Slide 1: Fourth Quarter 2010 Earnings Conference
th Quarter 2010 Earnings Conference January 10, 2011 Alcoa Logo Exhibit 99.2
Slide 2: Cautionary Statement
Cautionary Statement 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 c
Slide 3: Chuck McLane, EVP and Chief Financial Officer
Chuck McLane Executive Vice President and Chief Financial Officer Alcoa Logo
Slide 4: Fourth Quarter 2010 Financial Overview
4 th Quarter 2010 Financial Overview Income from Continuing Operations of $258 million, or $0.24 per share ; Restructuring and other special items totaled a favorable $35 million, or $0.03 per share Cash from Operations of $1.4 billion; Free Cash Flow of $1.0 billion Revenue up 7% sequentially, 4% v
Slide 5: Sequential Income Statement Summary
Sequential Income Statement Summary $ Millions 3Q’10 4Q’10 Change Sales $5,287 $5,652 $365 Cost of Goods Sold $4,413 $4,538 $125 COGS % Sales 83.5% 80.3% (3.2 % pts.) Selling, General Administrative, Other $232 $282 $50 SGA % Sales 4.4% 5.0% 0.6 % pts. Restructuring and Other Charges $2 ($12) ($14)
Slide 6: Fourth Quarter Restructuring and Special Items
4 th Quarter Restructuring and Special Items $ Millions After-Tax & Non- Controlling Interests Earnings Per Share Income Statement Classification Segment Restructuring $8 Restructuring Corporate Discrete Tax Items $18 Taxes Corporate Mark-to-Market Derivatives $9 Other Income/Expense Corporate Total
Slide 7: 4Q 2010 vs. 3Q 2010 Earnings Bridge
4 th Quarter 2010 vs. 3 rd Quarter 2010 Earnings Bridge Income from Continuing Operations excluding Restructuring & Special Items ($ millions) See appendix for reconciliation $96 $154 $14 $12 ($29) ($20) ($17) $35 ($22) $223 3Q10 LME Price/Mix Volume Raw Mat'l Costs Currency Energy Taxes Other 4Q10
Slide 8: Alumina Quarter Highlights and Outlook
Alumina 4 th Quarter Highlights 1 st Quarter Outlook 4 th Quarter Business Conditions 4 th Quarter Performance Bridge 4Q 09 3Q 10 4Q 10 Production (kmt) 3,897 4,047 4,119 rd Party Shipments (kmt) 2,716 2,423 2,433 rd Party Revenue ($MM) ATOI ($MM) Adjusted EBITDA rises by 23% over Q3 Record quarterl
Slide 9: Primary Metals Quarter Highlights and Outlook
Primary Metals 4 th Quarter Highlights 4 th Quarter Business Conditions 1 st Quarter Outlook 4 th Quarter Performance Bridge 4Q 09 3Q 10 4Q 10 Production (kmt) rd Party Shipments (kmt) rd Party Revenue ($MM) 1,900 1,688 1,970 rd Party Price ($/MT) 2,155 2,261 2,512 ATOI ($MM) (214) Realized pricing
Slide 10: Flat-Rolled Products Quarter Highlights and Outlook
1 st Quarter Outlook 4 th Quarter Business Conditions 4 th Quarter Highlights 4 th Quarter Performance Bridge Flat-Rolled Products ATOI $ Millions 4Q 09 3Q 10 4Q 10 Flat-Rolled Products, excl Russia, China & Other Russia, China & Other (27) (2) Total ATOI Seasonal volume declines in North America an
Slide 11: Engineered Products and Solutions Highlights and Outlook
Engineered Products and Solutions 4 th Quarter Business Conditions 1 st Quarter Outlook 4 th Quarter Highlights 4 th Quarter Performance Bridge Markets remain stable across the portfolio Slight increase in Commercial Transportation offset by Building and Construction seasonality Productivity improve
Slide 12: Fourth Quarter 2010 Cash Flow Overview
4 th Quarter 2010 Cash Flow Overview See appendix for free cash flow reconciliation 4Q’10 FCF $1.0 billion $1.5 billion of cash ($ Millions) 4Q'09 3Q'10 4Q'10 Net Income ($268) $109 $292 DD&A Change in Working Capital Pension Contributions (26) (26) (43) Taxes / Other Adjustments (262) Cash From Ope
Slide 13: 2010 Full-Year Financial Overview
2010 Full-Year Financial Overview Exceeded all Cash Sustainability targets Income from Continuing Operations of $262 million , or $0.25 per share; Restructuring and other special items totaled an unfavorable $297 million, or $0.29 per share Cash from operations of $2.3 billion; Free Cash Flow of $1.
