Alcoa Corporation · NYSE:AA
Alcoa — Q3 2023 Earnings Presentation
41 slides from Alcoa's earnings presentation, Oct 18, 2023
Slide 1: 3rd Quarter Earnings
rd 3 Quarter Earnings Alcoa Corporation October 18, 2023 1
Slide 2: Cautionary Statement regarding Forward-Looking Statements
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-looking statements inclu
Slide 3: Important information
Important information Non-GAAP Financial Measures This presentation contains reference to certain financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). Alcoa Corporation believes that the presentation of thes
Slide 4: William Oplinger
William Oplinger President and Chief Executive Officer 4
Slide 5: Performance expected, guided by our values
Performance expected, guided by our values CEO Viewpoint Values are constant guide Focus to perform both near term and long term ▪ Maintain positive operational momentum − Continue progress on safety and environment − Build on improvements to operational stability ▪ Key challenges and focal points −
Slide 6: 3Q23 Net loss; ongoing commercial, operational improvements
3Q23 Net loss; ongoing commercial, operational improvements Key takeaways for 3Q23 Ongoing strategic priorities 3Q23 Takeaways ▪ One serious injury (FSI-A) in the quarter, although other key indicators improving year over year ▪ Financial results for 3Q23 − Net loss attributable to Alcoa of $168 mil
Slide 7: Molly Beerman
Molly Beerman Executive Vice President and Chief Financial Officer 7
Slide 8: 3Q23 EPS of $(0.94), Adjusted EPS of $(1.14)
3Q23 EPS of $(0.94), Adjusted EPS of $(1.14) Quarterly income statement summary 2Q23 3Q23 Change Third Party Realized prices ($/mt) Realized primary aluminum price $2,924 $2,647 $(277) Realized alumina price $363 $354 $(9) Income statement highlights (millions, except per share amounts) Revenue $2,6
Slide 9: Lower metal and alumina prices outweigh improvements
Lower metal and alumina prices outweigh improvements Sequential changes in Adjusted EBITDA excluding special items, $M 5 137 49 2Q23 3Q23 Change Alumina1 $33 $53 $20 4 16 Aluminum1 110 79 (31) (2) 70 63 (64) Transformation (17) (29) (12) Intersegment (91) 31 (4) (35) eliminations Other corporate (20
Slide 10: Key raw material prices declining and improving EBITDA
Key raw material prices declining and improving EBITDA Key raw material global market prices and Segment Adjusted EBITDA impacts Average market prices of key raw materials1 Raw materials sequential impacts, $M -45% Caustic, $/dmt Alumina Segment Adjusted EBITDA impact 655 ▪ Price reductions slowing
Slide 11: Capital expenditures and income taxes are top YTD cash uses
Capital expenditures and income taxes are top YTD cash uses Key financial metrics and cash flow information, 3Q23 and YTD Key financial metrics 3Q23 YTD Cash flow information, $M 1,083 93 Other 3Q23 Days 2023 YTD Return on equity 52 Interest payments working capital 53 Pension/OPEB 2 54 Cash dividen
Slide 12: Working capital becomes significant source of cash
Working capital becomes significant source of cash 3Q23 sequential quarter cash flow information 6/30/23 to 9/30/23 Cash balance changes, $M 3Q23 Commentary 183 40 ▪ Working capital change was a $183 70 990 million source of cash, due mainly to a (90) (52) (22) 926 $210 million decrease in Inventori
Slide 13: 2023 Outlook
2023 Outlook FY23 Key metrics as of September 30, 2023 Income statement excl. special items impacts Cash flow impacts 3Q23 YTD Actual FY23 Outlook 3Q23 YTD Actual FY23 Outlook Alumina shipments (Mmt) 9.4 12.7 – 12.9 Pension / OPEB cash funding $63M ~ $75M Aluminum shipments (Mmt) 1.9 2.5 – 2.6 Stock
Slide 14: William Oplinger
William Oplinger President and Chief Executive Officer 14
Slide 15: Operations improved, addressing challenges
Operations improved, addressing challenges 3Q23 Operations update Operations Western Australia ▪ Canadian smelter system set quarterly and ▪ Submitted revised Mine Management YTD production records Program that includes increased protections for environment and ▪ Productivity initiatives underway to
