Alcoa Corporation · NYSE:AA
Alcoa — 11th Annual Deutsche Bank Global Industrials & Materials Summit (June 2020)
44 slides from Alcoa's conference presentation, Jun 8, 2020
Slide 1: Investor Presentation June 2020
Investor Presentation June 2020
Slide 2: Important information
Important information Cautionary statement regarding forward-looking statements This presentation may contain 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
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: Alcoa: A global values-driven enterprise
Alcoa: A global values-driven enterprise Global operations by business segment Iceland: Norway: Canada: United States: Spain: Saudi Arabia: Guinea: Brazil: Australia: Bauxite Alumina Aluminum 4
Slide 5: China aluminum market first to recover in April/May
China aluminum market first to recover in April/May 2020 market dynamics Alumina Aluminum FOB WA Shanxi LME SHFE 340 2,200 2,068 311 2,100 320 2,000 300 1,900 1,876 275 1,772 280 277 1,800 1,700 260 252 1,600 240 1,512 1,500 220 1,400 1/1/20 2/1/20 3/1/20 4/1/20 5/1/20 6/1/20 1/1/20 2/1/20 3/1/20 4/
Slide 6: Continued action to maintain safe and stable operations
Continued action to maintain safe and stable operations COVID-19 Alcoa impacts and actions Countries with Alcoa operations COVID cases Alcoa operational and commercial impacts Most countries show declining or flattening new All bauxite mines, alumina refineries, and aluminum confirmed COVID-19 cases
Slide 7: Acted early, targeting ~$900 million of FY20 cash levers
Acted early, targeting ~$900 million of FY20 cash levers Key strategic actions, 2020 programs, COVID-19 response New operating model: Creating a leaner, more integrated, operator-centric Alcoa Non-core asset sales: Generating additional cash through non-core asset sales Key strategic § Gum Springs t
Slide 8: Market resilience through early action and shared values
Market resilience through early action and shared values Key takeaways • Care and safety Protecting our employees and our operations throughout the COVID-19 pandemic Drive results and • Early action Prepared and well positioned through deliver returns to strengthened balance sheet and stockholders o
Slide 9: The Element of Possibility
The Element of Possibility” $
Slide 10: With large currency moves, revaluations can have impacts
With large currency moves, revaluations can have impacts Currency EBITDA sensitivities and balance sheet revaluation impacts ($M) Balance sheet EBITDA revaluation impact Currency annual sensitivity and EBITDA impact +0.01 +0.10 +0.01 +0.01 + 10 +0.10 AUD BRL CAD EUR ISK NOK Total AUD BRL CAD EUR ISK
Slide 11: 1Q20 Financial Results, Other Information and Appendix
1Q19 Financial Results, Other Information and Appendix as presented on April 22, 2020
Slide 12: Revenues, Adjusted EBITDA, reflect softer market
Revenues, Adjusted EBITDA, reflect softer market Quarterly income statement highlights Prior year Sequential M, Except realized prices and per share amounts 1Q19 4Q19 1Q20 change change Income statement highlights Revenue $2,719 $2,436 $2,381 $(338) $(55) Restructuring and other charges, net $113 $3
Slide 13: Seasonality and market prices impact Adjusted EBITDA
Seasonality and market prices impact Adjusted EBITDA Adjusted EBITDA excluding special items sequential changes, $M 64 12 12 4Q19 1Q20 Change (29) 346 (14) (18) Bauxite $132 $120 $(12) (17) 321 (21) (14) Alumina 133 193 60 Aluminum 75 62 (13) Segment total 340 375 35 Transformation (6) (16) (10) Int
Slide 14: Maintaining focus on balance sheet, cash balance $0.8B
Maintaining focus on balance sheet, cash balance $0.8B Key financial metrics and YTD cash flow information Key financial metrics YTD Cash flow information, $B $0.57 1Q20 Days 1Q20 $0.52 $0.03 Environmental/ARO working capital Return on equity $0.03 Net distributions to NCI $0.04 Restructuring 31 Day
Slide 15: Pension/OPEB impacts mixed, cash funding flexibility
Pension/OPEB impacts mixed, cash funding flexibility Pension/OPEB balance sheet and cash funding considerations as of March 31, 2020 Pension/OPEB balance sheet impact Pension/OPEB cash funding impact § Remeasurement of assets and liabilities occurs at § U.S. pension cash funding requirements are bas
