Alcoa Corporation · NYSE:AA
Alcoa — Goldman Sachs Global Metals & Mining Conference 2016
33 slides from Alcoa's conference presentation, Nov 16, 2016
Slide 1: Goldman Sachs Metals & Mining Conference
• Goldman Sachs Metals & Mining Conference Alcoa Corporation November 16, 2016
Slide 2: Important information
Important information • 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 containing such words as
Slide 3: Important information (continued)
Important information (continued) • This presentation includes unaudited “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA. Alcoa Corporation believes that the presentation of non-GAAP financial measures helps investors by p
Slide 4: Today's conversation
Today’s conversation • Presenter Today’s conversation 4 William F. Oplinger • Executive Vice President and Chief Financial Officer • Held the same position for Alcoa Inc. from 2013 to separation • Previously served as Chief Operating Officer for Alcoa Global Primary Products (GPP) and Chief Financia
Slide 5: Alcoa Corporation: a compelling investment
Alcoa Corporation: a compelling investment • • Global network of world-class aluminum assets and operations • Strong customer relationships and robust growth opportunities • Highly experienced senior management with operator-centric culture • Focused on optimizing cost and return on capital (ROC), c
Slide 6: Global portfolio provides access to growth markets
Global portfolio provides access to growth markets • 6 Global Strength: • 16,000 employees • 25 manufacturing facilities • 10 countries Global portfolio provides access to growth markets
Slide 7: Promoting strong, efficient, operator-centric culture
Promoting strong, efficient, operator-centric culture • Operating culture Promoting strong, efficient, operator-centric culture 7 Act with Integrity • Operate with Excellence • Care for People Unrelenting focus on safety • Reducing greenhouse gas emissions, lowering energy and fresh water consumptio
Slide 8: Global-leading portfolio of low-cost, world-class assets
Global-leading portfolio of low-cost, world-class assets • 2016 global cost curve positions Global-leading portfolio of low-cost, world-class assets 8 World’s largest alumina refiner1 Well-positioned smelting assets Alumina Aluminum 1st Quartile Mid 2nd Quartile Source: CRU and Alcoa analysis • 1. B
Slide 9: 3rd-party bauxite leads solid growth prospects
3rd-party bauxite leads solid growth prospects • Market outlook 3rd-party bauxite leads solid growth prospects 9 Source: CRU, CM Group, and Alcoa analysis • 2016-2017 balance figures are post-trade with Chinese imports of 3.0 Mt alumina (2016), 40 kmt aluminum (2016), and 25 kmt aluminum (2017) • Ba
Slide 10: Six segments diversify revenue and EBITDA
Six segments diversify revenue and EBITDA • Key financial metrics – Six months ending June 30, 2016 Six segments diversify revenue and EBITDA 10 Before intersegment eliminations. • See appendix for adjusted EBITDA reconciliations. • Represents the elimination of revenue generated from product sales
Slide 11: Resilient EBITDA despite lower prices
Resilient EBITDA despite lower prices • Financial trends Resilient EBITDA despite lower prices 11 See appendix for adjusted EBITDA reconciliations • Metal price represents combined annual averages of LME + Midwest premium Total Sales ($M) Adjusted EBITDA (1) ($M) Capital Expenditures ($M) Metal Pric
Slide 12: Strong balance sheet and financial position
Strong balance sheet and financial position • Pro Forma balance sheet1 – key metrics as of June 30, 2016 Strong balance sheet and financial position 12 Net Debt-to-LTM EBITDA Current business operations are ready to support our debt • Focus on maintaining strong non-investment grade rating Debt-to-E
Slide 13: Disciplined financial policies for prudent capital allocation
Disciplined financial policies for prudent capital allocation • Financial policy framework Disciplined financial policies for prudent capital allocation 13 Financial Policies Leverage Aggressive asset portfolio management Liquidity Efficient use of available capital Maintain appropriate leverage thr
Slide 14: Focused on managing our pension and OPEB obligations
Focused on managing our pension and OPEB obligations • Pension and OPEB overview Focused on managing our pension and OPEB obligations 14 Pension • $1.6B OPEB • $1.3B Pension funding status • U.S. ERISA ~95% • GAAP Worldwide ~75% Pro forma pension and OPEB liability • OPEB: Other Postretirement Emplo
Slide 15: High-return projects pipeline across the businesses
High-return projects pipeline across the businesses • Potential future key capital projects by business segment High-return projects pipeline across the businesses 15 Capital investment amount ($M) # of Projects 3 5 4 ($M) Estimated combined totals Based on estimated LME forward curve of $1,500/mt -