Slide 16: Commercial progress as market seeks recovery
Commercial progress as market seeks recovery 3Q23 Commercial update Commercial highlights Rest of world (RoW) aluminum demand trends 2020-2023 CAGR, 2023-2024 YoY estimate ▪ SustanaTM product family broadening market reach: +7% +5% − First EcoSource non-metallurgical alumina (NMA) Transport growth t
Slide 17: Operations improved in 3Q; workplan in place, outlook positive
Operations improved in 3Q; workplan in place, outlook positive 3Q23 Summary Third quarter summary ▪ Financial results reflect lower sales prices partially offset by lower costs; $0.9 billion cash balance with no major debt maturities until 2027 ▪ Several smelters set production records; improved sta
Slide 18: Appendix
Appendix 18
Slide 19: At steady state, well positioned across three product groups
At steady state, well positioned across three product groups Alcoa portfolio cost curve position and key factors, 2023 Bauxite Alumina Aluminum 1st Quartile 1st Quartile1 2nd Quartile ▪ World’s second largest bauxite ▪ Largest third-party alumina ▪ Low CO2e intensity producer, miner with assets acro
Slide 20: Maximizing value creation through balanced uses of cash
Maximizing value creation through balanced uses of cash Capital allocation framework and value creation considerations Capital allocation framework Maximize value creation Return cash to stockholders Maintain strong balance sheet through the cycle ▪ 3Q23 dividend payments totaled $18 million Transfo
Slide 21: Quarterly income statement
Quarterly income statement Quarterly income statement for 3Q22, 2Q23 and 3Q23 Prior Year Sequential Millions, except realized prices and per share amounts 3Q22 2Q23 3Q23 Change Change Realized primary aluminum price ($/mt) $3,204 $2,924 $2,647 $(557) $(277) Realized alumina price ($/mt) $371 $363 $3
Slide 22: Special items
Special items Breakdown of special items by income statement classification – gross basis Millions, except per share amounts 3Q22 2Q23 3Q23 Description of significant 3Q23 special items Net loss attributable to Alcoa Corporation $(746) $(102) $(168) Loss per share1 $(4.17) $(0.57) $(0.94) Special it
Slide 23: Quarterly income statement excluding special items
Quarterly income statement excluding special items Quarterly income statement excluding special items for 3Q22, 2Q23 and 3Q23 Prior Year Sequential Millions, except realized prices and per share amounts 3Q22 2Q23 3Q23 Change Change Realized primary aluminum price ($/mt) $3,204 $2,924 $2,647 $(557) $
Slide 24: 3Q23 Financial summary
3Q23 Financial summary Three months ending September 30, 2023, excluding special items Intersegment Other Alcoa Millions Alumina3 Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $1,338 $1,648 $5 $(389) - $2,602 Third-party revenue $957 $1,644 $2 - $(1) $2,602 Adjusted EBI
Slide 25: 3Q23 Segment Adjusted EBITDA drivers
3Q23 Segment Adjusted EBITDA drivers Segment Adjusted EBITDA sequential changes, $M Segment Segment Adjusted Adjusted EBITDA Metal Raw Production EBITDA 2Q23 Currency prices API materials Energy Price/mix Volume costs Other 3Q23 Alumina $33 12 (51) 29 3 3 3 32 (11) $53 Aluminum $110 (3) (91) 5 34 13
Slide 26: Aluminum value chain
Aluminum value chain 2023 YTD Alcoa shipments by product type Bauxite Alumina Aluminum 33.6 Mdmt shipments 9.4 Mmt shipments 1.9 Mmt shipments Intersegment Third party 0% 17% Intersegment 31% 69% 83% Third party 100% Intrasegment Third party 26
Slide 27: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 3Q23 production cash costs Alumina refining Bauxite Input Inventory Pricing FY23 annual cost cost flow convention sensitivity Conversion 23% 35% Caustic soda 5 - 6 Months Quarterly, Spot $9M per $10/dmt Quarterly, 91% with 18% Natural gas 1
Slide 28: 2023 Business information
