![]() Exhibit 99.2 [Alcoa logo] 4th Quarter 2005 Analyst Conference January 9, 2006 |
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 and Form 10-Q for the quarter ended September 30, 2005 filed with the Securities and Exchange Commission. Forward-Looking Statements |
![]() [Alcoa logo] Joseph Muscari Executive Vice President Chief Financial Officer |
![]() 4Q Summary Business Fundamentals Continued strong aluminum demand Tight aluminum markets driving LME prices Strength in aerospace and commercial vehicle markets Seasonal weakness in automotive, B&C and can sheet High raw material and energy costs 4Q Financial Performance Total revenues up 2% to $6.7 billion Income from continuing ops of $210 million, including $93 million of significant items Strong upstream performance; Alumina ATOI up 17%, Primary ATOI up 44% Cash from operations of $1 billion; FY05 at $1.7 billion Debt to capital at 30.8%, down 0.7 percentage points Growth Initiatives Alumar online Guinea MOU signed Pinjarra upgrade on schedule Operational Excellence Refining production getting back on track – December best month on record 220” mill production at Davenport best quarter on record Leading safety performance |
![]() 4 Quarter Market Conditions Revenue Changes by Market Packaging 24% Primary Products 28% Automotive 10% Building & Construction 9% Aerospace 11% Other (Distr., IGT) 8% Commercial Transportation 6% Industrial Products 4% Revenue by Market 4Q’05 Note: Packaging includes can sheet 4Q'04 3Q'05 3rd Party Realized Prices Alumina 12% 6% Aluminum 12% 11% 3rd Party Revenue Aerospace 25% 7% Automotive 0% 1% Commercial Transportation 9% -2% B&C 3% -10% Industrial Products 10% -2% Packaging 8% 2% th |
![]() Safety Lost Work Days Total Recordables 82% 18% 44% 56% Zero Incident Locations 428 Locations 129,000 Employees 351 77 0 5 0 1 0 0 1 5 0 2 0 0 2 5 0 3 0 0 3 5 0 4 0 0 N o L W D L W D # of Locations 190 238 0 5 0 1 0 0 1 5 0 2 0 0 2 5 0 3 0 0 3 5 0 4 0 0 N o T R R T R R # of Locations |
![]() Growth Upstream First production from Alumar smelter expansion Guinea alumina refinery MOU signed Rockdale power station LOI signed Juruti bauxite mine environmental license granted Downstream Bohai JV formed with Alcoa management Began construction of new coating line for Architectural products Initiated modernization project in Hungary Two Fasteners facilities in China on schedule Took full ownership of Tianjin Closures joint venture |
![]() Product Development Simultaneous multi alloy casting – construction started on pilot facility in Amorebieta Hurricane impact resistant aluminum composite building panel DuraBright in other commercial vehicle components A range of fasteners that are applicable to composite structures have been developed and specified Aluminum bottles Packaging Developments: Vino-Lok; Slow Cooker Liner; Reynolds FunShapes |
![]() Operational Excellence Davenport 220" hot mill had record production in the 4th quarter New annual production records where set in 6 of our 9 refineries Australian refining system had record production in the 4th quarter. AFL operational issues improving Brazil FRP production records |
![]() Portfolio Management Completed sale of Southern Graphic Systems Eastalco smelter curtailed Reorganized Extrusion Businesses Hard Alloy, Rod & Bar: Linked to Mill Products to better serve aerospace and industrial markets Soft Alloy: Global organization with new leader to leverage best practices and exploit advantage of individual facilities |
![]() Financial Income from continuing operations of $210 million, or $0.24 per share, includes items totaling negative $93 million, or $0.11 per share Cash from operations in the quarter of $1 billion Debt-to-cap reduced to 30.8% Revenue up 12% year over year and 2% sequentially 2005 ROC of 8.3%; ROC excluding growth investments of 9.5%. 4 Quarter Financial Overview th |
![]() 4 Quarter 2005 Financial Review In Millions 3Q'05 4Q'05 Fav/(Unfav) Sales $6,566 $6,669 $103 Cost of Goods Sold $5,405 $5,459 ($54) % of Sales 82.3% 81.9% 0.4 pts SG&A $317 $362 ($45) % of Sales 4.8% 5.4% (0.6 pts) Restructuring and Other Charges $7 $27 ($20) Interest Expense $96 $78 $18 Other Income, Net (Gain) ($92) ($5) ($87) Effective Tax Rate 24.2% 24.0% (0.2 pts) Minority Interests $59 $80 ($21) GAAP Net Income $289 $224 ($65) (Loss) Income from Discontinued Operations ($1) $16 $17 Cumulative effect of Accounting Change ($2) GAAP Income From Continuing Operations $290 $210 ($80) th |
