Alcoa Corporation (NYSE: AA) today reported third quarter 2022
financial results that reflect lower sequential average realized
prices for alumina and aluminum, coupled with higher costs for
energy and key raw materials.
Third Quarter Highlights
- Revenue of $2.85 billion
- Recorded a quarterly net loss of $746 million and loss per
share of $4.17, which includes $652 million of restructuring
charges related primarily to pension actions
- Completed a $1 billion pension annuity transaction, the fifth
such transaction since 2018, for a total transfer of approximately
$3.3 billion of prior pension obligations and related assets
- Acted to mitigate the impact of high energy prices in Europe;
curtailed one-third of the production capacity at the Lista smelter
in Norway and reduced daily production rates at the San Ciprián
refinery in Spain to lower natural gas use
- Generated $134 million in cash from operations; repurchased
$150 million of common stock and paid fourth consecutive cash
dividend of $18 million
- Finished the third quarter with a cash balance of $1.4
billion
“Across Alcoa, we have worked diligently over these past several
years to build increased resilience in our business so we can
compete through all phases of the commodity cycle, including the
one we are experiencing now,” said Alcoa President and CEO Roy
Harvey.
“Despite a challenging quarter that saw significantly lower
prices, and high costs for energy and raw materials, we maintained
a strong balance sheet, including transferring pension obligations
and returning cash to our stockholders,” Harvey said. “As we move
forward, we are keenly focused on the items within our direct
control, including boosting operational stability, advancing our
breakthrough technologies and continuing to promote our sustainable
product offerings so we can benefit from the positive, long-term
fundamentals for the aluminum industry.”
Financial Results
M, except per share amounts
3Q22
2Q22
3Q21
Revenue
$2,851
$3,644
$3,109
Net (loss) income attributable to Alcoa
Corporation
$(746)
$549
$337
(Loss) earnings per share attributable to
Alcoa Corporation
$(4.17)
$2.95
$1.76
Adjusted net (loss) income
$(60)
$496
$391
Adjusted (loss) earnings per share
$(0.33)
$2.67
$2.05
Adjusted EBITDA excluding special
items
$210
$913
$728
Third Quarter 2022 Results
- Revenue: Total third-party revenue decreased 22 percent
sequentially to $2,851 million primarily due to lower alumina and
aluminum prices. On a sequential basis, the average realized
third-party price of alumina decreased 16 percent and the average
realized third-party price of aluminum decreased 17 percent.
- Shipments: In Alumina, third-party shipments decreased 8
percent sequentially primarily due to lower trading volumes and the
decision to reduce production rates at the San Ciprián refinery in
Spain to mitigate the high costs of natural gas. Also, shipments
from the Australian refineries did not improve sequentially as
previously expected due to lower bauxite quality and extended
maintenance. In Aluminum, total shipment volume decreased
sequentially 8 percent due to the July curtailment of one of three
operating potlines at the Warrick smelter in Indiana, and reduced
trading opportunities in Europe given market uncertainty. Most of
the volume reduction was commodity grade aluminum; shipments of
value add products were flat sequentially.
- Production: The Company produced 497,000 metric tons of
aluminum, which was consistent with the prior quarter’s strong
output. Additional volume from the restarts at the Alumar smelter
in Brazil and the Portland smelter in Australia offset the lower
aluminum production at Warrick from the partial curtailment.
Alumina segment production decreased 4 percent to 3.1 million
metric tons, primarily due to the lower output at the San Ciprián
refinery.
- Net loss attributable to Alcoa Corporation was $746
million, or $4.17 per share, primarily due to the decline in
aluminum and alumina prices, higher energy and raw material costs,
and restructuring related charges recorded in the third quarter,
including $626 million of noncash pension settlement charges. Two
European locations that were exposed to spot energy had
sequentially higher costs. The Lista smelter in Norway recorded $57
million more in sequential costs for electricity; the San Ciprián
refinery in Spain recorded $21 million more in sequential costs for
natural gas. Costs for key raw materials, including caustic and
carbon materials, sequentially increased $58 million.
- Adjusted net loss was $60 million, or $0.33 per share,
excluding the impact from net special items of $686 million.
Notable special items include restructuring and other charges of
$652 million (primarily $626 million in noncash pension settlement
charges and a $29 million charge related to the permanent closure
of a long-curtailed magnesium smelter, as described below), a
mark-to-market loss of $49 million related to energy contracts and
$20 million in costs related to the restart processes at the Alumar
smelter in Brazil and the Portland smelter in Australia. The loss
was partially offset by tax and noncontrolling interest impacts on
above items of $38 million.
