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Alcoa Fourth Quarter and Full Year 2013 Business Update

Alcoa Fourth Quarter and Full Year 2013 Business Update



Alcoa’s repositioning is gaining traction and creating value for the future.

Alcoa’s repositioning is gaining traction and creating value for the future.



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    Alcoa Fourth Quarter and Full Year 2013 Business Update Alcoa Fourth Quarter and Full Year 2013 Business Update Document Transcript

    • FOURTH QUARTER AND FULL YEAR 2013 B U S I N E S S U P D AT E O n January 9, 2014 we announced earnings for the fourth quarter and full year 2013. We took decisive actions during the quarter to resolve and put behind us a number of significant legacy matters, clearing the way for our continuing transformation. We delivered on our strategic priorities, repositioning the Company by building out the value-add businesses and lowering the cost base of the upstream businesses. Today, our value-add businesses account for 57% of revenues and 80% of segment profits. Full-year earnings (excluding special items) were strong, up from last year despite lower metal prices. Our repositioning is gaining traction as we delivered against our 2013 financial targets in the face of headwinds. We generated positive free cash flow for the fourth straight year driven by strong execution across all segments. We captured $1.1B of productivity savings year-over-year and hit a record low 20 days working capital in the fourth quarter. Additionally, we have maintained solid liquidity and finished the year with cash of $1.4B, debt of $8.3B, and the lowest year-end net debt level since 2006 of $6.9B. As we look forward to 2014, our innovation and disciplined execution will continue to create value for our shareholders. In the near term, Engineered Products & Solutions (EPS) will grow profitably, Global Rolled Products (GRP) will rebound as auto takes off, and Global Primary Products (GPP) will focus on lowering the cost base and optimizing the portfolio. We fully expect to hit our annual targets as we have done over the last five years. The webcast replay and other relevant earnings materials can be accessed here. For all financial information, presentations, news and other helpful information, please visit our investor website by clicking here. 2013 Overview: Repositioning for the Future SOURCE: JAN. 9, 2014 EARNINGS PRESENTATION Putting Legacy Matters Behind Us • • • • Non-cash Goodwill write-down ($1.7B) for legacy acquisitions in smelting Discrete Tax items ($361M) Legacy Legal matter ($243M) Capital Projects write-off ($13M) Repositioning the Company in the Face of Headwinds Building out Value-Add Businesses & Lowering cost base of our Commodity Businesses Today: Value-add businesses account for 57% of revenues and 80% of segment profits Record downstream results (record 4th quarter; ATOI up 20% YOY) Lower cost position Upstream and nine consecutive quarters of improved performance Improved Productivity across all segments (2013 $1.1B); Record Days Working Capital (4 days lower=$240M) • Strengthening Balance Sheet ($1.4B cash on hand; $8.3B debt; $6.9B net debt, lowest year-end level since 2006) • Investing in the Future (e.g. Automotive, Saudi Arabia JV, Al Lithium) • Annual Earnings Increased (excluding special items) despite lower metal prices • • • • SOURCE: JAN. 9, 2014 EARNINGS PRESENTATION 4Q 2013 Income Statement $ Millions, except aluminum prices and per-share amounts 3rd Party Realized Aluminum Price ($/MT) Revenue Cost of Goods Sold COGS % Revenue Selling, General Administrative, Other SGA % Revenue Other (Income) Expense, Net Goodwill Impairment Charge Restructuring and Other Charges Effective Tax Rate Net (Loss) Income Net (Loss) Income per Diluted Share Income per Diluted Share excl Special Items Prior Year Sequential Change Change 4Q12 3Q13 4Q13 $2,325 $5,898 $4,968 84.2% $277 4.7% ($345) $2,180 $5,765 $4,798 83.2% $248 4.3% ($7) $2,157 $5,585 $4,708 84.3% $255 4.6% ($10) ($168) ($313) ($260) 0.1 % pts. ($22) (0.1 % pts.) $335 ($23) ($180) ($90) 1.1 % pts. $7 0.3 % pts. ($3) - - $1,731 $1,731 $1,731 $60 35.8% $242 $0.21 $0.06 $151 41.3% $24 $0.02 $0.11 FOURTH QUARTER AND FULL YEAR 2013 RESULTS ARE PRELIMINARY AND UNAUDITED. Repositioning gaining traction and creating value for the future Putting legacy matters behind us • Resolution of the Alba matter with the U.S. government • Taking necessary actions on the balance sheet for the smelting business Building out the value-add businesses while lowering the cost base in the commodity businesses • Innovation and share gains drive profitable value-add growth »» EPS: $1.2B incremental revenue ($900M from share gains and innovation) expected by 2016 with EBITDA margins above historical high of 21.5% »» GRP: $1.0B incremental revenue ($900M from share gains and innovation) expected by 2016 with EBITDA/MT at or exceeding average historical high of $344/MT • Lowering the cost base to win in a volatile commodity market »» Moving down the cost curves: 6% points lower for alumina to the 21st percentile by 2016; 5% points lower for aluminum to the 38th percentile by 2016 »» 655kmt currently curtailed and ~180kmt under review in the first half of 2014 Alcoa Advantage and disciplined