![]() 4 Quarter 2005 Significant Items $22 million Mark-to-Market $55 million Hurricanes & Business interruptions ($17 million) Power and other credits $93 million Total Net after-tax impact Item $14 million Russia $19 million Restructuring th |
![]() 4 Quarter 2005 Cash Flow Review $ In Millions 3Q'05 4Q'05 Net Income 289 224 DD&A 322 317 Change in Working Capital 240 479 Other Adjustments 6 38 Pension Contribution (364) (19) Cash From Operating Activities 493 1,039 Dividends to Shareholders (131) Other Financing Activities (52) (312) Cash From Financing Activities (183) (443) Capital Expenditures (542) (762) Acquisitions/Divestitures 90 410 Other Investing Activities 208 (2) Cash From Investing Activities (244) (354) $762* $542* $0 $200 $400 $600 $800 3Q'05 4Q'05 Non-Growth spend Growth projects Capital Expenditures *Total capital expenditures for the period th |
![]() Revenue and ATOI Performance 0 200 400 600 800 0 2,500 5,000 7,500 ATOI Revenue Historical Performance of Combined Segments ($million) Total ATOI is defined as sum of 3 party and intersegment ATOI. rd |
![]() 3,100 3,200 3,300 3,400 3,500 3,600 3,700 3,800 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% 160% Production CAP Index Realized Price Index Alumina 4Q vs 4Q 3Q vs 4Q 4Q’05 3% 17% 183 ATOI ($MM) 5% 6% 561 3 Party Sales ($MM) 2% 0% 3,706 Production (kmt) 12% 6% $248 3 Party Price (11%) (3%) 1,966 3 Party Shipmts (kmt) 4Q Highlights 4 Quarter Dynamics Alumina markets remain tight on strong global demand High raw material and energy costs 1Q’06 Outlook High prices on quarter lag Production improving Energy costs dependent on natural gas Input cost inflation slowing Production & Cost Trends CAP Index; Q4’05 = 100% Third Party Realized Price Index; Q1’03 = 100% rd rd rd th |
![]() 760 780 800 820 840 860 880 900 920 1Q03 3Q03 1Q04 3Q04 1Q05 3Q05 60% 70% 80% 90% 100% 110% 120% 130% 140% 150% Production CAP Index Realized Price Index Primary Metals 4Q vs 4Q 3Q vs 4Q 4Q’05 22% 44% 242 ATOI ($MM) 23% 6% 1,281 3 Party Sales ($MM) 9% 0% 900 Production (kmt) 12% 11% $2,177 3 Party Price 16% (6%) 557 3 Party Shipmts (kmt) 4 Quarter Dynamics Demand driving higher prices Demand for higher value products sustaining premiums 1Q’06 Outlook January sales on 30 day lag at a record $2,247/mt Alumar ramping up more than offset by idling of Eastalco; net 22 kmt decline in production Production & Cost Trends 4Q Highlights CAP Index; Q4’05 = 100% Third Party Realized Price Index; Q1’03 = 100% rd rd rd th |
![]() Flat Rolled Products 4Q vs 4Q 3Q vs 4Q $MM 5% (23%) 62 ATOI (incl. Russia) 16% 4% 1,739 Revenue 4Q Highlights 4 Quarter Dynamics Aerospace markets remain strong Seasonal volume declines in can sheet and automotive Natural gas and chemical coating costs higher on hurricane impact Russia growth costs of $20 million 1Q’06 Outlook Seasonal increase in can sheet and automotive volumes Price pressure in common alloy sheet Reduced Russia costs ATOI Performance 62 Boxed ATOI includes Russia losses 82 59 40 50 60 70 80 90 4Q04 4Q05 $ Millions ATOI Russia th |
![]() Extruded & End Products 4Q vs 4Q 3Q vs 4Q $MM (50%) (113%) (3) ATOI (incl. Russia) 5% (6%) 1,022 Revenue 4Q Highlights 4 Quarter Dynamics Hard alloy extrusions benefit from aerospace demand Steep seasonal volume declines in soft alloy, and building and construction Higher energy costs 1Q’06 Outlook Seasonal increase in automotive and B&C markets ATOI Performance (3) Boxed ATOI includes Russia losses (2) (2) -5.0 -4.0 -3.0 -2.0 -1.0 0.0 4Q04 4Q05 $ Millions ATOI Russia th |
![]() Engineered Solutions 4Q vs 4Q 3Q vs 4Q $MM 10% 41% 45 ATOI (incl. Russia) 10% 2% 1,275 Revenue 4Q Highlights 4 Quarter Dynamics Fasteners and investment castings remain strong on robust aerospace demand Improving performance at AFL Seasonal volume declines in automotive 1Q’06 Outlook Aerospace markets remain strong Further progress at AFL Up-tick in automotive volumes ATOI Performance 45 47 41 Boxed ATOI includes Russia losses 25 30 35 40 45 50 4Q04 4Q05 $ Millions ATOI Russia th |