- Adjusted EBITDA excluding special items was $210
million, a sequential decrease of 77 percent primarily due to lower
aluminum and alumina prices and higher energy and raw material
costs.
- Cash: Alcoa ended the quarter with cash on hand of $1.4
billion. Cash provided from operations was $134 million. Cash used
for financing activities was $185 million, primarily related to
$150 million in share repurchases and $18 million in cash dividends
on common stock. Cash used for investing activities was $138
million, which includes $128 million in capital expenditures.
- Working capital: The Company’s working capital balance
decreased sequentially by $143 million. On a days working capital
basis, 50 days at the end of the third quarter was seven days
higher sequentially, due to the decrease in sales revenue from
lower pricing for aluminum and alumina. Although inventory days
increased by 14 days, the finished goods inventory balance
decreased sequentially due to lower pricing, lower amounts on hand
due to logistics improvements, and lower metal purchases to serve
annual contracts related to the Alumar smelter.
Strategic Actions
- Strengthening the balance sheet: In the third quarter,
the Company strengthened the balance sheet through the transfer of
approximately $1 billion of pension obligations and assets
associated with defined benefit pension plans for certain United
States retirees and beneficiaries. Alcoa’s U.S. defined benefit
pension plans remain more than fully funded after the transfer with
minimal to no expected funding contributions going forward.
- Returns to stockholders: In the third quarter, the
Company returned $168 million of capital to stockholders through
$18 million in cash dividends and $150 million in share repurchases
from a prior authorization. At the end of the third quarter, the
Company had $500 million authorized and available for potential
share repurchases.
- Alloy development: On September 13, the Company
announced new innovations in alloy development and deployment,
including the introduction of A210 ExtruStrong™ alloy, a new
high-strength, 6000 series alloy that provides improved benefits
for extrusion customers. Also, the company announced that its C611
EZCast™ alloy, a high-performance alloy that does not require a
dedicated heat treatment, is being used in one-piece megacastings
for the automotive industry and won top recognition from the North
American Die Casting Association in September.
- San Ciprián alumina refinery: In the quarter, the
Company reduced production to 50 percent of the 1.6 million tons of
annual capacity in an effort to reduce the refinery’s losses from
exorbitant natural gas prices in Spain. The high volatility in
European energy markets makes estimates of future results for the
facility difficult to predict. As such, the Company is actively
reviewing the refinery’s operating levels, commercial options, and
other support.
- Lista, Norway: On August 30, the Company announced the
curtailment of one third of the production capacity at its Lista
smelter in Norway to mitigate high electricity costs for the site.
In the fourth quarter of 2022, the energy situation for the smelter
is expected to improve with a power agreement in place for the
remainder of the year and into 2023.
- Warrick, Indiana: On July 1, the Company announced that
one of its three operating potlines at the Warrick smelter in
Indiana was curtailed due to operational challenges, which stem
from workforce shortages in the region. The financial impact of the
curtailment was offset by strong third-party sales of excess
electricity from the site’s power plant.
- Addy, Washington: On July 27, the Company made the
decision to permanently close a magnesium smelter in the state of
Washington that had been fully idle since 2001. Due to significant
capital investments required, restarting the facility is not
economically viable.
Advancing Sustainably
On September 8, the Company announced it received certification
from the Aluminium Stewardship Initiative (ASI) for its Poços de
Caldas operations in Brazil. All of the Company’s operating
locations in Brazil are now ASI certified.
The Company currently has 17 global sites certified to ASI and
has also earned ASI’s Chain of Custody certification, which allows
Alcoa to continue marketing globally ASI-certified bauxite, alumina
and aluminum.
The ASI certification program is the aluminum industry’s most
comprehensive third-party program to validate responsible
production practices.
2022 Outlook
The Company expects total Aluminum segment shipments to remain
unchanged from the prior projection, ranging between 2.5 and 2.6
million metric tons in 2022.
In Alumina, the Company has decreased its 2022 projection for
shipments to range between 13.1 and 13.3 million metric tons, a
reduction of 0.5 million metric tons from the prior projection
primarily due to the reduced production at the San Ciprián refinery
and lower shipments from the Australian refineries.
In Bauxite, the Company has decreased its 2022 projection for
annual bauxite shipments to range between 43.0 and 44.0 million dry
metric tons, a decrease of 1 million dry metric tons from the prior
projection due to lower demand from the Australian refineries.
For the fourth quarter of 2022, Alcoa expects higher sequential
profitability in the Bauxite segment with increased third-party
shipments.
