Slide 1: 4th Quarter Earnings
4th Quarter Earnings Alcoa Corporation January 16, 2019
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: 4Q18: Solid performance and cash generation
4Q18: Solid performance and cash generation 4Q18 Financial results and business review ▪ Net income of $43 million, or $0.23 per share; excluding special items, 4Q18 adjusted net income of $125 million, or $0.66 per share Financial results ▪ Adjusted EBITDA excluding special items of $749 million ▪
Slide 6: FY18: Continued to strengthen, improve the Company
FY18: Continued to strengthen, improve the Company FY18 Financial results and business review ▪ Net income of $227 million, or $1.20 per share; excluding special items, FY18 adjusted net income of $675 million, or $3.58 per share Financial ▪ Adj. EBITDA excluding special items of $3.1 billion; up $0
Slide 7: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 8: Revenue slightly lower sequentially, up 5% year-over-year
Revenue slightly lower sequentially, up 5% year-over-year Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 4Q17 3Q18 4Q18 Change Change Realized primary aluminum price ($/mt) $2,365 $2,465 $2,358 $(7) $(107) Realized alumina price ($/mt) $406 $493 $479
Slide 9: Special items total $82M, driven by Brazil tax asset change
Special items total $82M, driven by Brazil tax asset change Breakdown of special items by income statement classification – gross basis M, Except per share amounts 4Q17 3Q18 4Q18 Description of significant 4Q18 special items Net income (loss) attributable to Alcoa Corporation $(196) $(41) $43 Dilute
Slide 10: Adjusted net earnings $125 million; adjusted EPS $0.66
Adjusted net earnings $125 million; adjusted EPS $0.66 Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 4Q17 3Q18 4Q18 Change Change Realized primary aluminum price ($/mt) $2,365 $2,465 $2,358 $(7) $(107) Realized alumina price
Slide 11: Volume improves, but pricing lowers adjusted EBITDA
Volume improves, but pricing lowers adjusted EBITDA Adjusted EBITDA excluding special items sequential changes, $M 48 $795 52 3 0 3 8 $749 (49) (70) (41) 3Q18 Metal API Currency Volume Price / Operational Energy Raw Other 4Q18 Prices Mix Impacts Materials 11
Slide 12: Bauxite and Alumina profits rise, while Aluminum offsets
Bauxite and Alumina profits rise, while Aluminum offsets Adjusted EBITDA excluding special items breakdown Segment information, $M Total Adjusted EBITDA information, $M 3Q18 4Q18 +3% 3Q18 4Q18 Change Segment total $839 $740 $(99) $660 $683 Transformation 1 (1) (2) +4% -173% Corporate inventory accou
Slide 13: 2018 Cash flow used to improve financial position
2018 Cash flow used to improve financial position Quarterly cash comparison and cash flow information Quarter ending cash balance, $M 2018 Cash flow information, $B AWAC debt & other Stock repurchases & debt prepayment Debt offering for pension contribution Capital expenditures $(245) Operating cash
Slide 14: Pension/OPEB net liability reduced by $1.2 billion in 2018
Pension/OPEB net liability reduced by $1.2 billion in 2018 Key financial metrics as of December 31, 2018 Key metrics Pension & OPEB net liability bridge, $B 4Q18 Days Pension OPEB Cash working capital $3.5 $1.1B 22 Days FY18 Capital FY18 (0.8) 0.2 $2.3 expenditures1 Return on capital 2.3 (0.4) (0.2)
Slide 15: 2018 framework complete; multiyear framework in place
2018 framework complete; multiyear framework in place Capital allocation framework and update 2018 Framework New multiyear framework Maintain liquidity Greater than Maintain liquidity throughout the cycle $1B cash balance Return cash to Sustain the Sustain and improve operations stockholders operati
Slide 16: 2019 Outlook
2019 Outlook FY19 Key metrics Income statement excl. special items impacts Cash flow impacts FY18 Actual FY19 Outlook FY18 Actual FY19 Outlook Bauxite shipments (Mdmt) 46.9 47.0 – 48.0 Minimum required pension/all OPEB funding $412M ~ $300M Alumina shipments (Mmt) 13.6 13.6 – 13.7 Additional pension
Slide 17: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 18: Long-term global aluminum demand growth is strong
Long-term global aluminum demand growth is strong Global demand trends for primary aluminum and semis Estimated annual primary aluminum demand, Mmt Estimated 2018-2023 CAGR (semis demand) by sector, % +3.4% 80 CAGR 78 Transportation 3.9 75 Construction 2.7 70 Packaging 3.6 66 Electrical 3.7 65 Machi
Slide 19: Alumina in surplus in 2019 and aluminum stays in deficit
Alumina in surplus in 2019 and aluminum stays in deficit Final 2018 and projected 2019 global market balances Bauxite Alumina Aluminum (3rd-party seaborne) (smelter grade) (primary) Final 2018 Surplus Deficit Deficit Balance 2019 Outlook Surplus Surplus Deficit 2019 Supply/Demand Balance, Mmt Global
Slide 20: Two years of progress; focused on further improvement
Two years of progress; focused on further improvement Alcoa Corporation progression over time Separate Strengthen Succeed November 1, 2016 Today ▪ Earn separation during ▪ Deliver on strategic ▪ Maintain gains and 2016 downturn priorities increase strength ▪ Structure the new ▪ Leverage favorable ▪
Slide 21: Strategic priorities to drive 2019 performance
Strategic priorities to drive 2019 performance FY19 Path forward Strategic priorities FY19 Focus Continue progress on safety Improve operational performance Execute capital allocation framework 21
Slide 22: Questions?