Slide 14: 2010 vs. 2009 Earnings Bridge
2010 vs. 2009 Earnings Bridge Income (Loss) from Continuing Operations excluding Restructuring & Special Items ($ millions) See appendix for reconciliation ($685) $1,386 $221 ($170) ($333) $371 ($251) $20 $559 YTD09 LME Price / Mix Energy Currency Productivity LIFO Taxes / Other YTD10
Slide 15: Exceeded All Cash Sustainability Targets
Exceeded All Cash Sustainability Targets Procurement 1 Overhead Total Capex 2 Working Capital $500 $1,250 2010 Cash Sustainability Operational Targets and Actual Performance $ Millions $509 $1,212 $ Millions $ Millions Days Working Capital $2,500 $2,643 Actual Target Actual Target Actual Target Actu
Slide 16: Procurement and Overhead – Sustainable Reductions
Procurement and Overhead – Sustainable Reductions 2009 2010 Procurement 1 Overhead 2009 2010 $ Millions $2,000 $ Millions $1,998 $1,500 Target Actual Procurement and other productivity Original Target Revised Target $2,500 $2,643 Actual $ Millions $400 $ Millions $412 $200 Target Actual Original Tar
Slide 17: Maintaining Discipline in Capital Expenditures
Maintaining Discipline in Capital Expenditures 2009 Total Capital Expenditures 2010 Total Capex includes investments in Ma’aden project $ Millions Target Actual $ Millions $1,212 $1,250 Target Actual $1,622 $1,800
Slide 18: Sustainable Reductions in Days Working Capital
Sustainable Reductions in Days Working Capital GPP GRP EPS 1 day better than 2010 target Yearly Improvement in Each Group Reduction in 13 Days Working Capital
Slide 19: Liquidity and Financial Positions Continue to Strengthen
Liquidity and Financial Positions Continue to Strengthen Drove Cash Sustainability savings to the bottom line… …efficiently managed cash flows and capex… …strengthened the balance sheet …improved liquidity… Adjusted Income (Loss) ($ Millions) Free Cash Flow ($ Millions) Debt ($ Millions) & Debt-to-C
Slide 20: Klaus Kleinfeld, Chairman and CEO
Klaus Kleinfeld Chairman and Chief Executive Officer Alcoa Logo
Slide 21: Historic Price Decline
Historic Price Decline =" Gurrent Broad-based Demand Destruction 2013 Targets GRP: $2.5 billion EPS: $1.6 billion || incremental revenue |i EBITDAmargins |" exceeding historical / levels I
Slide 22: Sustainability Leadership: Best Ever Safety Performance
Sustainability Leadership Best Ever Safety Performance Alcoa Lives Its Values Every Day Lost Workday Incident Rate th Consecutive Year Safety Incident Rate History and Significant Accreditations in 2010 Ranked Third of 339 Companies Named to World & North American Indexes Alcoa Primary Aluminum, Can
Slide 23: Alcoa Continues To Exceed Its Aggressive Targets
Alcoa Continues To Exceed Its Aggressive Targets Procurement 1 Overhead Total Capex 2 Working Capital $500 $1,250 2010 Cash Sustainability Operational Targets and Actual Performance $ Millions $509 $1,212 $ Millions $ Millions Days Working Capital $2,500 $2,643 Actual Target Actual Target Actual Tar
Slide 24: Driving Bauxite and Refining To 1st Quartile by 2015
Driving Bauxite and Refining To 1 st Quartile by 2015 Alumina Production Capacity: 18 mmt Source: CRU Adjusted EBITDA per Metric Ton The Alumina Leader – Sao Luis operating at full capacity – Record production in with unparalleled growth potential – Ma’aden , lowest cost refinery online in – Current
Slide 25: Driving Smelting Business To 2nd Quartile by 2015
Aluminum Production Capacity: 4.5 mmt Driving Smelting Business To 2 nd Quartile by 2015 Source: CRU Restructuring for Profitable Growth Adjusted EBITDA per Metric Ton – Optimizing smelter portfolio; reducing costs – Leveraging casthouse system to capture higher value-added – Ma’aden , lowest cost s
Slide 26: Rolled Products Positioned To Add $2.5b in Revenue by 2013
Rolled Products Positioned To Add $2.5b in Revenue by 2013 Adjusted EBITDA & Adjusted EBITDA % Sales 2010 3 rd Party Sales by Market Leveraging our strategic asset base Distribution 14% Automotive 7% B&C 6% Commercial Transport 5% Industrial /Other 14% Packaging 43% Aerospace 11% Flat Rolled Product