Slide 16: Outlook focused on operations and managing cash
Outlook focused on operations and managing cash • Key measures Outlook focused on operations and managing cash 16 Operational volumes 2017 Financial Does not include Yadkin generation, and reflects reduced generation at Warrick. • Does not include Transformation, Corp. Pension/OPEB, and Impact of LI
Slide 17: New governance practices focused on shareholders
New governance practices focused on shareholders • Governance factors New governance practices focused on shareholders 17
Slide 18: Alcoa Corporation: a compelling investment
Alcoa Corporation: a compelling investment • • Global network of world-class aluminum assets and operations • Strong customer relationships and robust growth opportunities • Highly experienced senior management with operator-centric culture • Focused on optimizing cost and return on capital (ROC), c
Slide 19: Appendix
• Appendix
Slide 20: Board of Directors
Board of Directors • As of November 1, 2016 Board of Directors 20 Michael Morris1 • Non-Executive Chairman, Alcoa Corporation; Former Chairman and CEO, American Electric Power James Nevels • Founder and Chairman, The Swarthmore Group James Owens1 • Former Chairman and CEO, Caterpillar Inc. Carol Rob
Slide 21: Actively participating in each segment of the value chain
Actively participating in each segment of the value chain • Bauxite Actively participating in each segment of the value chain 21 Product shipments by business (Estimated 2016 shipments in millions of metric tons) 3rd Party Rolling Mining Refining Smelting & Casting 47.5 – 48.5 ~85% ~15% ~35% ~65% ~5
Slide 22: AWAC: world's largest bauxite miner, alumina refiner
AWAC: world’s largest bauxite miner, alumina refiner • AWAC: world’s largest bauxite miner, alumina refiner AWAC Facts • Alcoa is the operator of the joint venture • A Strategic Council consisting of representatives from Alcoa Inc. and Alumina Limited oversees the venture • Alcoa internally consumes
Slide 23: Alumina and aluminum global cost curves
Alumina and aluminum global cost curves • Production (MMT) Alumina and aluminum global cost curves Alcoa moves to the 38th percentile in 2016 Alcoa moves to 17th percentile in 2016 2016 Actual: • 17th Percentile 2016 Target: • 21st Percentile 2010: • 30th Percentile Source: CRU and Alcoa analysis 23
Slide 24: Bauxite global cost curve
Bauxite global cost curve • Bauxite global cost curve Alcoa is in the 20th percentile in 2016 Production (mn dmt) Source: CRU and Alcoa analysis 24 200 220 240 50 40 30 60 20 70 0 320 140 160 180 80 100 120 10 300 280 260 2016: • 20th Percentile
Slide 25: Energy assets
Energy assets • Energy assets 25 Source: Alcoa Corporation Form 10 • The Consolidated Capacity of the Brazilian energy facilities is the assured energy that is approximately 55% of hydropower plant nominal capacity
Slide 26: Capital structure: low debt, substantial liquidity
Capital structure: low debt, substantial liquidity • Pro forma capital structure as of June 30, 20161 Capital structure: low debt, substantial liquidity Conservative balance sheet with substantial liquidity • Assumes starting cash balance of $632M • Alcoa Corporation issued $1.25B of funded debt, as
Slide 27: Composition of upstream production costs
Composition of upstream production costs • Composition of upstream production costs Alumina refining cost structure Aluminum smelting cost structure Natural Gas Caustic Bauxite Conversion Fuel Oil Alumina Carbon Power Materials Natural gas information related to Point Comfort will no longer apply as
Slide 28: Business sensitivities
Business sensitivities • Estimated annual EBITDA sensitivities Business sensitivities 28 Revenue information
Slide 29: 2015 key financial information
2015 key financial information • Key financials – Full year ending December 31, 2015 2015 key financial information 29 Before intersegment eliminations. • See appendix for adjusted EBITDA reconciliations. • Represents the elimination of revenue generated from product sales from one Alcoa Corporation
Slide 30: Alcoa Corporation adjusted EBITDA reconciliation
Alcoa Corporation adjusted EBITDA reconciliation • Alcoa Corporation adjusted EBITDA reconciliation 30 Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net
Slide 31: Segment adjusted EBITDA reconciliation
Segment adjusted EBITDA reconciliation • Segment adjusted EBITDA reconciliation 31 Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalen
Slide 32: Segment adjusted EBITDA reconciliation
Segment adjusted EBITDA reconciliation • Segment adjusted EBITDA reconciliation 32 Alcoa Corporation’s definition of Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) is net margin plus an add-back for depreciation, depletion, and amortization. Net margin is equivalen
Slide 33: The Element of Possibility
The Element of Possibility” ¢ :
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