AA
$28.35
Alcoa
$.48
1.72%
Earnings Details
2nd Quarter June 2023
Wednesday, July 19, 2023 4:10:00 PM
Tweet Share Watch
Summary

Alcoa Beats

Alcoa (AA) reported a 2nd Quarter June 2023 loss of $0.35 per share on revenue of $2.7 billion. The consensus estimate was a loss of $0.59 per share on revenue of $2.7 billion. The Earnings Whisper number was for a loss of $0.45 per share. Revenue fell 26.3% compared to the same quarter a year ago.

Alcoa Inc manufactures and engineers lightweight metals. It products include aluminum, titanium, and nickel, which are used in aircraft, automobiles, commercial transportation, packaging, oil and gas, defense and industrial applications, among others.

Results
Reported Earnings
($0.35)
Earnings Whisper
($0.45)
Consensus Estimate
($0.59)
Reported Revenue
$2.68 Bil
Revenue Estimate
$2.71 Bil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Alcoa Corporation Reports Second Quarter 2023 Results

PITTSBURGH--(BUSINESS WIRE)--Alcoa Corporation (NYSE: AA) today reported second quarter 2023 results that included higher sequential revenue as increased shipments outweighed lower average realized pricing.

Second Quarter

  • Generated revenue of $2.68 billion
  • Posted Net loss attributable to Alcoa of $102 million, or $0.57 per share, an improvement of 56 percent sequentially
  • Recorded Adjusted EBITDA excluding special items of $137 million
  • Finished the second quarter with a cash balance of $1.0 billion
  • Paid quarterly cash dividend of $0.10 per share of common stock, totaling $18 million
  • Completed the Company’s sixth pension annuity transaction for a total transfer of approximately $3.6 billion in pension obligations and assets since 2018
  • Executed new multi-year agreement to supply up to 15.6 million metric tons of alumina to Emirates Global Aluminium over an 8-year period commencing in 2024

Financial Results

M, except per share amounts

2Q23

1Q23

2Q22

 

Revenue

$2,684

$2,670

$3,644

 

Net (loss) income attributable to Alcoa Corporation

$(102)

$(231)

$549

 

(Loss) earnings per share attributable to Alcoa Corporation

$(0.57)

$(1.30)

$2.95

 

Adjusted net (loss) income

$(62)

$(41)

$496

 

Adjusted (loss) earnings per share

$(0.35)

$(0.23)

$2.67

 

Adjusted EBITDA excluding special items

$137

$240

$913

 

“While we saw lower pricing during the second quarter, our global teams have worked to address short-term challenges and drive operational improvements,” said Alcoa President and CEO Roy Harvey. “We expect to see financial improvement in the third quarter of 2023 as the Alumina and Aluminum segments are both forecast to have reduced costs for raw materials and production,” Harvey said.

“For the first half of the year, we’ve kept up with solid demand for value add aluminum products, which gives us access to a variety of end-use markets,” Harvey said. “As we look forward, we continue to be excited for the future because aluminum is a critical material, and we offer low-carbon solutions for our customers through our SustanaTM family of products.”

Second Quarter 2023 Results

  • Revenue: The Company’s total third-party revenue of $2.68 billion increased 1 percent sequentially with higher shipments in both the Alumina and Aluminum segments, which partially offset lower average realized third-party prices for alumina and aluminum of 2 percent and 5 percent, respectively.

  • Shipments: In the Alumina segment, third-party shipments of alumina increased 11 percent sequentially, primarily due to increased trading. Third-party shipments in the second quarter of 2023 include alumina purchased to offset lower production.

    In Aluminum, total shipments increased 4 percent sequentially due to increased offtake under a joint venture supply agreement and higher volumes from European smelters. Most of the volume increase is attributable to value add aluminum products, primarily foundry and high purity.

  • Production: Alumina production decreased 7 percent sequentially to 2.6 million metric tons primarily due to lower production at the Alumar refinery in Brazil, which had unplanned maintenance. Also, some Australian refineries had lower output as anticipated, due to lower grade bauxite. Increased production at the San Ciprián refinery in Spain partially offset decreases.

    In Aluminum, Alcoa produced 523,000 metric tons, a sequential increase of 1 percent above the first quarter’s strong output.
  • Net loss attributable to Alcoa Corporation was $102 million, or $0.57 per share. The sequential results reflect lower aluminum prices and higher Alumina segment production costs primarily related to operating Australia refineries with lower grade bauxite, partially offset by lower raw material costs. The sequential improvement reflects the non-recurrence of first quarter restructuring related charges of $149 million primarily related to the permanent closure of the Intalco smelter and certain employee obligations related to the updated agreement for the San Ciprián smelter and a utility settlement of $41 million at the Ma’aden joint venture in Saudi Arabia.
  • Adjusted net loss was $62 million, or $0.35 per share, excluding the impact from special items of $40 million. Notable special items include charges of $21 million in noncash pension settlement charges, and $13 million related to restart costs at the Alumar smelter.
  • Adjusted EBITDA excluding special items was $137 million, a $103 million sequential decrease due primarily to higher Alumina segment production costs and lower prices for aluminum.

