Slide 1: 2nd Quarter Earnings
2nd Quarter Earnings Alcoa Corporation July 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: Continuing actions to improve the business
Continuing actions to improve the business 2Q19 Financial results and business review ▪ Net loss of $402 million, or $2.17 per share; excluding special items, 2Q19 adjusted net loss of $2 million, or $0.01 per share Financial results ▪ Adjusted EBITDA excluding special items of $455 million ▪ Cash b
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Revenue flat as volume, energy sales offset price slip
Revenue flat as volume, energy sales offset price slip Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 2Q18 1Q19 2Q19 Change Change Realized primary aluminum price ($/mt) $2,623 $2,219 $2,167 $(456) $(52) Realized alumina price ($/mt) $467 $385 $376 $
Slide 8: Special items total $400M, primarily MRC rolling divestiture
Special items total $400M, primarily MRC rolling divestiture Breakdown of special items by income statement classification – gross basis M, Except per share amounts 2Q18 1Q19 2Q19 Description of significant 2Q19 special items Net income (loss) attributable to Alcoa Corporation $10 $(199) $(402) Dilu
Slide 9: Adjusted net loss $2 million, adjusted EPS $(0.01)
Adjusted net loss $2 million, adjusted EPS $(0.01) Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 2Q18 1Q19 2Q19 Change Change Realized primary aluminum price ($/mt) $2,623 $2,219 $2,167 $(456) $(52) Realized alumina price ($/
Slide 10: Favorable energy, raw materials offset alumina price drop
Favorable energy, raw materials offset alumina price drop Adjusted EBITDA excluding special items sequential changes, $M 19 $467 38 6 4 $455 (19) 22 (4) (18) (60) 1Q19 Currency Metal API Raw Energy Price / mix Volume Production Other 2Q19 prices materials costs 10
Slide 11: Aluminum recovering; Alumina steady; Bauxite off slightly
Aluminum recovering; Alumina steady; Bauxite off slightly Adjusted EBITDA excluding special items breakdown Segment information, $M Total Adjusted EBITDA information, $M 1Q19 2Q19 1Q19 2Q19 Change $(3) Segment total $402 $484 $82 $372 $369 $(14) Transformation 2 3 1 $126 $112 $99 Intersegment elimin
Slide 12: One time payments cause cash balance decline
One time payments cause cash balance decline Balance sheet and cash review Quarter ending cash balance, $M Key metrics as of June 30, 2019 2Q19 Days 1H19 Annualized $(107) working capital return on capital $1,196 $(183) $1,089 $1,113 31 Days 5.0% $1,022 $1,017 $834 1H19 Sustaining capital 1H19 Retur
Slide 13: 2019 Outlook
2019 Outlook FY19 Key metrics Income statement excl. special items impacts Cash flow impacts 1H19 Actual FY19 Outlook 1H19 Actual FY19 Outlook Bauxite shipments (Mdmt) 23.2 47.0 – 48.0 Minimum required pension/all OPEB funding $108M ~ $300M Alumina shipments (Mmt) 6.7 13.6 – 13.7 Additional pension
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 Global production as a percentage of consumption Global Regional 98 to 100 World ex-China 163% Third-party 13 to 17 Bauxite Surplus (85) to (83) China 57% 0.4 to 0.8 World ex-China 101% Smelter Grade 0.5 to 1.3 Alumina S
Slide 16: Strengthening the Company
Strengthening the Company Production update and improvement update Average daily production, kmt Actions and improvements +1% ▪ Completed major crusher overhaul at Willowdale mine Bauxite 132 ▪ Record quarterly production by current refinery 124 124 128 125 portfolio; completing residue filtration p
Slide 17: Executing strategic priorities to drive improvements
Executing strategic priorities to drive improvements Strategic priorities and focus areas 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 ▪ Complete Avi
Slide 18: Questions?
