Slide 1: Alcoa Corporation Investor Presentation October 2016
• Alcoa Corporation Investor Presentation October 2016
Slide 2: Important information
Important information • 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 th
Slide 3: Important information (continued)
Important information (continued) • Non-GAAP Financial Measures • This presentation includes unaudited “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including Adjusted EBITDA. Alcoa and Alcoa Corporation believe that the presentation of non-GAAP
Slide 4: Agenda
Agenda • Today’s conversation Agenda 4 Topics Our Business • Financial Overview • Q&A Presenters
Slide 5: Our Business
• Our Business Roy Harvey
Slide 6: Alcoa Corporation: a compelling investment
Alcoa Corporation: a compelling investment • Global network of world-class aluminium 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), cr
Slide 7: Global-leading portfolio of low-cost, world-class assets
Global-leading portfolio of low-cost, world-class assets • Global-leading portfolio of low-cost, world-class assets 7 2016 global cost curve positions World’s largest alumina refiner1 Well-positioned smelting assets Alumina Aluminum 1st Quartile Mid 2nd Quartile Source: CRU and Alcoa analysis • 1. B
Slide 8: Strengthened, independent businesses with proven record
Strengthened, independent businesses with proven record • Strengthened, independent businesses with proven record 8 Business segments Geographically dispersed mines with a premier low-cost position Bauxite Nine refineries on five continents with access to growth markets in Asia, Middle East, and Lat
Slide 9: Global portfolio provides access to growth markets
Global portfolio provides access to growth markets • 9 Global Strength: • 16,000 employees • 25 manufacturing facilities • 10 countries Global portfolio provides access to growth markets
Slide 10: 3rd-party bauxite leads solid growth prospects
3rd-party bauxite leads solid growth prospects • 3rd-party bauxite leads solid growth prospects 10 Source: CRU, CM Group, and Alcoa analysis • 2016-2017 balance figures are post-trade with Chinese imports of 3.0 Mt alumina (2016), 40 kt aluminum (2016), and 25 kt aluminum (2017) • Based on Platts FO
Slide 11: Leadership team ready to support the business
Leadership team ready to support the business • Leadership team ready to support the business 11 Roy Harvey, Chief Executive Officer • William Oplinger, Executive Vice President and Chief Financial Officer • Tómas Már Sigurdsson, Executive Vice President and Chief Operating Officer • Leigh Ann Fishe
Slide 12: Promoting strong, efficient, operator-centric culture
Promoting strong, efficient, operator-centric culture • Promoting strong, efficient, operator-centric culture 12 Act with Integrity • Operate with Excellence • Care for People Unrelenting focus on safety • Reducing greenhouse gas emissions, lowering energy and fresh water consumption • Supporting co
Slide 13: Financial Overview
• Financial Overview William Oplinger
Slide 14: 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 14 Before intersegment eliminations. • See appendix for adjusted EBITDA reconciliations. • Represents the elimination of revenue generated from product sales
Slide 15: Resilient EBITDA despite lower prices
Resilient EBITDA despite lower prices • Financial trends Resilient EBITDA despite lower prices 15 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 16: 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 16 Conservative balance sheet with substantial liquidity • Assumes starting cash balance of $632M • Alcoa Corporation issued $1.25B of funded debt,
Slide 17: Strong balance sheet and financial position
Strong balance sheet and financial position • Pro Forma balance sheet1 – key metrics as of June 30, 2016 Strong balance sheet and financial position 17 Net Debt-to-LTM EBITDA Current business operations are ready to support our debt • Focus on maintaining strong non-investment grade rating Debt-to-E
Slide 18: Balance sheet contains hidden value drivers
Balance sheet contains hidden value drivers • Pro Forma balance sheet as of June 30, 2016 – Other Noncurrent Assets Balance sheet contains hidden value drivers 18 1. Investment in Saudi Arabian joint venture, formed in 2009 with the Saudi Arabian Mining Company (Ma’aden).