  • Cash: Alcoa ended the quarter with a cash balance of $1.0 billion. Cash used for operations was $13 million. Cash used for financing activities was $24 million, primarily related to $18 million of cash dividends on common stock. Cash used for investing activities was $120 million, primarily related to capital expenditures of $115 million. Free cash flow was negative $128 million.
  • Working capital: For the second quarter, Receivables from customers of $0.7 billion, Inventories of $2.4 billion and Accounts payable, trade of $1.5 billion comprised DWC working capital. The Company reported 55 Days working capital over days in the quarter, a sequential improvement of one day. The change primarily relates to a decrease of two days in accounts receivable primarily related to lower pricing for aluminum.

Key Strategic Actions:

Financial

  • Pension annuitization: In May 2023, the Company completed the purchase of group annuity contracts to transfer approximately $235 million of pension obligations and assets associated with defined benefit pension plans for approximately 500 Canadian retirees and beneficiaries. The transfer, which required no cash funding from Alcoa, reduces the risk from volatility in pension plan obligations and continues to meet commitments to retirees and beneficiaries.

Commercial

  • In May 2023, the Company and Emirates Global Aluminium (EGA) announced a new multi-year agreement for Alcoa to supply EGA with smelter grade alumina. Over the life of the 8-year agreement, which commences in 2024, volume options will allow EGA to procure as much as 15.6 million metric tons of alumina from Western Australia. The supply agreement will represent a significant portion of Alcoa’s annual third-party alumina sales.

Operational

  • Labor agreement: In May 2023, members of the United Steelworkers ratified a new three-year collective bargaining agreement that covers more than 800 active employees at two smelters: Warrick Operations in Indiana and Massena Operations in New York.

  • Western Australia Mine Plan Approvals: During the second quarter of 2023, the Company continued to work with relevant state government agencies to support the annual mine approvals process. Alcoa seeks annual approvals from the Western Australian State Government for a rolling five-year mine plan and related forest clearing activities that are needed for the Huntly and Willowdale mines.

    In April 2023, Alcoa began mining lower grade bauxite in areas already permitted under Mine Management Programs (MMPs) at the Huntly Mine, which supplies the Pinjarra and Kwinana alumina refineries. The reduction in grade extends the ore supply to provide more time to work through the approvals process.

    Additionally, a third party has asked the Western Australian Environmental Protection Authority (WA EPA) to determine whether additional environmental review is needed on the Company’s MMPs. The WA EPA has indicated it could decide by the end of July 2023 whether to proceed to a public comment period, which would be the next stage in its consideration process on the third-party referrals.

    After a public comment period, the EPA would then consider whether to formally conduct additional review on all or part of the MMPs and, if so, at what level. The Company believes the MMPs can continue to be adapted to meet evolving needs and expectations for existing mine regions while transitioning to longer term plans for new regions that would fall under the WA EPA’s assessment process.

Sustainability

  • On May 25, 2023, the Company announced it received certification from the Aluminium Stewardship Initiative (ASI) for its Portland Aluminium joint venture in Australia. The latest ASI certification for Portland means that all of Alcoa of Australia’s operations are certified to ASI’s Performance Standard, which provides third-party validation of responsible production.

    The Company currently has 18 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.

Forward-Looking Non-GAAP financial measures

Alcoa Corporation does not provide reconciliations of the forward-looking non-GAAP financial measures Adjusted EBITDA and Adjusted Net Income, including transformation, intersegment eliminations and other corporate Adjusted EBITDA; operational tax expense; and other expense; each excluding special items, to the most directly comparable forward-looking GAAP financial measures because it is impractical to forecast certain special items, such as restructuring charges and mark-to-market contracts without unreasonable efforts due to the variability and complexity associated with predicting the occurrence and financial impact of such special items. For the same reasons, we are unable to address the probable significance of the unavailable information, which could be material to future results.

2023 Outlook

The Company expects 2023 total alumina and aluminum shipments to remain unchanged between 12.7 and 12.9 million metric tons, and between 2.5 and 2.6 million metric tons, respectively.

For third quarter 2023 Alumina Segment Adjusted EBITDA, the Company expects an improvement of $65 million due to lower raw material prices, and lower production costs and higher volumes as elevated maintenance from the second quarter of 2023 has concluded, to be partially offset by unfavorable impacts of $10 million related to operating the Kwinana and Pinjarra refineries with the lower bauxite grade.

For the third quarter 2023, the Company expects a net improvement of $25 million in Aluminum Segment Adjusted EBITDA on favorable raw materials and lower production costs, partially offset by unfavorable value add aluminum products sales, primarily due to softer billet demand. In addition, the Company expects alumina costs to be favorable by $5 million.

The second quarter 2023 included favorable foreign currency gains of $40 million that may not recur.

