![]() [Alcoa Logo] 1st Quarter 2006 Analyst Conference April 10, 2006 Exhibit 99.2 |
![]() 2 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, 2005 filed with the Securities and Exchange Commission. Forward-Looking Statements |
![]() ![]() [Alcoa Logo] Alain J. P. Belda Chairman and Chief Executive Officer |
![]() 4 1 Quarter 2006 Highlights Record income from continuing operations of $615m or $0.70 per share Highest quarterly revenues in company history of $7.24b Record profits in the Alumina, Primary Metals and Engineered Solutions segments Q1 annualized ROC of 14.2%, well in excess of cost of capital st |
![]() 5 Safety - 1 Quarter 2006 Lost Work Days Total Recordables 92% 8% 61% 39% Zero Incident Locations 345 31 0 50 100 150 200 250 300 350 400 No LWD LWD # of Locations 231 145 0 50 100 150 200 250 300 350 No TRR TRR # of Locations st |
![]() 6 Operational Excellence Production records set in Alumina Segment Quarterly production record for the refinery system Five refineries achieved quarterly production records Flat-Rolled Products Segment excels Record shipments in the automotive heat exchanger market out of Kofem Record shipments out of Kitts Green Extruded and End Products Segment improves Record production in the Lafayette aerospace flow-path Engineered Solutions Segment has record results Record shipments for Class 8 truck wheels Record productivity in Fasteners Business |
![]() 7 Innovation and New Products Dura-Bright Fuel Tanks: Greater than a $100 million revenue opportunity - to be launched in the next 12 months Smart Box – Power Distribution System: Launch in progress of a new AFL product developed jointly with the customer for efficient automotive power distribution - revenue potential of $45 million Alcoa Spaceframe: Selected for the new Ferrari 599 GTB Fiorano Packaging: Several products in the Packaging and Consumer Segment such as the next generation bottled water closures, Cater- Time platters and Microwave Foam Defense Products: Multiple products for 14 different military platforms being prototyped and tested Process Breakthroughs: Simultaneous Multi Alloy Casting |
![]() 8 Growth, Sustainable Development and Portfolio Management – Alumar smelter expansion completed and fully operational – Mechanical completion of the Pinjarra refinery expansion – Increased our stake in the Estreito hydropower project in Northern Brazil from 19.08% to 25.49% – Signed Agreement in Principle to build a 341,000 mtpy aluminum smelter in Trinidad – Selected to develop and began feasibility studies for a 250,000 mtpy aluminum smelter in North Iceland – Fjardaal, Iceland smelter construction on schedule – Formed aluminum brazing sheet joint venture in China – Published China Sustainability Report |
![]() 9 Global Environment Worldwide Alumina/Aluminum Supply & Demand (200) (400) (1,300) (300) Long / (Short) Alumina 68,300 64,600 61,800 57,300 Demand 68,100 64,200 60,500 57,000 Supply Aluminum (200) (500) 0 (700) Long / (Short) 35,200 33,600 31,700 30,000 Demand 35,000 33,100 31,700 29,300 Supply 2007 2006 2005 2004 000 tons Source: CRU, Metal Bulletin and Alcoa Analysis |
![]() 10 Global Environment Regional Premiums Source: Platts Regional Premiums $25 $45 $65 $85 $105 $125 $145 $165 $185 Prompt Midwest $/mt CIF Japan Duty Paid Europe |
