Slide 1: 3rd Quarter Earnings
3rd Quarter Earnings Alcoa Corporation October 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 w ithin the meaning of the Private Securities Litigation Reform Act of 1995. Forw ard-
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: Substantial actions continue to strengthen the portfolio
Substantial actions continue to strengthen the portfolio 3Q19 Financial results and business review ▪ Net loss of $221 million, or $1.19 per share; excluding special items, 3Q19 adjusted net loss of $82 million, or $0.44 per share Financial results ▪ Adjusted EBITDA excluding special items of $388 m
Slide 6: William Oplinger
William Oplinger Executive Vice President and Chief Financial Officer
Slide 7: Revenue down slightly, volume partially offsets price slip
Revenue down slightly, volume partially offsets price slip Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 3Q18 2Q19 3Q19 Change Change Realized primary aluminum price ($/mt) $2,465 $2,167 $2,138 $(327) $(29) Realized alumina price ($/mt) $493 $376 $3
Slide 8: Special items total $139M, primarily Spain divestiture
Special items total $139M, primarily Spain divestiture Breakdown of special items by income statement classification – gross basis M, Except per share amounts 3Q18 2Q19 3Q19 Description of significant 3Q19 special items Net income (loss) attributable to Alcoa Corporation $(6) $(402) $(221) Diluted e
Slide 9: Adjusted net loss $82M, adjusted loss per share $0.44
Adjusted net loss $82M, adjusted loss per share $0.44 Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 3Q18 2Q19 3Q19 Change Change Realized primary aluminum price ($/mt) $2,465 $2,167 $2,138 $(327) $(29) Realized alumina price
Slide 10: Solid performance partially offsets alumina price move
Solid performance partially offsets alumina price move Adjusted EBITDA excluding special items sequential changes, $M 16 455 (9) 15 388 15 23 (2) (107) (8) (10) 2Q19 Currency Metal API Raw Energy Price / mix Volume Production Other 3Q19 prices materials costs 10
Slide 11: Aluminum and Bauxite gain; Alumina impacted by market
Aluminum and Bauxite gain; Alumina impacted by market Adjusted EBITDA excluding special items breakdown Segment information, $M Total Adjusted EBITDA information, $M 2Q19 3Q19 2Q19 3Q19 Change $(146) Segment total $484 $400 $(84) $369 $22 Transformation 3 (6) (9) $223 $40 Intersegment eliminations (
Slide 12: Cash balance steady as portfolio improvements continue
Cash balance steady as portfolio improvements continue Balance sheet and cash review Quarter ending cash balance, $M Key metrics as of September 30, 2019 3Q19 Days 2019 YTD $(67) working capital Return on capital $1,089 $1,113 $1,022 $1,017 30 Days 4.6% $7 $834 $841 2019 YTD Sustaining 2019 YTD Retu
Slide 13: 2019 Outlook
2019 Outlook FY19 Key metrics Income statement excl. special items impacts Cash flow impacts 2019 YTD 2019 YTD Actual FY19 Outlook Actual FY19 Outlook Bauxite shipments (Mdmt) 35.8 47.0 – 48.0 Minimum required pension/all OPEB funding $146M ~ $300M Alumina shipments (Mmt) 10.1 13.6 – 13.7 Additional
Slide 14: Roy Harvey
Roy Harvey President and Chief Executive Officer
Slide 15: Aluminum projected to be in deficit in 2019
Aluminum projected to be in deficit in 2019 Projected 2019 market balances, Mmt Global production as a percentage of consumption Global Regional 102 to 104 World ex-China 166% Third-party 15 to 19 Bauxite Surplus (87) to (85) China 56% 0.7 to 1.1 World ex-China 102% Smelter Grade 1.0 to 1.8 Alumina
Slide 16: Strengthening the Company for current market conditions
Strengthening the Company for current market conditions Key actions Near Term Recent Now (12-18 months) Improvement initiatives Overhead reduction Asset sales ▪ Safety program revitalized ▪ New operating model for a leaner, ▪ Additional cash generation through more integrated, operator-centric non-c
Slide 17: Alcoa positioned to succeed in evolving sustainable world
Alcoa positioned to succeed in evolving sustainable world Aluminum and Alcoa benefits Aluminum sustainability advantages ▪ Demand for aluminum products has doubled since 2000 and ▪ Infinitely recyclable, saving up to 95% of the energy required for expected to continue to grow at ~3% per year in next
Slide 18: Review portfolio to be even more competitive
Review portfolio to be even more competitive Asset portfolio review Portfolio review Bauxite Alumina Aluminum 46 15 3.2 0 4 1.5 Capacity 45 (Mmt)1 11 1.7 2018 production 2019 capacity 2019 capacity • 2019 1st quartile cost • 2019 1st quartile cost • 2019 2nd quartile cost position position position,
Slide 19: A stronger Alcoa through refreshed strategic priorities
A stronger Alcoa through refreshed strategic priorities Strategic priorities • Reduce complexity A portfolio and operating model that is low cost, competitive and resilient in a low price environment • Drive returns Drive results and Improve commercial capabilities, invest in deliver returns to targ
Slide 20: Questions?
Questions? Alcoa Corporation
Slide 21: Appendix
Appendix
Slide 22: Superior bauxite and alumina assets, solid smelter portfolio
Superior bauxite and alumina assets, solid smelter portfolio 2019 Cost curve and business position Bauxite Alumina Aluminum 1st Quartile 1st Quartile 2nd Quartile ▪ World’s second largest bauxite ▪ Largest alumina refiner and largest ▪ Top 10 global aluminum smelter miner, with a first quartile cost
Slide 23: Strengthening the Company, to date
Strengthening the Company, to date Key actions to date 2017-2018 2019 ▪ Revitalized safety program; zero fatalities in 2018 ▪ Continued solid safety performance ▪ Restarted Portland smelter and Lake Charles calciner ▪ Set quarterly production records ▪ Streamlined business units to three, reduced ad
Slide 24: Capital allocation framework
Capital allocation framework Capital allocation framework and considerations Maintain liquidity throughout the cycle ▪ $1 billion target for minimum cash balance ▪ Sustaining capital expenditures of ~$290 million, return seeking capital of ~$110 Capital expenditures to sustain and improve operations
Slide 25: 3Q19 Financial summary
3Q19 Financial summary Three months ending September 30, 2019, excluding special items Intersegment Other Alcoa $M Bauxite Alum ina Alum inum3,4 Transformation elim inations corporate Corporation Total revenue $351 $1,140 $1,681 $21 $(626) - $2,567 Third-party revenue $100 $771 $1,677 $19 - - $2,567
Slide 26: 3Q19 Adjusted EBITDA drivers by segment
3Q19 Adjusted EBITDA drivers by segment Adjusted EBITDA excl. special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 2Q19 Currency prices API materials Energy Price/mix Volume costs Other 3Q19 Bauxite $112 2 - - - - (2) 6 9 7 $134 Alumina $369 14 - (197)
Slide 27: Aluminum value chain
Aluminum value chain YTD Alcoa product shipments by segment, as of September 30, 2019, Mmt Bauxite Alumina Aluminum 2.1 31% 100% Aluminum 3rd Party 10.1 87% 69% Alumina 3rd Party 35.8 13% Bauxite 3rd Party 27
Slide 28: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 3Q19 production cash costs Alumina refining Input Inventory Pricing FY19 Annual Cost Cost Flow Convention Sensitivity Conversion Bauxite Caustic Soda 5 - 6 Months Quarterly $10M per $10/dmt 34% 34% Natural Gas1 N/A N/A N/A 6% 13% Fuel Oil 1
Slide 29: 2019 Business information
2019 Business information Estimated annual Adjusted EBITDA sensitivities $M AUD BRL CAD EUR ISK NOK LME API Midw est Europe Japan + 0.01 + 0.10 + 0.01 + 0.01 + 10 + 0.10 Segm ent + $100/m t + $10/m t + $100/m t + $100/m t + $100/m t USD/AUD BRL/USD CAD/USD USD/EUR ISK/USD NOK/USD Bauxite (4) 3 Alumi
Slide 30: Additional business considerations
Additional business considerations Items expected to impact adjusted EBITDA for 4Q19 ▪ In the Bauxite segment, Adjusted EBITDA is expected to be in line with third quarter record ▪ In the Alumina segment, higher volume, lower seasonal maintenance and lower caustic costs are expected to provide $15 m
Slide 31: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of September 30, 2019 1 Estimated financial impacts, $M Expense impact 2019 OPEB Segment pension $45 Total Segment OPEB 5 U.S. $0.9B $0.9 Pension Corporate pension & OPEB 5 U.S. Total $1.1 Total adj. EBITD
Slide 32: Investments summary