Slide 27: Engineered Products Targeting $1.6b in Revenue by 2013
Aerospace 47% Engineered Products Targeting $1.6b in Revenue by 2013 Adjusted EBITDA & Adjusted EBITDA % Sales 2010 3 rd Party Sales by Market Strong Platform for Profitable Growth IGT 11% B&C 19% Commercial Transport 13% Automotive 4% Other 6% Engineered Products & Solutions financial and strategic
Slide 28: First Concrete Pour and Financing Secured in Ma'aden
First Concrete Pour and Financing Secured in Ma’aden Ma’aden and Pour Concrete for the Middle East’s First Integrated Smelter and Rolling Mill Poured first concrete on October 24, Successful, heavily over-subscribed bank financing for smelter and rolling mill announced November 30, All major equipme
Slide 29: Market Conditions In 2011
Market Conditions In 2011 Source: Alcoa analysis Alcoa End Markets: Current Assessment of 2011 vs. 2010 Conditions
Slide 30: 2011 Projected Primary Aluminum Consumption by Region
2011 Projected Primary Aluminum Consumption by Region (in mmt) 2011 Growth Maintains 2010 Momentum With 12% Increase *Other consists of: Middle East, Latin America ex Brazil, and Rest of World including unallocated global increase 19.0 6.9 5.6 5.45 3.6 1.9 1.1 1.0 4% 15% Russia Brazil Asia w/o China
Slide 31: Consumption Driving Inventory Decline and High Premiums
Consumption Driving Inventory Decline and High Premiums Source: Alcoa estimates, LME, SHFE, IAI, Marubeni, Platt’s Metals Week and Metal Bulletin Regional Premiums Near All-Time Highs Global Inventories Falling $113 / MT $205 / MT $137 / MT 0% 100% 200% 300% 400% 500% 600% 700% 800% 900% Midwest Jap
Slide 32: 2011 Primary Aluminum Balances
2011 Primary Aluminum Balances China Western World Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI Western World Annualized Production (Nov 2010) 25,225 Restarts and Expanded Capacity 1,260 Total Supply 26,485 Western World Consumption (25,540) (Deficit) Surplus China Annualized Production (Nov
Slide 33: 2011 Global Alumina Balances
2011 Global Alumina Balances Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI China Western World 2011 Annualized Production 32,600 Imports from Western World 4,000 Supply 36,600 Demand (36,600) (Deficit) / Surplus 2011 Annualized Production 56,400 Exports to China (4,000) Supply 52,400 Demand (5
Slide 34: Copper Up, Pressure to Replace Aluminum Wins
Copper Up Pressure to Replace Aluminum Wins Copper Prices Moving Up Low Voltage Electrical wiring & cable Cladding Other Sources: Bank of America / Merrill Lynch, International Copper Study Group and Alcoa Analysis Aluminum Is The Natural Substitute High Voltage $2,321 $9,740 Transportation Potentia
Slide 35: Aluminum's Advantages Recognized In Consumer Electronics
Aluminum’s Advantages Recognized In Consumer Electronics Advantages of Aluminum Aluminum-Intensive Devices CES 2011 Samsung 9 Series Notebook (anodized / brushed cover) Samsung 8000 Series LED TV (coated / brushed bezel) Nokia N Series Smartphone (color anodized case) Panasonic Viera TV (brushed bez
Slide 36: Accelerating Shareholder Value in 2011 and Beyond
Accelerating Shareholder Value in 2011 and Beyond Upstream 2015 Cost Curve Changes Refining Cost Curve Position Smelting Cost Curve Position Midstream 2013 Revenue Targets Downstream 2013 Revenue Targets 2011 Financial Targets Sustaining Capex $1.0b Growth Capex $0.5b Debt-to-cap Ratio 30 to 35% Pos
Slide 37: Continued Acceleration of Shareholder Value in 2011
Continued Acceleration of Shareholder Value in 2011 Market Environment Alcoa Actions Aggressive Targets All global end- markets showing improvement from Aluminum supply / demand surplus continues to shrink from Currency and energy cost headwinds persist Upstream assets focusing on restructuring and
Slide 38: Additional Information
Additional Information Roy Harvey Director, Investor Relations 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 www.alcoa.com
Slide 39: Slide 39
Slide 40: Annual Sensitivity Summary