In Alumina, the Company anticipates lower energy costs for the
San Ciprián refinery during the fourth quarter. Additionally,
benefits of the San Ciprián curtailment are expected to offset the
impact of lower bauxite quality in Australia and higher raw
materials costs. In the Aluminum segment, higher raw materials
costs, lower Warrick power plant sales, and lower value add product
premiums are expected to be offset by lower energy costs at the
Lista smelter.
Additionally, the Norwegian government recently issued a budget
proposal that sets a floor for the carbon dioxide compensation
scheme to be paid in 2023 based on 2022 power purchased. If
approved by Parliament, the Company would record an adjustment of
approximately $25 million in the fourth quarter to reverse amounts
accrued in cost of goods sold for 2022 credits earned through
September 30, 2022. The total impact of this budget proposal on the
Company’s full year results would be approximately $35 million.
Based on current alumina and aluminum market conditions, the
Company expects fourth quarter tax expense to approximate $50
million to $60 million, which may vary with market conditions and
jurisdictional profitability.
Conference Call Alcoa will hold its quarterly conference
call at 5:00 p.m. Eastern Daylight Time (EDT) on Wednesday, October
19, 2022, to present third quarter 2022 financial results and
discuss the business, developments, and market conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EDT on October 19, 2022. Call information and related details
are available under the “Investors” section of www.alcoa.com.
About Alcoa Corporation Alcoa (NYSE: AA) is a global
industry leader in bauxite, alumina and aluminum products with a
vision to reinvent the aluminum industry for a sustainable future.
With a values-based approach that encompasses integrity, operating
excellence, care for people and courageous leadership, our purpose
is to Turn Raw Potential into Real Progress. Since developing the
process that made aluminum an affordable and vital part of modern
life, our talented Alcoans have developed breakthrough innovations
and best practices that have led to improved safety,
sustainability, efficiency, and stronger communities wherever we
operate.
Discover more by visiting www.alcoa.com. Follow us on our social
media channels: Facebook, Instagram, Twitter, YouTube and
LinkedIn.
The Company does not incorporate the information contained on,
or accessible through, such websites into this press release.
Dissemination of Company Information Alcoa intends to
make future announcements regarding company developments and
financial performance through its website, www.alcoa.com, as well
as through press releases, filings with the Securities and Exchange
Commission, conference calls and webcasts.
Forward-Looking Statements This news release contains
statements that relate to future events and expectations and as
such constitute forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
“aims,” “ambition,” “anticipates,” “believes,” “could,” “develop,”
“endeavors,” “estimates,” “expects,” “forecasts,” “goal,”
“intends,” “may,” “outlook,” “potential,” “plans,” “projects,”
“reach,” “seeks,” “sees,” “should,” “strive,” “targets,” “will,”
“working,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results, or operating or sustainability performance
(including our ability to execute on strategies related to
environmental, social and governance matters); statements about
strategies, outlook, and business and financial prospects; and
statements about capital allocation and return of capital. These
statements reflect beliefs and assumptions that are based on Alcoa
Corporation’s perception of historical trends, current conditions,
and expected future developments, as well as other factors that
management believes are appropriate in the circumstances.
Forward-looking statements are not guarantees of future performance
and are subject to known and unknown risks, uncertainties, and
changes in circumstances that are difficult to predict. Although
Alcoa Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) current and potential future impacts to the
global economy and our industry, business and financial condition
caused by various worldwide or macroeconomic events, such as the
COVID-19 pandemic and the ongoing conflict between Russia and
Ukraine, and related regulatory developments; (b) material adverse
changes in aluminum industry conditions, including global supply
and demand conditions and fluctuations in London Metal
Exchange-based prices and premiums, as applicable, for primary
aluminum and other products, and fluctuations in indexed-based and
spot prices for alumina; (c) changes in global economic and
financial market conditions generally, such as inflation and
interest rate increases, and which may also affect Alcoa
Corporation’s ability to obtain credit or financing upon acceptable
terms or at all; (d) unfavorable changes in the markets served by
Alcoa Corporation; (e) the impact of changes in foreign currency
exchange and tax rates on costs and results; (f) unfavorable
changes in cost, quality, or supply of key inputs, including energy
and raw materials, or uncertainty of or disruption to the supply
chain including logistics; (g) the inability to execute on
strategies related to or achieve improvement in profitability and
margins, cost savings, cash generation, revenue growth, fiscal
discipline, environmental- and social-related goals and targets
(including due to delays in scientific and technological
developments), or strengthening of competitiveness and operations
anticipated from portfolio actions, operational and productivity
improvements, technology advancements, and other initiatives; (h)
the inability to realize expected benefits, in each case as planned
and by targeted completion dates, from acquisitions, divestitures,
restructuring activities, facility closures, curtailments,
restarts, expansions, or joint ventures; (i) political, economic,
trade, legal, public health and safety, and regulatory risks in the
countries in which Alcoa Corporation operates or sells products;
(j) labor disputes and/or work stoppages and strikes; (k) the
outcome of contingencies, including legal and tax proceedings,
government or regulatory investigations, and environmental
remediation; (l) the impact of cyberattacks and potential
information technology or data security breaches; (m) risks
associated with long-term debt obligations; (n) the timing and
amount of future cash dividends and share repurchases; (o) declines
in the discount rates used to measure pension and other
postretirement benefit liabilities or lower-than-expected
investment returns on pension assets, or unfavorable changes in
laws or regulations that govern pension plan funding; and, (p) the
other risk factors discussed in Part I Item 1A of Alcoa
Corporation’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2022, and other reports filed by Alcoa
Corporation with the U.S. Securities and Exchange Commission. Alcoa
Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law.
