Slide 1: 4th Quarter Earnings
4th Quarter Earnings Alcoa Corporation January 24, 2017
Slide 2: Important information
Important information 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-looking statements include those
Slide 3: Important information (continued)
Important information (continued) Non-GAAP financial measures This presentation includes unaudited “non-GAAP financial measures” (GAAP means accounting principles generally accepted in the United States of America) as defined in Regulation G under the Securities Exchange Act of 1934, including Adjus
Slide 4: Financial presentation information
Financial presentation information Methodology used for financial reporting 4Q16 information: Based on one month of Alcoa Inc. carve out financial results (October) and two months of Alcoa Corporation actual financial results (November & December) FY16 information: Based on ten months of Alcoa I
Slide 5: Roy Harvey, Chief Executive Officer
Roy Harvey Chief Executive Officer
Slide 6: Solid Alcoa Corporation launch, focused on the future
Solid Alcoa Corporation launch, focused on the future New company launched on November 1, 2016 Net loss of $125 million, or $(0.68) per share; excluding special items, adjusted net income of $26 million, or $0.14 per share Adjusted EBITDA excl. special items1 of $335M, up 18% vs. 3Q16 Increase
Slide 7: William Oplinger, Chief Financial Officer
William Oplinger Chief Financial Officer
Slide 8: Income statement summary
Income statement summary Prior Year Sequential $M, Except Realized Prices and Per Share Amounts 4Q15 3Q16 4Q16 Change Change Realized Aluminum Price ($ / MT) - Cast Products segment $1,802 $1,873 $1,906 $104 $33 Realized Alumina Price ($ / MT) - Alumina segment $261 $248 $272 $11 $24 Revenue $2,451
Slide 9: Special Items
Special Items $M, Except Per-Share Amounts 4Q15 3Q16 4Q16 Income Statement Classification Segment Net Loss ($826) ($10) ($125) Net Loss per Diluted Share1 ($4.52) ($0.06) ($0.68) Special items $720 ($85) $151 Restructuring-Related Items $646 $8 $123 Restructuring and Other Charges / COGS Corporate D
Slide 10: Earnings growth sequentially and year on year
Earnings growth sequentially and year on year Income statement excl. special items Prior Year Sequential $M, Except Realized Prices and Per Share Amounts 4Q15 3Q16 4Q16 Change Change Realized Aluminum Price ($ / MT) - Cast Products segment $1,802 $1,873 $1,906 $104 $33 Realized Alumina Price ($ / MT
Slide 11: Prices boost 4Q16 adjusted EBITDA excl. special items
Prices boost 4Q16 adjusted EBITDA excl. special items Adjusted EBITDA excl. special items sequential change by key impact area, $M $99 $7 ($14) ($6) ($13) $335 $28 ($37) ($1) ($12) $284 3Q16 Metal API Currency Volume Price / Net Energy Raw Other 4Q16 Prices Mix Productivity Materials 1. See appendix
Slide 12: 4Q16 Segment summary
4Q16 Segment summary Key segment metrics – Three months ending December 31, 2016 Volume 4Q16 3rd Party Revenue Total Revenue1 ATOI Segment Measure Volume $M $M $M Bauxite Production (Mbdmt) 11.8 $91 $293 $56 Alumina Production (Mmt) 3.3 $618 $995 $81 Aluminum Production (Mmt) 0.6 ($6) $941 ($3) 3rd-
Slide 13: Alumina margin doubles, drives segment improvement
Alumina margin doubles, drives segment improvement Adjusted EBITDA1 sequential comparison 4Q16 Segment Change vs. 3Q16 4Q16 Segment Change vs. 3Q16 Adj. EBITDA, $M $M Adj. EBITDA Margin % Margin % Bauxite $102 $5 34.8% 0.8% pts Alumina $167 $94 16.8% 8.7% pts Aluminum $42 ($19) 4.5% (2.1%) pts Cast