![]() 11 Global Environment Aluminum Inventory History Sources: IAI, LME LME & IAI Stock Implied Days of Global Consumption Consumption February 2006 : 27.7 Days DOWN from 29.9 Days 0 7 14 21 28 35 42 49 56 IAI Global Days of Consumption LME Global Days Consumption 19.2 Days 8.5 Days |
![]() 12 [Alcoa Logo] Joseph Muscari Executive Vice President Chief Financial Officer |
![]() 13 Record income from continuing operations of $615 million ($0.70 per share) was 190% and 129% higher than the previous and prior year quarter respectively Highest quarterly revenues of $7.24 billion – 9% and 16% higher than the previous and prior year quarter respectively Capital expenditures were $592 million – 63% was devoted to growth projects Working capital increased; however Days of Working Capital improved three days year over year Debt-to-cap in target range at 32.4% Trailing four quarters ROC of 9.7%; ROC excluding growth investments of 11.2% Prior period restructuring generated approximately $30 million pre-tax savings Included in the results are the negative impact of stock-based compensation expenses of $20 million, or $0.02 per share 1 Quarter 2006 Financial Overview st |
![]() 14 1 Quarter 2006 Financial Review In Millions 4Q'05 1Q'06 Change Sales $6,666 $7,244 $578 Cost of Goods Sold $5,453 $5,459 $6 % of Sales 81.8% 75.4% (6.4 pts) SG&A $362 $369 $7 % of Sales 5.4% 5.1% (0.3 pts) Restructuring and Other Charges $26 $1 ($25) Interest Expense $78 $92 $14 Other Income, Net (Gain) ($5) ($35) ($30) Effective Tax Rate 24.4% 28.1% (3.7)% Minority Interests $80 $105 $25 GAAP Net Income $224 $608 $384 (Loss) Income from Discontinued Operations $14 ($7) ($21) Cumulative effect of Accounting Change ($2) $0 $2 GAAP Income From Continuing Operations $212 $615 $403 st |
![]() 15 1 Quarter 2006 Cash Flow Review Capital Expenditures Debt-to-Capital $ In Millions 1Q'05 1Q'06 Net Income $260 $608 DD&A 315 309 Change in Working Capital (769) (1,030) Other Adjustments (27) (23) Pension Contributions (18) (77) Cash From Operating Activities (239) (213) Dividends to Shareholders (131) (131) Other Financing Activities 1,000 701 Cash From Financing Activities 869 570 Capital Expenditures (347) (592) Acquisitions (433) (1) Other Investing Activities 196 (74) Cash From Investing Activities ($584) ($667) $347 $592 72% 50% $0 $200 $400 $600 $800 1Q05 1Q06 40% 60% 80% 100% Growth projects Non-Growth spend Non-Growth Capex / Depreciation $7,276 $7,327 32.4% 33.3% $6,000 $7,000 $8,000 1Q05 1Q06 25% 30% 35% 40% Debt Debt/Cap st |
![]() 16 Revenue and ATOI Performance Historical Performance of Combined Segments ($million) Total ATOI is the sum of the segment ATOI. 0 200 400 600 800 1,000 0 2,500 5,000 7,500 10,000 ATOI Revenue |
![]() 17 Alumina Benefit from higher LME on an approximate 2 to 3 month lag Productivity gains continue Pinjarra expansion ramping up Realized benefit of strong LME Production record for entire system as well as 5 out of 9 refineries achieved quarterly records Higher energy costs 1 Quarter Dynamics ATOI Performance 0 40 80 120 160 200 240 280 1Q05 4Q05 1Q06 $ Millions 1Q vs 1Q 1Q vs 4Q 1Q’06 50% 32% 242 ATOI ($MM) 24% 12% 628 3 Party Sales ($MM) 3% 0% 3,702 Production (kmt) 5% 3% 2,023 3 Party Shipmts (kmt) rd rd 2 Quarter Outlook nd st 1 Quarter Highlights st |