Based on current alumina and aluminum market conditions, Alcoa expects third quarter operational tax expense to approximate $10 million to $20 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, July 19, 2023, to present second quarter 2023 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 July 19, 2023. Call information and related details are available under the “Investors” section of www.alcoa.com.

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. The Company does not incorporate the information contained on, or accessible through, its corporate website or such other websites or platforms referenced herein into this press release.

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. Our purpose is to turn raw potential into real progress, underpinned by Alcoa Values that encompass integrity, operating excellence, care for people and courageous leadership. 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.

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 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 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’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 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) cyclicality of the aluminum industry and aluminum end use markets, including due to the influence of global economic conditions, and unfavorable changes in the markets served by Alcoa; (b) the effects of non-market forces, such as government policies and political instability, on global aluminum supply and demand; (c) volatility and declines in aluminum industry, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices and premiums, as applicable, for primary aluminum and other commodities, and fluctuations in indexed-based and spot prices for alumina; (d) legal, regulatory, economic, political, trade, public health and safety, and reputational risks and conditions, including changes in conditions beyond our control as a result of our participation in increasingly competitive and complex global markets; (e) our ability to obtain, maintain, or renew permits or approvals necessary for our mining operations; (f) unfavorable changes in cost, quality, or availability of key inputs, including energy and raw materials, or uncertainty of or disruption to the supply chain including logistics; (g) our ability to realize expected benefits or achieve intended results, including as planned and by targeted completion dates, from announced strategies, plans, programs, or initiatives relating to our portfolio, profitability, capital investments, and developing technologies, and from joint ventures or other strategic alliances or business transactions; (h) fluctuations in foreign currency exchange and tax rates on costs and results; (i) changes in tax laws or exposure to additional tax liabilities; (j) changes in global economic and financial market conditions generally, such as inflation, recessionary conditions, and interest rate increases, which may also affect Alcoa’s ability to obtain credit or financing upon acceptable terms or at all; (k) 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 ongoing conflict between Russia and Ukraine; (l) global competition within and beyond the aluminum industry; (m) our ability to obtain or maintain adequate insurance coverage; (n) the outcomes of contingencies, including legal and tax proceedings, government or regulatory investigations, and environmental remediation, or changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (o) the impacts of climate change, related legislation or regulations, and efforts to reduce greenhouse gas emissions and our ability to achieve strategies and expectations related to climate change and other environmental matters; (p) claims, costs and liabilities resulting from the impact of our operations, including impoundments, or from health, safety, and environmental laws, regulations, and requirements, in the areas where we operate; (q) the impact of cyberattacks and potential information technology or data security breaches, including disruptions to our operations, liability, and reputational harm; (r) our ability to fund capital expenditures; (s) risks associated with long-term debt obligations including restrictions on our current and future operations as a result of our indebtedness; (t) our ability to continue to return capital to stockholders through cash dividends and/or share repurchases; (u) the impact of labor disputes, work stoppages and strikes, or other employee relations issues, as well as labor market conditions; (v) 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 (w) the other risk factors discussed in Alcoa’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022 and other reports filed by Alcoa with the SEC. Alcoa 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

This release contains reference to certain financial measures that are not calculated and presented in accordance with generally accepted accounting principles in the United States (GAAP). Alcoa Corporation believes that the presentation of these 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. Certain definitions, reconciliations to the most directly comparable GAAP financial measures and additional details regarding 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

 

 

June 30,
2023

 

March 31,
2023

 

June 30,
2022

Sales

 

$

2,684

 

 

$

2,670

 

 

$

3,644

 

 

 

 

 

 

 

 

Cost of goods sold (exclusive of expenses below)

 

 

2,515

 

 

 

2,404

 

 

 

2,767

 

Selling, general administrative, and other expenses

 

 

52

 

 

 

54

 

 

 

52

 

Research and development expenses

 

 

6

 

 

 

10

 

 

 

7

 

Provision for depreciation, depletion, and amortization

 

 

153

 

 

 

153

 

 

 

161

 

Restructuring and other charges, net

 

 

24

 

 

 

149

 

 

 

(75

)

Interest expense

 

 

27

 

 

 

26

 

 

 

30

 

Other expenses (income), net

 

 

6

 

 

 

54

 

 

 

(206

)

Total costs and expenses

 

 

2,783

 

 

 

2,850

 

 

 

2,736

 

 

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(99

)

 

 

(180

)

 

 

908

 

Provision for income taxes

 

 

22

 

 

 

52

 

 

 

234

 

 

 

 

 

 

 

 

Net (loss) income

 

 

(121

)

 

 

(232

)

 

 

674

 

 

 

 

 

 

 

 

Less: Net (loss) income attributable to noncontrolling interest

 

 

(19

)

 

 

(1

)

 

 

125

 

 

 

 

 

 

 

 

NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION

 

$

(102

)

 

$

(231

)

 

$

549

 