Slide 14: Gains partially offset by LIFO costs
Gains partially offset by LIFO costs 4Q16 Adjusted EBITDA excl. special items1 breakdown by component, $M Income/(Expense) 3Q16 4Q16 $ Change Segment Total Adjusted EBITDA $350 $406 $56 Segment Operations excl. Pension / OPEB $380 $436 $56 Segment Pension / OPEB ($30) ($30) – Corporate Total Adjuste
Slide 15: Solid cash and working capital days, low leverage
Solid cash and working capital days, low leverage Key financial metrics as of December 31, 2016 Cash 4Q16 Working Capital Manage cash position Optimize working capital $853M 13 Days FY16 FY16 Maintain assets Capital Expenditures1 Return on Capital2 Invest in return seeking projects $404M 5.3
Slide 16: Outlook for 2017; updating capital investment plan
Outlook for 2017; updating capital investment plan FY17 outlook Estimated shipments Key financial measures Pension & OPEB ~ $175M Bauxite (Mbdmt)1 47.5 – 48.5 IMPACTS EXPENSE Interest ~ $110M Alumina (Mmt) 13.8 – 13.9 Transformation4 ~ $150M Other Corporate spending5 ~ $150M Aluminum (Mmt) 2.3 – 2.4
Slide 17: Roy Harvey, Chief Executive Officer
Roy Harvey Chief Executive Officer
Slide 18: Progress in 2016 enabled separation, positions for 2017
Progress in 2016 enabled separation, positions for 2017 Activities and accomplishments in 2016 Productivity: Achieved $760M 2016 gross productivity versus $550M target; net performance of $290M Bauxite: 6.0M bdmt total third-party shipments from all mines; initial shipments from Australia to Chi
Slide 19: Key capital expenditures driving progress
Key capital expenditures driving progress Examples of recently completed projects and impacts Expanded production capacity to meet third party Juruti expansion bauxite sales goals; foundation for future growth Return-Seeking Capex = $13M 2016 EBITDA benefit of $5M Rebuilt and improved our prod
Slide 20: Strong fundamentals driven by Chinese market
Strong fundamentals driven by Chinese market Chinese market developments and outlook Strong demand Limited capacity available to respond Rising input costs Chinese demand, 2015-2017E (Mmt) Chinese capacity, 2015-2016 (Mmtpy) Chinese alumina, coal, caustic prices (indexed) +7% Alumina Coal Caustic CA
Slide 21: Stable market outlook in 2017
Stable market outlook in 2017 Projected market balances Bauxite – Relative balance Alumina – Relative balance Aluminum – Modest surplus 2017E Bauxite Balance (3rd Party Seaborne) (Mmt) 2017E Alumina Balance (Mmt) 2017E Primary Aluminum Balance (Mmt) 60 to 70 0.2 to 0.6 2.1 to 2.3 Surplus Balanced to
Slide 22: Focused on driving results in 2017 and beyond
Focused on driving results in 2017 and beyond Top priorities Strengthen Preserve cash optionality Balance Sheet Manage pension and OPEB obligations Simplify processes, streamline management systems, reduce costs Reduce Complexity Setting 2017 net performance goal1 of $50M after overcoming en
Slide 23: Appendix
Appendix Includes EBITDA Reconciliations
Slide 24: 4Q16 Segment financial summary
4Q16 Segment financial summary Key financial metrics – Three months ending December 31, 2016 3rd Party Revenue Total Revenue1 Adj. EBITDA1,2 Adj. EBITDA ATOI Segment $M $M $M Margin % $M Bauxite $91 $293 $102 34.8% $56 Alumina $618 $995 $167 16.8% $81 Aluminum ($6) $941 $42 4.5% ($3) Cast Products $
Slide 25: 4Q16 Adjusted EBITDA drivers by segment
