Alcoa Corporation · NYSE:AA
Alcoa — BMO 30th Global Metals & Mining Virtual Conference (March 2021)
47 slides from Alcoa's conference presentation, Mar 3, 2021
Slide 1: Alcoa Corporation Investor Presentation
Alcoa Corporation Investor Presentation March 2021
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: A global, values-driven aluminum industry leader
A global, values-driven aluminum industry leader Alcoa global operations by business segment Iceland: Norway: Canada: United States: Spain: Saudi Arabia: Guinea: Brazil: Australia: Bauxite Alumina Aluminum 4
Slide 5: Well positioned across three product segments
Well positioned across three product segments Alcoa portfolio position Bauxite Alumina Aluminum 1st Quartile 1st Quartile 2nd Quartile ▪ World’s second largest miner with ▪ Largest refiner and largest long ▪ Targeting 1st quartile following operations across four continents position, outside of Chin
Slide 6: Aluminum an increasingly attractive solution
Aluminum an increasingly attractive solution Global aluminum trends Aluminum integral in transition to low carbon economy and emerging market development ▪ Lightweight, durable and ▪ Aluminum intensity to grow infinitely recyclable in all passenger vehicle Aluminum semis consumption (Mmt) 2020 categ
Slide 7: Alcoa well-positioned if carbon price shifts up cost curves
Alcoa well-positioned if carbon price shifts up cost curves 2021 Global cost curve sensitivity to $50/Mt1 CO2e and sites ranked by CO2e intensity Aluminum Alumina Cost curve impact from global carbon pricing ($/mt aluminum) Cost curve impact from global carbon pricing ($/mt alumina) 3,500 600 3,000
Slide 8: Many key strategic actions completed, others progressing
Many key strategic actions completed, others progressing Key strategic actions achievements and timeline Completed Completed Ongoing New operating model Non-core asset sales Asset portfolio review ▪ Redesigned and ▪ Targeted $500 million to ▪ Complete Portland power negotiations simplified organizat
Slide 9: Delivering a stronger Company amidst industry gains
Delivering a stronger Company amidst industry gains Key takeaways ▪ Market dynamics improving Expecting benefit from supply shifts and aluminum demand growth, especially in emerging markets ▪ Focusing on actions Implementing key strategic actions to improve operationally and financially ▪ Positionin
Slide 10: Appendix I
Appendix I
Slide 11: 2020 Debt issue and stable conditions provide liquidity
2020 Debt issue and stable conditions provide liquidity Liquidity position and business considerations Cash balance and maturity profile ($M) Cash and liquidity considerations On July 13, 2020 issued $750 million aggregate principal amount of 5.5% senior notes due 2027 1,607 ▪ Rationale at time of i
Slide 12: Appendix II: 4Q20 Financial Results and Other Information
Appendix II: 4Q20 Financial Results and Other Information as presented on January 20, 2021
Slide 13: 4Q20 Results improve sequentially and year over year
4Q20 Results improve sequentially and year over year Income statement highlights M, Except per share amounts 4Q19 3Q20 4Q20 FY19 FY20 Income statement highlights Revenue $2,436 $2,365 $2,392 $10,433 $9,286 Restructuring and other charges, net $363 $5 $60 $1,031 $104 Provision for income taxes $54 $4
Slide 14: Higher metal and alumina prices drive EBITDA increase
Higher metal and alumina prices drive EBITDA increase Adjusted EBITDA excluding special items sequential changes, $M 30 54 361 90 (3) 3Q20 4Q20 Change (20) (13) (7) Bauxite $124 $120 $(4) 284 (26) Alumina 119 97 (22) (28) Aluminum 116 181 65 Segment total 359 398 39 Transformation (11) (8) 3 Interse
Slide 15: $1.6 billion cash after $250 million U.S. pension funding
$1.6 billion cash after $250 million U.S. pension funding Quarterly cash comparison and cash flow information Quarter ending cash balance, $M YTD Cash flow information, $M $2,248 +$728 $1,736 $1,607 Debt issuance $736 proceeds (net) $736 Debt issuance $1,520 Other $736 proceeds (net) Change in $67 $
Slide 16: Capital allocation framework directs uses of excess cash
Capital allocation framework directs uses of excess cash Capital allocation framework and considerations Maintain liquidity throughout the cycle ▪ $1 billion target for minimum cash balance; $1.6 billion as of December 31 ▪ Sustaining capital expenditures of ~$375 million, return seeking capital of
Slide 17: Pension/OPEB net liability $2.4 billion, DWC 4 days better
Pension/OPEB net liability $2.4 billion, DWC 4 days better Key financial metrics and pension/OPEB update Key financial metrics Pension/OPEB update, $ billion Pension OPEB FY20 Days FY20 Return on equity working capital (DWC) 0.6 0.0 $2.41 $2.3 23 Days (5.9)% (0.4) 1.5 (0.1) 1.5 FY20 Capital Proporti
Slide 18: Successful cash actions, solid progress on strategic actions
