April 10, 2007 1 st Quarter 2007 Analyst Conference Exhibit 99.2 [Alcoa logo] |
2 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, 2006 filed with the Securities and Exchange Commission. [Alcoa logo] |
[Alcoa logo] Vice President and Chief Financial Officer Chuck McLane |
4 [Alcoa logo] 1 st Quarter 2007 Financial Overview – Income from continuing operations of $691m or $0.79 per share - $673m or $0.77 per share including the impact of restructurings – Revenues of $7.9b – Cash from operations of $527m – Debt-to-cap at 30.9% – Trailing four quarters ROC of 12.7% |
5 [Alcoa logo] 1 st Quarter 2007 Financial Overview In Millions 4Q'06 1Q'07 Change Sales $7,840 $7,908 $68 Cost of Goods Sold $6,132 $6,007 ($125) % of Sales 78.2% 76.0% (2.2) pts. SG&A $367 $357 ($10) % of Sales 4.7% 4.5% (0.2) pts. Restructuring and Other Charges $554 $26 ($528) Interest Expense $93 $83 ($10) Other Income, Net ($49) ($44) $5 Effective Tax Rate -0.3% 29.8% 30.1 pts. Minority Interests $98 $115 $17 GAAP Net Income $359 $662 $303 (Loss) Income from Discontinued Operations $101 ($11) ($112) GAAP Income From Continuing Operations $258 $673 $415 |
6 [Alcoa logo] 4 th Quarter vs. 1 st Quarter Comparison |
7 [Alcoa logo] 1Q’07 4Q’06 1Q’06 1,877 2,084 2,023 3 Party Shipments (kmt) 3,655 3,790 3,702 Production (kmt) 645 711 628 3 Party Revenue ($MM) 260 259 242 ATOI ($MM) Decreased production Higher prices Lower shipments Guinea strike impact Stronger Australian dollar Alumina 1 st Quarter Highlights 2 nd Quarter Outlook Prices to follow 2 month lag calculation Anticipate 4% production increase sequentially Anticipate impact of Guinea strike of approximately $8 million after tax 1 st Quarter Business Conditions $100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300 1Q06 2Q06 3Q06 4Q06 1Q07 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 ATOI Total Revenue rd rd |
8 [Alcoa logo] 1 st Quarter Highlights 504 480 445 ATOI ($MM) 2,902 2,766 2,534 3 Party Price ($/MT) 1,633 1,698 1,408 3 Party Revenue ($MM) 1Q’07 4Q’06 1Q’06 518 556 488 3 Party Shipments (kmt) 899 908 867 Production (kmt) Primary Metals 2 nd Quarter Outlook 1 st Quarter Business Conditions Higher realized pricing Intalco and Iceland start-up costs Increased carbon costs Increased energy costs due to Rockdale power plant closure Unfavorable currency Average March cash LME = $2,761/MT Iceland start-up costs estimated at $25 million after-tax Continued higher energy costs at Rockdale $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 1Q06 2Q06 3Q06 4Q06 1Q07 $1,500 $1,700 $1,900 $2,100 $2,300 $2,500 $2,700 $2,900 $3,100 $3,300 $3,500 ATOI Total Revenue rd rd rd |
9 [Alcoa logo] Favorable aerospace volumes and mix Productivity offset cost inflation Prior quarter tax benefit not repeated 1Q’07 4Q’06 1Q’06 62 62 66 ATOI ($MM) 2,275 2,127 1,940 3 Party Revenue ($MM) Flat-Rolled Products 1 st Quarter Highlights 2 nd Quarter Outlook 1 st Quarter Business Conditions Global aerospace markets remain strong Continued productivity gains Seasonal increases in can sheet and building & construction markets Increased volumes out of Russian facilities $0 $20 $40 $60 $80 $100 1Q06 2Q06 3Q06 4Q06 1Q07 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 $2,300 $2,400 ATOI Third Party Revenue rd |
10 [Alcoa logo] (6) (4) (5) Other 73 61 16 4Q’06 Total Investment Castings, Forgings, Fasteners AFL, Auto Castings and Structures 83 93 (5) 1Q’06 93 107 (8) 1Q’07 North America Class 8 truck builds off 25% year over year – partially offset by share gains and new product sales Weakness continued in the North American automotive customer base Prior quarter tax benefit not repeated Increased global aerospace sales despite A380 delays - underpinned by share gains and new product sales Strong productivity across Fasteners, Forgings and Investment Castings Engineered Solutions ATOI ($MM) 1 st Quarter Business Conditions 2 nd Quarter Outlook Global aerospace markets remain strong Decline in Class 8 truck to continue at an accelerated rate – 45% year over year North American auto production cuts continue on specific platforms $0 $20 $40 $60 $80 $100 $120 1Q06 2Q06 3Q06 4Q06 1Q07 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 ATOI Third Party Revenue |