 

 

 

 

 

 

 

EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS:

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

Net (loss) income

 

$

(0.57

)

 

$

(1.30

)

 

$

3.01

 

Average number of shares

 

 

178,404,252

 

 

 

178,012,784

 

 

 

182,499,574

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

Net (loss) income

 

$

(0.57

)

 

$

(1.30

)

 

$

2.95

 

Average number of shares

 

 

178,404,252

 

 

 

178,012,784

 

 

 

186,068,663

 

 

 

 

 

 

 

 

Alcoa Corporation and subsidiaries

Statement of Consolidated Operations (unaudited)

(dollars in millions, except per-share amounts)

 

 

 

Six Months Ended

 

 

June 30,
2023

 

June 30,
2022

Sales

 

$

5,354

 

 

$

6,937

 

 

 

 

 

 

Cost of goods sold (exclusive of expenses below)

 

 

4,919

 

 

 

4,948

 

Selling, general administrative, and other expenses

 

 

106

 

 

 

96

 

Research and development expenses

 

 

16

 

 

 

16

 

Provision for depreciation, depletion, and amortization

 

 

306

 

 

 

321

 

Restructuring and other charges, net

 

 

173

 

 

 

50

 

Interest expense

 

 

53

 

 

 

55

 

Other expenses (income), net

 

 

60

 

 

 

(220

)

Total costs and expenses

 

 

5,633

 

 

 

5,266

 

 

 

 

 

 

(Loss) income before income taxes

 

 

(279

)

 

 

1,671

 

Provision for income taxes

 

 

74

 

 

 

444

 

 

 

 

 

 

Net (loss) income

 

 

(353

)

 

 

1,227

 

 

 

 

 

 

Less: Net (loss) income attributable to noncontrolling interest

 

 

(20

)

 

 

209

 

 

 

 

 

 

NET (LOSS) INCOME ATTRIBUTABLE TO ALCOA CORPORATION

 

$

(333

)

 

$

1,018

 

 

 

 

 

 

EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA CORPORATION COMMON SHAREHOLDERS:

 

 

 

 

Basic:

 

 

 

 

Net (loss) income

 

$

(1.87

)

 

$

5.55

 

Average number of shares

 

 

178,182,657

 

 

 

183,489,221

 

 

 

 

 

 

Diluted:

 

 

 

 

Net (loss) income

 

$

(1.87

)

 

$

5.44

 

Average number of shares

 

 

178,182,657

 

 

 

187,282,228

 

 

 

 

 

 

Alcoa Corporation and subsidiaries

Consolidated Balance Sheet (unaudited)

(in millions)

 

 

 

June 30,
2023

 

 

December 31,
2022

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

990

 

 

$

1,363

 

Receivables from customers

 

 

702

 

 

 

778

 

Other receivables

 

 

104

 

 

 

131

 

Inventories

 

 

2,400

 

 

 

2,427

 

Fair value of derivative instruments

 

 

93

 

 

 

134

 

Prepaid expenses and other current assets(1)

 

 

381

 

 

 

417

 

Total current assets

 

 

4,670

 

 

 

5,250

 

Properties, plants, and equipment

 

 

19,814

 

 

 

19,605

 

Less: accumulated depreciation, depletion, and amortization

 

 

13,369

 

 

 

13,112

 

Properties, plants, and equipment, net

 

 

6,445

 

 

 

6,493

 

Investments

 

 

1,034

 

 

 

1,122

 

Deferred income taxes

 

 

320

 

 

 

296

 

Fair value of derivative instruments

 

 

5

 

 

 

2

 

Other noncurrent assets(2)

 

 

1,654

 

 

 

1,593

 

Total assets

 

$

14,128

 

 

$

14,756

 

LIABILITIES

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable, trade

 

$

1,491

 

 

$

1,757

 

Accrued compensation and retirement costs

 

 

340

 

 

 

335

 

Taxes, including income taxes

 

 

67

 

 

 

230

 

Fair value of derivative instruments

 

 

165

 

 

 

200

 

Other current liabilities

 

 

532

 

 

 

481

 

Long-term debt due within one year

 

 

1

 

 

 

1

 

Total current liabilities

 

 

2,596

 

 

 

3,004

 

Long-term debt, less amount due within one year

 

 

1,808

 

 

 

1,806

 

Accrued pension benefits

 

 

242

 

 

 

213

 

Accrued other postretirement benefits

 

 

445

 

 

 

480

 

Asset retirement obligations

 

 

717

 

 

 

711

 

Environmental remediation

 

 

215

 

 

 

226

 

Fair value of derivative instruments

 

 

912

 

 

 

1,026

 

Noncurrent income taxes

 

 

221

 

 

 

215

 

Other noncurrent liabilities and deferred credits

 

 

514

 

 

 

486

 

Total liabilities

 

 

7,670

 

 

 

8,167

 

EQUITY

 

 

 

 

 

 

Alcoa Corporation shareholders’ equity:

 

 

 

 

 

 

Common stock

 

 

2

 

 

 

2

 

Additional capital

 

 

9,173

 

 

 

9,183

 

Accumulated deficit

 

 

(939

)

 

 

(570

)

Accumulated other comprehensive loss

 

 

(3,394

)

 

 

(3,539

)

Total Alcoa Corporation shareholders’ equity

 

 

4,842

 

 

 

5,076

 

Noncontrolling interest

 

 

1,616

 

 

 

1,513

 

Total equity

 

 

6,458

 

 

 

6,589

 

Total liabilities and equity

 

$

14,128

 

 

$

14,756

 

(1)

This line item includes $44 and $55 of restricted cash at June 30, 2023 and December 31, 2022, respectively.

(2)

This line item includes $63 and $56 of noncurrent restricted cash at June 30, 2023 and December 31, 2022, respectively.

Alcoa Corporation and subsidiaries

Statement of Consolidated Cash Flows (unaudited)

(in millions)

 

 

 

Six Months Ended June 30,

 

 

2023

 

2022

CASH FROM OPERATIONS

 

 

 

 

Net (loss) income

 

$

(353

)

 

$

1,227

 

Adjustments to reconcile net (loss) income to cash from operations:

 

 

 

 

Depreciation, depletion, and amortization

 

 

306

 

 

 

321

 

Deferred income taxes

 

 

(36

)

 

 

93

 

Equity loss (income), net of dividends

 

 

123

 

 

 

(61

)

Restructuring and other charges, net

 

 

173

 

 

 

50

 

Net loss from investing activities – asset sales

 

 

19

 

 

 

5

 

Net periodic pension benefit cost

 

 

2

 

 

 

28

 

Stock-based compensation

 

 

21

 

 

 

20

 

Loss (gain) on mark-to-market derivative financial contracts

 

 

4

 

 

 

(123

)

Other

 

 

59

 

 

 

28

 

Changes in assets and liabilities, excluding effects of divestitures and foreign currency translation adjustments:

 

 

 

 

Decrease (increase) in receivables

 

 

71

 

 

 

(153

)

Decrease (increase) in inventories

 

 

22

 

 

 

(657

)

Decrease in prepaid expenses and other current assets

 

 

63

 

 

 

15

 

(Decrease) increase in accounts payable, trade

 

 

(277

)

 

 

98

 

Decrease in accrued expenses

 

 

(48

)

 

 

(103

)

Decrease in taxes, including income taxes

 

 

(146

)

 

 

(79

)

Pension contributions

 

 

(9

)

 

 

(9

)

Increase in noncurrent assets

 

 

(66

)

 

 

(71

)

Decrease in noncurrent liabilities

 

 

(104

)

 

 

(59

)

CASH (USED FOR) PROVIDED FROM OPERATIONS

 

 

(176

)

 

 

570

 

 

 

 

 

 

FINANCING ACTIVITIES

 

 

 

 

Additions to debt

 

 

25

 

 

 

 

Payments on debt

 

 

(16

)

 

 

 

Proceeds from the exercise of employee stock options

 

 

1

 

 

 

22

 

Repurchase of common stock

 

 

 

 

 

(350

)

Dividends paid on Alcoa common stock

 

 

(36

)

 

 

(37

)

Payments related to tax withholding on stock-based compensation awards

 

 

(34

)

 

 

(19

)

Financial contributions for the divestiture of businesses

 

 

(25

)

 

 

(9

)

Contributions from noncontrolling interest

 

 

122

 

 

 

83

 

Distributions to noncontrolling interest

 

 

(22

)

 

 

(245

)

Other

 

 

1

 

 

 

(3

)

CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES

 

 

16

 

 

 

(558

)

 

 

 

 

 

INVESTING ACTIVITIES

 

 

 

 

Capital expenditures

 

 

(198

)

 

 

(181

)

Proceeds from the sale of assets

 

 

2

 

 

 

4

 

Additions to investments

 

 

(36

)

 

 

(21

)

Sale of investments

 

 

 

 

 

10

 

Other

 

 

10

 

 

 

2

 

CASH USED FOR INVESTING ACTIVITIES

 

 

(222

)

 

 

(186

)

 

 

 

 

 

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS AND RESTRICTED CASH

 

 

5

 

 

 

(2

)

Net change in cash and cash equivalents and restricted cash

 

 

(377

)

 

 

(176

)

Cash and cash equivalents and restricted cash at beginning of year

 

 

1,474

 

 

 

1,924

 

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH AT END OF PERIOD

 

$

1,097

 

 

$

1,748

 

Alcoa Corporation and subsidiaries

Segment Information (unaudited)

(dollars in millions, except realized prices; dry metric tons in millions (mdmt); metric tons in thousands (kmt))

 

 

1Q22

 

 

2Q22

 

 

3Q22

 

 

4Q22

 

 

2022

 

 

1Q23

 

 

2Q23

 

 

