Exhibit 99.2
2nd Quarter 2005 Analyst Conference
July 7, 2005
Forward-Looking Statements
Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Alcoa’s Form 10-K for the year ended December 31, 2004, in addition to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2005 filed with the Securities and Exchange Commission.
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Alain J. P. Belda
Chairman and Chief Executive Officer
1H 2005 Achievements
Financial
Strong earnings Cost control
Record revenue
Debt-to-cap within target range
Operational
Record safety
Targeted restructuring initiated
Smelting capacity restarted
Growth
Alumar, Iceland on schedule Suriname complete, Pinjarra on schedule
Integrating Russia Progress in China
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Top Priorities
Capitalize on the current market environment Strong Aero/Commercial Vehicle recovery Robust upstream markets Strong demand in key geographies
Execute the Productivity Projects Further deploy ABS, focused on margin improvement Capture the restructuring benefits Accelerate global competitive sourcing Integrate Russia
Drive growth beyond 2005 Exploit unmatched growth opportunities across the business portfolio Leverage platforms in Brazil, Russia and China to capture share in growth markets
Maintain balance sheet strength Maintain debt-to-cap within target range Manage working capital Ensure that sustaining capital spend is less than depreciation
Manage for the long term Live our values
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Richard B. Kelson
Executive Vice President and Chief Financial Officer
2nd Quarter Overview
Financial
Income from continuing operations of $0.54/share Revenue up 8% sequentially to $6.8 billion All segments experienced sequential and year ago quarter increases in third party revenue Record high Alumina segment profits 2Q’05 ROC of 11.0%, trailing 4 quarters ROC of 8.3% Debt-to-cap 32.2%, down 110 basis points sequentially
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2nd Quarter Overview
Growth
Integration of recently acquired Russian facilities continues Completed purchase of full ownership in Shanghai rolling mill Progress made in construction of Iceland and Brazil smelter projects Efficiency project at Pinjarra continues and Jamaica expansion underway Aerospace capability expansion
Restructuring
Actions taken to strengthen portfolio
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Safety
LWD Incident Rate
0.6 0.4 0.2 0.0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005YTD 2005 Milestone
0.49 0.46 0.36 0.23 0.18 0.16 0.15 0.12 0.09 0.08 0.075 54 LWD in 133 million hours worked in 2005
Rate (injuries per 200,000 hrs. worked)
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2nd Quarter 2005 Financial Review
In Millions 1Q’05 2Q’05 Fav/(Unfav)
LME 3-Month Average ($/MT) $1,892 $1,797 ($95)
Sales $6,289 $6,763 $474
Cost of Goods Sold $4,981 $5,456 ($475)
% of Sales 79.2% 80.7% (1.5 pts)
SG&A $333 $357 ($24)
% of Sales 5.3% 5.3% 0.0 pts
Restructuring and Other Charges $45 $261 ($216)
Other Income, Net (Gain) ($36) ($347) $311
Effective Tax Rate 37% 9% 28 pts
Minority Interests $60 $60 $0
GAAP Net Income $260 $460 $200
Income (Loss) from Discontinued Operations ($13) ($13) $0
GAAP Income From Continuing Operations $273 $473 $200
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2nd Quarter 2005 Events
Elkem $219 million after-tax gain
Tax Benefits $120 million from the finalization of certain tax reviews and audits
Environmental Reserve $14 million after-tax related to a closed facility
Russia $29 million after-tax due to integration costs, general market softness and the costs to shift to higher-value added products
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2nd Quarter 2005 Events
Restructuring/Impairment charges
After-tax impact of ~$230 million ~50% cash, ~50% non-cash Affects approximately 6,300 personnel