11 [Alcoa logo] 22 13 (7) Alcoa Custom Extruded Solutions, US Industrial and Other 1Q’07 4Q’06 1Q’06 34 27 - Total 12 14 7 Global Hard Alloy Extrusions, Building & Construction Systems and Russia Solid markets in building & construction and aerospace Lower volume in North American automotive and Class 8 truck markets Extruded and End Products ATOI ($MM) 1 st Quarter Business Conditions 2 nd Quarter Outlook Seasonal increase in building & construction and soft alloy extrusion demand Aerospace and Industrial markets remain strong Expected to finalize soft alloy extrusions joint venture $0 $5 $10 $15 $20 $25 $30 $35 1Q06 2Q06 3Q06 4Q06 1Q07 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 ATOI Third Party Revenue |
12 [Alcoa logo] (1) (1) (1) Other 26 (9) 36 4Q’06 Total Reynolds Food Packaging and Flexible Packaging Closure Systems and Consumer Products 8 (11) 20 1Q’06 19 (3) 23 1Q’07 Packaging & Consumer ATOI ($MM) 1 st Quarter Business Conditions 2 nd Quarter Outlook Seasonal increase in Closures and Consumer businesses Continued productivity improvements across all businesses Anticipate resin price stability – Normal seasonal decline in the Consumer business – Year over year productivity improvements – Stable resin cost environment $0 $10 $20 $30 $40 $50 $60 1Q06 2Q06 3Q06 4Q06 1Q07 $500 $600 $700 $800 $900 ATOI Third Party Revenue |
13 [Alcoa logo] 1 st Quarter 2007 Cash Flow Review $ In Millions 1Q'06 1Q'07 Net Income $608 $662 DD&A 307 304 Change in Working Capital (915) (457) Other Adjustments (136) 68 Pension Contributions (77) (50) Cash From Operating Activities (213) 527 Dividends to Shareholders (131) (148) Change in Debt 830 509 Dividends to Minority Interests (115) (158) Contributions from Minority Interests 0 114 Other Financing Activities (14) (107) Cash From Financing Activities 570 210 Capital Expenditures (592) (783) Other Investing Activities (75) (45) Cash From Investing Activities ($667) ($828) |
14 [Alcoa logo] Strong Performance Trends |
15 [Alcoa logo] 2007 Financial Targets |
[Alcoa logo] Chairman and Chief Executive Officer Alain J.P. Belda |
17 [Alcoa logo] Taking Action on Climate Change 0 30 1990 2006 2010 Target Level 25% Direct CO 2 Reduction 26% Reduction in GHG Emissions Leader in Public Policy Founding Member USCAP Alcoa is Favorably Positioned to Help Customers with GHG Emissions |
18 [Alcoa logo] Safety Performance |
19 [Alcoa logo] Global Environment Aluminum Consumption Growth Rates Source: Alcoa analysis |
20 [Alcoa logo] Source: Alcoa analysis Global Environment Supply / Demand Projections |
21 [Alcoa logo] Global Environment Days of Consumption Source: IAI, Reuters and LME |
22 [Alcoa logo] Global Market Dynamics |
23 [Alcoa logo] Global Market Dynamics |
24 [Alcoa logo] Global Market Dynamics |
25 [Alcoa logo] Momentum Builders – Record 2006 Financial Performance – Disciplined Capital Management • Debt restructuring • Increased dividend • 10% share buyback program • 2007 peak capital spending year |
26 [Alcoa logo] Momentum Builders – Continued Portfolio Management • Sale of Alcoa Home Exteriors • Creation of a soft alloy extrusions joint venture • November 2006 downstream restructuring • Continued review of the packaging assets |
27 [Alcoa logo] Momentum Builders – Realization of the Growth Projects • Pinjarra refinery expansion • 50% aerospace capacity increase • Russia and China rolling assets • Sao Luis refinery expansion • Juruti bauxite mine development • Iceland smelter |
28 [Alcoa logo] Momentum Builders |
29 [Alcoa logo] Momentum Builders – Continued Improvement in Downstream Performance • Consistent quarter over quarter improvement • Proprietary technology and unique equipment • Continued new product development • Significant investments in productive assets • Unique and proprietary products for growing end markets |
30 [Alcoa logo] Momentum Continues |
31 [Alcoa logo] 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 For Additional Information, Contact: |
32 [Alcoa logo] A |
33 [Alcoa logo] A APPENDIX |