Market projections are subject to the risks described above and
other risks in the market.
Non-GAAP Financial Measures Some of the information
included in this release is derived from Alcoa Corporation’s
consolidated financial information but is not presented in Alcoa
Corporation’s financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP). Certain of these data are considered “non-GAAP
financial measures” under SEC regulations. Alcoa Corporation
believes that the presentation of non-GAAP financial measures is
useful to investors because such measures provide both additional
information about the operating performance of Alcoa Corporation
and insight on the ability of Alcoa Corporation to meet its
financial obligations by adjusting the most directly comparable
GAAP financial measure for the impact of, among others, “special
items” as defined by the Company, non-cash items in nature, and/or
nonoperating expense or income items. The presentation of non-GAAP
financial measures is not intended to be a substitute for, and
should not be considered in isolation from, the financial measures
reported in accordance with GAAP. Reconciliations to the most
directly comparable GAAP financial measures and management’s
rationale for the use of the non-GAAP financial measures can be
found in the schedules to this release.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Quarter Ended
September 30,
2022
June 30, 2022
September 30,
2021
Sales
$
2,851
$
3,644
$
3,109
Cost of goods sold (exclusive of expenses
below)
2,668
2,767
2,322
Selling, general administrative, and other
expenses
44
52
53
Research and development expenses
7
7
8
Provision for depreciation, depletion, and
amortization
149
161
156
Restructuring and other charges, net
652
(75
)
33
Interest expense
25
30
58
Other expense (income), net
35
(206
)
(18
)
Total costs and expenses
3,580
2,736
2,612
(Loss) income before income taxes
(729
)
908
497
Provision for income taxes
40
234
127
Net (loss) income
(769
)
674
370
Less: Net (loss) income attributable to
noncontrolling interest
(23
)
125
33
NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
(746
)
$
549
$
337
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net (loss) income
$
(4.17
)
$
3.01
$
1.80
Average number of shares
178,778,774
182,499,574
186,942,851
Diluted:
Net (loss) income
$
(4.17
)
$
2.95
$
1.76
Average number of shares
178,778,774
186,068,663
190,823,143
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Nine months ended
September 30,
2022
September 30,
2021
Sales
$
9,788
$
8,812
Cost of goods sold (exclusive of expenses
below)
7,616
6,770
Selling, general administrative, and other
expenses
140
159
Research and development expenses
23
21
Provision for depreciation, depletion, and
amortization
470
499
Restructuring and other charges, net
702
73
Interest expense
80
167
Other income, net
(185
)
(147
)
Total costs and expenses
8,846
7,542
Income before income taxes
942
1,270
Provision for income taxes
484
331
Net income
458
939
Less: Net income attributable to
noncontrolling interest
186
118
NET INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
272
$
821
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income
$
1.50
$
4.40
Average number of shares
181,893,140
186,623,281
Diluted:
Net income
$
1.47
$
4.32
Average number of shares
185,586,493
189,926,028
Common stock outstanding at the end of the
period
176,935,900
187,060,044
Alcoa Corporation and subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
September 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
1,432
$
1,814
Receivables from customers
749
757
Other receivables
119
127
Inventories
2,400
1,956
Fair value of derivative instruments
207
14