Targeting $150 million in pre-tax savings annually
Key Components Positions Total Charges Pre-tax Savings
Engineered Solutions 3,326 $80 $48 million
Primary Products 258 $73 $21 million
Extrusions & End Prod. 1,018 $45 $35 million
Packaging & Consumer 1,508 $18 $27 million
Corporate 157 $9 $15 million
Flat Rolled Products 78 $5 $4 million
Total 6,345 $230 $150 million
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2nd Quarter 2005 Cash Flow Review
$ In Millions 1Q’05 2Q’05
Net Income 260 460
DD&A 320 317
Change in Working Capital (774) (270)
Other Adjustments (45) (123)
Cash From Operating Activities (239) 384
Dividends to Shareholders (131) (131)
Other Financing Activities 1,000 (437)
Cash From Financing Activities 869 (568)
Capital Expenditures (347) (487)
Acquisitions (434) 0
Other Investing Activities 197 634
Cash From Investing Activities (584) 147
Capital Expenditures $600 $400 $200 $0
1Q’05 2Q’05
Growth projects Non-Growth spend Capex / Depreciation
169% 137% 105% 72% 40% $347
108%
154% $487
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2nd Quarter Market Conditions
Revenue by Market As of 2Q’05
Primary Products 24%
Packaging 25%
Industrial Products 4%
Other (Distr., IGT) 10%
Building & Construction 10%
Commercial Transportation 7%
Automotive 10%
Aerospace 10%
Market Conditions
Change from Change from
2Q’04 1Q’05
Realized Prices
Alumina 11% 4%
Primary 6% -3%
3rd Party Revenue
Aerospace 20% 9%
Automotive -1% 1%
Commercial Transportation 22% 5%
B&C 4% 15%
Industrial Products 19% 7%
Packaging 9% 10%
Note: Packaging includes can sheet
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Alumina
Bauxite mining and alumina refining
Markets
3rd Party Revenue
Intersegment Revenue
Current Business Conditions
Positives
ATOI Performance $ Millions
205 180 155 130 105 80
2Q04 3Q04 4Q04 1Q05 2Q05 ATOI LME
LME $/MT
1950 1850 1750 1650
+14%
+13%
Negatives
Lower LME negatively affects price
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Primary Metals
4.0 million mt of smelting capacity, with 380,000 mt currently idled
Markets
3rd Party Revenue
Intersegment Revenue
Current Business Conditions
Positives
ATOI Performance $ Millions 280 240 200 160 120 80 40 0
2Q 04 3Q 04 4Q04 1Q05 2Q05 ATOI LME
LME $/MT
1950 1850 1750 1650
-19%
-17%
Negatives
Current LME and Midwest premium pricing lower than 2Q’05 average
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Flat Rolled Products
Aluminum sheet and plate for aerospace applications, rigid container sheet for beverage cans, and mill products
Markets
Distribution & Other
Building & Construction
Commercial Vehicle
Aero
Auto
Can Sheet
Current Business Conditions
Positives
Strong aerospace and commercial vehicle demand
*Excludes Russia losses
ATOI Performance $ Millions 100
90 80 70 60 50 40
2Q04 3Q04 4Q04 1Q05 2Q05
ATOI Boxed ATOI includes Russia losses
+54%*
+6%*
86
91
75
70
Negatives
Seasonal shutdowns in key markets Normal summer outages for maintenance and upgrade Softening common alloy market
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Extruded and End Products
Hard- and soft-alloy extrusions, architectural extrusions, and vinyl siding
Markets
Distribution & Other
Auto Aero
Commercial Vehicle
Building & Construction
ATOI Performance $ Millions 30
20 10 0 -10
2Q04 3Q04 4Q04 1Q05 2Q05
ATOI Boxed ATOI includes Russia losses
-13%*
+160%*
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Current Business Conditions
Positives
Strength in aerospace and commercial vehicle markets Seasonal up-turn in building and construction
*Excludes Russia losses
Negatives
European markets remain soft
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Engineered Solutions
Solutions used in the automotive, aerospace, commercial transportation, and industrial markets
Markets
Industrial & Other
IGT
Commercial Vehicle
Aero
Auto
Current Business Conditions
Positives
Strength in aerospace and commercial vehicle markets
