Slide 1: 4th Quarter Earnings
4th Quarter Earnings Alcoa Corporation January 17, 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: 4Q17: Key actions taken; adjusted EBITDA of $775M
4Q17: Key actions taken; adjusted EBITDA of $775M 4Q17 Summary ▪ Net loss of $196 million, or $1.06 per share; excluding special items, adjusted net income of $195 million, or $1.04 per share Financial ▪ Adjusted EBITDA excluding special items1 of $775 million results ▪ Days working capital of 11 da
Slide 6: FY17: Strong financial performance and business progress
FY17: Strong financial performance and business progress FY17 Summary ▪ Revenue of $11.7 billion; up $2.3 billion vs. 2016 ▪ Net income of $217 million, or $1.16 per share; excluding special items, Financial adjusted net income of $563 million, or $3.01 per share results ▪ Adjusted EBITDA excluding
Slide 7: January 2018: Further actions and announcements
January 2018: Further actions and announcements Recent key items Post-employment benefits changes Bécancour smelter (ABI) update Effective January 1, 2021: ▪ On January 11, 2018, plant management began a lock-out of the facility’s union ▪ Salaried employees in the U.S. and Canada membership after un
Slide 8: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 9: Revenue up 7% sequentially, adjusted EBITDA up 40%
Revenue up 7% sequentially, adjusted EBITDA up 40% Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 4Q16 3Q17 4Q17 Change Change Realized primary aluminum price ($/mt) $1,906 $2,237 $2,365 $459 $128 Realized alumina price ($/mt) $272 $314 $406 $134 $92
Slide 10: Special items total $391 million, led by Rockdale actions
Special items total $391 million, led by Rockdale actions Breakdown of special items by income statement classification – gross basis M, Except per share amounts 4Q16 3Q17 4Q17 Description of significant 4Q17 special items Net income (loss) $(125) $113 $(196) Net income (loss) per diluted share $(0.
Slide 11: Adjusted net income grows 44% sequentially
Adjusted net income grows 44% sequentially Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 4Q16 3Q17 4Q17 Change Change Realized primary aluminum price ($/mt) $1,906 $2,237 $2,365 $459 $128 Realized alumina price ($/mt) $272 $3
Slide 12: Adjusted EBITDA excluding special items up $214 million
Adjusted EBITDA excluding special items up $214 million Adjusted EBITDA excluding special items1 sequential changes, $M 253 16 0 32 (28) 5 $775 (100) (15) 51 $561 3Q17 Metal API Currency Volume Price / Net Energy Raw Other 4Q17 Prices Mix Productivity Materials 1. See appendix for adjusted EBITDA ex
Slide 13: Alumina adjusted EBITDA rises, segments total up 46%
Alumina adjusted EBITDA rises, segments total up 46% Quarterly segment adjusted EBITDA1, $M 3Q17 4Q17 +177% +46% $562 $902 -23% $619 -6% $303 $203 $234 $113 $106 Bauxite Alumina Aluminum Segments Total 4Q17 Segment Adj. EBITDA Margin % 34.6% 37.0% 10.9% 22.7% Change vs. 3Q17, Margin % -0.2% pts +18.