Prepaid expenses and other current
assets(1)
443
358
Total current assets
5,350
5,026
Properties, plants, and equipment
19,019
19,753
Less: accumulated depreciation, depletion,
and amortization
12,765
13,130
Properties, plants, and equipment, net
6,254
6,623
Investments
1,223
1,199
Deferred income taxes
417
506
Fair value of derivative instruments
20
7
Other noncurrent assets(2)
1,621
1,664
Total assets
$
14,885
$
15,025
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,590
$
1,674
Accrued compensation and retirement
costs
329
383
Taxes, including income taxes
301
374
Fair value of derivative instruments
167
274
Other current liabilities
566
517
Long-term debt due within one year
1
1
Total current liabilities
2,954
3,223
Long-term debt, less amount due within one
year
1,725
1,726
Accrued pension benefits
370
417
Accrued other postretirement benefits
616
650
Asset retirement obligations
611
622
Environmental remediation
262
265
Fair value of derivative instruments
812
1,048
Noncurrent income taxes
201
191
Other noncurrent liabilities and deferred
credits
442
599
Total liabilities
7,993
8,741
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,171
9,577
Accumulated deficit
(158
)
(315
)
Accumulated other comprehensive loss
(3,644
)
(4,592
)
Total Alcoa Corporation shareholders’
equity
5,371
4,672
Noncontrolling interest
1,521
1,612
Total equity
6,892
6,284
Total liabilities and equity
$
14,885
$
15,025
(1)
This line item includes $55 and $4 of
restricted cash at September 30, 2022 and December 31, 2021,
respectively.
(2)
This line item includes $54 and $106 of
noncurrent restricted cash at September 30, 2022 and December 31,
2021, respectively.
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in millions)
Nine Months Ended September
30,
2022
2021
CASH FROM OPERATIONS
Net income
$
458
$
939
Adjustments to reconcile net income to
cash from operations:
Depreciation, depletion, and
amortization
470
499
Deferred income taxes
93
61
Equity earnings, net of dividends
(35
)
(84
)
Restructuring and other charges, net
702
73
Net loss (gain) from investing activities
– asset sales
7
(132
)
Net periodic pension benefit cost
39
36
Stock-based compensation
28
26
Premium paid on early redemption of
debt
—
43
Gain on mark-to-market derivative
financial contracts
(84
)
—
Other
30
45
Changes in assets and liabilities,
excluding effects of divestitures and foreign currency translation
adjustments:
Decrease (Increase) in receivables
23
(408
)
Increase in inventories
(580
)
(373
)
(Increase) Decrease in prepaid expenses
and other current assets
(10
)
39
(Decrease) Increase in accounts payable,
trade
(10
)
153
Decrease in accrued expenses
(122
)
—
(Decrease) Increase in taxes, including
income taxes
(103
)
143
Pension contributions
(12
)
(575
)
Increase in noncurrent assets
(94
)
(47
)
Decrease in noncurrent liabilities
(96
)
(83
)
CASH PROVIDED FROM OPERATIONS
704
355
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)
—
495
Payments on debt (original maturities
greater than three months)
—
(1,294
)
Proceeds from the exercise of employee
stock options
22
19
Repurchase of common stock
(500
)
—
Dividends paid on Alcoa common stock
(55
)
—
Payments related to tax withholding on
stock-based compensation awards
(19
)
—
Financial contributions for the
divestiture of businesses
(19
)
(14
)
Contributions from noncontrolling
interest
150
8
Distributions to noncontrolling
interest
(319
)
(177
)
Other
(3
)
(3
)
CASH USED FOR FINANCING ACTIVITIES
(743
)
(966
)
INVESTING ACTIVITIES
Capital expenditures
(309
)
(237
)
Proceeds from the sale of assets
5
715
Additions to investments
(32
)
(7
)
Sale of investments
10
—
Other
2
—
CASH (USED FOR) PROVIDED FROM INVESTING
ACTIVITIES
(324
)
471
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(20
)
(11
)
Net change in cash and cash equivalents
and restricted cash
(383
)
(151
)
Cash and cash equivalents and restricted
cash at beginning of year
1,924
1,610
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
1,541
$
1,459
Alcoa Corporation and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
1Q21
2Q21
3Q21
4Q21
2021
1Q22
2Q22
3Q22
Bauxite:
Production(1) (mdmt)
11.9
12.2
11.7
11.8
47.6
11.0
10.2
10.3
Third-party shipments (mdmt)
1.5
1.1
1.5
1.6
5.7
0.8
0.6
1.0
Intersegment shipments (mdmt)
10.5
10.8
10.5
10.6
42.4
10.1
10.0
9.9
Third-party sales
$
58
$
39
$
56
$
83
$
236
$
43
$
34
$
59
Intersegment sales
$
185
$
179
$
172
$
175
$
711
$
170
$
165
$
181
Segment Adjusted EBITDA(2)
$
59
$
41
$
23
$
49
$
172
$
38
$
5
$
15
Depreciation, depletion, and
amortization
$
57
$
32
$
30
$
34
$
153
$
35
$
35
$
31
Alumina:
Production (kmt)
3,327
3,388
3,253
3,291
13,259
3,209
3,226
3,092
Third-party shipments (kmt)
2,472
2,437
2,426
2,294
9,629
2,277
2,438
2,244
Intersegment shipments (kmt)
1,101
1,054
1,011
1,121
4,287
940
984
1,005
Average realized third-party price per
metric ton of alumina
$
308
$
282
$
312
$
407
$
326
$
375
$
442
$
371
Third-party sales
$
760
$
688
$
756
$
935
$
3,139
$
855
$
1,077
$
832
Intersegment sales
$
364
$
343
$
349
$
530
$
1,586
$
418
$
489
$
418
Segment Adjusted EBITDA(2)
$
227
$
124
$
148
$
503
$
1,002
$
262
$
343
$
69
Depreciation and amortization
$
46
$
50
$
47
$
55
$
198
$
50
$
49
$
43
Equity (loss) income
$
(5
)
$
(1
)
$
(1
)
$
11
$
4
$
1
$
(5
)
$
(18
)
Aluminum:
Primary aluminum production (kmt)
548
546
545
554
2,193
498
499
497
Third-party aluminum shipments(3)
(kmt)
831
767
722
687
3,007
634
674
621
Average realized third-party price per
metric ton of primary aluminum
$
2,308
$
2,753
$
3,124
$
3,382
$
2,879
$
3,861
$
3,864
$
3,204
Third-party sales
$
2,047
$
2,102
$
2,295
$
2,322
$
8,766
$
2,388
$
2,539
$
1,976
Intersegment sales
$
2
$
3
$
8
$
5
$
18
$
7
$
8
$
10
Segment Adjusted EBITDA(2)
$
283
$
460
$
613
$
523
$
1,879
$
713
$
596
$
152
Depreciation and amortization
$
73
$
73
$
72
$
71
$
289
$
69
$
71
$
70
Equity income (loss)
$
13
$
28
$
38
$
37
$
116
$
39
$
40
$
(5
)
Reconciliation of total segment
Adjusted EBITDA to consolidated net income (loss)
attributable to Alcoa Corporation:
Total Segment Adjusted EBITDA(2)
$
569
$
625
$
784
$
1,075
$
3,053
$
1,013
$
944
$
236
Unallocated amounts:
Transformation(4)
(11
)
(13
)
(10
)
(10
)
(44
)
(14
)
(11
)
(19
)
Intersegment eliminations
(7
)
35
(8
)
(121
)
(101
)
102
20
17
Corporate expenses(5)
(26
)
(28
)
(30
)
(45
)
(129
)
(29
)
(35
)
(27
)
Provision for depreciation, depletion,
and amortization
(182
)
(161
)
(156
)
(165
)
(664
)
(160
)
(161
)
(149
)
Restructuring and other charges, net
(7
)
(33
)
(33
)
(1,055
)
(1,128
)
(125
)
75
(652
)
Interest expense
(42
)
(67
)
(58
)
(28
)
(195
)
(25
)
(30
)
(25
)
Other income (expense), net
24
105
18
298
445
14
206
(35
)
Other(6)
(6
)
(2
)
(10
)
(20
)
(38
)
(13
)
(100
)
(75
)
Consolidated income (loss) before income
taxes
312
461
497
(71
)
1,199
763
908
(729
)
Provision for income taxes
(93
)
(111
)
(127
)
(298
)
(629
)
(210
)
(234
)
(40
)
Net income (loss) attributable to
noncontrolling interest
(44
)
(41
)
(33
)
(23
)
(141
)
(84
)
(125
)
23
Consolidated net income (loss)
attributable to Alcoa Corporation
$
175
$
309
$
337
$
(392
)
$
429
$
469
$
549
$
(746
)
The difference between segment totals and consolidated amounts is
in Corporate.
(1)
The production amounts can vary from total
shipments due primarily to differences between the equity
allocation of production and off-take agreements with the
respective equity investment.
(2)
Alcoa Corporation’s definition of Adjusted
EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
(3)
Until the sale of the Warrick Rolling Mill
on March 31, 2021, the Aluminum segment’s third-party aluminum
shipments were composed of both primary aluminum and flat-rolled
aluminum. Beginning April 1, 2021, the segment’s third-party
aluminum shipments include only primary aluminum.
(4)
Transformation includes, among other
items, the Adjusted EBITDA of previously closed operations.
(5)
Corporate expenses are composed of general
administrative and other expenses of operating the corporate
headquarters and other global administrative facilities, as well as
research and development expenses of the corporate technical
center.
(6)
Other includes certain items that impact
Cost of goods sold and other expenses on Alcoa Corporation’s
Statement of Consolidated Operations that are not included in the
Adjusted EBITDA of the reportable segments.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited)
(in millions, except per-share
amounts)
Adjusted Income
(Loss) Income
Diluted EPS (4)
Quarter ended
Quarter ended
September 30,
2022
June 30, 2022
September 30,
2021
September 30,
2022
June 30, 2022
September 30,
2021
Net (loss) income attributable to Alcoa
Corporation
$
(746
)
$
549
$
337
$
(4.17
)
$
2.95
$
1.76
Special items:
Restructuring and other charges, net
652
(75
)
33
Other special items(1)
72
(76
)
26
Discrete tax items (2)
(1
)
—
1
Tax impact on special items(3)
(21
)
52
(2
)
Noncontrolling interest impact(3)
(16
)
46
(4
)
Subtotal
686
(53
)
54
Net (loss) income attributable to Alcoa
Corporation – as adjusted
$
(60
)
$
496
$
391
$
(0.33
)
$
2.67
$
2.05
Net (loss) income attributable to Alcoa Corporation – as adjusted
is a non-GAAP financial measure. Management believes this measure
is meaningful to investors because management reviews the operating
results of Alcoa Corporation excluding the impacts of restructuring
and other charges, various tax items, and other special items
(collectively, “special items”). There can be no assurances that
additional special items will not occur in future periods. To
compensate for this limitation, management believes it is
appropriate to consider both Net (loss) income attributable to
Alcoa Corporation determined under GAAP as well as Net (loss)
income attributable to Alcoa Corporation – as adjusted.
(1)
Other special items include the
following:
- for the quarter ended September 30, 2022, a net unfavorable
change in mark-to-market energy derivative instruments ($49), costs
related to the restart process at the Alumar, Brazil smelter ($14),
costs related to the restart process of the Portland, Australia
smelter ($6), and charges for other special items ($3);
- for the quarter ended June 30, 2022, a net favorable change in
mark-to-market energy derivative instruments ($106), costs related
to the restart process at the Alumar, Brazil smelter ($22), an
adjustment to the gain on sale of the Warrick Rolling Mill in
Evansville, Indiana for additional site separation costs ($5), and
costs related to the restart process of the Portland, Australia
smelter ($3); and,
- for the quarter ended September 30, 2021, a charge for debt
redemption expenses ($22), a net unfavorable change in certain
mark-to-market energy derivative instruments ($9), net gains on
asset sales ($8), and a net charge from other special items
($3).
(2)
Discrete tax items are generally unusual
or infrequently occurring items, changes in law, items associated
with uncertain tax positions, or the effect of measurement-period
adjustments and include the following:
- for the quarter ended September 30, 2022, net benefit for
discrete tax items of ($1); and,
- for the quarter ended September 30, 2021, net charge for
discrete tax items ($1).
(3)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa’s partner’s share of certain special
items.
(4)
In any given period, the average number of
shares applicable to diluted EPS for Net (loss) income attributable
to Alcoa Corporation common shareholders may exclude certain share
equivalents as their effect is anti-dilutive. For the quarter ended
September 30, 2022, all share equivalents had an anti-dilutive
effect, and therefore, are excluded from the diluted EPS
calculation.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
September 30,
2022
June 30, 2022
September 30,
2021
Net (loss) income attributable to Alcoa
Corporation
$
(746
)
$
549
$
337
Add:
Net (loss) income attributable to
noncontrolling interest
(23
)
125
33
Provision for income taxes
40
234
127
Other expense (income), net
35
(206
)
(18
)
Interest expense
25
30
58
Restructuring and other charges, net
652
(75
)
33
Provision for depreciation, depletion, and
amortization
149
161
156
Adjusted EBITDA
132
818
726
Special items(1)
78
95
2
Adjusted EBITDA, excluding special
items
$
210
$
913
$
728
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. The Adjusted EBITDA
presented may not be comparable to similarly titled measures of
other companies.