4Q16 Adjusted EBITDA drivers by segment Sequential Adjusted EBITDA change impacts by segment vs. 3Q16, $M Adj. Net Adj. EBITDA Metal Product- Raw EBITDA Segment 3Q16 Prices API Currency Volume Price/Mix ivity Energy Materials Other 4Q16 Bauxite $97 $0 $0 $1 $1 $3 ($1) $0 $0 $1 $102 Alumina $73 $7 $1
Slide 26: FY16 Segment financial summary
FY16 Segment financial summary Key financial metrics – Twelve months ending December 31, 2016 3rd Party Revenue Total Revenue1 Adj. EBITDA1,2 Adj. EBITDA ATOI Segment $M $M $M Margin % $M Bauxite $315 $1,066 $375 35.2% $212 Alumina $2,300 $3,607 $351 9.7% $102 Aluminum $9 $3,763 $186 4.9% ($19) Cast
Slide 27: Aluminum value chain
Aluminum value chain Product shipments by business (2016 shipments in millions of metric tons) Smelting & Mining Refining Rolling Casting 0.4 4% Rolled 100% 3rd Party Products 3.1 96% Cast Products 3rd Party 34% Aluminum 13.8 86% 66% Alumina 3rd Party 46.91 14% Bauxite 3rd Party 1. Does not include
Slide 28: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB overview $3.1B in unfunded liability as 2017 Impacts, $M of December 31, 20161 Pension OPEB < $250 ~ $175 ~50% OPEB U.S. Pension ~15% $1.3 Corporate Total U.S. Total ~15% $1.5 $1.3B $1.8B ~15% Segments ~50% ROW ~55% $0.3 Expense Cash Pension funding status 2
Slide 29: Return on Capital (ROC) overview
Return on Capital (ROC) overview Purpose and calculation methodology Why ROC? Calculation framework Evaluates ability to (PBT1 + DDA2 + Net Interest3 + Restructuring) x (1- Fixed Tax Rate4) drive returns above ROC % = X 100 cost of capital (Assets – Cash – Current Liabilities + Short Term Debt)5
Slide 30: Composition of production costs
Composition of production costs Production cost information Alumina refining cost structure Pricing Estimated Annual Fuel Oil Natural Gas Input Cost Inventory Flow Convention EBITDA Sensitivity 5% 14% Caustic Fuel Oil 1 - 2 Months Prior Month $3M per $1/bbl 10% 41% Natural Gas1 N/A N/A N/A Conversio
Slide 31: 2017 Business sensitivities
2017 Business sensitivities Estimated annual EBITDA sensitivities ($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 (3) 4 Alumina 11 110 (1
Slide 32: Capacity closed, sold and curtailed
Capacity closed, sold and curtailed Smelting capacity Refining capacity Closed / Sold Since December 2007 Curtailed Closed / Sold Since December 2007 Curtailed Facility Year kmt Facility Year kmt Facility Year kmt Facility Year kmt Baie Comeau 2008 53 Portland 2008 30 Jamalco (sale) 2014 779 Point C
Slide 33: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation (in millions) Adjusted EBITDA 4Q15 3Q16 4Q16 FY16 Net Loss attributable to Alcoa Corporation ($826) ($10) ($125) ($400) Add: Net income attributable to non-controlling interest (64) 20 (4) 54 Provision for income taxes 92 92 6 184 Other (income) expenses, net 51 (106)
Slide 34: 4Q16 Segment adjusted EBITDA reconciliation
4Q16 Segment adjusted EBITDA reconciliation ($ in millions) For the three months ended December 31, 2016 Cast Rolled Alcoa Corporation - Segments Bauxite Alumina Aluminum Products Products Energy After-tax operating income (ATOI) 56 81 (3) 43 (16) 17 Add: Depreciation, depletion, and amortization 20
Slide 35: FY16 Segment adjusted EBITDA reconciliation
FY16 Segment adjusted EBITDA reconciliation ($ in millions) For the twelve months ended December 31, 2016 Cast Rolled Alcoa Corporation - Segments Bauxite Alumina Aluminum Products Products Energy After-tax operating income (ATOI) 212 102 (19) 176 (41) 76 Add: Depreciation, depletion, and amortizati
Slide 36: The Element of Possibility”
The Element of Possibility”