Slide 14: Non-segment costs higher due to LIFO & profit eliminations
Non-segment costs higher due to LIFO & profit eliminations Adjusted EBITDA excluding special items1 breakdown by component, $M 3Q17 4Q17 Change Segment total adjusted EBITDA $619 $902 $283 Transformation & legacy pension/OPEB2 (25) (4) 21 Impact of LIFO and metal price lag (9) (51) (42) Other corpor
Slide 15: Cash position reaches $1.36 billion at year end
Cash position reaches $1.36 billion at year end Quarterly cash comparison and cash flows, $M Quarter ending cash balance Free cash flow and change in cash +239 1Q17 2Q17 3Q17 4Q17 +165 1,358 Cash provided from operations $74 $311 $384 $455 +150 1,119 Capital expenditures (71) (88) (96) (150) (49) Fr
Slide 16: Strengthening balance sheet, further progress planned
Strengthening balance sheet, further progress planned Key financial metrics as of December 31, 2017 4Q17 Days Cash ▪ Manage cash position Working Capital ▪ Optimize working capital $1,358M 11 Days 2017 2017 ▪ Maintain assets Capital Expenditures1 Return on Capital2 ▪ Invest in return-seeking project
Slide 17: Discount rate, asset performance increase net liability
Discount rate, asset performance increase net liability Pension and OPEB net liability update Pension & OPEB net liability change, $B Actions and changes ▪ Implementing less complex, peer- like investment strategy 0.2 $3.5 $3.1 0.4 0.3 ▪ U.S. and Canada salaried 0.1 Pension (ROW) 0.3 (0.1) employee
Slide 18: Balanced capital allocation approach for 2018
Balanced capital allocation approach for 2018 Capital allocation strategy 2018 Framework Disciplined approach for 2018 ▪ Target holding $1 billion in cash on Maintain liquidity hand Greater than $1B cash balance ▪ Maintain the assets by spending close to $300 million in sustaining capital expenditur
Slide 19: Return-seeking projects expected to drive future returns
Return-seeking projects expected to drive future returns Return-seeking capital expenditures overview Investment and return summary Key project examples by segment ▪ Phased expansion of Juruti ~$150M ~50% mine ~45% Bauxite $118M ▪ Western Australia export infrastructure ▪ São Luís debottlenecking ▪
Slide 20: 2018 Outlook: FY18 adjusted EBITDA of $2.6B to $2.8B
2018 Outlook: FY18 adjusted EBITDA of $2.6B to $2.8B1 FY18 Key metrics Shipments Adjusted EBITDA excl. special items impacts FY17 Actual FY18 Outlook FY17 Actual FY18 Outlook Bauxite (Mdmt) 47.7 47.5 – 48.5 Adjusted EBITDA excl. special items $2.35B $2.6 – $2.8B1 Alumina (Mmt) 13.7 13.8 – 14.0 Trans
Slide 21: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 22: Aluminum deficit projected for 2018
Aluminum deficit projected for 2018 Final 2017 and projected 2018 market balances Bauxite Alumina Aluminum (3rd-party seaborne) (smelter grade) (primary) Final 2017 Balanced Balanced Balanced Global Balance 2018 Outlook Balanced Balanced Deficit 2018 Supply/Demand Balance, Mmt Global 1 to 6; stockpi
Slide 23: NDRC cuts executed; MEP cuts lower, but likely to repeat
NDRC cuts executed; MEP cuts lower, but likely to repeat Chinese alumina and aluminum policy-driven curtailments Relevant Chinese policy initiatives Chinese policy-driven curtailments, Mmtpa Ministry of Environmental Protection (MEP) 10.7 9.0 ▪ Winter heating season curtailment program applies to al
Slide 24: Chinese smelting margins under pressure
Chinese smelting margins under pressure Average aluminum costs, prices, and margins, $/mt Costs increased more Prices increased more Chinese margins shrinking; in China outside China1 ~50% cash negative in Q4 Carbon Energy Alumina +$100 World +$200 ex-China -$100 3Q17 4Q17 3Q17 4Q17 3Q17 4Q17 +$10 C
Slide 25: Good progress in 2017; prepared for 2018 and beyond
Good progress in 2017; prepared for 2018 and beyond Progress on strategic priorities ▪ Streamlined organizational structure and reduced administrative locations Reduce ▪ Addressed multiple legacy issues, including Rockdale power contract, which will have Complexity continued year-over-year benefit f
Slide 26: Questions?