Annual Sensitivity Summary Currency Annual Net Income Sensitivity LME Aluminum Annual Net Income Sensitivity +/- 10% versus USD Australian $ +/- $75 million Brazilian $ +/- $50 million Euro € +/- $40 million Canadian $ +/- $35 million +/- $100/MT = +/- $200 million
Slide 41: Effective Tax Rate
Effective Tax Rate Effective tax rate, excluding discrete tax items is a non-GAAP financial measure. Management believes that the Effective tax rate, excluding discrete tax items is meaningful to investors because it provides a view of Alcoa’s operational tax rate. $ Millions 1Q’10 2Q’10 3Q’10 4Q’10
Slide 42: Reconciliation of ATOI to Consolidated Net Income Attributable to Alcoa
Reconciliation of ATOI to Consolidated Net (Loss) Income Attributable to Alcoa (in millions) 4Q09 1Q10 2Q10 3Q10 4Q10 Total segment ATOI $ (101) $ (234) $ 306 $ 381 $ 328 $ $ 1,424 Unallocated amounts (net of tax): Impact of LIFO (14) (3) (2) (16) Interest income Interest expense (79) (306) (77) (77
Slide 43: Reconciliation of Adjusted Income
Reconciliation of Adjusted Income (in millions) Quarter ended Year ended December 31, March 31, June 30, September 30, December 31, December 31, December 31, Net (loss) income attributable to Alcoa $ (277) $ (201) $ 136 $ 61 $ 258 $ (1,151) $ 254 Loss from discontinued operations (11) (7) (1) – – (1
Slide 44: Reconciliation of Adjusted Income, con't
Reconciliation of Adjusted Income, con’t (in millions) Quarter ended December 31, March 31, June 30, September 30, Net (loss) income attributable to Alcoa $ (1,191) $ (497) $ (454) $ 77 (Loss) income from discontinued operations (262) (17) (142) (Loss) income from continuing operations attributable
Slide 45: Reconciliation of Free Cash Flow
Reconciliation of Free Cash Flow (in millions) Quarter ended Year ended December 31, March 31, June 30, September 30, December 31, March 31, June 30, September 30, December 31, December 31, Cash provided from operations $ 608 $ (271) $ 328 $ 184 $ 1,124 $ 199 $ 300 $ 392 $ 1,370 $ 2,261 Capital expe
Slide 46: Days Working Capital
Days Working Capital Days Working Capital ($ in millions) Working Capital Components Calculation Month ended Quarter ended October 31, November 30, December 31, December 31, Receivables from customers, less allowances $ 2,104 $ 2,111 $ 1,565 Less: Accounts receivable programs – Receivables from cust
Slide 47: Reconciliation of Alcoa Adjusted EBITDA
Reconciliation of Alcoa Adjusted EBITDA ($ in millions) 4Q10 Net income (loss) attributable to $ 1,484 $ 908 $ 420 $ 938 $ 1,310 $ 1,233 $ 2,248 $ 2,564 $ (74) $ (1,151) $ 258 $ 254 Add: Net income attributable to noncontrolling interests Cumulative effect of accounting changes – (34) – – – – – – –
Slide 48: Reconciliation of Alumina Adjusted EBITDA
Reconciliation of Alumina Adjusted EBITDA ($ in millions) 3Q10 4Q10 After-tax operating income (ATOI) $ 585 $ 471 $ 315 $ 415 $ 632 $ 682 $ 1,050 $ 956 $ 727 $ 112 $ 70 $ 65 $ 301 Add: Depreciation, depletion, and amortization Equity (income) loss (3) (1) (1) – (1) – (1) (7) (8) (1) (3) (10) Income
Slide 49: Reconciliation of Primary Metals Adjusted EBITDA
Reconciliation of Primary Metals Adjusted EBITDA ($ in millions) 3Q10 4Q10 After-tax operating income (ATOI) $ 1,000 $ 905 $ 650 $ 657 $ 808 $ 822 $ 1,760 $ 1,445 $ 931 $ (612) $ 78 $ 178 $ 488 Add: Depreciation, depletion, and amortization Equity (income) loss (50) (52) (44) (55) (58) (82) (57) (2)
Slide 50: Reconciliation of Flat-Rolled Products Adjusted EBITDA
Reconciliation of Flat-Rolled Products Adjusted EBITDA ($ in millions) After-tax operating income (ATOI) $ 296 $ 253 $ 225 $ 222 $ 254 $ 278 $ 233 $ 178 $ (3) $ (49) $ 220 Add: Depreciation, depletion, and amortization Equity (income) loss (3) – – – – – Income taxes Other (5) (8) (5) (2) Adjusted Ea
Slide 51: Reconciliation of Engineered Products and Solutions Adjusted EBITDA
Reconciliation of Engineered Products and Solutions Adjusted EBITDA ($ in millions) 4Q09 3Q10 4Q10 After-tax operating income (ATOI) $ 125 $ 189 $ 63 $ 124 $ 156 $ 271 $ 365 $ 435 $ 533 $ 315 $ 57 $ 114 $ 113 $ 415 Add: Depreciation, depletion, and amortization Equity (income) loss (1) – – – – – – –