Slide 16: Strong debt profile and cash position; significant levers
Strong debt profile and cash position; significant levers Liquidity, cash, and financial strengthening during COVID-19 pandemic Debt maturities and available credit Cash position and levers Debt maturities ($M) § Cash on hand at March 31, 2020 of $829 million $800 750 § Targeting additional cash fro
Slide 17: Cash actions total ~$900 million
Cash actions total ~$900 million Impacts of announced FY20 actions, before tax and noncontrolling interest, $M Cash actions Run rate One time Deferral FY20 Key strategic actions New operating model 60 45 Non-core asset sales 200 200 Portfolio review 35-100 (25) 10-75 2020 programs Leaner working cap
Slide 18: 2020 Outlook
2020 Outlook FY20 Key metrics Income statement excl. special items impacts Cash flow impacts 1Q20 Actual FY20 Outlook 1Q20 Actual FY20 Outlook Bauxite shipments (Mdmt) 11.9 48.0 – 49.0 Minimum required pension/all OPEB funding $72M ~ $180M Alumina shipments (Mmt) 3.4 13.6 – 13.7 Additional pension f
Slide 19: Appendix
Appendix
Slide 20: Continuing improvement actions during uncertain times
Continuing improvement actions during uncertain times 1Q20 Financial results and business review § Net income of $80 million, or $0.43 per share; excluding special items, 1Q20 adjusted net loss of $42 million, or $0.23 per share Financial results § Adjusted EBITDA excluding special items of $321 mil
Slide 21: Quarterly income statement
Quarterly income statement Quarterly income statement Prior Year Sequential M, Except realized prices and per share amounts 1Q19 4Q19 1Q20 Change Change Realized primary aluminum price ($/mt) $2,219 $2,042 $1,988 $(231) $(54) Realized alumina price ($/mt) $385 $291 $299 $(86) $8 Revenue $2,719 $2,43
Slide 22: Special items
Special items Breakdown of special items by income statement classification – gross basis M, Except per share amounts 1Q19 4Q19 1Q20 Description of significant 1Q20 special items Net (loss) income attributable to Alcoa Corporation $(199) $(303) $80 Diluted (loss) earnings per share $(1.07) $(1.63) $
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 1Q19 4Q19 1Q20 Change Change Realized primary aluminum price ($/mt) $2,219 $2,042 $1,988 $(231) $(54) Realized alumina price ($/
Slide 24: Strengthening the Company, 2017-2019
Strengthening the Company, 2017-2019 Key actions 2017 – 2018 2019 § Revitalized safety program; zero fatalities in 2018 § Continued solid safety performance; zero fatalities § Restarted Portland smelter and Lake Charles calciner § Set annual and quarterly production records § Streamlined business un
Slide 25: 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 ~$350 million, return seeking capital of ~$25 Capital expenditures to sustain and improve operations
Slide 26: 1Q20 Financial summary
1Q20 Financial summary Three months ending March 31, 2020, excluding special items Intersegment Other Alcoa $M Bauxite Alumina Aluminum3,4 Transformation eliminations corporate Corporation Total revenue $306 $1,043 $1,601 $5 $(574) - $2,381 Third-party revenue $71 $707 $1,598 $5 - - $2,381 Adjusted
Slide 27: 1Q20 Adjusted EBITDA drivers by segment
1Q20 Adjusted EBITDA drivers by segment Adjusted EBITDA excl. special items sequential changes by segment, $M Adj. Adj. EBITDA Metal Raw Production EBITDA Segment 4Q19 Currency prices API materials Energy Price/mix Volume costs Other 1Q20 Bauxite $132 7 0 0 0 0 (5) (4) (2) (8) $120 Alumina $133 48 0
Slide 28: Aluminum value chain
Aluminum value chain 1Q20 Alcoa product shipments by segment, Mmt Bauxite Alumina Aluminum 11.9 Mdmt shipments 3.4 Mmt shipments 0.7 Mmt shipments Third Party Intercompany 0% 12% Intercompany 31% 69% Third Party 88% 100% Intercompany Third Party 28
Slide 29: Composition of alumina and aluminum production costs
Composition of alumina and aluminum production costs Alcoa 1Q20 production cash costs Alumina refining Input Inventory Pricing FY20 Annual Cost Cost Flow Convention Sensitivity Bauxite Caustic Soda 5 - 6 Months Quarterly, Spot $10M per $10/dmt Conversion 36% 34% Natural Gas1 N/A N/A N/A 5% 12% Fuel