Successful cash actions, solid progress on strategic actions Impacts of cash actions, before tax and noncontrolling interest, $M Cash actions compared to FY19 baseline New operating model: Leaner, more integrated, operator-centric FY20 Target FY20 Actual organization; achieved run-rate savings of ~$
Slide 19: 2021 Outlook
2021 Outlook FY20 and FY21 Key metrics Income statement excl. special items impacts Cash flow impacts FY20 Actual FY21 Outlook FY20 Actual FY21 Outlook Bauxite shipments (Mdmt) 48.7 49.0 – 50.0 Pension / OPEB funding $436M ~ $315M Alumina shipments (Mmt) 13.9 13.9 – 14.0 Discretionary debt repayment
Slide 20: Strengthening the Company, 2017-2020
Strengthening the Company, 2017-2020 Multi-year strategy to remain competitive in a quickly evolving market 2017 – 2019 2020 Operating Safely and Optimizing and Reshaping ▪ Continued safety focus; comprehensive preparedness and Efficiently the Portfolio response plan maintained across all locations
Slide 21: Quarterly income statement
Quarterly income statement Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 4Q19 3Q20 4Q20 Change Change Realized primary aluminum price ($/mt) $2,042 $1,904 $2,094 $52 $190 Realized alumina price ($/mt) $291 $274 $268 $(23) $(6) Revenue $2,436 $2,365
Slide 22: Special items
Special items Breakdown of special items by income statement classification – gross basis M, Except per share amounts 4Q19 3Q20 4Q20 Description of significant 4Q20 special items Net loss attributable to Alcoa Corporation $(303) $(49) $(4) Diluted loss per share $(1.63) ($0.26) ($0.02) Special items
Slide 23: Quarterly income statement excluding special items
Quarterly income statement excluding special items Quarterly income statement excluding special items Prior Year Sequential M, Except realized prices and per share amounts 4Q19 3Q20 4Q20 Change Change Realized primary aluminum price ($/mt) $2,042 $1,904 $2,094 $52 $190 Realized alumina price ($/mt)
Slide 24: 4Q20 Financial summary
4Q20 Financial summary Three months ending December 31, 2020, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $304 $934 $1,690 $4 $(544) $4 $2,392 Third-party revenue $79 $620 $1,685 $4 - $4 $2,392 Adjust
Slide 25: 4Q20 Adjusted EBITDA drivers by segment
4Q20 Adjusted EBITDA drivers by segment Adjusted EBITDA excluding special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 3Q20 Currency prices API materials Energy Price/mix Volume costs Other 4Q20 Bauxite $124 (4) 0 0 0 0 (12) (6) (3) 21 $120 Alumina $11
Slide 26: Income statement information
Income statement information FY19 and FY20 Annual income statement FY19 FY20 Adjusted excl. Adjusted excl. M, Except realized prices and per share amounts Reported Special items special items Reported Special items special items Realized primary aluminum price ($/mt) $2,141 $2,141 $1,915 $1,915 Real
Slide 27: FY20 Financial information
FY20 Financial information FY20 Highlights and annual change impacts Full year financial highlights Adjusted EBITDA excl. special items bridge, $M FY20 vs. FY19 Realized primary aluminum price ($/mt) $1,915 $(226) 118 $1,656 Realized alumina price ($/mt) $273 $(70) (318) Revenue, $M $9,286 $(1,147)
Slide 28: Aluminum value chain
Aluminum value chain FY20 Alcoa product shipments by segment Bauxite Alumina Aluminum 48.7 Mdmt shipments 13.9 Mmt shipments 3.0 Mmt shipments Third Party Intersegment 0% 13% Intersegment 31% 69% 87% Third Party 100% Intersegment Third Party 28
Slide 29: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 4Q20 production cash costs Alumina refining Input Inventory Pricing FY21 Annual Cost Cost Flow Convention Sensitivity Bauxite Caustic Soda 5 - 6 Months Quarterly, Spot $10M per $10/dmt Conversion 35% 32% Quarterly, 85% with Natural Gas 1 Mon
Slide 30: 2021 Business information
2021 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 + $100/mt 0.731 5.401 1.311 1.191 134.721 9.051 Bauxite (4) 2 Alumina 120 (16) 4 (1)
Slide 31: Currency impacts on Adjusted EBITDA
Currency impacts on Adjusted EBITDA Currency balance sheet revaluation and EBITDA sensitivities ($M, except currencies) Balance sheet revaluation impact Currency annual sensitivity and actual impact +0.01 +0.10 +0.01 +0.01 + 10 +0.10 AUD BRL CAD EUR ISK NOK Total AUD BRL CAD EUR ISK NOK Total 12/31/
Slide 32: Additional business considerations
Additional business considerations Items expected to impact Adjusted EBITDA for 1Q21 ▪ Sequentially, Adjusted EBITDA in the Bauxite segment is expected to be ~$45 million lower due to lower internal bauxite pricing, and an additional $25 million lower due to lower earnings from minority owned mines
Slide 33: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of December 31, 20201 Estimated financial impacts, $M OPEB Expense impact 2021 Total Segment pension $20 $0.9B2 U.S. Pension Segment OPEB 5 $0.9 U.S. Total Corporate pension & OPEB - $1.1 $1.5B Total adj.