Questions? Alcoa Corporation
Slide 19: Appendix
Appendix
Slide 20: 2Q19 Financial summary
2Q19 Financial summary Three months ending June 30, 2019, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $313 $1,309 $1,761 $24 $(696) - $2,711 Third-party revenue $67 $864 $1,757 $23 - - $2,711 Adjusted
Slide 21: 2Q19 Adjusted EBITDA drivers by segment
2Q19 Adjusted EBITDA drivers by segment Adjusted EBITDA excl. special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 1Q19 Currency prices API materials Energy Price/mix Volume costs Other 2Q19 Bauxite $126 2 - - - - 2 (1) (8) (9) $112 Alumina $372 12 - (
Slide 22: Aluminum value chain
Aluminum value chain 1H19 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 1.4 31% 100% Aluminum 3rd Party 6.7 88% 69% Alumina 3rd Party 23.2 12% Bauxite 3rd Party 22
Slide 23: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 2Q19 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 35% 33% Natural Gas1 N/A N/A N/A 5% 14% Fuel Oil 1
Slide 24: 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 25: Additional business considerations
Additional business considerations Items expected to impact adjusted EBITDA for 3Q19 ▪ In the Bauxite segment, we expect Adjusted EBITDA sequential improvement of $5 million to $10 million, on higher volumes and lower major maintenance costs compared to 2Q19 ▪ In the Alumina segment, higher volume,
Slide 26: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of June 30, 20191 Estimated financial impacts, $M Expense impact 2019 OPEB Segment pension $45 Total Segment OPEB 5 U.S. $0.9B Pension $0.9 U.S. Corporate pension & OPEB 5 Total $1.1 Total adj. EBITDA impa
Slide 27: Investments summary
Investments summary Investments listing and income statement location Ownership Carrying Value as of Income Statement Location of Investee Country Nature of Investment4 Interest June 30, 2019 Equity Earnings Elysis Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminum Comp
Slide 28: 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 29: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of June 30, 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 30: Valuation framework
Valuation framework LTM ending Valuation framework key considerations 6/30/2019 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 $454M Transformation + Alumina ii. Ownership in certain mines and
Slide 31: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 LTM $195 $10 $(6) $51 $250 $(199) $(402) $(556) Net income (loss) attributable to Alcoa Corporation Add: Net income attributable to noncontrolling interest 145 121 201 176 643 141 109 627 Provision for income taxes 151 158 260 163
Slide 32: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 2Q18 1Q19 2Q19 Income statement classification Special items $211 $156 $400 USW master agreement negotiation - - 5 Cost of goods sold Bécancour lockout related costs 2 2 2 Cost of goods sold Spain collective dismissal costs - 15 1 Cost
Slide 33: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 4Q17 1Q18 2Q181 3Q18 4Q18 1Q19 2Q19 Cash from operations $455 $55 $(430) $288 $535 $168 $82 Capital expenditures (150) (74) (95) (82) (148) (69) (89) Free cash flow 305 (19) (525) 206 387 99 (7) Contributions from noncontrolling interest 24 53 56 - 40 20 1 Distributi
Slide 34: Net Debt reconciliation
Net Debt reconciliation 4Q18 1Q19 2Q19 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $- $- $- Long-term debt due within one year 1 - 1 1 - 1 1 - 1 Long-term debt, less amount due within one year 1,801 34 1,767 1,802 34 1,768 1,804 34 1,7
Slide 35: Days Working Capital
Days Working Capital $M 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 Receivables from customers $789 $840 $811 $814 $1,025 $1,017 $830 $758 $684 Add: Inventories 1,447 1,494 1,599 1,855 1,772 1,819 1,819 1,799 1,767 Less: Accounts payable, trade 1,508 1,618 1,898 1,813 1,752 1,711 1,663 1,503 1,523
Slide 36: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 1H18 1H19 (PBT + net interest3 + special items1) x 2 x (1 – fixed tax rate4) ROC % = X 100 Numerator: ( Total assets – cash5 – current liabilities + short-term debt) Net income attributable to Alcoa Corporation $205 $(6
Slide 37: 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 38: The Element of Possibility”
The Element of Possibility”