(1)
Special items include the following (see
reconciliation of Adjusted Income above for additional
information):
- for the quarter ended September 30, 2022, costs related to the
restart process at the Alumar, Brazil smelter ($14), costs related
to the restart process of the Portland, Australia smelter ($6), and
charges for other special items ($1). Additionally, due to
unprecedented price increases in the Australian power market, the
mark-to-market contracts associated with the Portland smelter have
generated gains ($57) in Other expense (income), net which
economically offset a portion of the cost of power recorded in Cost
of goods sold. This non-GAAP reclass presents the net cost of power
within Cost of goods sold;
- for the quarter ended June 30, 2022, costs related to the
restart process at the Alumar, Brazil smelter ($22), costs related
to the restart process of the Portland, Australia smelter ($3), and
a non-GAAP reclass of gains on mark-to-market contracts associated
with the Portland smelter ($70) to Cost of goods sold (see above);
and,
- for the quarter ended September 30, 2021, external costs
related to portfolio actions ($1) and costs related to the closure
of the Lake Charles anode facility ($1).
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
September 30,
2022
June 30, 2022
September 30,
2021
Cash provided from operations
$
134
$
536
$
435
Capital expenditures
(128
)
(107
)
(83
)
Free cash flow
$
6
$
429
$
352
Free Cash Flow is a non-GAAP financial
measure. Management believes this measure is meaningful to
investors because management reviews cash flows generated from
operations after taking into consideration capital expenditures,
which are both necessary to maintain and expand Alcoa Corporation’s
asset base and expected to generate future cash flows from
operations. It is important to note that Free Cash Flow does not
represent the residual cash flow available for discretionary
expenditures since other non-discretionary expenditures, such as
mandatory debt service requirements, are not deducted from the
measure.
Net Debt
September 30,
2022
December 31,
2021
Short-term borrowings
$
75
$
75
Long-term debt due within one year
1
1
Long-term debt, less amount due within one
year
1,725
1,726
Total debt
1,801
1,802
Less: Cash and cash equivalents
1,432
1,814
Net debt (cash)
$
369
$
(12
)
Net debt is a non-GAAP financial measure.
Management believes this measure is meaningful to investors because
management assesses Alcoa Corporation’s leverage position after
considering available cash that could be used to repay outstanding
debt. When cash exceeds total debt, the measure is expressed as net
cash.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted Net Debt and Proportional
Adjusted Net Debt
September 30,
2022
December 31,
2021
Consolidated
NCI
Alcoa Proportional
Consolidated
NCI
Alcoa Proportional
Short-term borrowings
$
75
$
30
$
45
$
75
$
30
$
45
Long-term debt due within one year
1
—
1
1
—
1
Long-term debt, less amount due within one
year
1,725
—
1,725
1,726
—
1,726
Total debt
1,801
30
1,771
1,802
30
1,772
Less: Cash and cash equivalents
1,432
138
1,294
1,814
177
1,637
Net debt (net cash)
369
(108
)
477
(12
)
(147
)
135
Plus: Net pension / OPEB liability
851
8
843
973
15
958
Adjusted net debt (net cash)
$
1,220
$
(100
)
$
1,320
$
961
$
(132
)
$
1,093
Net debt is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt. When cash
exceeds total debt, the measure is expressed as net cash.
Adjusted net debt and proportional adjusted net debt are also
non-GAAP financial measures. Management believes that these
additional measures are meaningful to investors because management
also assesses Alcoa Corporation’s leverage position after
considering available cash that could be used to repay outstanding
debt and net pension/OPEB liability, net of the portion of those
items attributable to noncontrolling interest (NCI).
Days Working Capital
Quarter ended
September 30,
2022
June 30, 2022
September 30,
2021
Receivables from customers
$
749
$
898
$
769
Add: Inventories
2,400
2,556
1,702
Less: Accounts payable, trade
(1,590
)
(1,752
)
(1,482
)
DWC working capital
$
1,559
$
1,702
$
989
Sales
$
2,851
$
3,644
$
3,109
Number of days in the quarter
92
91
92
Days working capital(1)
50
43
29
Days working capital is a non-GAAP financial measure. Management
believes that this measure is meaningful to investors because
management uses its working capital position to assess Alcoa
Corporation’s efficiency in liquidity management.
(1)
Days working capital is calculated as DWC
working capital divided by the quotient of Sales and number of days
in the quarter.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221013005757/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com Media Contact: Jim Beck +1 412 315
2909 Jim.Beck@alcoa.com
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