Exhibit 99.2 Slides of Presentation by Michael Hanley, Executive Vice President, Interim Chief Financial Officer, Alcan Inc.
Forward Looking Statements | |||
Statements made in the course of this presentation which describe the Company's intentions, expectations or predictions may be "forward-looking statements" within the meaning of securities laws. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty, and actual actions or results could differ materially. Reference should be made to the most recent Form 10-Q and Form 10-K for a summary of major risk factors. In addition, certain non-GAAP measures are used which are reconciled to the comparable GAAP measures herein or on the Company's website at www.alcan.com in the "Investors" section.
| |||
© 2005 ALCAN INC. | Slide 2 |
Agenda | |||
| |||
© 2005 ALCAN INC. | Slide 3 |
Value Based Management | |||
Governing objective: maximizing shareholder value over the long term | |||
■ EVA introduced in 1997 ■ In 2001, implemented a value-based management framework:
■ In 2003, set out three financial targets to support objective:
| |||
© 2005 ALCAN INC. | Slide 4 |
Performance Against Targets | ||
Partial success |
Metric | Target | Achievement |
Operating EPS growth | 15% / year | CAGR 18% (2001-2004) |
Free cash flow | Minimum $400M / year | in 2002 and 2003 in 2004 |
EVA | Positive by 2006 | Delayed |
© 2005 ALCAN INC. | Slide 5 |
Key Challenges – Currencies | |||
© 2005 ALCAN INC. | Slide 6 |
Key Challenges - Currencies | ||
Sharp weakening of the U.S. dollar since 1H 2003 |
Currency | Current | Change | Annualized | ||
$ | % | ||||
CAD | 2 B | US$ | +0.20 | +30 | (220) |
AUD | 0.5 B | US$ | +0.15 | +25 | (60) |
Euro-like | 0.5 B | US$ | +0.10 | +10 | (60) |
Total | (340) |
© 2005 ALCAN INC. | Slide 7 |
Key Challenges – Raw Material Costs | ||
Major external cost pressures |
Current Annual Requirements | Change 2003 vs 2005 | Annualized Cost Impact (US$M) | |||
$ | % | ||||
Caustic | 600 kt | $/t | +150 | +100 | (90) |
Coke | 1,500 kt | $/t | +30 | +25 | (50) |
Resins / films | 1,100 kt | $/t | +265 | +30 | (290) |
Oil | 6 mbbls | $/bbl | +15 | +60 | (90) |
Gas | 16 Pj | $/Gj | +4 | +100 | (60) |
Maritime freight | $/t | +13 | +75 | (120) | |
Total | (700) |
© 2005 ALCAN INC. | Slide 8 |
Key Challenges – Operating Earnings | ||
About 80% of aluminum price benefit offset by higher input costsand currencies | ||
(US$M) | Annualized Impact on Operating Earnings |
Aluminum * | 800 |
Raw Materials | (330) |
Currencies | (340) |
Total | (670) |
* Based on published sensitivity
© 2005 ALCAN INC. | Slide 9 |
Portfolio Management | |||
Key component of VBM, but not without short-term impacts | |||
■ Pechiney acquisition –December 2003
■ NovelisSpin-off – January 2005
■ Gove – Ongoing
■ Non-operating items
| |||
© 2005 ALCAN INC. | Slide 10 |
Priorities – Pechiney Synergy Capture |
■ Excellent track record ■ Original target of $360M by end of ■ Bulk of benefits to be captured in ■ Target was maintained despite ■ Executing to plan --on track to reach
|
© 2005 ALCAN INC. | Slide 11 |
Priorities | |||
Focused on high impact opportunities | |||
| |||
© 2005 ALCAN INC. | Slide 12 |
Key Performance Indicators | ||
Earning and exceeding our cost of capital is priority # 1 |
Metric | Target |
Return on capital employed | Cover COC by 2008 |
Operating EPS growth | 15% / year |
Cash from operations | Min. $2bn from 2006 |
Debt to Capital | 35% |
Note: based on 5-year plans and forward rates for currency and metal
© 2005 ALCAN INC. | Slide 13 |
Key Performance Indicators | |||
© 2005 ALCAN INC. | Slide 14 |
Key Performance Indicators | |||
© 2005 ALCAN INC. | Slide 15 |
Investment Thesis | |||
■ Track record in managing for value ■ Modern and cost efficient upstream assets
■ Downstream businesses in profitable markets with competitive
■ Financial and capital allocation discipline ■ Commitment to profitable growth
| |||
© 2005 ALCAN INC. | Slide 16 |
APPENDIX
| |
| |
© 2005 ALCAN INC. | Slide 17 |
Key Economic Sensitivities |
Change in Full Year Average | NI ($M) | EPS ($/share) | |
Aluminum | +US$100/mt | $170 | $0.46 |
Currency | |||
CAD | +US$0.10 | $(110) | $(0.30) |
European | +US$0.10 | $(56) | $(0.15) |
AUD | +US$0.10 | $(40) | $(0.11) |
| |
© 2005 ALCAN INC. | Slide 18 |
Return on Capital Employed Definition | |||
Income = Net income (loss) from continuing operations Average * Capital Employed = Total debt
* Average of beginning and end of period.
| |||
© 2005 ALCAN INC. | Slide 19 |
Other Specified Items (OSIs) | ||
■ By their nature, non-operating items are difficult to forecast. ■ Increase in number of OSIs ■ Further rationalization and
|
© 2005 ALCAN INC. | Slide 20 |
© 2005 ALCAN INC. | Slide 21 |