Financial summary Three months ending March 31, 2019, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $301 $1,314 $1,738 $23 $(657) - $2,719 Third-party revenue $65 $897 $1,735 $22 - - $2,719 Adjuste
Slide 22: 1Q19 Adjusted EBITDA drivers by segment
1Q19 Adjusted EBITDA drivers by segment Adjusted EBITDA excl. special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 4Q18 Currency prices API materials Energy Price/mix Volume costs Other 1Q19 Bauxite $110 1 - - - 1 (3) (7) - 24 $126 Alumina $683 (3) - (
Slide 23: Aluminum value chain
Aluminum value chain 1Q19 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 0.7 29% 100% Aluminum 3rd Party 3.3 89% 71% Alumina 3rd Party 11.4 11% Bauxite 3rd Party 23
Slide 24: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 1Q19 production cash costs Alumina refining Input Inventory Pricing FY19 Annual Cost Cost Flow Convention Sensitivity Conversion Bauxite Caustic Soda 5 - 6 Months Quarterly $10M per $10/dmt 34% 33% Natural Gas1 N/A N/A N/A 5% 15% Fuel Oil 1
Slide 25: 2019 Business information
2019 Business information Estimated annual Adjusted EBITDA sensitivities $M AUD BRL CAD EUR ISK NOK LME API Midwest Europe Japan + 0.01 + 0.10 + 0.01 + 0.01 + 10 + 0.10 Segment + $100/mt + $10/mt + $100/mt + $100/mt + $100/mt USD/AUD BRL/USD CAD/USD USD/EUR ISK/USD NOK/USD Bauxite (4) 3 Alumina 120
Slide 26: Additional business considerations
Additional business considerations Items impacting adjusted EBITDA for 2Q19 and FY19 ▪ 2019 Estimated annual adjusted EBITDA sensitivities have been updated for portfolio changes ▪ Lower alumina prices flowing into the Aluminum segment in 2Q19 estimated to produce sequential benefit of $20 million t
Slide 27: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of March 31, 20191 Estimated financial impacts, $M Expense impact 2019 Segment pension $45 OPEB Segment OPEB 5 Total U.S. Pension U.S. Corporate pension & OPEB 5 $1.0B $1.0 Total $1.1 Total adj. EBITDA imp
Slide 28: Investments summary
Investments summary Ownership Carrying Value as of Income Statement Location of Investee Country Nature of Investment4 Interest March 31, 2019 Equity Earnings Elysis Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminum Company1 Saudi Arabia Aluminum smelter 25.1% Ma’aden
Slide 29: Rigorous standard in place to manage tailings and residue
Rigorous standard in place to manage tailings and residue Industry leading standard established over 25 years ago; continuously improved and updated Robust management process Inventory of tailings dams & residue storage ▪ Governance structure with global oversight and clearly ▪ No Alcoa operated ups
Slide 30: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of March 31, 2019 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2018 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia 33
Slide 31: Valuation framework
Valuation framework LTM ending Valuation framework key considerations 3/31/2019 Adj. EBITDA excl. special items Economic value using market multiple of: + Bauxite i. AWAC joint venture, minus small portions of AWAC JV in Aluminum and $442M Transformation + Alumina ii. Ownership in certain mines and
Slide 32: Inventory accounting change FY18 impacts
Inventory accounting change FY18 impacts Comparison of FY18 Income statement details, $M Based on January 2019 change from LIFO to average cost inventory accounting and movement of metal price lag from Corporate inventory accounting into the Aluminum segment As reported in 2018 As adjusted 2018 $M 1
Slide 33: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 LTM $195 $10 $(6) $51 $250 $(199) $(144) Net income (loss) attributable to Alcoa Corporation Add: Net income attributable to noncontrolling interest 145 121 201 176 643 141 639 Provision for income taxes 151 158 260 163 732 150 731 Othe
Slide 34: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 1Q18 4Q18 1Q19 Income statement classification Special items $(5) $82 $156 Spain collective dismissal costs - - 15 Cost of goods sold Bécancour lockout related costs 2 2 2 Cost of goods sold Warrick smelter restart costs 16 1 - Cost of
Slide 35: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 4Q17 1Q18 2Q181 3Q18 4Q18 1Q19 Cash from operations $455 $55 $(430) $288 $535 $168 Capital expenditures (150) (74) (95) (82) (148) (69) Free cash flow 305 (19) (525) 206 387 99 Contributions from noncontrolling interest 24 53 56 0 40 20 Distributions to noncontrollin
Slide 36: Net Debt reconciliation
Net Debt reconciliation 1Q18 4Q18 1Q19 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $- $- $- Long-term debt due within one year 15 - 15 1 - 1 1 - 1 Long-term debt, less amount due within one year 1,445 31 1,414 1,801 34 1,767 1,802 34 1
Slide 37: Days Working Capital
Days Working Capital $M 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 Receivables from customers $708 $789 $840 $811 $814 $1,025 $1,017 $830 $758 Add: Inventories 1,406 1,447 1,494 1,599 1,855 1,772 1,819 1,819 1,799 Less: Accounts payable, trade 1,434 1,508 1,618 1,898 1,813 1,752 1,711 1,663 1,503
Slide 38: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 1Q18 1Q19 (PBT + net interest3 + special items1) x 4 x (1 – fixed tax rate4) ROC % = X 100 Numerator: ( Total assets – cash5 – current liabilities + short-term debt) Net income attributable to Alcoa Corporation $195 $(1
Slide 39: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points GAAP Accounting principles generally accepted in the United States of America 1H## Six months ending June 30 GWh Gigawatt hour 1Q## Three months ending March 31 ISK
Slide 40: The Element of Possibility”
The Element of Possibility”