2023 Business information Estimated annual Segment Adjusted EBITDA sensitivities $Millions 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 + $100/mt 0.651 4.881 1.341 1.091 133.251 10.481 Alumina 103 (23) 8 (
Slide 29: Currency impacts on Segment Adjusted EBITDA
Currency impacts on Segment Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities impact ($M, except currencies) AUD BRL CAD EUR ISK NOK Total 9/30/23 currencies 0.64 5.05 1.35 1.05 137.45 10.74 3Q23 currency avg. 0.65 4.88 1.34 1.09 133.25 10.48 3Q23 Balance sheet revaluation
Slide 30: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA and Adjusted net income for 4Q23 Expected sequential impacts on Adjusted EBITDA excluding special items, excluding indexed sales prices or currency impacts: ▪ In the Alumina segment, we expect a benefit of approximately $50
Slide 31: 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 September 30, 2023 equity earnings ELYSIS Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminiu
Slide 32: Alcoa sustainability goals
Alcoa sustainability goals Alcoa strategic long-term sustainability goals, baseline and progress Goal Description 2015 Baseline 2022 Progress Zero fatalities and serious injuries (life-threatening, life-altering injury or 5 fatal or serious 0 fatalities and 1 serious Safety illness) injuries/illness
Slide 33: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of September 30, 2023 Alumina refining, kmt Aluminum smelting, kmt Facility Country Capacity Curtailed Facility Country Capacity Curtailed Kwinana Australia 2,190 438 Portland Australia 197 49 Pinjarra Australia 4,7
Slide 34: Valuation framework key considerations
Valuation framework Valuation framework key considerations LTM ending 9/30/23 Adj. EBITDA excl. special items Economic value using market multiple of: i. AWAC joint venture, minus small portions of AWAC JV in Aluminum and + Alumina segment Transformation $239M ii. Ownership in certain mines and refi
Slide 35: Adjusted EBITDA reconciliations
Adjusted EBITDA reconciliations Millions 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 Net loss attributable to Alcoa $(746) $(395) $(123) $(231) $(102) $(168) Add: Net (loss) income attributable to noncontrolling interest (23) (25) 161 (1) (19) (25) Provision for (benefit from) income taxes 40 180 664 52 22 (35) O
Slide 36: Free cash flow reconciliation
Free cash flow reconciliation Millions 3Q22 4Q22 FY22 1Q23 2Q23 3Q23 Cash provided from operations $134 $118 $822 $(163) $(13) $69 Capital expenditures (128) (171) (480) (83) (115) (145) Free cash flow 6 (53) 342 (246) (128) (76) Contributions from noncontrolling interest 67 64 214 86 36 42 Distribu
Slide 37: Net debt reconciliations
Net debt reconciliations 3Q22 2Q23 3Q23 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $75 $30 $45 $10 $- $10 $42 $- $42 Long-term debt due within one year 1 - 1 1 - 1 1 - 1 Long-term debt, less amount due within one year 1,725 - 1,725 1,808 32 1,776 1,809
Slide 38: DWC working capital and Days working capital reconciliations
DWC working capital and Days working capital reconciliations Millions 3Q22 4Q22 1Q23 2Q23 3Q23 Receivables from customers $749 $778 $753 $702 $691 Add: Inventories 2,400 2,427 2,395 2,400 2,190 Less: Accounts payable, trade 1,590 1,757 1,489 1,491 1,472 DWC working capital $1,559 $1,448 $1,659 $1,61
Slide 39: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) ROE Reconciliation and calculation information as of September 30, 2023 Millions 2022 YTD 2023 YTD (Net Loss/Income Attributable to Alcoa + Special Items1) Numerator: ROE % = X 100 Net income (loss) attributable to Alcoa Corporation $272 $(501) (Total Assets – Total
Slide 40: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FOB WA Freight on board Western Australia 1H## Six months ending June 30 FY## Twelve months ending December 31 1Q## Three months ending March 31 GAAP Accounting prin
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