Howmet Aerospace (HWM) 8-K AA - Q3 2008 ALCOA Inc Earnings Conference Call

[Alcoa

logo]

October 7, 2008

3

rd

Quarter

2008

Analyst

Conference

Exhibit 99.2

2

[Alcoa logo]

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,

2007

and

Forms

10-Q

for

the

quarters

ended

March

31,

2008

and

June

30,

2008,

and

other

reports

filed

with

the

Securities

and

Exchange

Commission.

[Alcoa

logo]

Executive Vice President and Chief Financial Officer

Chuck McLane

4

[Alcoa logo]

3

rd

Quarter 2008 Financial Overview

–

Net income of $268m, or $0.33 per share –

includes $29m or $0.04

per share for restructuring

–

Sequentially, currency translation was a negative $52m, or $0.06

per share

–

Typical sequential seasonal decline amplified by weakening

markets

–

Revenues of $7.2 billion –

up from $6.5 billion in 3Q 2007,

excluding divested businesses

–

Increases in input costs persist

–

Cash on hand at $831m with debt-to-capital at 36.3%

–

Trailing 12-month ROC stands at 11.5%, excluding growth

investments

5

[Alcoa logo]

Margin squeeze impacting entire industry

Alumina

EBITDA

Change

–1H

08

vs

1H

07

Smelting

EBITDA

Change

–1H

08

vs

1H

07

Alcoa (-27%)

Competitor

A

(-

40%)

Competitor

B

(-

40%)

Competitor C (-23%)

Alcoa (-22%)

Competitor

A

(-

44%)

Competitor B (-13%)

Competitor C (-21%)

Source:  Company filings

6

[Alcoa logo]

7,412

7,123

3Q07

3Q08

$250

$526

3Q07

3Q08

110%

The industry is facing significant input cost escalation

Caustic Soda ( per dmt)

88%

Calcined

Coke (per mt)

Ocean Freight (Baltic Dry Index)

(4%)

Natural Gas

(US Henry Hub per MMBtu)

47%

Fuel Oil (Low Sulfur Oil Index per bbl)

77%

Source: CMAI

Source: PACE

Source: Bloomberg

Source: Bloomberg

Source: Bloomberg

U.S. Dollar*

(6%)

Source: Bloomberg

* Relative USD value vs

weighted average of Alcoa exposure to AUD, CAD, BRL, & EUR

$510

$958

3Q07

3Q08

$57

$101

3Q07

3Q08

94

100

3Q07

3Q08

$6.18

$9.06

3Q07

3Q08

7

[Alcoa logo]

3Q vs

3Q 2007 Earnings Bridge

Income

from

Continuing

Operations

excluding

Restructuring,

Transaction

Costs,

and

Chalco

Gain

millions

340

139

17

298

50

36

145

24

23

64

35

117

177

$0

$100

$200

$300

$400

8

[Alcoa logo]

Sequential Income Statement

In Millions

2Q 08

3Q 08

Change

Sales

$7,620

$7,234

(5%)

Cost of Goods Sold

$6,090

$5,944

(2%)

   % of Sales

79.9%

82.2%

2.3 pts

SG&A

$306

$283

(8%)

   % of Sales

4.0%

3.9%

(0.1 pts)

Restructuring and Other Charges

$2

$43

nm

Interest Expense

$87

$97

11%

Other Expense/(Income)

$(97)

$17

nm

Effective Tax Rate

27.3%

24.9%

(2.4 pts)

Minority Interests

$70

$84

20%

Net Income

$546

$268

(51%)

Earnings per Diluted Share

$0.66

$0.33

(50%)

9

[Alcoa logo]

3Q vs

2Q 2008 Earnings Bridge

Income from Continuing Operations Excluding Restructuring

millions

396

539

23

298

98

17

9

27

45

34

18

76

$0

$100

$200

$300

$400

$500

$600

10

[Alcoa logo]

3Q 08

2Q 08

3Q 07

2,010

1,913

1,937

3   Party Shipments (kmt)

3,790

3,820

3,775

Production (kmt)

805

717

664

3   Party Revenue ($ million)

206

190

215

ATOI ($ million)

Production

records

at

Pinjarra

&

San

Ciprian

Point Comfort production affected by

Hurricane Ike (~ 60 kmt)

Sequential adverse effect of Western Australia

gas disruption of $9 million

Higher caustic & fuel oil costs of $16 million

Favorable currency effects of $29 million

Alumina

3

rd

Quarter Highlights

4

th

Quarter Outlook

Prices to follow approximate two-month lag –

currently 12% lower than 3Q

Higher caustic costs

Current currency levels will lower costs if

sustained

Sequential benefit of approximately $15 million

as recovery continues from Western Australia

gas disruption; 4Q impact ~ ($10) million

3

rd

Quarter Business Conditions

$100

$120

$140

$160

$180

$200

$220

$240

$260

$280

$300

1Q 07

2Q 07

3Q 07

4Q 07

1Q 08

2Q 08

3Q08

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

ATOI

Total Revenue

rd

rd

11

[Alcoa logo]

3

rd

Quarter Highlights

297

428

283

ATOI ($ million)

2,945

3,058

2,734

3   Party Price ($/mt)

2,127

2,437

1,600

3   Party Revenue ($ million)

3Q 08

2Q 08

3Q 07

704

750

584

3   Party Shipments (kmt)

1,011

1,030

934

Production (kmt)

Primary Metals

4

th

Quarter Outlook

3

rd

Quarter Business Conditions

Realized pricing down 4% sequentially

Higher costs for carbon products and LME-

linked costs

Iceland efficiency & volume gains of $14

million

Favorable

currency

effects

of

$29

million

Current cash LME ~ $2,250/mt

Higher input costs continue

Current currency levels will lower costs if

sustained

Sequential negative impact of complete

Rockdale curtailment expected to be

approximately $30 million during the period

$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

$500

$550

1Q 07

2Q 07

3Q 07

4Q 07

1Q 08

2Q 08

3Q08

$2,000

$2,500

$3,000

$3,500

$4,000

$4,500

$5,000

ATOI

Total Revenue

rd

rd

rd

12

[Alcoa logo]

Flat-Rolled Products

4

th

Quarter Outlook

3

rd

Quarter Business Conditions

(38)

(26)

(29)

Russia, China & Other

55

7

74

2Q 08

Total

Hard Alloy Extrusions

Global Rolled Products,

exc

Russia & China

62

6

85

3Q 07

29

7

60

3Q 08

ATOI ($ million)

Weak end markets in North America & Europe

expected to persist

Higher costs for metals, energy & coatings

Prolonged Boeing strike would crimp

profitability

Bohai

start-up costs

Typical seasonal slowdown compounded by

softer market demand

Higher costs for metals & energy of $8 million

Start-up costs in China of $3 million

Favorable currency effects of $9 million

($20)

$0

$20

$40

$60

$80

$100

$120

1Q 07

2Q 07

3Q 07

4Q 07

1Q 08

2Q 08

3Q08

$1,600

$1,800

$2,000

$2,200

$2,400

$2,600

$2,800

$3,000

ATOI

Third Party Revenue

13

[Alcoa logo]

Engineered Products and Solutions

7

11

12

Building and Construction

& Other

157

155

(9)

2Q 08

Total

Investment Castings,

Forgings & Fasteners

AFL, Auto Castings &

Structures

82

102

(32)

3Q 07

101

131

(37)

3Q 08

Record third quarter profitability

Volume decreases in excess of typical

seasonal slowdown for automotive &

commercial transportation

Aerospace spares demand decreasing

U.S. commercial building & construction

market decline accelerates

ATOI ($ million)

3

rd

Quarter Business Conditions

4

th

Quarter Outlook

Weak market conditions persist in automotive,

commercial transportation and accelerating decline in

building & construction

Prolonged Boeing strike will crimp profitability

IGT market continues strong with industry at capacity

and expanding

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

1Q 07

2Q 07

3Q 07

4Q 07

1Q 08

2Q 08

3Q08

$800

$1,000

$1,200

$1,400

$1,600

$1,800

$2,000

$2,200

ATOI

Third Party Revenue

14

[Alcoa logo]

Cash Flow Statement

In Millions

3Q 07

2Q 08

3Q 08

Net Income

$555

$546

$268

DD&A

338

321

317

Change in Working Capital

345

234

(519)

Other Adjustments

(440)

(46)

259

Pension Contributions

(206)

(48)

(418)

Cash From Operating Activities

$592

$1,007

$(93)

Dividends to Shareholders

$(150)

$(140)

$(140)

Change in Debt

(494)

199

1,573

Dividends to Minority Interests

(106)

(78)

(76)

Contributions from Minority Interests

152

181

130

Share Repurchases

(1,295)

(175)

(477)

Share Issuances

391

154

1

Other Financing Activities

41

11

(7)

Cash From Financing Activities

$(1,461)

$152

$1,004

Capital Expenditures

$(941)

$(796)

$(877)

Sales of Assets/Investments

2,041

149

115

Additions to Investments

(67)

(22)

(39)

Other Investing Activities

(25)

(86)

(56)

Cash From Investing Activities

$1,008

$(755)

$(857)

15

[Alcoa logo]

3.9

9.8

8.6

9.2

6.3%

5.6%

5.2%

6.2%

Pre New

Issue

Post New

Issue

Pre New

Issue

Post New

Issue

Weighted Life (Years)

Weighted Interest Rate

Management actions leading to better capital structure

Long-Term Debt Maturity Profile ($Millions)

Cash & CP History ($Millions)

January 2007 and July 2008

issuances increased average debt

maturity

Annual maturities are manageable

over the long-term

Minimal 2009 maturities

Liquidity is strong due to higher

cash balances

Refinancing Impacts

2007 New Issue

2008 New Issue

0

400

800

1,200

1,600

Q4'07

Q1'08

Q2'08

Q3'08

Commercial Paper

Cash

[Alcoa logo]

President and Chief Executive Officer

Klaus Kleinfeld

17

[Alcoa logo]

Market conditions weakened during 3

rd

Quarter

Growth by Industry & Geography 2008 vs. 2007

18

[Alcoa logo]

Slowing growth in several regions

Source: Alcoa analysis

2nd Quarter Forecast

3rd Quarter Forecast

1.0

1.1

5.3

6.0

8.0

13.8

Brazil

CIS

Asia w/o China

North America

Europe

China

2008 Projected

Consumption (million mt)

6%

15%

8%

3%

-5%

-10%

1%

-2%

22%

15%

2008

Projected Growth Rates

Note:  2008 Projected Global Consumption:  40.4 million mt

2008 Global Demand Growth Rates

2Q Forecast: +8%

3Q Forecast: +6%

19

[Alcoa logo]

Higher inventories and lower LME price

Source:  LME

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

20

[Alcoa logo]

Cash cost

(per mt)

About 1/3 of global production under water

Source: CRU International, Alcoa analysis

Worldwide Capacity (million mt)

Global

Smelting

Cash

Cost

Curve

(per

mt)

Note: 2008 cost curve adjusted to reflect current LME, FX, coke costs

~ 1/3 total

Current LME price = $2,200/mt

$800

$1,200

$1,600

$2,000

$2,400

$2,800

$3,200

$3,600

0

5

10

15

20

25

30

35

40

45

2005

2006

2007

2008

21

[Alcoa logo]

$2,200

$2,400

$2,600

$2,800

$3,000

$3,200

$3,400

$3,600

3 mo

15 mo

27 mo

39 mo

51 mo

63 mo

123 mo

Market remains optimistic on aluminum prospects

Source: Bloomberg

+23%

Forward Curve of LME Aluminum Pricing

June 30, 2008

Sept 30, 2007

Sept 30, 2008

22

[Alcoa logo]

Taking decisive actions

Decelerating

Aluminum

Growth

End

Market

Weakness

Cost

Pressures

Global

Liquidity

Crisis

Alcoa Actions

Review Upstream Footprint

Review Product Portfolio

Capture Pricing Opportunities

Balance Capacity with Demand

Complete Repowering Efforts

Capture Procurement Opportunities

Suspend Share Repurchases

Stop Non-Critical Capital Spend

M

A

R

K

E

T

C

O

N

D

I

T

I

O

N

S

23

[Alcoa logo]

23

8.2

10.6

4.6

7.3

5.6

Strong demand for aluminum will continue

World Aluminum Consumption

(million metric tons)

Source:  Brook Hunt, Alcoa analysis

22

1998

China

Rest of

Asia

2.8

6.7

3.6

North

9.2

8.6

29.1

67

2017

E. Europe/

Mid East/

Africa

W.Europe

South

6.7

5.2

12.0

38

2007

6% CAGR

6% CAGR

Europe/ME/

Africa

Americas

Asia

12%

1%

6%

8%

4%

5%

2.5

0.8

1.3

2.6

24

[Alcoa logo]

2008F

2009F

2010F

Projected Cash Conversion Cost of Production

(per mt)

Fjardaal

–

successful start-up that will drive profit growth

+30 kmt

(17%)

Source:  Alcoa analysis

+ $ 170m

incremental

EBITDA in 2010

Projected Smelting Production

(kmt)

320

346

350

2008F

2009F

2010F

25

[Alcoa logo]

Sao Luis Alumina Refinery Expansion

•

Expansion

from

0.8

million

mt

to

1.9

million

mt

•

Investment of $1.6 billion

•

Projected to move from 33   percentile to 14

percentile on cash cost curve

Brazil mining & refining projects to contribute to results

Juruti

Bauxite Mine Development

•

Initial

production

of

2.6

million

mt

per

annum

–

estimated 200 year reserve

•

Investment of $2.0 billion with significant

infrastructure investment enabling future

expansions

+ $ 80m

incremental

EBITDA in 2010

Note: Alcoa share = 60% of above

rd

th

26

[Alcoa logo]

Can

sheet market provides profitable growth opportunities

Source: Alcoa analysis

•

Strong global demand growth

•

Alcoa well-positioned with

global customers

•

Recycling infrastructure

improves cost position and

environmental footprint

•

Expiration of can sheet

contract provides earnings

opportunity

Can Sheet Opportunity

+ $ 320m

incremental

EBITDA in 2010

+41% p.a.

Alcoa Can Sheet Production in Russia & China

(kmt)

80

107

160

2008F

2009F

2010F

27

[Alcoa logo]

We are committed to our strategic priorities

Disciplined

Execution

across all activities

Alcoa’s Three Strategic Priorities

Profitable

Growth

in every business

Business Programs

that define:

–

3-year aspirations

–

Priority levers

–

Accountability

Alcoa Advantage

creating value for

all businesses

–

Talent

–

Technology

–

Customer Intimacy

–

Purchasing

–

Operating System

28

[Alcoa logo]

Greg Aschman

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:

29

[Alcoa logo]

[Alcoa logo]

30

[Alcoa logo]

APPENDIX

[Alcoa logo]

31

[Alcoa logo]

In the first quarter of 2008, management approved a realignment of Alcoa's reportable segments to better reflect the core businesses in which Alcoa operates and

how it is managed.  This realignment consisted of eliminating the Extruded and End Products segment, and realigning its component businesses as follows: the

building and construction systems business is reported in the Engineered Products and Solutions segment; the hard alloy extrusions business and the Russian 

extrusions business are reported in the Flat-Rolled Products segment; and the remaining segment components, consisting primarily of the equity

investment/income of Alcoa's interest in the Sapa AB joint venture, and the Latin American extrusions business, are reported in Corporate.  Additionally, the

Russian forgings business was moved from the Engineered Products and Solutions segment to the Flat-Rolled Products segment, where all Russian operations

are now reported.  Prior period amounts were reclassified to reflect the new segment structure.  Also, the Engineered Solutions segment was renamed the 

Engineered Products and Solutions segment.

Reconciliation of ATOI to

Consolidated Net Income

$     268

$     546

$     303

$  2,564

$     632

$     555

$     715

$     662

Consolidated net income

(116)

(32)

(98)

741

303

446

(22)

14

Other

(1)

–

–

(7)

8

(3)

(1)

(11)

Discontinued operations

(29)

(2)

(30)

(307)

1

(311)

21

(18)

Restructuring and other charges

(77)

(91)

(82)

(388)

(100)

(101)

(101)

(86)

Corporate expense

(84)

(70)

(67)

(365)

(64)

(76)

(110)

(115)

Minority interests

(63)

(57)

(64)

(261)

(53)

(98)

(56)

(54)

Interest expense

10

12

9

40

10

10

9

11

Interest income

(5)

(44)

(31)

(24)

9

10

(16)

(27)

Impact of LIFO

Unallocated amounts (net of tax):

$     633

$     830

$     666

$  3,135

$     518

$     678

$     991

$     948

Total segment ATOI

3Q08

2Q08

1Q08

2007

4Q07

3Q07

2Q07

1Q07

(in millions)

$     268

$     546

$     303

$  2,564

$     632

$     555

$     715

$     662

Consolidated net income

(116)

(32)

(98)

741

303

446

(22)

14

Other

(1)

–

–

(7)

8

(3)

(1)

(11)

Discontinued operations

(29)

(2)

(30)

(307)

1

(311)

21

(18)

Restructuring and other charges

(77)

(91)

(82)

(388)

(100)

(101)

(101)

(86)

Corporate expense

(84)

(70)

(67)

(365)

(64)

(76)

(110)

(115)

Minority interests

(63)

(57)

(64)

(261)

(53)

(98)

(56)

(54)

Interest expense

10

12

9

40

10

10

9

11

Interest income

(5)

(44)

(31)

(24)

9

10

(16)

(27)

Impact of LIFO

Unallocated amounts (net of tax):

$     633

$     830

$     666

$  3,135

$     518

$     678

$     991

$     948

Total segment ATOI

3Q08

2Q08

1Q08

2007

4Q07

3Q07

2Q07

1Q07

(in millions)

32

[Alcoa logo]

Days of Working Capital = Working Capital divided by (Adjusted Sales/number of days in the quarter)

(a)

Adjusted Sales is a non-GAAP financial measure and is being used to calculate Days of Working Capital to be consistent with the fact that the

working capital components of the above-mentioned divested businesses were classified as held for sale, and, therefore, are not included in the

Working Capital amounts above.

Days of Working Capital

$   7,234

$   7,601

$   6,502

Adjusted Sales (a)

47.7

45.0

51.5

Days of Working Capital

–

19

885

Packaging and Consumer, Soft Alloy Extrusions, and

Auto Castings

$   7,234

$   7,620

$   7,387

Sales

$   3,753

$   3,755

$   3,638

Working Capital

2,791

3,121

2,649

Less: Accounts payable, trade

3,844

3,813

3,311

Add: Inventories

$   2,700

$   3,063

$   2,976

Receivables from customers, less allowances

September 30,

2008

June 30,

2008

September 30,

2007

(in millions)

Quarter ended

$   7,234

$   7,601

$   6,502

Adjusted Sales (a)

47.7

45.0

51.5

Days of Working Capital

–

19

885

Packaging and Consumer, Soft Alloy Extrusions, and

Auto Castings

$   7,234

$   7,620

$   7,387

Sales

$   3,753

$   3,755

$   3,638

Working Capital

2,791

3,121

2,649

Less: Accounts payable, trade

3,844

3,813

3,311

Add: Inventories

$   2,700

$   3,063

$   2,976

Receivables from customers, less allowances

September 30,

2008

June 30,

2008

September 30,

2007

(in millions)

Quarter ended

33

[Alcoa logo]

Other Financial Reconciliations

(in millions)

September 30, 2008

Quarter ended

Third-party Sales

September 30,

2007

Debt-to-Capital

Debt-to-Capital

Cash and cash

equivalents

Net Debt-to-

Capital

Sales

$    7,387

Total Debt

Short-term borrowings

$       498

$       

–

$       498

Divested businesses (a)

885

Commercial paper

1,207

831

376

Long-term debt due

within one year

54

–

54

Sales, excluding divested

businesses

$    6,502

Long-term debt, less

amount due within one

year

8,370

–

8,370

Numerator

$  10,129

$       831

$    9,298

Total Capital

Total debt (Numerator)

$  10,129

$       831

$    9,298

(a)

Divested businesses include the businesses

within the Packaging and Consumer segment,

certain U.S. locations of the Soft Alloy

Extrusions business that were not contributed

to the Sapa

AB joint venture, and the

Automotive Castings business.

Minority interests

2,740

–

2,740

Total shareholders’

equity

15,065

–

15,065

Denominator

$  27,934

$       831

$  27,103

Quarter ended

Cash From Operations

September 30,

2008

Ratio

36.3%

34.3%

Cash used for operations

$      (93)

Pension contributions

418

Cash from operations,

excluding pension

contributions

$     325

34

[Alcoa logo]

Reconciliation of Adjusted Income

(in millions)

Quarter ended

3Q07

2Q08

3Q08

Net income

$   555

$   546

$   268

Loss from

discontinued

operations

(3)

–

(1)

Income from

continuing

operations

558

546

269

Discrete tax items

464

(9)

–

Gain on sale of

Chalco

investment

(1,140)

–

–

Transaction costs*

55

–

–

Restructuring and

other charges**

403

2

29

Income from

continuing

operations

–

as

adjusted

$   340

$   539

$   298

* Transaction costs include investment banking, legal, audit related, and other third party expenses, and interest expense related to the offer for

   Alcan.  All costs except for interest expense are included in Selling, general administrative, and other expenses on the Statement of

   Consolidated Income.

** In the third quarter of 2007, Restructuring and other charges include a $93 after tax goodwill impairment charge related to the Electrical and

    Electronic Solutions business.

35

[Alcoa logo]

(2)

Year 2010 projections of EBITDA are forward-looking non-GAAP financial measures. As such the most directly comparable GAAP measures

for 2010 (actual net income) are not yet available. However, management believes that the 2010 projections are meaningful to investors

because of the magnitude of the potential earnings contribution. Year 2010 projections are based upon September 2008 year-to-date pricing

and input costs and represent an incremental add to EBITDA with a base year of 2008. Iceland EBITDA is for the Fjarðaál smelter, Brazil

EBITDA is for the Juruti bauxite mine development and São Luís alumina refinery expansion, and Can Sheet EBITDA is for Alcoa’s global can

sheet businesses and assumes the elimination of LME-related pricing caps by the end of 2009 and volume increases of at least 30 percent in

Russia and China. Forward-looking statements are subject to risks, contingencies, and uncertainties and are not guarantees of future

performance. Actual results, performance or outcomes may differ materially from those expressed in or implied by these forward looking

statements. See Slide 2 (Forward Looking Statements) for additional information.

EBITDA Reconciliations

(in millions)

Six months

ended

June 30,

2007

Six months

ended

June 30,

2008

Six months

ended

June 30,

2007

Six months

ended

June 30,

2008

Alumina

Primary Metals

After-tax operating income (ATOI)

(1)

$     536

$     359

$     966

$     735

Add:

Income taxes

202

124

410

247

Depreciation, depletion, and amortization

118

141

197

252

Earnings before interest, taxes, depreciation, and

amortization (EBITDA)

$     856

$     624

$  1,573

$  1,234

(1)

See Slide 33 for a reconciliation of segment ATOI to consolidated net income.

Year 2010 Projections (2)

Iceland

Brazil

Can Sheet

Net income

$     130

$    

30

$     250

Add:

Minority interests

–

15

–

Income taxes

30

5

60

Depreciation, depletion, and amortization

10

30

10

EBITDA

$     170

$       80

$     320

36

[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

3Q'08

2Q'08

1Q'08

4Q'07

3Q'07

2Q'07

1Q'07

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

(In Millions)

Method

Method

Method

Method

Method

Method

Method

Net income

$1,749

$2,036

$2,205

$2,564

$2,291

$2,273

$2,302

Minority interests

$285

$277

$317

$365

$399

$432

$446

Interest expense (after-tax)

$312

$267

$266

$262

$246

$270

$281

Numerator (sum total)

$2,346

$2,580

$2,788

$3,191

$2,936

$2,975

$3,029

Average Balances

Short-term borrowings

$537

$568

$524

$516

$497

$451

$441

Short-term debt

$126

$352

$358

$356

$525

$359

$360

Commercial paper

$782

$819

$864

$1,164

$1,275

$1,169

$972

Long-term debt

$7,351

$6,523

$6,374

$5,574

$5,390

$5,709

$5,767

Preferred stock

$55

$55

$55

$55

$55

$55

$55

Minority interests

$2,532

$2,519

$2,320

$2,130

$1,927

$1,809

$1,669

Common equity

$15,435

$16,695

$15,563

$15,269

$15,255

$15,571

$14,621

Denominator (sum total)

$26,818

$27,531

$26,058

$25,064

$24,924

$25,123

$23,885

Return on Capital

8.7%

9.4%

10.7%

12.7%

11.8%

11.8%

12.7%

37

[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

3Q'08

2Q'08

1Q'08

4Q'07

3Q'07

2Q'07

1Q'07

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

Bloomberg

(In Millions)

Method

Method

Method

Method

Method

Method

Method

Numerator (sum total)

$2,346

$2,580

$2,788

$3,191

$2,936

$2,975

$3,029

Russia, Bohai, and Kunshan

net losses

($132)

($118)

($96)

($91)

($57)

($51)

($79)

Adjusted numerator

$2,478

$2,698

$2,884

$3,282

$2,993

$3,026

$3,108

Average Balances

Denominator (sum total)

$26,818

$27,531

$26,058

$25,064

$24,924

$25,123

$23,885

Capital projects in progress and

Russia, Bohai, and Kunshan

capital base

$5,244

$5,289

$4,730

$4,620

$4,430

$4,521

$3,945

Adjusted denominator

$21,574

$22,242

$21,328

$20,444

$20,494

$20,602

$19,940

Return on capital, excluding

growth investments

11.5%

12.1%

13.5%

16.1%

14.6%

14.7%

15.6%