![]() 18 Primary Metals 1Q vs 1Q 98% 29% ATOI Performance Increases in LME and premiums driven by strong demand Lower shipments and production due to Eastalco curtailment and Portland outage Full benefit of Alumar expansion Portland not back to 100% Power costs will be challenging April sales on a 30 day LME lag at $2,431/mt 1 Quarter Highlights 1 Quarter Dynamics 0 50 100 150 200 250 300 350 400 450 1Q05 4Q05 1Q06 $ Millions st st 1Q vs 4Q 1Q’06 84% 445 ATOI ($MM) 10% 1,408 3 Party Sales ($MM) 2% (4%) 867 Production (kmt) 24% 16% $2,534 3 Party Price 0% (12%) 488 3 Party Shipmts (kmt) rd rd rd 2 Quarter Outlook nd |
![]() 19 Flat-Rolled Products 1Q vs 1Q 1Q vs 4Q $MM (12%) 6% 66 ATOI 17% 12% 1,940 Revenue 1 Quarter Highlights 1 Quarter Dynamics 2 Quarter Outlook ATOI Performance Aerospace and commercial transportation demand remains strong Seasonal increase in can sheet volumes Russia will continue to be challenging Strong demand in the aerospace and industrial products markets Demand for common alloy products robust in North America Energy & freight costs remain high Can Sheet Aerospace Automotive Building & Construction Distribution Industrial 0 20 40 60 80 1Q05 4Q05 1Q06 $ Millions nd st st |
![]() 20 Extruded & End Products 1 Quarter Dynamics ATOI Performance Seasonal increase in B&C and soft alloy extrusion demand Stronger volumes over prior quarter Lower Russia volumes Commercial Vehicle Aerospace Automotive Building & Construction Distribution Industrial 1Q vs 1Q 1Q vs 4Q $MM NM NM (0) ATOI 13% 14% 1,170 Revenue -5 0 5 10 15 1Q05 4Q05 1Q06 st 2 Quarter Outlook nd 1 Quarter Highlights st |
![]() 21 Seasonal declines in Consumer Products, although volumes higher year over year Weaker volume and pricing in Food Packaging Packaging & Consumer 1Q vs 1Q 1Q vs 4Q $MM (50%) (60%) 8 ATOI 6% (6%) 749 Revenue 1 Quarter Dynamics ATOI Performance Strong seasonal demand in Consumer Products and Closures Consumer Products Closures Flexible Packaging Reynolds Food Packaging 0 10 20 30 1Q05 4Q05 1Q06 $ Millions 2 Quarter Outlook nd st 1 Quarter Highlights st |
![]() 22 Engineered Solutions 36% 10% 1Q vs 1Q 77% 83 ATOI 1Q vs 4Q $MM 7% 1,360 Revenue 1 Quarter Highlights 1 Quarter Dynamics ATOI Performance Strong productivity gains across all businesses of the segment Market growth supported by record production in Forged Products, and Fasteners New products & favorable mix aided top line and bottom line performance 2005 investment in portfolio restructuring generating significant dividends 2 Quarter Outlook Productivity gains realized in Q1 sustainable Automotive demand is softening Underlying demand in aerospace and commercial transportation remains strong and in line with Q1 25 35 45 55 65 75 85 95 1Q05 4Q05 1Q06 $ Millions st st nd |
![]() 23 Engineered Solutions – Next Level of Detail ($1) ($5) ($5) Other $47 $65 ($13) 4Q05 Total Investment Castings, Forgings, Fasteners AFL, Auto Castings and Structures $83 $93 ($5) 1Q06 $61 $58 $4 1Q05 ATOI ($ Millions) AFL performance significantly improved from 2H05 Launches stabilized Large productivity improvements in Mexico and Europe Investment castings, forgings, and fasteners drove 13% productivity improvements delivering cost reductions and capacity ABS de-bottlenecked constrained facilities Investment in advanced process technologies Raw Material escalation captured in pricing 2005 portfolio restructuring generating $15 million pre-tax savings Expanding capacity in investment castings, forgings, and fasteners to accommodate new products, strong market demand, and share growth Engineered Solutions Segment Performance $0 $20 $40 $60 $80 $100 Q1 '05 Q2 '05 Q3 '05 Q4 '05 Q1 '06 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 Third Party Revenue ATOI |
