Alcoa : Earnings Document

Alcoa Corporation

Fourth Quarter 2020 Earnings Presentation and Conference Call

Wednesday, January 20, 2021, 5:00 PM Eastern

CORPORATE PARTICIPANTS

Roy Harvey - President, Chief Executive Officer

William Oplinger - Executive Vice President, Chief Financial Officer

James Dwyer - Vice President, Investor Relations

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PRESENTATION
Operator	Good afternoon and welcome to the Alcoa Corporation Fourth Quarter
	2020 Earnings Presentation and Conference Call. All participants will be
	in a listen-only mode. Should you need assistance, please signal a
	conference specialist by pressing the star key followed by zero. After
	today's presentation, there will be an opportunity to ask questions. To ask
	a question, you may press star then one on your phone, to withdraw your
	question, please press star then two. Please note this event is being
	recorded.
	I would now like to turn the conference over to James Dwyer, Vice
	President of Investor Relations. Please go ahead.
James Dwyer	Thank you, and good day everyone. I'm joined today by Roy Harvey,
	Alcoa Corporation President and Chief Executive Officer, and William
	Oplinger, Executive Vice President and Chief Financial Officer. We will
	take your questions after comments by Roy and Bill.
	As a reminder, today's discussion will contain forward looking statements
	relating to future events and expectations that are subject to various
	assumptions and caveats. Factors that may cause the Company's actual
	results to differ materially from these statements are included in today's
	presentation and in our SEC filings.
	In addition, we have included some non-GAAP financial measures in this
	presentation. Reconciliations to the most directly comparable GAAP
	financial measures can be found in the appendix to today's presentation.
	Any reference in our discussion today to EBITDA means adjusted
	EBITDA.
	Finally, as previously announced, the earnings release and slide
	presentation are available on our website.
	With that, here's Roy.
Roy Harvey	Thank you, Jim, and thanks to everyone for joining this call today.
	Obviously, 2020 was a historic year, with the world united in fighting
	through the challenges associated with the global pandemic. Throughout
	this turbulent time, however, we stayed true to our Alcoa values and
	accomplished much in an unprecedented year. We focused on our
	people, making sure we took every possible steps to protect our
	employees and contractors, and to support the communities where we
	operate. Due to teamwork across Alcoa, we not only kept our operations
	running efficiently, we improved our processes and made our company
	even stronger.

Alcoa Corporation Wednesday, January 20, 2021, 5:00 PM Eastern

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Bill will discuss the specific financial results shortly, but it all culminated with a solid fourth quarter. We had a higher sequential quarterly adjusted EBITDA, and we also recognized quarterly improvement in revenue. Both prices and demand improved in the fourth quarter, including for value-add aluminum products. And, for the full year, we made significant progress in improving our cost structure with our multi-year strategy, and we will highlight many of those achievements during this call today.

First, however, I would like to address safety. Despite so many accomplishments in 2020, and as reported last April, we sadly did not achieve our most important objective; a contracted worker died on February 10th after sustaining on-the-job injuries at our Poços de Caldas facility in Brazil. This was an unacceptable tragedy, and we've worked to make sure it does not recur. This tragic accident demonstrates that we must be ever vigilant with our safety practices and must remain focused on each and every task at hand. Safety is embedded in the three Alcoa core values you see on the left-hand of this slide. And those three simple values continue to guide us. In fact, our response to the pandemic demonstrated how a relentless commitment to these values can deliver positive impacts.

Not only did we sustain our operations, we also set annual production records in both our Bauxite and Alumina segments. In Aluminum, we continued to improve our cost structure and successfully completed the full restart of the ABI smelter in Bécancour, Québec and the curtailment of the Intalco smelter in Washington State. