![]() [Alcoa logo] July 9, 2007 2 nd Quarter 2007 Analyst Conference Exhibit 99.2 |
![]() 2 [Alcoa logo] Forward Looking Statements The information discussed on this call contains forward-looking statements that involve future events and known and unknown risks and uncertainties, including current expectations regarding Alcoa’s future performance and the potential benefits of the combination of Alcoa and Alcan. Actual results may differ materially from those discussed today in our presentation. Additional information concerning factors that may cause actual results to differ can be found in Alcoa’s and Alcan’s respective filings with the U.S. Securities and Exchange Commission and, in Alcan’s case, the Canadian securities regulatory authorities. Lastly, certain portions of the discussion concerning the proposed transaction are addressed in a registration statement which Alcoa has filed with the SEC and the Canadian securities regulatory authorities. We urge you to read the registration statement because it contains important information. |
![]() [Alcoa logo] Vice President and Chief Financial Officer Chuck McLane |
![]() 4 [Alcoa logo] 2 nd Quarter 2007 Financial Overview – Income from continuing operations of $716m or $0.81 per share – Revenues of $8.1b – Cash from operations of $1.35b – Debt-to-cap at 29.4% – Trailing four quarters ROC of 11.8% |
![]() 5 [Alcoa logo] 2 nd Quarter 2007 Financial Overview In Millions 1Q'07 2Q'07 Change Sales $7,908 $8,066 $158 Cost of Goods Sold $6,007 $6,178 $171 % of Sales 76.0% 76.6% 0.6 pts. SG&A $357 $367 $10 % of Sales 4.5% 4.5% 0.0 pts. Restructuring and Other Charges $26 ($57) ($83) Interest Expense $83 $86 $3 Other Income, Net ($44) ($60) ($16) Effective Tax Rate 29.8% 30.0% 0.2 pts. Minority Interests $115 $110 ($5) GAAP Net Income $662 $715 $53 (Loss) Income from Discontinued Operations ($11) ($1) $10 GAAP Income From Continuing Operations $673 $716 $43 |
![]() 6 [Alcoa logo] 1 st Quarter vs. 2 nd Quarter Comparison |
![]() 7 [Alcoa logo] 2Q’07 1Q’07 2Q’06 1,990 1,877 2,108 3 Party Shipments (kmt) 3,799 3,655 3,746 Production (kmt) 712 645 713 3 Party Revenue ($MM) 276 260 278 ATOI ($MM) Production 4% higher sequentially Higher prices Reduced impact from Guinea strike Stronger Australian dollar Alumina 2 nd Quarter Highlights 3 rd Quarter Outlook Prices to follow approximate two-month lag calculation Consistent production and shipment levels anticipated 2 nd Quarter Business Conditions $100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 ATOI Total Revenue rd rd |
![]() 8 [Alcoa logo] 2 nd Quarter Highlights 462 504 489 ATOI ($MM) 2,879 2,902 2,728 3 Party Price ($/MT) 1,746 1,633 1,589 3 Party Revenue ($MM) 2Q’07 1Q’07 2Q’06 565 518 508 3 Party Shipments (kmt) 901 899 882 Production (kmt) Primary Metals 3 rd Quarter Outlook 2 nd Quarter Business Conditions Lower realized pricing sequentially Tennessee and Rockdale curtailment costs Increased Iceland start-up costs Unfavorable currency Average June cash LME = $2,677/MT Iceland start-up costs of $24 million after-tax Continued Rockdale curtailment costs U.S. seasonal energy cost increases $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 $550 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $1,500 $1,700 $1,900 $2,100 $2,300 $2,500 $2,700 $2,900 $3,100 $3,300 $3,500 ATOI Total Revenue rd rd rd |
![]() 9 [Alcoa logo] Increased volumes and favorable mix Productivity increases Improved Russia performance 2Q’07 1Q’07 2Q’06 93 62 79 ATOI ($MM) 2,344 2,275 2,115 3 rd Party Revenue ($MM) Flat-Rolled Products 2 nd Quarter Highlights 3 rd Quarter Outlook 2 nd Quarter Business Conditions Scheduled outages and seasonal slowdown – European holidays and North American automotive shutdowns Global aerospace markets remain strong $0 $20 $40 $60 $80 $100 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 $2,300 $2,400 ATOI Third Party Revenue |
![]() 10 [Alcoa logo] (5) (6) (6) Other 93 107 (8) 1Q’07 Total Investment Castings, Forgings, Fasteners AFL, Auto Castings and Structures 100 97 9 2Q’06 105 118 (8) 2Q’07 North America Class 8 truck builds off 50% year over year – partially offset by continued share gains and new product sales Weakness continued in the North American automotive customer base Aerospace remains strong – accelerated by share gains and new product sales Strong productivity across Fasteners, Forgings and Investment Castings Engineered Solutions ATOI ($MM) 2 nd Quarter Business Conditions 3 rd Quarter Outlook Seasonal slowdown – European holidays and North American automotive shutdowns Negative impact of $9 million after-tax for AFL tax rate change in Germany Decline in Class 8 truck to continue – projected at 48% year over year Global aerospace markets remain strong $0 $20 $40 $60 $80 $100 $120 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 ATOI Third Party Revenue |
![]() 11 [Alcoa logo] 29 22 7 Alcoa Custom Extruded Solutions, US Industrial and Other 2Q’07 1Q’07 2Q’06 46 34 17 Total 17 12 10 Global Hard Alloy Extrusions, Building & Construction Systems and Russia Soft alloy extrusion joint venture completed Strong markets in Europe Improved productivity Extruded and End Products ATOI ($MM) 2 nd Quarter Business Conditions 3 rd Quarter Outlook Seasonal slowdown – European holidays and North American automotive shutdowns Soft alloy extrusions joint venture in effect for entire quarter $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $0 $200 $400 $600 $800 $1,000 $1,200 $1,400 ATOI Third Party Revenue |
![]() 12 [Alcoa logo] (2) (1) (2) Other 19 (3) 23 1Q’07 Total Reynolds Food Packaging and Flexible Packaging Closure Systems and Consumer Products 37 (1) 40 2Q’06 37 (1) 40 2Q’07 Packaging & Consumer ATOI ($MM) 2 nd Quarter Business Conditions 3 rd Quarter Outlook Benefits of the prior year restructuring program and productivity improvements will offset cost inflation Normal seasonal slowdown expected in Closure Systems – Normal seasonal increase in the Closures and Consumer business – Productivity improvements $0 $10 $20 $30 $40 $50 $60 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 $500 $600 $700 $800 $900 ATOI Third Party Revenue |
![]() 13 [Alcoa logo] 2 nd Quarter 2007 Cash Flow Review $ In Millions 2Q'06 2Q'07 Net Income $744 $715 DD&A 324 317 Change in Working Capital (399) 474 Other Adjustments 55 (116) Pension Contributions (25) (41) Cash From Operating Activities 699 1,349 Dividends to Shareholders (131) (149) Change in Debt 191 172 Dividends to Minority Interests (85) (46) Contributions from Minority Interests 40 103 Other Financing Activities (45) 192 Cash From Financing Activities (30) 272 Capital Expenditures (729) (891) Other Investing Activities 44 5 Cash From Investing Activities ($685) ($886) |
![]() 14 [Alcoa logo] Strong Performance Trends |
![]() 15 [Alcoa logo] 2007 Financial Targets |
![]() [Alcoa logo] |
![]() 17 [Alcoa logo] Safety Performance |
![]() 18 [Alcoa logo] Aluminum Consumption Growth Rates Source: Alcoa analysis |
![]() 19 [Alcoa logo] Source: Alcoa analysis Supply / Demand Projections |
![]() 20 [Alcoa logo] Source: IAI and LME Global Days of Consumption |
![]() 21 [Alcoa logo] Momentum Builders Update |
![]() 22 [Alcoa logo] The Momentum Continues |
![]() 23 [Alcoa logo] Alcan Offer Update – Synergies – Growth Opportunities – Commitment to Quebec and Canada – Regulatory Approvals |
![]() 24 [Alcoa logo] A Winning Strategic Combination – Creates the premier fully integrated aluminum company – Enhanced cash flow and $1 billion in annual synergies – Significant scale to compete in a changing environment – Optimized portfolio of upstream assets – Enhanced capacity for growth – Strong technology, operations and talent – Shared values and commitment to sustainability |
![]() 25 [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: |
![]() 26 [Alcoa logo] [Alcoa logo] |