Investments summary Investments listing and income statement location Ow nership Carrying Value as of Incom e Statement Location of Investee Country Nature of Investment4 Interest September 30, 2019 Equity Earnings ELYSISTM Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Alum
Slide 33: Rigorous standard in place to manage tailings and residue
Rigorous standard in place to manage tailings and residue Industry leading standard established over 25 years ago; continuously improved and updated Robust management process Inventory of tailings dams & residue storage ▪ Governance structure with global oversight and clearly ▪ No Alcoa operated ups
Slide 34: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of September 30, 2019 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2018 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australi
Slide 35: Valuation framework
Valuation framework LTM ending Valuation framework key considerations 9/30/2019 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 $482M Transformation + Alumina ii. Ownership in certain mines and
Slide 36: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q18 2Q18 3Q18 4Q18 FY18 1Q19 2Q19 3Q19 LTM Net income (loss) attributable to Alcoa $195 $10 $(6) $51 $250 $(199) $(402) $(221) $(771) Corporation Add: Net income attributable to noncontrolling interest 145 121 201 176 643 141 109 74 500 Provision for income taxes 1
Slide 37: Special items detail, net of tax and noncontrolling interest
Special items detail, net of tax and noncontrolling interest $M 3Q18 2Q19 3Q19 Income statement classification Special items $160 $400 $139 USW master agreement negotiation - 5 2 Cost of goods sold Bécancour lockout and restart costs 2 2 9 Cost of goods sold Warrick smelter restart costs 1 - - Cost
Slide 38: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 1Q18 2Q181 3Q18 4Q18 1Q19 2Q19 3Q19 Cash from operations $55 $(430) $288 $535 $168 $82 $174 Capital expenditures (74) (95) (82) (148) (69) (89) (87) Free cash flow (19) (525) 206 387 99 (7) 87 Contributions from noncontrolling interest 53 56 - 40 20 1 20 Distribution
Slide 39: Net Debt reconciliation
Net Debt reconciliation 1Q19 2Q19 3Q19 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $- $- $- Long-term debt due within one year 1 - 1 1 - 1 1 - 1 Long-term debt, less amount due within one year 1,802 34 1,768 1,804 34 1,770 1,805 34 1,7
Slide 40: Days Working Capital
Days Working Capital $M 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 Receivables from customers $840 $811 $814 $1,025 $1,017 $830 $758 $684 $596 Add: Inventories 1,494 1,599 1,855 1,772 1,819 1,819 1,799 1,767 1,649 Less: Accounts payable, trade 1,618 1,898 1,813 1,752 1,711 1,663 1,503 1,523 1,418
Slide 41: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 2018 YTD 2019 YTD (PBT + net interest 3 + special items1) x 4/3 x (1 – fixed tax rate 4) ROC % = X 100 Numerator: ( Total assets – cash5 – current liabilities + short-term debt) Net income (loss) attributable to Alcoa C
Slide 42: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FY ## Twelv e months ending December 31 1H## Six months ending June 30 GAAP Accounting principles generally accepted in the United States of America 1Q## Three month
Slide 43: The Element of Possibility
The Element of Possibility”