Slide 34: 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 December 30, 2020 Equity Earnings ELYSISTM Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Alumini
Slide 35: Alcoa sustainability goals
Alcoa sustainability goals Alcoa strategic long-term goals from 2019 Sustainability Report Zero fatalities and serious injuries (life- From a 2015 baseline, reduce landfilled Safety threatening, life-altering injury or illness) Waste waste 15% by 2025 and 25% by 2030 From a 2015 baseline, reduce the
Slide 36: Rigorous standard in place to manage tailings and residue
Rigorous standard in place to manage tailings and residue Tailings and residue impoundments management process and inventory Robust and ongoing management process Inventory of tailings dams & residue storage1 ▪ Established industry-leading standards over 25 years ago; ▪ No Alcoa operated upstream ba
Slide 37: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of December 31, 2020 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2020 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia
Slide 38: Valuation framework
Valuation framework FY20 Valuation framework key considerations 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 $495M Transformation + Alumina ii. Ownership in certain mines and refineries outsi
Slide 39: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20 4Q20 FY20 Net (loss) income attributable to Alcoa $(199) $(402) $(221) $(303) $(1,125) $80 $(197) $(49) $(4) ($170) Add: Net income (loss) attributable to 141 109 74 (52) 272 59 47 29 21 156 noncontrolling interest Provision f
Slide 40: Operational tax reconciliation
Operational tax reconciliation $M 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 2Q20 3Q20 4Q20 FY20 Provision for income taxes $150 $116 $95 $54 $415 $80 $45 $42 $20 $187 Tax on special items 1 10 12 9 32 8 1 3 1 13 Discrete tax items - (1) (8) (2) (11) (1) - 2 25 26 Interim tax impacts1 (34) (31) 40 25 - (21) (142
Slide 41: Free cash flow reconciliation
Free cash flow reconciliation $M 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Cash provided from (used for) operations $168 $82 $174 $262 $(90) $288 $158 $38 Capital expenditures (69) (89) (87) (134) (91) (77) (74) (111) Free cash flow 99 (7) 87 128 (181) 211 84 (73) Contributions from noncontrolling int
Slide 42: Net Debt reconciliation
Net Debt reconciliation FY18 FY19 FY20 Alcoa Alcoa Alcoa $M Cons. NCI Prop. Cons. NCI Prop. Cons. NCI Prop. Short-term borrowings $- $- $- $- $- $- $77 $31 $46 Long-term debt due within one year 1 - 1 1 - 1 2 - 2 Long-term debt, less amount due within one year 1,801 34 1,767 1,799 31 1,768 2,463 - 2
Slide 43: Days Working Capital
Days Working Capital $M 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 Receivables from customers $758 $684 $596 $546 $570 $402 $516 $471 Add: Inventories 1,799 1,767 1,649 1,644 1,509 1,419 1,398 1,398 Add: Net DWC working capital held for sale2 ̶ ̶ ̶ ̶ ̶ ̶ ̶ 129 Less: Accounts payable, trade 1,503 1,523
Slide 44: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) Reconciliation and calculation information $M 2019 2020 (Net Loss/Income Attributable to Alcoa + Special Items) ROE % = X 100 Numerator: (Total Assets – Total Liabilities – Noncontrolling Interest)2 Net loss attributable to Alcoa Corporation $(1,125) $(170) Add: Spe
Slide 45: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 2019 2020 (PBT + net interest3 + special items1) x (1 – fixed tax rate4) ROC % = X 100 Numerator: (Total assets – cash5 – current liabilities + short-term debt) Net loss attributable to Alcoa Corporation $(1,125) $(170)
Slide 46: 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
Slide 47: The Element of Possibility
The Element of Possibility” $
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