![]() Packaging & Consumer 4Q vs 4Q 3Q vs 4Q $MM (33%) (29%) 20 ATOI 4% (1%) 798 Revenue 4Q Highlights 4 Quarter Dynamics Resin cost increases outpace ability to pass through on hurricane related shortages 4 quarter peak season for Alcoa Consumer Products Seasonal declines in Closures 1Q’06 Outlook Consumer Products volumes decline following holiday season Sustained high resin prices Higher metal cost will impact Consumer Products, Food Packaging and Flexible Packaging ATOI Performance 0 5 10 15 20 25 30 35 4Q04 4Q05 $ Millions 20 30 th th |
![]() Outlook Summary 1Q‘06 Outlook Positives Negatives Continued strong aluminum demand Aluminum prices strengthened to fifteen year highs Aerospace markets are strong Continued operating improvement Seasonal declines in consumer products and building and construction Continued progress on growth projects: Upstream, Russia, and China |
![]() [Alcoa logo] Alain J. P. Belda Chairman and Chief Executive Officer |
![]() 2005 Review Revenue growth of 13%, or $2.9 billion, over 2004 Income from continuing operations of $1.2 billion Maintained debt-to-cap within target range (30.8% at year-end) ROC excluding growth investments of 9.5% Mitigated significant cost inflation through price, mix and productivity Executed on growth strategy |
![]() 2005 Cost Pressures & Management Actions $630 425 188 69 141 126 34 50 124 410 80 234 433 $500 $1,000 $1,500 External Cost Pressures Income from Continuing Operations ($ millions) Management Actions Management Actions $1,233 $1,377 |
![]() Fundamentally Strong Franchise Target Range (25-35%) * Bloomberg trailing 12 month average Excludes growth investments (CWIP and Russia) for 2003 through 2005 Return on Capital* (%) Debt to Total Capital (%) 2 % 3 % 4 % 5 % 6 % 7 % 8 % 9 % 1 0 % 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 % 2 5 % 3 0 % 3 5 % 4 0 % 4 5 % |
![]() Industry Costs Continue to Escalate Worldwide Aluminum Smelter Cash Costs 2003 - 2005 600 800 1000 1200 1400 1600 1800 2000 2200 2400 0 5000 10000 15000 20000 25000 30000 35000 Worldwide Production - 000 MT $ per MT 2003 Cost Curve 2004 Cost Curve Data : Alcoa, CRU International 2005 Cost Curve |
![]() Upstream Production and Labor Productivity Alumina Production Improvement - Alcoa Share Indexed to 2001 1.0 1.04 1.10 1.14 1.17 2001 2002 2003 2004 2005 Alumina Productivity Improvement Indexed to 2001 1.0 1.07 1.20 1.23 1.21 2001 2002 2003 2004 2005 Smelting Productivity Improvement Indexed to 2001 (Excludes effect of ABI strike) 1.03 1.08 1.11 1.11 1.0 2001 2002 2003 2004 2005 Smelting Production Improvement Indexed to 2001 (Continuously Operating Smelters) 1.0 1.03 1.03 1.04 1.06 2001 2002 2003 2004 2005 Excludes Badin, Eastalco, Intalco, Wenatchee and ABI *Productivity measured by man hours/ton * * |
![]() 2005 Downstream Segment Highlights Engineered Solutions Alcoa Investment Cast and Forged Products—Sales up 16% YOY on strong aerospace demand and market position on key aerospace and IGT programs; operating margin expansion of 26% driven by productivity improvements Fasteners—Sales increased by 10% in 2005. Packaging & Consumer Closures—2005 revenue grew by 11% vs. 2004, with unit volume up by 7%. Increased resin pass through to 90%, up significantly vs. 2004 rate Flat-Rolled Products North American Mill Products—Operating margin was 67% higher due to significant productivity improvements and higher aerospace shipments. Davenport had a record year of plate production. Extruded and End Products Hard Alloy—Aerospace volume grew 10% YOY. |
![]() 2005 estimated consumption 2020 incremental consumption (1) Includes Africa and the Middle East Source: McKinsey Asia Latin America Western Europe North America Eastern Europe, CIS & Other (1) Projected 2020 World Aluminum Consumption (M Tons) Total Strong Consumption Growth Al Consumption vs GDP Per Capita 0 10 20 30 40 50 60 6.7 7.2 13.1 1.1 10.8 11.6 31.6 5.0 3.1 29.5 1.7 0.6 31.1 60.6 18.5 4.4 4.1 1.9 0 10 20 30 40 50 60 10 20 30 40 50 Al Cons (kg/cap) GDP(US$000/cap) Significant Long-Run Growth Potential India China Brazil Mexico Taiwan Australia Venezuela Thailand Italy France Canada UK Germany Indonesia Sweden USA Japan Korea Russia |
![]() 0 1000 2000 3000 4000 5000 Jamalco Alumar Pinjarra Upstream Growth Projects 2005 2006 2007 2008 2009 + Project Year Refining Smelting 11 0 200 400 600 800 Trinidad Iceland Alumar |