![]() 24 2 Quarter 2006 Outlook Summary Industry fundamentals expected to remain strong Economic conditions expected to remain positive globally Operating improvements to stay on track Continued energy cost pressures Other input costs stabilizing U.S. labor negotiations nd |
![]() 25 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 |
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![]() [Alcoa Logo] Appendix |
![]() 28 Reconciliation of Return on Capital Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. 1Q'06 4Q'05 3Q'05 2Q'05 1Q'05 Bloomberg 1Q'06 Bloomberg 4Q'05 Bloomberg 3Q'05 Bloomberg 2Q'05 Bloomberg 1Q'05 In Millions Method Annlzd Method Annlzd Method Annlzd Method Annlzd Method Annlzd Net Income 1,581 $2,432 $1,233 $896 $1,277 $1,156 $1,271 $1,840 $1,215 $1,040 Minority Interest 304 $420 $259 $320 $227 $236 $240 $240 $254 $240 Interest Expense (After-tax) $274 $264 $261 $236 $263 $291 $237 $319 $212 $198 Numerator (Sum Total) $2,159 $3,116 $1,753 $1,452 $1,767 $1,683 $1,748 $2,399 $1,681 $1,478 Average Balances Short-term borrowings $350 $335 $284 $285 $153 $263 $152 $293 $171 $298 Short-term debt $53 $59 $58 $53 $272 $47 $273 $47 $269 $52 Commercial paper $1,652 $1,292 $771 $1,037 $946 $1,134 $1,093 $1,368 $818 $1,131 Long-term debt $5,246 $5,253 $5,312 $5,332 $5,382 $5,450 $5,381 $5,389 $6,022 $5,305 Preferred Stock $55 $55 $55 $55 $55 $55 $55 $55 $55 $55 Minority interests $1,280 $1,378 $1,391 $1,333 $1,332 $1,254 $1,253 $1,188 $1,263 $1,293 Common equity $13,611 $13,596 $13,282 $13,454 $13,045 $13,446 $12,761 $13,324 $12,793 $13,296 Denominator (Sum Total) $22,247 $21,968 $21,153 $21,549 $21,185 $21,649 $20,968 $21,664 $21,391 $21,430 Return on Capital 9.7% 14.2% 8.3% 6.7% 8.3% 7.8% 8.3% 11.1% 7.9% 6.9% |
![]() 29 Reconciliation of Adjusted Return on Capital 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. 1Q'06 4Q'05 3Q'05 2Q'05 1Q'05 Bloomberg 1Q'06 Bloomberg 4Q'05 Bloomberg 3Q'05 Bloomberg 2Q'05 Bloomberg 1Q'05 In Millions Method Annlzd Method Annlzd Method Annlzd Method Annlzd Method Annlzd Numerator (Sum Total) $2,159 $3,116 $1,753 $1,452 $1,767 $1,683 $1,748 $2,399 $1,681 $1,478 Russia & Bohai Net Loss ($86) ($110) ($71) ($91) ($48) ($27) ($41) ($115) ($12) ($49) Adjusted Net Income $2,245 $3,226 $1,824 $1,543 $1,815 $1,710 $1,789 $2,514 $1,693 $1,527 Average Balances Denominator (Sum Total) $22,247 $21,968 $21,153 $21,549 $21,185 $21,649 $20,968 $21,664 $21,391 $21,430 Capital Projects in Progress, Russia & Bohai Capital Base $2,139 $2,892 $1,981 $2,664 $1,736 $2,177 $1,539 $1,896 $1,423 $1,385 Adjusted Capital Base $20,108 $19,076 $19,172 $18,885 $19,449 $19,472 $19,429 $19,768 $19,968 $20,045 Return on Capital Excluding Growth Investments 11.2% 16.9% 9.5% 8.2% 9.3% 8.8% 9.2% 12.7% 8.5% 7.6% |
![]() 30 Days of Working Capital Definition In Millions 1Q'05 4Q'05 1Q'06 Add: Receivables from customers, less allowances $ 3,110 $ 2,914 $ 3,380 Add: Inventories $ 3,365 $ 3,446 $ 3,778 Less: Accounts payable, trade $ 2,418 $ 2,659 $ 2,691 Working Capital $ 4,057 $ 3,701 $ 4,467 Sales $ 6,221 $ 6,666 $ 7,244 Days of Working Capital * 58.7 d 51.1 d 55.5 d * Days of Working Capital = Working Capital divided by (Sales/number of days in the quarter) |
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