Alumina(5):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bauxite production (mdmt)

 

11.0

 

 

 

10.2

 

 

 

10.3

 

 

 

10.6

 

 

 

42.1

 

 

 

9.9

 

 

 

10.0

 

 

Third-party bauxite shipments (mdmt)

 

0.8

 

 

 

0.6

 

 

 

1.0

 

 

 

1.1

 

 

 

3.5

 

 

 

1.9

 

 

 

1.8

 

 

Alumina production (kmt)

 

3,209

 

 

 

3,226

 

 

 

3,092

 

 

 

3,017

 

 

 

12,544

 

 

 

2,755

 

 

 

2,559

 

 

Third-party alumina shipments (kmt)

 

2,277

 

 

 

2,438

 

 

 

2,244

 

 

 

2,210

 

 

 

9,169

 

 

 

1,929

 

 

 

2,136

 

 

Intersegment alumina shipments (kmt)

 

940

 

 

 

984

 

 

 

1,005

 

 

 

1,029

 

 

 

3,958

 

 

 

1,039

 

 

 

944

 

 

Average realized third-party price per metric ton of alumina

$

375

 

 

$

442

 

 

$

371

 

 

$

342

 

 

$

384

 

 

$

371

 

 

$

363

 

 

Third-party bauxite sales

$

43

 

 

$

34

 

 

$

59

 

 

$

68

 

 

$

204

 

 

$

136

 

 

$

113

 

 

Third-party alumina sales

$

855

 

 

$

1,077

 

 

$

832

 

 

$

756

 

 

$

3,520

 

 

$

721

 

 

$

781

 

 

Intersegment alumina sales

$

413

 

 

$

483

 

 

$

412

 

 

$

400

 

 

$

1,708

 

 

$

421

 

 

$

397

 

 

Segment Adjusted EBITDA(1)

$

302

 

 

$

358

 

 

$

78

 

 

$

50

 

 

$

788

 

 

$

103

 

 

$

33

 

 

Depreciation and amortization

$

85

 

 

$

84

 

 

$

74

 

 

$

69

 

 

$

312

 

 

$

77

 

 

$

80

 

 

Equity income (loss)

$

1

 

 

$

(5

)

 

$

(18

)

 

$

(17

)

 

$

(39

)

 

$

(17

)

 

$

(11

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aluminum:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aluminum production (kmt)

 

498

 

 

 

499

 

 

 

497

 

 

 

516

 

 

 

2,010

 

 

 

518

 

 

 

523

 

 

Total aluminum shipments (kmt)

 

634

 

 

 

674

 

 

 

621

 

 

 

641

 

 

 

2,570

 

 

 

600

 

 

 

623

 

 

Average realized third-party price per metric ton of aluminum

$

3,861

 

 

$

3,864

 

 

$

3,204

 

 

$

2,889

 

 

$

3,457

 

 

$

3,079

 

 

$

2,924

 

 

Third-party sales

$

2,388

 

 

$

2,539

 

 

$

1,976

 

 

$

1,832

 

 

$

8,735

 

 

$

1,810

 

 

$

1,788

 

 

Intersegment sales

$

7

 

 

$

8

 

 

$

10

 

 

$

2

 

 

$

27

 

 

$

3

 

 

$

4

 

 

Segment Adjusted EBITDA(1)

$

713

 

 

$

596

 

 

$

152

 

 

$

31

 

 

$

1,492

 

 

$

184

 

 

$

110

 

 

Depreciation and amortization

$

69

 

 

$

71

 

 

$

70

 

 

$

73

 

 

$

283

 

 

$

70

 

 

$

68

 

 

Equity income (loss)

$

39

 

 

$

40

 

 

$

(5

)

 

$

(26

)

 

$

48

 

 

$

(57

)

 

$

(16

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of total segment Adjusted EBITDA to consolidated net income (loss) attributable to Alcoa Corporation:

Total Segment Adjusted EBITDA(1)

$

1,015

 

 

$

954

 

 

$

230

 

 

$

81

 

 

$

2,280

 

 

$

287

 

 

$

143

 

 

Unallocated amounts:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Transformation(2)

 

(14

)

 

 

(11

)

 

 

(19

)

 

 

(22

)

 

 

(66

)

 

 

(8

)

 

 

(17

)

 

Intersegment eliminations

 

100

 

 

 

10

 

 

 

23

 

 

 

5

 

 

 

138

 

 

 

(8

)

 

 

31

 

 

Corporate expenses(3)

 

(29

)

 

 

(35

)

 

 

(27

)

 

 

(37

)

 

 

(128

)

 

 

(30

)

 

 

(24

)

 

Provision for depreciation, depletion, and amortization

 

(160

)

 

 

(161

)

 

 

(149

)

 

 

(147

)

 

 

(617

)

 

 

(153

)

 

 

(153

)

 

Restructuring and other charges, net

 

(125

)

 

 

75

 

 

 

(652

)

 

 

6

 