![]() 27 [Alcoa logo] Forward-Looking Statements Certain statements and assumptions in this communication contain or are based on "forward-looking" information and involve risks and uncertainties. Forward-looking statements may be identified by their use of words like "anticipates," "believes," "estimates," "expects," "hopes," "targets," "should," "will," "will likely result," "forecast," "outlook," "projects" or other words of similar meaning. Such forward-looking information includes, without limitation, the statements as to the impact of the proposed acquisition of Alcan on revenues, costs and earnings. Such forward- looking statements are subject to numerous assumptions, uncertainties and risks, many of which are outside of Alcoa's control. Accordingly, actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this communication. These risks and uncertainties include Alcoa's ability to successfully integrate the operations of Alcan; the outcome of contingencies including litigation, environmental remediation, divestitures of businesses, and anticipated costs of capital investments; general business and economic conditions; interest rates; the supply and demand for, deliveries of, and the prices and price volatility of primary aluminum, fabricated aluminum, and alumina produced by Alcoa and Alcan; the timing of the receipt of regulatory and governmental approvals necessary to complete the acquisition of Alcan and any undertakings agreed to in connection with the receipt of such regulatory and governmental approvals; the timing of receipt of regulatory and governmental approvals for Alcoa's and Alcan's development projects and other operations; the availability of financing to refinance indebtedness incurred in connection with the acquisition of Alcan on reasonable terms; the availability of financing for Alcoa's and Alcan's development projects on reasonable terms; Alcoa's and Alcan's respective costs of production and their respective production and productivity levels, as well as those of their competitors; energy costs; Alcoa's and Alcan's ability to secure adequate transportation for their respective products, to procure mining equipment and operating supplies in sufficient quantities and on a timely basis, and to attract and retain skilled staff; the impact of changes in foreign currency exchange rates on Alcoa's and Alcan's costs and results, particularly the Canadian dollar, Euro, and Australian dollar, may affect profitability as some important raw materials are purchased in other currencies, while products generally are sold in U.S. dollars; engineering and construction timetables and capital costs for Alcoa's and Alcan's development and expansion projects; market competition; tax benefits and tax rates; the outcome of negotiations with key customers; the resolution of environmental and other proceedings or disputes; and Alcoa's and Alcan's ongoing relations with their respective employees and with their respective business partners and joint venturers. |
![]() 28 [Alcoa logo] Forward-Looking Statements Additional risks, uncertainties and other factors affecting forward looking statements include, but are not limited to, the following: •Alcoa is, and the combined company will be, subject to cyclical fluctuations in London Metal Exchange primary aluminum prices, economic and business conditions generally, and aluminum end-use markets; •Alcoa's operations consume, and the combined company's operations will consume, substantial amounts of energy, and profitability may decline if energy costs rise or if energy supplies are interrupted; •The profitability of Alcoa and/or the combined company could be adversely affected by increases in the cost of raw materials; •Union disputes and other employee relations issues could adversely affect Alcoa's and/or the combined company's financial results; •Alcoa and/or the combined company may not be able to successfully implement its growth strategy; •Alcoa's operations are, and the combined company's operations will be, exposed to business and operational risks, changes in conditions and events beyond its control in the countries in which it operates; •Alcoa is, and the combined company will be, exposed to fluctuations in foreign currency exchange rates and interest rates, as well as inflation and other economic factors in the countries in which it operates; •Alcoa faces, and the combined company will face, significant price competition from other aluminum producers and end-use markets for Alcoa products that are highly competitive; •Alcoa and/or the combined company could be