Alcoa Corporation · NYSE:AA
Alcoa — Q1 2023 Earnings Presentation
40 slides from Alcoa's earnings presentation, Apr 19, 2023
Slide 1: 1st Quarter Earnings
st 1 Quarter Earnings Alcoa Corporation April 19, 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: Roy Harvey
Roy Harvey President and Chief Executive Officer 4
Slide 5: Improved financials; addressing operational challenges
Improved financials; addressing operational challenges Key takeaways for 1Q23 1Q23 Takeaways ▪ No fatal or serious injuries (FSI-As) in the quarter ▪ Financial results for 1Q23 − Net loss attributable to Alcoa of $231 million; Adjusted net loss of $41 million − Adjusted EBITDA excluding special item
Slide 6: Molly Beerman
Molly Beerman Executive Vice President and Chief Financial Officer 6
Slide 7: 1Q23 EPS of $(1.30), Adjusted EPS of $(0.23)
1Q23 EPS of $(1.30), Adjusted EPS of $(0.23) Quarterly income statement summary 4Q22 1Q23 Change Realized prices ($/mt) Realized primary aluminum price $2,889 $3,079 $190 Realized alumina price $342 $371 $29 Income statement highlights (millions, except per share amounts) Revenue $2,663 $2,670 $7 Ne
Slide 8: Higher market prices, lower energy costs, improve Adj. EBITDA
Higher market prices, lower energy costs, improve Adj. EBITDA Sequential changes in Adjusted EBITDA excluding special items, $M 40 240 20 1 66 4Q22 1Q23 Change (30) Alumina1 $50 $103 53 Aluminum 31 184 153 43 0 Transformation (22) (8) 14 105 Intersegment 5 (8) (13) eliminations Other corporate (35)
Slide 9: Higher Adj. EBITDA offset by seasonal working capital build
Higher Adj. EBITDA offset by seasonal working capital build Key financial metrics and cash flow information, 1Q23 Key financial metrics 1Q23 Cash flow information, $M 569 1Q23 Days 93 All other 2023 YTD Return on equity working capital (DWC) Interest payments 12 16 Pension/OPEB2 (3.5)% 56 Days 18 Ca
Slide 10: Key input prices declining; inventories expected to follow
Key input prices declining; inventories expected to follow Key raw material purchase prices for refining and smelting and consolidated inventories, 1Q22 to 1Q23 Average market prices of key raw materials1 Inventories -7.3% -17.4% -16.0% 3,000 -6.3% 766 789 1,410 1,307 2,556 633 663 2,395 2,000 1Q22
Slide 11: 2023 Outlook
2023 Outlook FY23 Key metrics as of March 31, 2023 Income statement excl. special items impacts Cash flow impacts 1Q23 YTD Actual FY23 Outlook 1Q23 YTD Actual FY23 Outlook Alumina shipments (Mmt) 3.0 12.7 – 12.9 Pension / OPEB cash funding $19M ~ $75M Aluminum shipments (Mmt) 0.6 2.5 – 2.6 Stock rep
Slide 12: Roy Harvey
Roy Harvey President and Chief Executive Officer 12
Slide 13: Market balanced today, future fundamentals remain positive
Market balanced today, future fundamentals remain positive Global supply and demand dynamics; market and commercial developments Supply and demand dynamics Market developments Projected 2023 market balances1 ▪ Noteworthy announced global aluminum supply changes in 1Q23 (kmtpa): Global Regional − RoW
Slide 14: Adjusting portfolio operating levels and addressing challenges
Adjusting portfolio operating levels and addressing challenges Alcoa global operations overview Iceland: ▪ San Ciprián refinery expected to operate at ~50 percent of capacity Norway: ▪ Announced updated agreement for the 2024 restart of the San Ciprián smelter; signed wind power MOUs Canada: ▪ Conti
Slide 15: Extended approval process affecting Western Australia mines
Extended approval process affecting Western Australia mines Overview of WA mine plan approval process, impacts, and actions ▪ Background: − Huntly bauxite mine feeds Pinjarra and Kwinana alumina refineries; Willowdale mine feeds Wagerup alumina refinery − Current bespoke, annual mine plan approval p
Slide 16: Improving financials and operations, positive fundamentals
Improving financials and operations, positive fundamentals 1Q23 Summary ▪ Improved financial results: Increased Adjusted EBITDA from $29 million to $240 million; balance sheet remains strong with $1.1 billion cash and $1.4 billion proportional adjusted net debt ▪ Focused on operations: Addressing ch
Slide 17: Appendix
Appendix 17
Slide 18: 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 ▪ 1Q23 dividend payments totaled $18 million through the cycle Transfo
Slide 19: Quarterly income statement
Quarterly income statement Quarterly income statement for 1Q22, 4Q22 and 1Q23 Prior Year Sequential Millions, except realized prices and per share amounts 1Q22 4Q22 1Q23 Change Change Realized primary aluminum price ($/mt) $3,861 $2,889 $3,079 $(782) $190 Realized alumina price ($/mt) $375 $342 $371
Slide 20: Special items
Special items Breakdown of special items by income statement classification – gross basis Millions, except per share amounts 1Q22 4Q22 1Q23 Description of significant 1Q23 special items Net income (loss) attributable to Alcoa Corporation $469 $(395) $(231) Earnings (loss) per share1 $2.49 $(2.24) $(
Slide 21: Quarterly income statement excluding special items
Quarterly income statement excluding special items Quarterly income statement excluding special items for 1Q22, 4Q22 and 1Q23 Prior Year Sequential Millions, except realized prices and per share amounts 1Q22 4Q22 1Q23 Change Change Realized primary aluminum price ($/mt) $3,861 $2,889 $3,079 $(782) $
Slide 22: 1Q23 Financial summary
