Slide 1: 1st Quarter Earnings
1st Quarter Earnings Alcoa Corporation April 18, 2018
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: Resilient results in unprecedented times
Resilient results in unprecedented times 1Q18 Financial results and business and market update ▪ Net income of $150 million, or $0.80 per share; excluding special items, 1Q18 adjusted net income of $145 million, or $0.77 per share Financial ▪ Adjusted EBITDA excluding special items of $653 million r
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Higher Midwest premium offsets lower alumina revenues
Higher Midwest premium offsets lower alumina revenues Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 1Q17 4Q17 1Q18 Change Change Realized primary aluminum price ($/mt) $2,080 $2,365 $2,483 $403 $118 Realized alumina price ($/mt) $325 $406 $385 $60 $
Slide 8: Special items total $(5) million
Special items total $(5) million Breakdown of special items by income statement classification – gross basis M, Except per share amounts 1Q17 4Q17 1Q18 Description of significant 1Q18 special items Net income (loss) attributable to Alcoa Corporation $225 $(196) $150 Diluted earnings (loss) per share
Slide 9: Adjusted EBITDA excluding special items of $653 million
Adjusted EBITDA excluding special items of $653 million Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 1Q17 4Q17 1Q18 Change Change Realized primary aluminum price ($/mt) $2,080 $2,365 $2,483 $403 $118 Realized alumina price (
Slide 10: Alumina pricing is largest sequential impact in 1Q18
Alumina pricing is largest sequential impact in 1Q18 Adjusted EBITDA excluding special items sequential changes, $M 78 $796 61 36 (146) (24) $653 (46) (40) (45) (17) 4Q17 Metal API Currency Volume Price / Operational Energy Raw Other 1Q18 Prices Mix Impacts Materials 10
Slide 11: API impacts both Alumina and Aluminum segments
API impacts both Alumina and Aluminum segments Adjusted EBITDA excluding special items breakdown Segment information, $M Total adjusted EBITDA information, $M 4Q17 1Q18 4Q17 1Q18 Change -30% Segment total $913 $655 $(258) $562 Transformation 10 (2) (12) $392 -38% Corporate inventory accounting1 (95)
Slide 12: Cash balance at $1.2 billion
Cash balance at $1.2 billion Quarterly cash comparison and cash flows, $M Quarter ending cash balance Free cash flow and change in cash 1Q17 2Q17 3Q17 4Q17 1Q18 +239 (162) Cash provided from operations $74 $311 $384 $455 $55 1,358 +165 Capital expenditures (71) (88) (96) (150) (74) 1,196 +150 1,119
Slide 13: Capital allocation, strengthening balance sheet: on track
Capital allocation, strengthening balance sheet: on track Capital allocation and key financial metrics as of March 31, 2018 Maintain liquidity 1Q18 Days Cash Greater than working capital $1B cash balance $1,196M 18 Days Return cash to Sustain the 1Q18 Capital 1Q18 Annualized stockholders operations
Slide 14: 2018 Outlook
2018 Outlook FY18 Key metrics Total shipments Adjusted EBITDA excl. special items impacts 1Q18 Actual FY18 Outlook 1Q18 Actual FY18 Outlook Bauxite (Mdmt) 11.5 47.5 – 48.5 Adjusted EBITDA excl. special items $0.7B $3.5 – $3.7B1 Alumina (Mmt) 3.5 13.8 – 14.0 Transformation EBITDA impacts $(2)M ~ $(30
Slide 15: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 16: Significant, but positive volatility in our markets
Significant, but positive volatility in our markets Recent price trends, $/mt Weighted average aluminum transaction price1 Platts FOB Western Australia alumina price 2,700 600 2,600 550 2,500 500 2,400 2,300 450 2,200 400 2,100 350 2,000 300 1,900 1,800 250 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18
Slide 17: Alcoa uniquely positioned across products, geographies
Alcoa uniquely positioned across products, geographies 2017 Bauxite production, and refining and smelting capacity, kmt North America South America Europe, Middle East1 & Africa Australia 33,200 Operating Curtailed 8,979 8,600 33,200 8,600 4,100 8,979 2,305 2,280 1,712 1,952 215 4,100 1,220 2,305 70
Slide 18: Alcoa has opportunities amidst market uncertainties
Alcoa has opportunities amidst market uncertainties Alcoa impacts & opportunities by market Alumina supply Chinese regulatory Tariffs Sanctions disruptions reforms U.S. Metal ▪ 45% of primary aluminum shipments exposed to the MWP market ▪ Annualized EBITDA sensitivity: $106M for +$100/mt MWP ▪ 341 k
Slide 19: Deficit now projected for both alumina and aluminum
Deficit now projected for both alumina and aluminum Projected 2018 market balances Bauxite Alumina Aluminum (3rd-party seaborne) (smelter grade) (primary) 2018 Outlook Balanced Deficit Deficit 2018 Supply/Demand Balance, Mmt Global 1 to 6; stockpile growth -1.1 to -0.3; deficit -1.0 to -0.6; deficit
Slide 20: Good start to 2018; focused on executing priorities
Good start to 2018; focused on executing priorities 1Q18 Summary Strategic priorities Keys to Alcoa Global network of world-class assets; well-positioned across market events FY18 adjusted EBITDA outlook excluding special items of $3.5 to $3.7B1 Improving balance sheet; pension and OPEB actions alig
Slide 21: Questions?