Questions? Alcoa Corporation
Slide 27: Appendix
Appendix
Slide 28: FY17 Income statement information
FY17 Income statement information Annual income statement Adjusted excl. M, Except realized prices and per share amounts Reported Special items special items Realized primary aluminum price ($/mt) $2,224 $2,224 Realized alumina price ($/mt) $340 $340 Revenue $11,652 $11,652 Cost of goods sold $9,072
Slide 29: FY17 Financial information
FY17 Financial information FY17 highlights and annual change impacts Full year financial highlights Adjusted EBITDA excl. special items1 bridge, $M FY17 vs. FY16 Net performance of ($184M) Realized primary aluminum price ($/mt) $2,224 +$362 774 25 (116) (4) (46) 62 $2,352 Realized alumina price ($/m
Slide 30: 4Q17 Financial summary
4Q17 Financial summary Three months ending December 31, 2017, excluding special items Transformation & Impact from Alcoa Other $M Bauxite Alumina Aluminum3,4 Legacy Pension / LIFO & Metal Corporation Corporate OPEB Costs Price Lag Total Total revenue1 $306 $1,517 $2,148 $15 - $(812) $3,174 Third-par
Slide 31: 4Q17 Adjusted EBITDA drivers by segment
4Q17 Adjusted EBITDA drivers by segment Sequential Adjusted EBITDA change impacts by segment vs. 3Q17, $M Adj. Net Adj. EBITDA Metal Product- Raw EBITDA Segment 3Q17 Prices API Currency Volume Price/Mix ivity Energy Materials Other 4Q17 Bauxite $113 - - 6 3 (2) (6) (1) - (7) $106 Alumina $203 5 358
Slide 32: Aluminum value chain
Aluminum value chain 2017 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 3.4 33% 100% Aluminum 3rd Party 13.7 86% 67% Alumina 3rd Party 47.7 14% Bauxite 3rd Party 32
Slide 33: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 4Q17 production cash costs Alumina refining Input Inventory Pricing Estimated Annual Cost Flow Convention Cost Sensitivity Bauxite Fuel Oil 1 - 2 Months Prior Month $3M per $1/bbl Conversion 32% 37% Natural Gas1 N/A N/A N/A 4% 13% Caustic So
Slide 34: 2018 Business sensitivities
2018 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 119 (16) 6
Slide 35: Pension and OPEB summary
Pension and OPEB summary Pension and OPEB net liability and financial impacts Pension & OPEB net liability, $3.5B Financial impacts, $M Expense impact 2017 2018 OPEB Segment pension $89M ~80% Total Segment OPEB $23M ~5% $1.2B U.S. Legacy operations $36M N/A $1.2 Corporate $13M ~15% U.S. Pension Tota
Slide 36: Investments summary
Investments summary P&L Location Ownership Carrying Value as of of Equity Investee Country Nature of Investment4 Interest December 31, 2017 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%
Slide 37: Capacity closed, sold and curtailed
Capacity closed, sold and curtailed Smelting and Refining capacity information as of December 31, 2017 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 B
Slide 38: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 4Q16 3Q17 4Q17 FY17 P&L classification Special items $151 $22 $391 $346 Warrick restart costs - 17 29 46 Cost of goods sold Portland restart power exposure - 3 - 9 Cost of goods sold Rockdale inventory writedown - - 6 6 Cost of goods so
Slide 39: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 4Q16 FY16 3Q17 4Q17 FY17 Net income (loss) attributable to Alcoa Corporation $(125) $(400) $113 $(196) $217 Add: Net income (loss) attributable to noncontrolling interest (4) 54 56 140 342 Provision for income taxes 6 184 119 272 600 Other expenses / (income), net 1
Slide 40: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 4Q16 FY16 1Q17 2Q17 3Q17 4Q17 FY17 Cash from operations $239 $(311) $74 $311 $384 $455 $1,224 Capital expenditures (146) (404) (71) (88) (96) (150) (405) Free cash flow $93 $(715) $3 $223 $288 $305 $819 Free Cash Flow is a non-GAAP financial measure. Management belie
Slide 41: Net Debt reconciliation
Net Debt reconciliation $M 4Q16 4Q17 Short-term borrowings $1 $8 Long-term debt due within one year 21 16 Long-term debt, less amount due within one year 1,424 1,388 Total debt 1,446 1,412 Less: Cash and cash equivalents 853 1,358 Net debt $593 $54 Net debt is a non-GAAP financial measure. Managemen
Slide 42: Days Working Capital
Days Working Capital $M 4Q16 1Q17 2Q17 3Q17 4Q17 Receivables from customers $668 $708 $789 $840 $811 Add: Inventories 1,160 1,294 1,287 1,323 1,453 Less: Accounts payable, trade 1,455 1,434 1,508 1,618 1,898 DWC Working Capital $373 $568 $568 $545 $366 Revenue $2,537 $2,655 $2,859 $2,964 $3,174 Numb
Slide 43: 2016 and 2017 Return on Capital (ROC)
2016 and 2017 Return on Capital (ROC) Reconciliation and calculation information (PBT + net interest3 + special items) x (1 – fixed tax rate4) $M 2016 2017 ROC % = X 100 Numerator: (Assets – cash – current liabilities + short term debt) Net income (loss) attributable to Alcoa Corporation (400) 217 A
Slide 44: Glossary of terms
Glossary of terms Abbreviations listed in alphabetical order Abbreviation Description Abbreviation Description % pts Percentage points GAAP Accounting principles generally accepted in the United States of America 1Q## Three months ending March 31 IRR Internal rate of return 2Q## Three months ending
Slide 45: The Element of Possibility
The Element of Possibility”