adversely affected by changes in the business or financial condition of a significant customer or customers; •Alcoa and/or the combined company may not be able to successfully implement its productivity and cost-reduction initiatives; •Alcoa and/or the combined company may not be able to successfully develop and implement new technology initiatives; •Alcoa is, and the combined company will be, subject to a broad range of environmental laws and regulations in the jurisdictions in which it operates and may be exposed to substantial costs and liabilities associated with such laws; •Alcoa’s smelting operations are expected to be affected by various regulations concerning greenhouse gas emissions; •Alcoa and the combined company may be exposed to significant legal proceedings, investigations or changes in law; and •Unexpected events may increase Alcoa's and/or the combined company's cost of doing business or disrupt Alcoa's and/or the combined company's operations. See also the risk factors disclosed in Alcoa's Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. Readers are cautioned not to put undue reliance on forward-looking statements. Alcoa disclaims any intent or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. |
![]() 29 [Alcoa logo] In connection with the offer by Alcoa to purchase all of the issued and outstanding common shares of Alcan (the “Offer”), Alcoa has filed with the Securities and Exchange Commission (the “SEC”) a registration statement on Form S-4 (the “Registration Statement”), which contains a prospectus relating to the Offer (the “Prospectus”), and a tender offer statement on Schedule TO (the “Schedule TO”), each as amended. This communication is not a substitute for the Prospectus, the Registration Statement and the Schedule TO. ALCAN SHAREHOLDERS AND OTHER INTERESTED PARTIES ARE URGED TO READ THESE DOCUMENTS, ALL OTHER APPLICABLE DOCUMENTS AND ANY AMENDMENTS OR SUPPLEMENTS TO ANY SUCH DOCUMENTS WHEN THEY BECOME AVAILABLE, BECAUSE EACH CONTAINS OR WILL CONTAIN IMPORTANT INFORMATION ABOUT ALCOA, ALCAN AND THE OFFER. Materials filed with the SEC are available electronically without charge at the SEC’s website, www.sec.gov. Materials filed with the Canadian securities regulatory authorities ("CSRA") are available electronically without charge at www.sedar.com. Materials filed with the SEC or the CSRA may also be obtained without charge at Alcoa’s website, www.alcoa.com, or by directing a request to Alcoa’s investor relations department at (212) 836-2674. In addition, Alcan shareholders may obtain free copies of such materials filed with the SEC or the CSRA by directing a written or oral request to the Information Agent for the Offer, MacKenzie Partners, Inc., toll-free at (800) 322-2885 (English) or (888) 405-1217 (French). While the Offer is being made to all holders of Alcan Common Shares, this communication does not constitute an offer or a solicitation in any jurisdiction in which such offer or solicitation is unlawful. The Offer is not being made in, nor will deposits be accepted in, any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction. However, Alcoa may, in its sole discretion, take such action as it may deem necessary to extend the Offer in any such jurisdiction. Where to Find Additional Information |
![]() 30 [Alcoa logo] APPENDIX [Alcoa logo] |
![]() 31 [Alcoa logo] (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 $ 715 $ 662 $ 2,248 $ 359 $ 537 $ 744 $ 608 Consolidated net income (50) (10) 104 10 (7) 51 50 Other (1) (11) 87 101 (3) (5) (6) Discontinued operations 21 (18) (379) (386) 2 6 (1) Restructuring and other charges (101) (86) (317) (82) (64) (82) (89) Corporate expense (110) (115) (436) (98) (109) (124) (105) Minority interests (56) (54) (250) (61) (66) (63) (60) Interest expense 9 11 58 14 23 10 11 Interest income (16) (27) (170) (66) (19) (49) (36) Impact of LIFO (1) Unallocated amounts (net of tax): $ 1,019 $ 972 $ 3,551 $ 927 $ 780 $ 1,000 $ 844 Total segment ATOI 2Q07 1Q07 2006 4Q06 3Q06 2Q06 1Q06 |
![]() [Alcoa logo] |
![]() [Alcoa logo] |
![]() [Alcoa logo] |