Questions? Alcoa Corporation
Slide 23: Appendix
Appendix
Slide 24: FY18 Income statement information
FY18 Income statement information Annual income statement Adjusted excl. M, Except realized prices and per share amounts Reported Special items special items Realized primary aluminum price ($/mt) $2,484 $2,484 Realized alumina price ($/mt) $455 $455 Revenue $13,403 $13,403 Cost of goods sold $10,08
Slide 25: FY18 Financial information
FY18 Financial information FY18 Highlights and annual change impacts Full year financial highlights Adjusted EBITDA excl. special items bridge, $M FY18 vs. FY17 Realized primary aluminum price ($/mt) $2,484 +$260 155 837 61 (42) Realized alumina price ($/mt) $455 +$115 (255) (145) $3,101 519 (358) R
Slide 26: 4Q18 Financial summary
4Q18 Financial summary Three months ending December 31, 2018, excluding special items Corporate $M inventory Other Alcoa Bauxite Alumina Aluminum4,5 Transformation accounting corporate Corporation Total revenue1 $325 $1,699 $2,111 $25 $(817) $1 $3,344 Third-party revenue $80 $1,132 $2,107 $24 - $1 $
Slide 27: 4Q18 Adjusted EBITDA drivers by segment
4Q18 Adjusted EBITDA drivers by segment Adjusted EBITDA excl. special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Op. Raw EBITDA Segment 3Q18 Prices API Currency Volume Price/Mix Impacts Energy Materials Other 4Q18 Bauxite $106 - - (2) 9 (1) (2) (1) - 1 $110 Alumina $660 - 23 (3)
Slide 28: Aluminum value chain
Aluminum value chain 2018 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 3.3 32% 100% Aluminum 3rd Party 13.6 88% 68% Alumina 3rd Party 46.9 12% Bauxite 3rd Party 28
Slide 29: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 4Q18 production cash costs Alumina refining Input Inventory Pricing FY19 Annual Cost Cost Flow Convention Sensitivity Bauxite Caustic Soda 5 - 6 Months Quarterly $10M per $10/dmt Conversion 34% 31% Natural Gas1 N/A N/A N/A 5% 17% Fuel Oil 1
Slide 30: 2019 Business information
2019 Business information Estimated annual Adjusted 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 (4) 3 Alumina 120
Slide 31: Additional business considerations
Additional business considerations Important items for 2019 ▪ Expect improvement in Alumina operational stability and higher year on year refinery production ▪ Anticipate sequential recovery of approximately two-thirds of 4Q18 Alumina price/mix decline in 1Q19: ~$30 million ▪ Sequentially lower alum
Slide 32: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of December 31, 20181 Estimated financial impacts, $M Expense impact 2019 Segment pension $45 OPEB Segment OPEB $5 Total U.S. Pension U.S. Corporate pension & OPEB $5 $1.0B $1.0 Total $1.1 Total adj. EBITD
Slide 33: Investments summary
Investments summary Ownership Carrying Value as of Income Statement Location of Investee Country Nature of Investment4 Interest December 31, 2018 Equity Earnings Elysis Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminum Company1 Saudi Arabia Aluminum smelter 25.1% Ma’ad
Slide 34: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of December 31, 2018 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2018 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia
Slide 35: Valuation framework
Valuation framework Valuation framework key considerations FY18 Adj. EBITDA excl. special items Economic value using market multiple of: + Bauxite i. AWAC joint venture, minus small portions of AWAC JV in Aluminum and $426M Transformation + Alumina ii. Ownership in certain mines and refineries outsi
Slide 36: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 4Q17 FY17 1Q18 2Q18 3Q18 4Q18 FY18 Net income (loss) attributable to Alcoa Corporation $(196) $217 $150 $75 $(41) $43 $227 Add: Net income attributable to noncontrolling interest 140 342 124 155 196 169 644 Provision for income taxes 272 600 138 180 251 157 726 Othe
Slide 37: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 4Q17 3Q18 4Q18 FY18 P&L classification Special items $391 $160 $82 $448 Warrick smelter restart costs 29 1 1 20 Cost of goods sold Bécancour lockout related costs 3 2 2 8 Cost of goods sold Contractor arbitration loss - - - 15 Cost of g
Slide 38: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 4Q17 1Q18 2Q181 3Q18 4Q18 Cash from operations $455 $55 $(430) $288 $535 Capital expenditures (150) (74) (95) (82) (148) Free cash flow $305 $(19) $(525) $206 $387 Free Cash Flow is a non-GAAP financial measure. Management believes that this measure is meaningful to
Slide 39: Net Debt reconciliation
Net Debt reconciliation FY16 FY17 FY18 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $1 $- $1 $8 $- $8 $- $- $- Long-term debt due within one year 21 - 21 16 - 16 1 - 1 Long-term debt, less amount due within one year 1,424 1 1,423 1,388 7 1,381 1,801 34 1
Slide 40: Days Working Capital
Days Working Capital $M 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Receivables from customers $708 $789 $840 $811 $814 $1,025 $1,017 $830 Add: Inventories 1,294 1,287 1,323 1,453 1,630 1,668 1,666 1,644 Less: Accounts payable, trade 1,434 1,508 1,618 1,898 1,813 1,752 1,711 1,663 DWC working capital $5
Slide 41: Return on Capital
Return on Capital Reconciliation and calculation information $M FY17 FY18 (PBT + net interest3 + special items1) x (1 – fixed tax rate4) ROC % = X 100 Numerator: ( Total assets – cash5 – current liabilities + short-term debt) Net income attributable to Alcoa Corporation 217 227 Add: Net income attri
Slide 42: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FY## Twelve months ending December 31 1Q## Three months ending March 31 GAAP Accounting principles generally accepted in the United States of America 2Q## Three mont
Slide 43: The Element of Possibility”
The Element of Possibility”