Slide 19: High-return projects pipeline across the businesses
High-return projects pipeline across the businesses • High-return projects pipeline across the businesses Potential future key capital projects by business segment1 Capital investment amount ($M) # of Projects 3 5 4 19 ($M) Estimated combined totals Based on estimated LME forward curve of $1,500/mt
Slide 20: Disciplined financial policies for prudent capital allocation
Disciplined financial policies for prudent capital allocation • Financial policy framework Disciplined financial policies for prudent capital allocation 20 Financial Policies Leverage Aggressive asset portfolio management Liquidity Efficient use of available capital Maintain appropriate leverage thr
Slide 21: Outlook focused on operations and managing cash
Outlook focused on operations and managing cash • Key measures Outlook focused on operations and managing cash 21 Operational volumes 2017 Financial Return-seeking capital expenditures of < $100M Other corporate overhead2 • < $200M Pension and OPEB cash contributions of < $250M Sustaining capital ex
Slide 22: Closing Remarks
• Closing Remarks Roy Harvey
Slide 23: Alcoa Corporation: a compelling investment
Alcoa Corporation: a compelling investment • Alcoa Corporation: a compelling investment Global network of world-class aluminum assets and operations • Bauxite and Alumina: Combination of global industry-leading low-cost assets • Aluminum: Well-positioned portfolio includes Saudi Arabia Joint Venture
Slide 24: Appendix
• Appendix
Slide 25: Contact information
Contact information • Contact information Investors: • Jim Dwyer, Vice President of Investor Relations • (212) 518-5450 • AlcoaIR@Alcoa.com • Media: • Monica Orbe, Senior Vice President, Chief Communications Officer • (212) 518-2632 • Monica.Orbe@Alcoa.com • Investor and media contact information 25
Slide 26: Transaction overview
Transaction overview • Transaction overview 26 Share information 1. Includes shares of common stock of Alcoa Corporation retained by Arconic.
Slide 27: Alcoa Corporation's leading governance practices
Alcoa Corporation’s leading governance practices • Alcoa Corporation’s leading governance practices 27 Governance practices
Slide 28: Accomplished Board of Directors
Accomplished Board of Directors • Michael Morris • Non-Executive Chairman, Alcoa Corporation; Former Chairman and CEO, American Electric Power James Nevels • Founder and Chairman, The Swarthmore Group James Owens • Former Chairman and CEO, Caterpillar Inc. Accomplished Board of Directors Board of Di
Slide 29: 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 29 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 30: Income statement
Income statement1 • Income statement1 30 See appendix for EBITDA reconciliations.
Slide 31: 2015 key financial information
2015 key financial information • Key financials – Full year ending December 31, 2015 2015 key financial information 31 Before intersegment eliminations. • See appendix for adjusted EBITDA reconciliations. • Represents the elimination of revenue generated from product sales from one Alcoa Corporation
Slide 32: Pension and OPEB information
Pension and OPEB information • Pension and OPEB information Pro forma pension and OPEB liabilities and expenses1,2 32 • For additional information, see Alcoa Upstream Corporation Form 10 as filed with the Securities and Exchange Commission on October 11, 2016. • OPEB: Other Postretirement Employee B
Slide 33: 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 34: 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 2010: • 30th Percentile Source: CRU and Alcoa analysis 34
Slide 35: 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 35 200 220 240 50 40 30 60 20 70 0 320 140 160 180 80 100 120 10 300 280 260 2016: • 20th Percentile
Slide 36: 2016 demand grows at 5%; supply grows at 3%
2016 demand grows at 5%; supply grows at 3% • 2016 demand grows at 5%; supply grows at 3% 36 2016 Primary aluminum demand & Y-o- Y growth (Mt) Primary aluminum demand and supply by region China India North Asia Europe North America Russia Brazil Other (1) MENA SE Asia 59.7 Mt 6.5% 3.5% 2.0% 1.0% 7.0
Slide 37: Aluminum market remains in deficit at 615 kmt
Aluminum market remains in deficit at 615 kmt • Aluminum market remains in deficit at 615 kmt Continue to see global deficit in 2016 2016E Aluminum balance (kmt) Aluminum fundamentals overview Global inventories at 54 days, - 7.5 days Y-o-Y Source: Alcoa analysis, CRU, Wood Mackenzie, IAI, CNIA, NBS
Slide 38: Alumina market remains in deficit at 1.6 Mmt
Alumina market remains in deficit at 1.6 Mmt • Alumina market remains in deficit at 1.6 Mmt Continue to see large deficit for 2016 2016E Alumina balance (kmt) Alumina fundamentals overview Demand growth at 5% while supply only grows at 1% in 2016 Source: Alcoa analysis, CRU, Wood Mackenzie, IAI, CNI
Slide 39: Premier bauxite position, world's largest producer