![]() 35 [Alcoa logo] Reconciliation of EBITDA Margin Year ended December 31, 2006 Six months ended June 30, 2007 Year ended December 31, 2006 Six months ended June 30, 2007 Year ended December 31, 2006 Six months ended June 30, 2007 Flat-Rolled Products Extruded and End Products Engineered Solutions After-tax operating income (ATOI) (1) $ 255 $ 155 $ 60 $ 80 $ 331 $ 198 Add: Income taxes 68 59 18 40 101 91 Less: Other income and (expenses), net (2) (26) (15) 2 16 (5) (1) Net margin 349 229 76 104 437 290 Add: Depreciation, depletion, and amortization 219 110 118 19 169 83 Earnings before interest, taxes, depreciation, and amortization (EBITDA) (3) $ 568 $ 339 $ 194 $ 123 $ 606 $ 373 Third-party sales $ 8,297 $ 4,619 $ 4,419 $ 2,140 $ 5,456 $ 2,927 Intersegment sales 246 123 99 68 – – Total Sales $ 8,543 $ 4,742 $ 4,518 $ 2,208 $ 5,456 $ 2,927 EBITDA Margin (4) 6.6% 7.1% 4.3% 5.6% 11.1% 12.7% (1) See Slide 34 for a reconciliation of segment ATOI to consolidated net income. (2) Other income and (expenses), net, include equity income (loss), gain or loss on sale of assets, mark-to-market activities and other items. (3) Alcoa’s definition of EBITDA is net margin plus depreciation, depletion, and amortization. Net margin is equivalent to sales minus the following items: cost of goods sold; selling, general administrative, and other expenses; and research and development expenses. (4) EBITDA Margin is calculated by dividing EBITDA by Total Sales. |
![]() 36 [Alcoa logo] Reconciliation of EBITDA Margin – P&C Quarter ended June 30, 2006 Quarter ended June 30, 2007 Year ended December 31, 2006 Six months ended June 30, 2007 Packaging and Consumer: After-tax operating income (ATOI) (1) $ 37 $ 37 $ 95 $ 56 Add: Income taxes 9 17 33 24 Less: Other income and (expenses), net (2) 4 – 6 1 Net margin 42 54 122 79 Add: Depreciation, depletion, and amortization 31 30 124 60 Earnings before interest, taxes, depreciation, and amortization (EBITDA) (3) $ 73 $ 84 $ 246 $ 139 Third-party sales $ 834 $ 837 $ 3,235 $ 1,573 EBITDA Margin (4) 8.8% 10.0% 7.6% 8.8% (1) See Slide 34 for a reconciliation of segment ATOI to consolidated net income. (2) Other income and (expenses), net, include equity income (loss), gain or loss on sale of assets, mark-to-market activities and other items. (3) Alcoa’s definition of EBITDA is net margin plus depreciation, depletion, and amortization. Net margin is equivalent to sales minus the following items: cost of goods sold; selling, general administrative, and other expenses; and research and development expenses. (4) EBITDA Margin is calculated by dividing EBITDA by Third-party Sales. |
![]() 37 [Alcoa logo] 48.9 51.5 51.7 Days of Working Capital $ 8,066 $ 7,908 $ 7,797 Sales $ 4,335 $ 4,524 $ 4,427 Working Capital 2,668 2,570 2,536 Less: Accounts payable, trade 3,633 3,780 3,820 Add: Inventories $ 3,370 $ 3,314 $ 3,143 Receivables from customers, less allowances June 30, 2007 March 31, 2007 June 30, 2006 (a) Quarter ended Days of Working Capital = Working Capital divided by (Sales/number of days in the quarter) (a) Certain financial information has been reclassified to reflect the movement of the home exteriors business to discontinued operations and as held for sale in the third quarter of 2006, and the soft alloy extrusions business as held for sale in the fourth quarter of 2006. Days of Working Capital |
![]() 38 [Alcoa logo] Reconciliation of Sales (a) This amount represents the sales for the month of June 2007 related to Alcoa’s soft alloy extrusions business that was contributed to the joint venture formed with Orkla ASA’s Sapa Group on June 1, 2007. (b) Management believes that this measure is meaningful to investors because in prior quarters the revenue of the soft alloy extrusion business was included for all three months. Due to the completion of the joint venture with Sapa effective June 1, 2007, only two months of sales were included in consolidated revenue. The adjusted consolidated revenue measure provides an accurate comparison to past quarters. Quarter ended (in billions) June 30, 2007 Sales $ 8 .1 Add: sales of soft alloy extrusions operations (a) 0.2 Sales, including sales of soft alloy extrusions operations (b) $ 8.3 |