execution drive profitable growth in 2014 • Capitalizing on historic auto industry shift to lightweight vehicles »» Davenport expansion is ready to roll; completed the first phase of Alcoa’s auto triple play • Continuing to deliver operational performance »» Drive productivity gains of $850M • Investing in the future and actively managing the base »» Build value-add with growth capital of $500M »» Invest in Saudi JV of $125M »» Manage sustaining capital of $750M • Strengthening the balance sheet »» Generate positive free cash flow »» Attain 30%-35% debt-to-capital For further information contact: Kelly Pasterick, Director, Investor Relations 390 Park Avenue New York, NY 10022-4608 Telephone: (212) 836-2674 $380 $320 $229 (15.6%) (51.4 % pts.) (56.9 % pts.) ($2,339) ($2,581) ($2,363) For daily business updates and news, follow ($2.19) ($2.40) ($2.21) @Alcoa on Facebook and Twitter: $0.04 ($0.02) ($0.07) {www.facebook.com/Alcoa {www.twitter.com/Alcoa
    • CAUTIONARY STATEMENT: Forward-Looking Statements This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements. Forward-looking statements include those containing such words as “anticipates,” “estimates,” “expects,” “forecasts,” “intends,” “outlook,” “plans,” “projects,” “should,” “targets,” “will,” or other words of similar meaning. All statements that reflect Alcoa’s expectations, assumptions, or projections about the future other than statements of historical fact are forward-looking statements, including, without limitation, forecasts concerning global demand growth for aluminum, end-market conditions, supply/demand balances, and growth opportunities for aluminum in automotive, aerospace and other applications, trend projections, targeted financial results or operating performance, and statements about Alcoa’s strategies, outlook, and business and financial prospects. Forward-looking statements are subject to a number of known and unknown risks, uncertainties, and other factors and are not guarantees of future performance. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in aluminum industry conditions, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable for primary aluminum, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa, including automotive and commercial transportation, aerospace, building and construction, distribution, packaging, defense, and industrial gas turbine; (d) the impact of changes in foreign currency exchange rates on costs and results, particularly the Australian dollar, Brazilian real, Canadian dollar, euro, and Norwegian kroner; (e) increases in energy costs, including electricity, natural gas, and fuel oil, or the unavailability or interruption of energy supplies; (f) increases in the costs of other raw materials, including calcined petroleum coke, caustic soda, and liquid pitch; (g) Alcoa’s inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations (including moving its alumina refining and aluminum smelting businesses down on the industry cost curves and increasing revenues in its Global Rolled Products and Engineered Products and Solutions segments) anticipated from its restructuring programs and productivity improvement, cash sustainability, and other initiatives; (h) Alcoa’s inability to realize expected benefits, in each case as planned and by targeted completion dates, from sales of non-core assets, or from newly constructed, expanded, or acquired facilities, including facilities supplying auto sheet capacity or aluminum-lithium capacity, or from international joint ventures, including the joint venture in Saudi Arabia; (i) political, economic, and regulatory risks in the countries in which Alcoa operates or sells products, including unfavorable changes in laws and governmental policies, civil unrest, or other events beyond Alcoa’s control; (j) the outcome of contingencies, including legal proceedings, government investigations, and environmental remediation; (k) the business or financial condition of key customers, suppliers, and business partners; (l) adverse changes in tax rates or benefits; (m) adverse changes in discount rates or investment returns on pension assets; (n) the impact of cyber attacks and potential information technology or data security breaches; and (o) the other risk factors summarized in Alcoa’s Form 10-K for the year ended December 31, 2012 and other reports filed with the Securities and Exchange Commission. Alcoa disclaims any obligation to update publicly any forward-looking statements, whether in response to new information, future events or otherwise, except as required by applicable law. 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 U.S. generally accepted accounting principles (GAAP). Certain of these data are considered “non-GAAP financial measures” under SEC rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most directly comparable GAAP financial measures and management’s rationale for the use of the non-GAAP financial measures can be found in the Appendix to this presentation and on our website at www.alcoa.com under the “Invest” section. Any reference during the discussion today to EBITDA means adjusted EBITDA, for which we have provided calculations and reconciliations in the Appendix and on our website. PAGE 2
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