1Q23 Financial summary Three months ending March 31, 2023, excluding special items Intersegment Other Alcoa Millions Alumina3 Aluminum4 Transformation eliminations corporate Corporation Total revenue $1,278 $1,813 $2 $(427) $4 $2,670 Third-party revenue $857 $1,810 $2 - $1 $2,670 Adjusted EBITDA1 $1
Slide 23: 1Q23 Adjusted EBITDA drivers by segment
1Q23 Adjusted EBITDA drivers by segment Adjusted EBITDA excluding special items sequential changes by segment, $M Adjusted Adjusted EBITDA Metal Raw Production EBITDA Segment 4Q22 Currency prices API materials Energy Price/mix Volume costs Other 1Q23 Alumina $50 (16) 0 56 (8) 6 9 9 (20) 17 $103 Alum
Slide 24: Recast of former Bauxite and Alumina Segments Adj. EBITDA
Recast of former Bauxite and Alumina Segments Adj. EBITDA 2022 Quarterly Adjusted EBITDA excluding special items recast to new Alumina Segment, $M Millions 1Q22 2Q22 3Q22 4Q22 FY22 Former Bauxite Segment $38 $5 $15 $24 $82 Former Alumina Segment 262 343 69 27 701 Intersegment eliminations 2 10 (6) (
Slide 25: Aluminum value chain
Aluminum value chain 1Q23 Alcoa shipments by product type Bauxite Alumina Aluminum 10.9 Mdmt shipments 3.0 Mmt shipments 0.6 Mmt shipments Intersegment Third party 0% 17% Intersegment 35% 65% Third party 83% 100% Intrasegment Third party 25
Slide 26: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 1Q23 production cash costs Alumina refining Bauxite Input Inventory Pricing FY23 annual cost 21% cost flow convention sensitivity Conversion 36% Caustic soda 5 - 6 Months Quarterly, Spot $9M per $10/dmt 17% Quarterly, 91% with Caustic Natura
Slide 27: 2023 Business information
2023 Business information Estimated annual 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 + $100/mt 0.681 5.201 1.351 1.071 142.141 10.221 Alumina 103 (23) 8 (1) Alumi
Slide 28: Currency impacts on Adjusted EBITDA
Currency impacts on Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities ($M, except currencies) AUD BRL CAD EUR ISK NOK Total 3/31/23 currencies 0.67 5.13 1.36 1.09 136.16 10.42 1Q23 currency avg. 0.68 5.20 1.35 1.07 142.14 10.22 1Q23 Balance sheet revaluation impact Alumina
Slide 29: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA and Adjusted net income for 2Q23 Expected sequential impacts on Adjusted EBITDA excluding special items, excluding indexed sales prices or currency impacts: ▪ In the Alumina segment, we expect an approximately $55 million un
Slide 30: 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 March 31, 2023 equity earnings ELYSIS Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminium Co
Slide 31: Alcoa sustainability goals
Alcoa sustainability goals Alcoa strategic long-term sustainability goals, baseline and progress Goal Description 2015 Baseline 2021 Progress Zero fatalities and serious injuries (life-threatening, life-altering injury or 5 fatal or serious 0 fatal or serious Safety illness) injuries/illnesses injur
Slide 32: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of March 31, 2023 Alumina refining, kmt Aluminum smelting, kmt Facility Country Capacity Curtailed Facility Country Capacity Curtailed Kwinana1 Australia 2,190 438 Portland3 Australia 197 49 Pinjarra Australia 4,700
Slide 33: Valuation framework
Valuation framework Valuation framework key considerations LTM ending 3/31/23 Adj. EBITDA excl. special items Economic value using market multiple of: i. AWAC joint venture, minus small portions of AWAC JV in Aluminum and + Alumina1 Transformation $589M ii. Ownership in certain mines and refineries
Slide 34: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation Millions 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 Net income (loss) attributable to Alcoa $469 $549 $(746) $(395) $(123) $(231) Add: Net income (loss) attributable to noncontrolling interest 84 125 (23) (25) 161 (1) Provision for income taxes 210 234 40 180 664 52 Other (income)
Slide 35: Free cash flow reconciliation
Free cash flow reconciliation Millions 1Q22 2Q22 3Q22 4Q22 FY22 1Q23 Cash provided from operations $34 $536 $134 $118 $822 $(163) Capital expenditures (74) (107) (128) (171) (480) (83) Free cash flow (40) 429 6 (53) 342 (246) Contributions from noncontrolling interest 46 37 67 64 214 86 Distribution
Slide 36: Net debt reconciliation
Net debt reconciliation FY18 FY19 FY20 FY21 FY22 1Q23 YTD Alcoa Alcoa Alcoa Alcoa Alcoa Alcoa Cons. NCI Cons. NCI Cons. NCI Millions Prop. Prop. Prop. Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $77 $31 $46 $75 $30 $45 $- $- $- $25 $- $25 Long-term debt du
Slide 37: Days working capital reconciliation
Days working capital reconciliation Millions 1Q22 2Q22 3Q22 4Q22 1Q23 Receivables from customers $952 $898 $749 $778 $753 Add: Inventories 2,495 2,556 2,400 2,427 2,395 Less: Accounts payable, trade 1,645 1,752 1,590 1,757 1,489 DWC working capital $1,802 $1,702 $1,559 $1,448 $1,659 Sales $3,293 $3,
Slide 38: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) ROE Reconciliation and calculation information as of March 31, 2023 Millions 1Q22 1Q23 (Net Loss/Income Attributable to Alcoa + Special Items1) Numerator: ROE % = X 100 Net income (loss) attributable to Alcoa Corporation $469 $(231) (Total Assets – Total Liabilities
Slide 39: 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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