Questions? Alcoa Corporation
Slide 22: Appendix
Appendix
Slide 23: 1Q18 Financial summary
1Q18 Financial summary Three months ending March 31, 2018, excluding special items Corporate $M inventory Other Bauxite Alumina Aluminum4,5 Transformation accounting corporate Total Total revenue1 $296 $1,368 $2,115 $19 $(708) - $3,090 Third-party revenue $47 $914 $2,111 $18 - - $3,090 Adjusted EBIT
Slide 24: 1Q18 Adjusted EBITDA drivers by segment
1Q18 Adjusted EBITDA drivers by segment Sequential adjusted EBITDA excl. special items change impacts by segment vs. 4Q17, $M Adj. Adj. EBITDA Metal Op. Raw EBITDA Segment 4Q17 Prices API Currency Volume Price/Mix Impacts Energy Materials Other 1Q18 Bauxite $105 - - (3) (16) 3 (1) (1) - 23 $110 Alum
Slide 25: Aluminum value chain
Aluminum value chain 1Q18 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 0.8 32% 100% Aluminum 3rd Party 3.5 91% 68% Alumina 3rd Party 11.5 9% Bauxite 3rd Party 25
Slide 26: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 1Q18 production cash costs Alumina refining Input Inventory Pricing Estimated Annual Cost Flow Convention Cost Sensitivity Bauxite Caustic Soda 5 - 6 Months Quarterly $9M per $10/dmt Conversion 31% 36% Natural Gas1 N/A N/A N/A 5% 15% Fuel Oi
Slide 27: 2018 Business information
2018 Business information 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 119 (16) 6 (1
Slide 28: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB net liability and financial impacts Net liability as of March 31, 20181 Estimated financial impacts, $M Expense impact 2018 OPEB Segment pension ~85% Total Segment OPEB ~5% $1.2B U.S. Corporate ~10% $1.2 Total adj. EBITDA impact ~$65M U.S. Pension Non-operat
Slide 29: Investments summary
Investments summary P&L Location Ownership Carrying Value as of of Equity Investee Country Nature of Investment4 Interest March 31, 2018 Earnings Ma’aden Aluminum Company1 Saudi Arabia Aluminum smelter 25.1% Ma’aden Bauxite and Alumina Company1 Saudi Arabia Bauxite mine and Alumina refinery 25.1%5 M
Slide 30: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2017 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia 33.2 Kwinana Australia
Slide 31: Adjusted EBITDA structure and information
Adjusted EBITDA structure and information 4Q17 Adjusted EBITDA excluding special items comparison Adjusted EBITDA Prior Adjusted EBITDA New excl. special items, $M structure excl. special items, $M structure Notes Bauxite $106 Bauxite $105 ▪ Adjusted for pension/OPEB accounting change Alumina $562 A
Slide 32: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q17 4Q17 1Q18 LTM Net income (loss) attributable to Alcoa Corporation $225 $(196) $150 $142 Add: Net income attributable to noncontrolling interest 83 140 124 383 Provision for income taxes 110 272 138 628 Other expenses / (income), net (79) 30 21 127 Interest expe
Slide 33: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 1Q17 4Q17 1Q18 P&L classification Special items $(108) $391 $(5) Warrick restart costs - 29 16 Cost of goods sold Rockdale inventory writedown - 6 - Cost of goods sold Becancour labor negotiation costs - 3 2 Cost of goods sold Mark-to-m
Slide 34: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 1Q17 2Q17 3Q17 4Q17 1Q18 Cash from operations $74 $311 $384 $455 $55 Capital expenditures (71) (88) (96) (150) (74) Free cash flow $3 $223 $288 $305 $(19) Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to investors
Slide 35: Net Debt reconciliation
Net Debt reconciliation $M 4Q17 1Q18 Short-term borrowings $8 $- Long-term debt due within one year 16 15 Long-term debt, less amount due within one year 1,388 1,445 Total debt 1,412 1,460 Less: Cash and cash equivalents 1,358 1,196 Net debt $54 $264 Net debt is a non-GAAP financial measure. Managem
Slide 36: Days Working Capital
Days Working Capital $M 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 Receivables from customers $668 $708 $789 $840 $811 $814 Add: Inventories 1,160 1,294 1,287 1,323 1,453 1,630 Less: Accounts payable, trade 1,455 1,434 1,508 1,618 1,898 1,813 DWC working capital $373 $568 $568 $545 $366 $631 Sales $2,537 $2,655
Slide 37: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information (PBT + net interest3 + special items) x 4 x (1 – fixed tax rate4) $M 1Q17 1Q18 ROC % = X 100 Numerator: (Assets – cash – current liabilities + short term debt) Net income attributable to Alcoa Corporation 225 150 Add: Net
Slide 38: Glossary of terms
Glossary of terms Abbreviations listed in alphabetical order Abbreviation Description Abbreviation Description % pts Percentage points ISK Icelandic Krona 1Q## Three months ending March 31 kmt Thousand metric tons 2Q## Three months ending June 30 LIFO Last in first out method of inventory accounting
Slide 39: The Element of Possibility”
The Element of Possibility”