Premier bauxite position, world’s largest producer • Premier bauxite position, world’s largest producer 39 Largest bauxite miner, 45.3 Mmt production in 2015 • First quartile cost curve position 1 • Next to major markets, with space to grow • Technical refining knowledge to provide multi-product cus
Slide 40: World's most attractive alumina refining business
World’s most attractive alumina refining business • World’s most attractive alumina refining business Largest alumina producer, 15.7 Mmt production in 2015 • First quartile cost curve position1 driven by technology, operating expertise • Geographically diverse portfolio; nine refineries on five cont
Slide 41: Aluminum portfolio positioned for any market
• Aluminum portfolio positioned for any market World’s 4th largest primary aluminium producer in 2015 • ~50% of capacity, 1.7M mt, at top-tier sites • Canada, Iceland, Norway • 25.1% ownership of the world’s lowest-cost smelter (Saudi Arabia JV) ...complemented by success factors ensuring long-term
Slide 42: Cast Products global focus on value-added products
Cast Products global focus on value-added products • Cast Products global focus on value-added products World-class casthouses • 181 casthouses providing value-added products • Casthouse Center of Excellence driving continuous improvement and best practice sharing across the portfolio ...continuousl
Slide 43: Value-added products serve array of end markets
Value-added products serve array of end markets • Value-added products serve array of end markets 43 Cast Products key markets, uses and value-added products Slab End Markets • Transportation, Industrial, B&C, Packaging • Main Uses • Sheet and plate, can stock • Supplying Locations • Canada: Baie Co
Slide 44: Leading can sheet supplier in North America
Leading can sheet supplier in North America • Leading can sheet supplier in North America World-class operations serving can sheet market • Warrick Operations: Food stock, beverage end & tab stock, lithographic sheet, body stock, and bottle stock • Ma’aden Rolling Company1: Wide body stock, beverage
Slide 45: Driving value through substantial energy assets
Driving value through substantial energy assets • Driving value through substantial energy assets ...managed to create maximum profitability under a variety of situations Energy assets 1 in North and South America... Strategic power management • Brazil assets provide optionality between market sales
Slide 46: Bauxite mines detailed information
Bauxite mines detailed information • Bauxite mines detailed information 46 Source: Alcoa Corporation Form 10 • This entity is part of the AWAC group of companies and is owned 60% by Alcoa Corporation and 40% by Alumina Limited • Alumínio is owned 100% by Alcoa Corporation • Brazilian mineral legisla
Slide 47: Geographically distributed refining assets
Geographically distributed refining assets • Geographically distributed refining assets 47 Source: Alcoa Corporation Form 10 • Nameplate Capacity is an estimate based on design capacity and normal operating efficiencies and does not necessarily represent maximum possible production • The figures in
Slide 48: Global smelting network
Global smelting network • Global smelting network 48 Source: Alcoa Corporation Form 10 • Nameplate Capacity is an estimate based on design capacity and normal operating efficiencies and does not necessarily represent maximum possible production • The figures in this column reflect Alcoa Corporation'
Slide 49: Global network of casthouses
Global network of casthouses • Global network of casthouses 49 Source: Alcoa Corporation Form 10 • The named company or an affiliate holds this interest • The Alumar casthouse has been fully curtailed since April 2015 • Owned through Rio Tinto Alcan Inc.'s interest in Pechiney Reynolds Québec, Inc.,
Slide 50: Rolling assets are US, Saudi-based
Rolling assets are US, Saudi-based • Rolling assets are US, Saudi-based 50
Slide 51: Energy assets
Energy assets • Energy assets 51 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 52: Alcoa upstream capacity closed, sold and curtailed
Alcoa upstream capacity closed, sold and curtailed • Alcoa upstream capacity closed, sold and curtailed 52 Smelting capacity Refining capacity Closed / Sold Since December 2007 Curtailed
Slide 53: 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 54: Business sensitivities
Business sensitivities • Estimated annual EBITDA sensitivities Business sensitivities 54 Price information
Slide 55: Alcoa Corporation adjusted EBITDA reconciliation
Alcoa Corporation adjusted EBITDA reconciliation • Alcoa Corporation adjusted EBITDA reconciliation 55 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 56: Segment adjusted EBITDA reconciliation
Segment adjusted EBITDA reconciliation • Segment adjusted EBITDA reconciliation 56 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 57: Segment adjusted EBITDA reconciliation
Segment adjusted EBITDA reconciliation • Segment adjusted EBITDA reconciliation 57 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