![]() Downstream Growth Projects—Flat Rolled Products Other includes: Davenport, Kitts Green, Kofem, Shanghai 0 100 200 300 400 500 600 700 2005 2006 2007 2008 2009+ Bohai Other Russia |
![]() Strategically Managing the Portfolio Divested/Restructured Acquired/Invested Smelting HAW Eastalco Elkem Equity Aluminum Downstream Automotive Castings Cast Auto Wheels Non-aluminum Integris Southern Graphics AFL- telecommunications Other Restructuring 7% headcount reduction Refining Suriname Pinjarra Energy Three Oaks mine, Friendsville mine US hydro, Latin America hydro Warrick power plant Smelting Iceland, Alumar stubline Ghana restart European modernizations Rolling Russia, Bohai, Shanghai, Aerospace |
![]() Priorities in 2006 Managerial Excellence Focus on volume (creep and productivity) and cost via ABS, centralized purchasing, consolidation, LCC Increase overhead productivity while managing overhead expenses through EBS and low-cost country sourcing Focus on product mix, pricing and new product application Actively manage capital expenditures and projects Portfolio Management Monitor progress of underperforming assets and make necessary adjustments Profitable Growth Capitalize on strong markets where we are well positioned Profit from our technology Integrate Russia and China Continue to focus on value-creating organic growth projects |
For Additional Information, Contact: Tony Thene Director, Investor Relations Alcoa 390 Park Avenue New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com |
![]() [Alcoa logo] Appendix |
![]() Reconciliation of Return on Capital FY05 FY04 FY03 Bloomberg Bloomberg Bloomberg In Millions Method Method Method Net Income $1,233 $1,310 $938 Minority Interest $259 $242 $238 Interest Expense $261 $201 $238 (After-tax) Numerator (Sum Total) $1,753 $1,753 $1,414 Average Balances (1) ST Borrowings $1,112 $767 $345 LT Borrowings $5,312 $6,019 $7,529 Preferred Equity $55 $55 $55 Minority Interest $1,391 $1,378 $1,317 Common Equity $13,282 $12,633 $10,946 Denominator (Sum Total) $21,152 $20,852 $20,193 Return on Capital 8.3% 8.4% 7.0% Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. (1) FY05 calculated as (December 2004 ending balance + December 2005 ending balance) divided by 2. |
![]() Reconciliation of Adjusted Return on Capital Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. Return on capital, excluding growth investments, is a non- GAAP financial measure. Management believes that this measure is meaningful to investors because it provides greater insight with respect to the underlying operating performance of the company’s productive assets. The company has significant growth investments underway in its upstream and downstream businesses, as previously noted, with expected completion dates over the next several years. As these investments generally require a period of time before they are productive, management believes that a return on capital measure excluding these growth investments is more representative of current operating performance. (1) FY05 calculated as (December 2004 ending balance + December 2005 ending balance) divided by 2. FY05 FY04 FY03 Bloomberg Bloomberg Bloomberg In Millions Method Method Method Numerator (Sum Total) $1,753 $1,753 $1,414 Russia Net Income Impact $69 $0 $0 Adjusted Net Income $1,822 $1,753 $1,414 Average Balances (1) ST Borrowings $1,112 $767 $345 LT Borrowings $5,312 $6,019 $7,530 Preferred Equity $55 $55 $55 Minority Interest $1,391 $1,378 $1,317 Common Equity $13,282 $12,633 $10,946 Denominator (Sum Total) $21,152 $20,852 $20,193 Capital Projects in Progress & Russia Capital Base ($1,913) ($1,140) ($1,132) Adjusted Capital Base $19,239 $19,712 $19,061 Return on Capital, Excluding Growth Investments 9.5% 8.9% 7.4% |
![]() Segment ATOI Reconciliation In Millions 4Q'05 4Q'04 Flat Rolled Products ATOI excluding Russia losses $82 $59 Russia losses $20 NA Segment ATOI $62 $59 Extrusions and End Products ATOI excluding Russia losses ($2) ($2) Russia losses ($1) NA Segment ATOI ($3) ($2) Engineered Solutions ATOI excluding Russia losses $47 $41 Russia losses $2 NA Segment ATOI $45 $41 Note: 1) Russia losses have been excluded in the segment to exhibit the underlying performance of both the segment and the Russia businesses on a stand alone basis. 2) Alcoa completed acquisition of Russian fabricating facilities on January 31, 2005. |