*Excludes Russia losses
Negatives
Automotive OEM shutdowns in North America and Europe
$ Millions 70
60 50 40 30
2Q04 3Q04 4Q04 1Q05 2Q05
ATOI Boxed ATOI includes Russia losses
ATOI Performance
-10%*
+5%*
59 59
62 60
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Packaging & Consumer
Consumer products, closures, food packaging, flexible packaging, and packaging graphics design
Markets
Flexible Packaging & Other
Consumer Products
Food Packaging
Closures
Current Business Conditions
Positives
Strong overall consumer demand
ATOI Performance $ Millions 60
50 40 30 20 10 0
-13%
+114%
2Q04 3Q04 4Q04 1Q05 2Q05
Negatives
Record high oil prices maintaining high resin costs
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Outlook Summary
3Q ‘05 Outlook
Positives
Aerospace and commercial vehicle markets are strong
Seasonal upswing in building and construction
Focus of cost reduction and productivity programs
Negatives
Current metal prices lower than 2Q’05 average
Seasonal shutdowns and maintenance outages
Continued Russia integration costs
European softness
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For Additional Information, contact:
William F. Oplinger Director, Investor Relations
Alcoa
390 Park Avenue
New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com
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Appendix
Reconciliation of Return on Capital
In Millions 2Q’05 Bloomberg Method 2Q’05 Annlzd 1Q’05 Bloomberg Method 1Q’05 Annlzd 4Q’04 Bloomberg Method 4Q’04 Annlzd 3Q’04 Bloomberg Method 3Q’04 Annlzd 2Q’04 Bloomberg Method 2Q’04 Annlzd
Net Income $1,271 $1,840 $1,215 $1,040 $1,310 $1,072 $1,333 $1,132 $1,330 $1,616
Minority Interest $239 $240 $252 $240 $242 $192 $238 $288 $220 $296
Interest
Expense $234 $313 $206 $198 $201 $240 $198 $192 $207 $200
(After-tax)
Numerator
(Sum Total) $1,744 $2,393 $1,673 $1,478 $1,753 $1,504 $1,769 $1,612 $1,757 $2,112
ST Borrowings $981 $1,710 $1,269 $1,482 $767 $753 $370 $547 $332 $540
LT Borrowings $5,922 $5,391 $6,025 $5,307 $6,019 $5,727 $6,883 $6,219 $7,137 $6,556
Preferred Equity $55 $55 $55 $55 $55 $55 $55 $55 $55 $55
Minority Interest $1,253 $1,188 $1,263 $1,293 $1,378 $1,389 $1,321 $1,330 $1,407 $1,328
Common Equity $12,761 $13,325 $12,766 $13,297 $12,633 $12,873 $11,781 $12,360 $11,277 $12,230
Denominator
(Sum Total) $20,971 $21,668 $21,377 $21,432 $20,852 $20,798 $20,410 $20,511 $20,208 $20,709
ROC 8.3% 11.0% 7.8% 6.9% 8.4% 7.2% 8.7% 7.9% 8.7% 10.2%
Notes:
Note: Bloomberg Methodology calculates ROC based on trailing 4 quarters.
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Segment ATOI Reconciliation
In Millions 2Q’05 1Q’05
Flat Rolled Products
ATOI excluding Russia losses $91 $86
Russia losses $21 $11
Segment ATOI $70 $75
Extruded and End Products
ATOI excluding Russia losses $26 $10
Russia losses $6 $0
Segment ATOI $20 $10
Engineered Solutions
ATOI excluding Russia losses $62 $59
Russia losses $2 $0
Segment ATOI $60 $59
(1) Alcoa believes that segment after tax operating income excluding Russia related integration and other losses is a measure that should be presented in addition to segment after tax operating income. The following matters should be considered when evaluating this financial measure:
– |
| Alcoa reviews the operating results of its businesses excluding the impacts of Russia related losses. Excluding the impacts of these losses can provide an additional basis of comparison. Management believes that these losses are not indicative of ongoing operating results. As a result, management believes these losses should be considered in order to compare past, current, and future periods. |
– |
| There can be no assurance that additional Russia related losses will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both after tax operating income as well as after tax operating income excluding Russia related integration and other losses. |
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