 

 

(696

)

 

 

(149

)

 

 

(24

)

 

Interest expense

 

(25

)

 

 

(30

)

 

 

(25

)

 

 

(26

)

 

 

(106

)

 

 

(26

)

 

 

(27

)

 

Other income (expenses), net

 

14

 

 

 

206

 

 

 

(35

)

 

 

(67

)

 

 

118

 

 

 

(54

)

 

 

(6

)

 

Other(4)

 

(13

)

 

 

(100

)

 

 

(75

)

 

 

(33

)

 

 

(221

)

 

 

(39

)

 

 

(22

)

 

Consolidated income (loss) before income taxes

 

763

 

 

 

908

 

 

 

(729

)

 

 

(240

)

 

 

702

 

 

 

(180

)

 

 

(99

)

 

Provision for income taxes

 

(210

)

 

 

(234

)

 

 

(40

)

 

 

(180

)

 

 

(664

)

 

 

(52

)

 

 

(22

)

 

Net (income) loss attributable to noncontrolling interest

 

(84

)

 

 

(125

)

 

 

23

 

 

 

25

 

 

 

(161

)

 

 

1

 

 

 

19

 

 

Consolidated net income (loss) attributable to Alcoa Corporation

$

469

 

 

$

549

 

 

$

(746

)

 

$

(395

)

 

$

(123

)

 

$

(231

)

 

$

(102

)

 

The difference between segment totals and consolidated amounts is in Corporate.

(1)

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.

(2)

Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.

(3)

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.

(4)

Other includes certain items that are not included in the Adjusted EBITDA of the reportable segments.

(5)

Beginning in January 2023, the Company changed its operating segments by combining the Bauxite and Alumina segments, and reported its financial results in the following two segments: (i) Alumina and (ii) Aluminum. Segment information for all prior periods presented has been updated to reflect the new segment structure.

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

 

 

 

June 30,
2023

 

 

March 31,
2023

 

 

June 30,
2022

 

 

June 30,
2023

 

 

March 31,
2023

 

 

June 30,
2022

 

Net (loss) income attributable to Alcoa Corporation

 

$

(102

)

 

$

(231

)

 

$

549

 

 

$

(0.57

)

 

$

(1.30

)

 

$

2.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Special items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and other charges, net

 

 

24

 

 

 

149

 

 

 

(75

)

 

 

 

 

 

 

 

 

 

Other special items(1)

 

 

35

 

 

 

25

 

 

 

(76

)

 

 

 

 

 

 

 

 

 

Discrete and other tax items impacts(2)

 

 

1

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

Tax impact on special items(3)

 

 

(13

)

 

 

6

 

 

 

52

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest impact(3)

 

 

(7

)

 

 

8

 

 

 

46

 

 

 

 

 

 

 

 

 

 

Subtotal

 

 

40

 

 

 

190

 

 

 

(53

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Alcoa Corporation – as adjusted

 

$

(62

)

 

$

(41

)

 

$

496

 

 

$

(0.35

)

 

$

(0.23

)

 

$

2.67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 June 30, 2023, a net unfavorable change in mark-to-market energy derivative instruments ($22) and costs related to the restart process at the Alumar, Brazil smelter ($13);
  • for the quarter ended March 31, 2023, a net favorable change in mark-to-market energy derivative instruments ($23), costs related to the restart process at the Alumar, Brazil smelter ($19), an adjustment to the gain on sale of the Warrick Rolling Mill in Evansville, Indiana for additional site separation costs ($17), costs related to the closure of the Intalco, Washington aluminum smelter ($16), and a net benefit for other special items ($4); and,
  • 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).
 
(2)

Discrete and other 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 June 30, 2023, net charge for discrete tax items ($1); and,
  • for the quarter ended March 31, 2023, net charge for discrete tax items ($2).
 

(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 period with a Net loss attributable to Alcoa Corporation (GAAP or as adjusted), the average number of shares applicable to diluted earnings per share exclude certain share equivalents as their effect is anti-dilutive.

Alcoa Corporation and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in millions)

 

Adjusted EBITDA

 

Quarter ended

 

 

 

June 30,
2023

 

 

March 31,
2023

 

 

June 30,
2022

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Alcoa Corporation

 

$

(102

)

 

$

(231

)

 

$

549

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to noncontrolling interest

 

 

(19

)

 

 

(1

)

 

 

125

 

Provision for income taxes

 

 

22

 

 

 

52

 

 

 

234

 

Other expenses (income), net

 

 

6

 

 

 

54

 

 

 

(206

)

Interest expense

 

 

27

 

 

 

26

 

 

 

30

 

Restructuring and other charges, net

 

 

24

 

 

 

149

 

 

 

(75

)

Provision for depreciation, depletion, and amortization

 

 

153

 

 

 

153

 

 

 

161

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA

 

 

111

 

 

 

202

 

 

 

818

 

 

 

 

 

 

 

 

 

 

 

Special items(1)

