Alcoa Corporation · NYSE:AA
Alcoa — Q3 2004 Earnings Presentation
37 slides from Alcoa's earnings presentation, Oct 12, 2004
Slide 1: 3rd Quarter 2004 Analyst Conference, New York
Exhibit 99.2 3rd Quarter October 7, 2004 2004New Analyst York, Conference NY
Slide 2: Forward-Looking Statements
Forward-Looking Today’s involve factors Quarterly 2 that known discussion Report could andon cause Statements may unknown Form results include 10-Q risks to“forward-looking for differ and the uncertainties. quarter materially ended statements” from Alcoa’s June those 30,actual expressed within 2004r
Slide 3: Alain J. P. Belda, Chairman and Chief Executive Officer
Alain J. P. and Chairman Belda Chief Executive Officer
Slide 4: Agenda
Reflections Agenda Continued Taking 4 action strong onon third costs market quarter dynamics performance
Slide 5: Perspective: Market Dynamics and Cost Pressures
Perspective 2Q’04 Automotive Markets ABI Labor People Costs 3Q’04 5 5 day $0.46 $0.34 Materials notices on Europe 3QEnergy Packaging
Slide 6: Strong Favorable Market Trends
Strong Favorable Trends: Cyclical Share Next Integrated Differentiated Alcoa % Packaging Aerospace Automotive Commercial Building Other Industrial Primary 6 of Revenues generation gains (Distr., Actions: Revenue Underlying Products upturn &Products primary solutions 26% 9% Construction 11% Transport
Slide 7: Alcoa's Global Cost Structure
Alcoa’s Other Energy Material People Total (FY’04 Note: 7 Costs: excludes $3.7 $6.0 $2.6 YTD Global $7.8 BB$20.1 BAnnualized) (B(18%) (DD&A. Cost 30%) (13%) 39%) billion Structure
Slide 8: Addressing People Costs
Addressing People Per US Outside 2003 Benefits Key Enhance Seek Address 8 Capita Actions: lower 2004 $6.0 US structural Compensation productivity Employee cost People B ( 30%) production legacy Costs Expense through issues platforms ABS, automation and unbundling
Slide 9: Addressing Material Costs
Addressing Material Coatings/ Resin Chemicals/Caustic Metal/Scrap Other Packaging Carbon Key Efficiency Best Technology ABS Leverage Increase 9 Actions: Practice vendor $7.8 global production improvements /Paper Materials Sharing B (concentration buy 39%)materials Costs through: and streamline the s
Slide 10: Addressing Energy Costs
Addressing Energy Fixed Electricity* Oil LME Self-Generation Variable Natural Key Decrease Transfer R&D Favorably Expand *Spot 10 Actions: Linked Price purchases $2.6 Usage Gas self-generation Price of consumption extend best Energy B (by Not ( practices 13%) ofexisting type) LME electricity Costs t
Slide 11: Alcoa Today and Tomorrow
Alcoa areas Fundamentals Significant Many Continue Confidently 11 Today togrowth of manage pursuing and are engagement Tomorrow better opportunities capital a winning, than on wisely they costs exist global have been strategy in many years
Slide 12: Richard B. Kelson, Executive Vice President and Chief Financial Officer
Richard Executive Chief Financial B.Vice Kelson President Officer
Slide 13: 3rd Quarter Overview: Values and Growth
3rd Quarter Values Named Ahead Growth Broke Bahrain Continued Russia 13 ground of –toMOU continue schedule Dow strong progress Overview on no Jones Iceland safety longer toon on pursue Sustainability Suralco Bohai, performance in force, anti-monopoly expect project, pursuing Index finalization on-sc
Slide 14: 3rd Quarter Overview: Markets
3rd Quarter Alumina, Markets Softness ABI Labor Wenatchee 14 and in 5primary day tentative Europe, Overview notices metal, automotive agreement commercial reached and packaging transportation, marketsaerospace and distribution strong
Slide 15: 3rd Quarter Overview: Financial
3rd Quarter Income Financial Revenue Temporary Trailing Continued Capital 15 spending from 4down quarters reduction regression Overview continuing sequentially, discipline ROC ofindebt-to-capital of operations cost 8.7% –YTD savings lowering revenue of 34 to full32.3%, cents/share highest year capit
Slide 16: Continued Safety Performance
LWD Safety Continued Rate 0.6 0.49 1996 58 3Q04 03 Alcoa Note: 16 fewer 0.4 0.46 (injuries 1997 Acquired Incident : 0.2 2005 0.08 incidents 0.36 strong 0.0 1998 Milestone per Rate 0.23 businesses 1999 performance 200,000 YTD 0.18 2000 04 0.16 hrs.) included vs. 2001 0.15 in YTD 2004 2002 0.16 in the
Slide 17: Discrete Items by Segment
3rd COGS Item Previously ABI Northwood (2) KAMA Sale Other Jamalco (1) (5) Alumina 17 Other Quarter of (29) Net events Protective (3) Port Tolling Income Revenue, Income Other Reconciliation announced Revenue, (1) Discrete Damage Restructuring Contract Segment ($millions) Reconciliation Packaging CO
Slide 18: 3rd Quarter Financial Overview
3rdof In LME Sales Cost SG&A % Restructuring Other Effective Minority GAAP 18 Millions Quarter of Sales 3-Month $6,070 Income, Net Income $317 Goods Interests Tax 78.9% 5.2% Income 2Q 2004 $315 $5,975 Rate and Net Sold Average From 045.3% Financial 80.1% Other $73 3Q04 $2 29% (Gain) $404 $4,787 ($95
Slide 19: Year to Date Financial Overview
Year In LME Sales Cost SG&A % Restructuring Other Effective Minority GAAP 19 Millions of of to Sales 3-Month $15,900 Income, Net Income $942 Date Goods Interests Tax 79.5% 5.9% Income YTD $974 2004 Rate and $17,718 Net Sold Average From 5.5% 0379.0% Other $188 (Financial 26% (Gain) $647 $32) $12,642
Slide 20: Balance Sheet and Capital Metrics
Balance Capital $700 $566 75% YTD Capex Non-Growth Growth $8,000 Debt-to-Capital $7,855 45% Days Debt/Capitalization Debt 60 57.2 Cash $1,000 $482 3Q03 * 20Balances 5855.3 70% 40% $600 63% $847 From Working 03 3Q04 56 /$800 $7,000 38.8% Expenditures Depreciation Sheet YTD 54 65% 35% $667 $500 reflec
Slide 21: Cost Savings: Quarterly Cost Change
Cost Quarterly 182 1999 $2.2 3rd Other Packaging Engineered FRP Primary Alumina Decrease 1 0 Increase N 3 21 1et Quarter cost 278 billion Challenge 2000 -10365 increase Run 2001 in Cost 428 savings Rate 2002 Change 531 of in $7558 2003 Millions since million by 5711Q04 program Segment 564 of 2Q04 do
Slide 22: 3rd Quarter Revenue by Market and Segment
Market Building Other Revenue As Change Realized Alumina Primary 3rd Aerospace Automotive Commercial B&C Industrial Packaging Note: 22 of Quarter Party 15% 3Q’04 Packaging (Distr., Conditions from Products 20% Prices by 22% & Revenue Products 26% 14% 1% 10% 22% Construction Market Market 10% -5% Tra
Slide 23: Alumina
Alignment: Intersegment Markets: 3rd ATOI $ 200 3Q03 + LME 80 Current Alumina Positives Q3 Negatives 23Millions 50% 6% 78 includes Party 160 Cent/Lb 476 Performance: ATOI Business 120 & prices 74 Revenue Chemicals Bauxite 72 favorable 80 Revenue LME 70 are 40Conditions: 68 0expected 2Q04 mining, 66
Slide 24: Primary Metals
Primary Alignment: Intersegment Markets: 3rd $ +15% 240 3Q03 -18% LME 80 ATOI Current Positives Continued Potential Negatives * 24Millions includes 78 Party 220 Cent/Lb 4Q 76 Performance: LME Business Metals 200 74 ABI Revenue 03 Alcoa’s strong program 4.0 72 1Q 180 Revenue Impact 70 million 04 160
Slide 25: Flat-Rolled Products
Flat Alignment: Markets: Building Can Auto Aero ATOI $ 75 3Q03 +5% Current Improving Positives Distribution Seasonal Negatives Commercial 25Millions 60Rolled Sheet 4Q03 45 Performance: Business 30 & slowing aerospace Products Aluminum Construction 1Q04 15 & market Vehicle vehicle Other 0 Conditions:
Slide 26: Engineered Products
Engineered Alignment: Markets: ATOI Aero IGT Auto $ +28% 90 3Q03 -23% Current Improving Positives Distribution Building Negatives Commercial Seasonal 26Millions 80 4Q03 70 Performance: Business 60 & maintenance aerospace Construction construction Products Hard 1Q04 50 & markets Vehicle vehicle Other
Slide 27: Packaging and Consumer
Packaging Alignment: Flexible Markets: Consumer Food Closures ATOI $ -21% 60 3Q03 -24% Current Positives While Seasonal Negatives Input 27Millions 40 Packaging costs 4Q03 20 Performance: resin Business Packaging 0weakness strength Products & (metal, Reynolds costs 1Q04 Consumer Conditions: remain in
Slide 28: Other
Alignment: Other Commercial Markets: Building Auto ATOI Tele $ +50% 35 3Q03 -60% Current Automotive Positives Residential Negatives 28Millions 30 4Q03 25 Performance: Business 20 & building Alcoa Construction 1Q04 15 platform-specific Vehicle 10Conditions: Fujikura, 2Q04 5 0& construction 3Q04reside
Slide 29: 4Q '04 Outlook Summary
Outlook 4Q Alumina Positives Aerospace Consumer ABI Negatives Seasonal 29 ‘04 impact Outlook Summary and declines Packaging andprimary distribution in building seasonally metalmarkets prices andstrong construction, remain are strong high can sheet, and commercial vehicles
Slide 30: Return on Capital
Return % 20 15.9 7.8 4.3 3Q T Alcoa All 30op Return 15 03 7.6 7.0 indicators 16.1 Quintile 10 ROC Quarter 4Q on 8.7 7.7 517.3 on 03 Capital 0 Capital 10.2 8.81Q S&P are Annualized 17.8 8.7 7.8 04 based Industrials 2Q 04 on 3Q04 the Bloomberg ROC Methodology.
Slide 31: For Additional Information, Investor Relations Contact
For Additional William Director, 390 Alcoa New Telephone: Facsimile: 31 www.alcoa.com Park York, F.Avenue Investor (212) Oplinger N.Y. (212) Information, 10022-4608 836-2813 836-2674 Relations contact:
Slide 32: Appendix
ALCOA Appendix
Slide 33: Reconciliation of Income from Continuing Operations
In Millions Discontinued GAAP Restructuring Restructurings Loss Income restructuring 33 onIncome Net and from divestitures Income 3Q EPS and continuing operations and $1 from 03Information other $3 other 2Q $280 $0 continuing $4 04 charges $1 charges operations -$404 3Q operating loss $004 and $283
Slide 34: EPS Reconciliation (Continued)
Income In Discontinued GAAP Restructuring Loss Restructurings EPS Avg. 34 Millions from on Shares Earnings and Divestitures continuing 3Q EPS Diluted operations and 03per Information other 2Qshare Outstanding operations 04charges: -3Q operating loss $0.33 from 04 and on continuing excluding $0.46 85
Slide 35: Notes on Restructuring and Other Charges
Notes (1) in Alcoa Management to The cash Charges results. primarily Restructuring restructurings There appropriate (2) 35 accordance compare Alcoa Restructuring economic and can to reviews associated Reconciliation non-cash for believes bepast, tostrategic no believes and with consider impacts the
Slide 36: Return on Capital Reconciliation
Reconciliation In Method Net Interest Numerator (After-tax) ST LT Preferred Minority Common (Sum Denominator ROC Note: Notes: 36 Millions Borrowings Income 8.7% Total) Bloomberg Expense 3Q Interest Equity 7.8% 3Q 03 $1,333 $1,769 $20,410 Annlzd of 04 $6,883 $370 $55 $199 $11,781 8.7% $237 $1,321 Ret
Slide 37: Working Capital Days Reconciliation
Reconciliation In Receivables Inventories Accounts (Sum Numerator Daily Quarterly Number Average Denominator Days 1 Notes: 37Balances Millions Working Total) Revenue of Daily Payable, Revenue reflect Days 3Q $2,524 $3,303 from Capital Revenue of 2003 92 Days Customers reclassifications Trade $2,995