34 [Alcoa logo] $ 662 $2,248 $ 359 $ 537 $ 744 $ 608 Consolidated net income (10) 104 10 (7) 51 50 Other (11) 87 101 (3) (5) (6) Discontinued operations (18) (379) (386) 2 6 (1) Restructuring and other charges (86) (317) (82) (64) (82) (89) Corporate expense (115) (436) (98) (109) (124) (105) Minority interests (54) (250) (61) (66) (63) (60) Interest expense 11 58 14 23 10 11 Interest income (27) (170) (66) (19) (49) (36) Impact of LIFO (1) Unallocated amounts (net of tax): $ 972 $3,551 $ 927 $ 780 $1,000 $ 844 Total segment ATOI 1Q07 2006 4Q06 3Q06 2Q06 1Q06 (1) Certain amounts for the first and second quarter of 2006 have been reclassified to Other so that this line reflects only the impact of LIFO. Presenting the Impact of LIFO as a separate line in the Reconciliation of ATOI started in the third quarter of 2006. Financial information for the first and second quarter of 2006 has been reclassified to reflect the movement of the home exteriors business to discontinued operations in the third quarter of 2006. Reconciliation of ATOI to Consolidated Net Income |
35 [Alcoa logo] Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. Reconciliation of Return on Capital 1Q'07 4Q'06 3Q'06 2Q'06 1Q'06 4Q'05 3Q'05 2Q'05 1Q'05 Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg (In Millions) Method Method Method Method Method Method Method Method Method Net income $2,302 $2,248 $2,113 $1,865 1,581 $1,233 $1,270 $1,271 $1,215 Minority interests $446 $436 $418 $368 304 $259 $230 $239 $252 Interest expense (after-tax) $281 $291 $272 $268 $274 $261 $263 $234 $206 Numerator (sum total) $3,029 $2,975 $2,803 $2,501 $2,159 $1,753 $1,763 $1,744 $1,673 Average Balances Short-term borrowings $441 $386 $349 $306 $342 $279 $155 $152 $185 Short-term debt $360 $451 $449 $55 $53 $58 $272 $273 $269 Commercial paper $972 $1,192 $1,678 $1,501 $1,652 $771 $581 $553 $815 Long-term debt $5,767 $4,861 $4,915 $5,333 $5,243 $5,309 $5,746 $5,920 $6,023 Preferred stock $55 $55 $55 $55 $55 $55 $55 $55 $55 Minority interests $1,669 $1,583 $1,416 $1,340 $1,280 $1,391 $1,332 $1,253 $1,263 Common equity $14,621 $13,947 $14,120 $13,834 $13,611 $13,282 $13,045 $12,761 $12,766 Denominator (sum total) $23,885 $22,475 $22,982 $22,424 $22,236 $21,144 $21,185 $20,967 $21,376 Return on Capital 12.7% 13.2% 12.2% 11.2% 9.7% 8.3% 8.3% 8.3% 7.8% |
36 [Alcoa logo] 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. Reconciliation of Adjusted Return on Capital 1Q'07 4Q'06 3Q'06 2Q'06 1Q'06 4Q'05 3Q'05 2Q'05 1Q'05 Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg Bloomberg (In Millions) Method Method Method Method Method Method Method Method Method Numerator (sum total) $3,029 $2,975 $2,803 $2,501 $2,159 $1,753 $1,763 $1,744 $1,673 Russia, Bohai, and Kunshan net losses ($79) ($74) ($85) ($78) ($86) ($71) ($48) ($41) ($12) Adjusted numerator $3,108 $3,049 $2,888 $2,579 $2,245 $1,824 $1,811 $1,785 $1,685 Average Balances Denominator (sum total) $23,885 $22,475 $22,982 $22,424 $22,236 $21,144 $21,185 $20,967 $21,376 Capital projects in progress and Russia, Bohai, and Kunshan capital base $3,945 $3,655 $2,540 $2,330 $2,139 $1,913 $1,776 $1,478 $1,403 Adjusted denominator $19,940 $18,820 $20,442 $20,094 $20,097 $19,231 $19,409 $19,489 $19,973 Return on capital, excluding growth investments 15.6% 16.2% 14.1% 12.8% 11.2% 9.5% 9.3% 9.2% 8.4% |
37 [Alcoa logo] Reconciliation of Income and EPS, excluding Restructuring Charges & Discrete Tax Items Income from continuing operations – excluding restructuring and other charges and discrete tax items is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges and discrete tax items. There can be no assurances that additional restructuring and other charges and discrete tax items will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both income from continuing operations determined under GAAP as well as income from continuing operations – excluding restructuring and other charges and discrete tax items. 0.66 0.79 $ 575 $ 691 Income from continuing operations – excluding restructuring and other charges and discrete tax items 386 18 Restructuring and other charges (69) – Discrete tax items 0.29 0.77 258 673 Income from continuing operations 101 (11) (Loss) income from discontinued operations $ 0.41 $ 0.75 $ 359 $ 662 Net income 4Q06 1Q07 4Q06 1Q07 Quarter ended Quarter ended Diluted EPS Net Income |
38 [Alcoa logo] 51.5 49.9 51.1 Days of Working Capital $ 7,908 $ 7,840 $ 7,111 Sales $ 4,524 $ 4,252 $ 4,038 Working Capital 2,570 2,680 2,449 Less: Accounts payable, trade 3,780 3,805 3,524 Add: Inventories $ 3,314 $ 3,127 $ 2,963 Receivables from customers, less allowances March 31, 2007 December 31, 2006 March 31, 2006 Quarter ended Days of Working Capital = Working Capital divided by (Sales/number of days in the quarter) Days of Working Capital |