 

 

26

 

 

 

38

 

 

 

95

 

 

 

 

 

 

 

 

 

 

 

Adjusted EBITDA, excluding special items

 

$

137

 

 

$

240

 

 

$

913

 

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. Adjusted EBITDA is a non-GAAP financial measure. Management believes this measure is meaningful to investors because Adjusted EBITDA provides additional information with respect to Alcoa Corporation’s operating performance and the Company’s ability to meet its financial obligations. 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 June 30, 2023, costs related to the restart process at the Alumar, Brazil smelter ($13). Additionally, due to changes in price in the Australian power market, the mark-to-market contracts associated with the Portland smelter have generated gains ($13) in Other expenses (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 March 31, 2023, costs related to the restart process at the Alumar, Brazil smelter ($19), costs related to the closure of the Intalco, Washington aluminum smelter ($16), and net cost of power associated with the Portland smelter ($3); and,
  • for the quarter ended June 30, 2022, net cost of power associated with the Portland smelter ($70), costs related to the restart process at the Alumar, Brazil smelter ($22), and costs related to the restart process of the Portland, Australia smelter ($3).

Alcoa Corporation and subsidiaries

Calculation of Financial Measures (unaudited), continued

(in millions)

 

Free Cash Flow

 

Quarter ended

 

 

June 30,
2023

 

March 31,
2023

 

June 30,
2022

Cash (used for) provided from operations

 

$

(13

)

 

$

(163

)

 

$

536

 

 

 

 

 

 

 

 

Capital expenditures

 

 

(115

)

 

 

(83

)

 

 

(107

)

 

 

 

 

 

 

 

Free cash flow

 

$

(128

)

 

$

(246

)

 

$

429

 

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

 

June 30,
2023

 

 

December 31,
2022

 

Short-term borrowings

 

$

10

 

 

$

 

Long-term debt due within one year

 

 

1

 

 

 

1

 

Long-term debt, less amount due within one year

 

 

1,808

 

 

 

1,806

 

Total debt

 

 

1,819

 

 

 

1,807

 

 

 

 

 

 

 

 

Less: Cash and cash equivalents

 

 

990

 

 

 

1,363

 

 

 

 

 

 

 

 

Net debt

 

$

829

 

 

$

444

 

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

 
 

 

 

June 30, 2023

 

 

December 31, 2022

 

 

 

Consolidated

NCI

Alcoa
Proportional

 

 

Consolidated

NCI

Alcoa
Proportional

 

Short-term borrowings

 

$

10

 

 

$

 

 

$

10

 

 

$

 

 

$

 

 

$

 

Long-term debt due within one year

 

 

1

 

 

 

 

 

 

1

 

 

 

1

 

 

 

 

 

 

1

 

Long-term debt, less amount due within one year

 

 

1,808

 

 

 

32

 

 

 

1,776

 

 

 

1,806

 

 

 

32

 

 

 

1,774

 

Total debt

 

 

1,819

 

 

 

32

 

 

 

1,787

 

 

 

1,807

 

 

 

32

 

 

 

1,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less: Cash and cash equivalents

 

 

990

 

 

 

91

 

 

 

899

 

 

 

1,363

 

 

 

94

 

 

 

1,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net debt (net cash)

 

 

829

 

 

 

(59

)

 

 

888

 

 

 

444

 

 

 

(62

)

 

 

506

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: Net pension / OPEB liability

 

 

595

 

 

 

11

 

 

 

584

 

 

 

614

 

 

 

9

 

 

 

605

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjusted net debt (net cash)

$

1,424

$

(48

)

$

1,472

$

1,058

 

$

(53

)

$

1,111

 

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).

DWC Working Capital and Days Working Capital

 

 

 

Quarter ended

 

 

June 30,
2023

 

March 31,
2023

 

June 30,
2022

Receivables from customers

 

$

702

 

 

$

753

 

 

$

898

 

 

 

 

 

 

 

 

Add: Inventories

 

 

2,400

 

 

 

2,395

 

 

 

2,556

 

 

 

 

 

 

 

 

Less: Accounts payable, trade

 

 

(1,491

)

 

 

(1,489

)

 

 

(1,752

)

 

 

 

 

 

 

 

DWC working capital

 

$

1,611

 

 

$

1,659

 

 

$

1,702

 

 

 

 

 

 

 

 

Sales

 

$

2,684

 

 

$

2,670

 

 

$

3,644

 

 

 

 

 

 

 

 

Number of days in the quarter

 

 

91

 

 

 

90

 

 

 

91

 

 

 

 

 

 

 

 

Days working capital(1)

 

 

55

 

 

 

56

 

 

 

43

 

DWC working capital and Days working capital are non-GAAP financial measures. Management believes that these measures are 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.

 

Investor: James Dwyer +1 412 992 5450 James.Dwyer@alcoa.com
Media: Jim Beck +1 412 315 2909 Jim.Beck@alcoa.com

Source: Alcoa