Slide 30: 2020 Business information
2020 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 0.661 4.441 1.341 1.101 127.781 9.441 Bauxite (4) 3 Alumina 119 (18) 8 (1)
Slide 31: Additional business considerations
Additional business considerations Items expected to impact adjusted EBITDA for 2Q20 § In the Bauxite segment, Adjusted EBITDA is expected to be ~$10 million lower, primarily due to non-recurrence of an annual sales contract true up § In the Alumina segment, we are expecting lower raw material costs
Slide 32: Pension and OPEB summary
Pension and OPEB summary Net pension and OPEB liability and financial impacts Net liability as of March 31, 20201 Estimated financial impacts, $M OPEB Expense impact 2020 Total Segment pension $50 $0.8B U.S. Segment OPEB 5 $0.8 Pension Corporate pension & OPEB 5 U.S. Total $1.1 Total adj. EBITDA imp
Slide 33: 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, 2020 Equity Earnings ELYSISTM Limited Partnership Canada Aluminum smelting technology 48.235% Ma’aden Aluminium
Slide 34: 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 35: Production and capacity information
Production and capacity information Alcoa Corporation annual consolidated amounts as of March 31, 2020 Bauxite production, Mdmt Alumina refining, kmt Aluminum smelting, kmt 2019 Mine Country Production Facility Country Capacity Curtailed Facility Country Capacity Curtailed Darling Range Australia 34
Slide 36: Valuation framework key considerations
Valuation framework LTM ending Valuation framework key considerations 3/31/2020 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 $498M Transformation + Alumina ii. Ownership in certain mines and
Slide 37: Adjusted EBITDA reconciliation
Adjusted EBITDA reconciliation $M 1Q19 2Q19 3Q19 4Q19 FY19 1Q20 Net (loss) income attributable to Alcoa $(199) $(402) $(221) $(303) $(1,125) $80 Add: Net income (loss) attributable to noncontrolling interest 141 109 74 (52) 272 59 Provision for income taxes 150 116 95 54 415 80 Other expenses (incom
Slide 38: Free Cash Flow reconciliation
Free Cash Flow reconciliation $M 1Q19 2Q19 3Q19 4Q19 1Q20 Cash from (used in) operations $168 $82 $174 $262 $(90) Capital expenditures (69) (89) (87) (134) (91) Free cash flow 99 (7) 87 128 (181) Contributions from noncontrolling interest 20 1 20 10 - Distributions to noncontrolling interest (214) (
Slide 39: Net Debt reconciliation
Net Debt reconciliation 1Q19 4Q19 1Q20 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 1,799 31 1,768 1,801 31 1,7
Slide 40: Days Working Capital
Days Working Capital $M 1Q19 2Q19 3Q19 4Q19 1Q20 Receivables from customers $758 $684 $596 $546 $570 Add: Inventories 1,799 1,767 1,649 1,644 1,509 Less: Accounts payable, trade 1,503 1,523 1,418 1,484 1,276 DWC working capital $1,054 $928 $827 $706 $803 Sales $2,719 $2,711 $2,567 $2,436 $2,381 Numb
Slide 41: Annualized Return on Equity (ROE)
Annualized Return on Equity (ROE) Reconciliation and calculation information $M 1Q19 1Q20 (Net Loss/Income Attributable to Alcoa + Special Items) ROE % = X 100 Numerator: (Total Assets – Total Liabilities – Noncontrolling Interest)2 Net (loss) income attributable to Alcoa Corporation $(199) $80 Add:
Slide 42: Annualized Return on Capital (ROC)
Annualized Return on Capital (ROC) Reconciliation and calculation information $M 1Q19 1Q20 (PBT + net interest3 + special items1) x 4 x (1 – fixed tax rate4) ROC % = X 100 Numerator: (Total assets – cash5 – current liabilities + short-term debt) Net (loss) income attributable to Alcoa Corporation $(
Slide 43: Glossary of terms
Glossary of terms Abbreviations listed in alphanumeric order Abbreviation Description Abbreviation Description % pts Percentage points FY## Twelve months ending December 31 1H## Six months ending June 30 GAAP Accounting principles generally accepted in the United States of America 1Q## Three months
Slide 44: The Element of Possibility
The Element of Possibility” $
Alcoa — 11th Annual Deutsche Bank Global Industrials & Materials Summit (June 2020) on 6ix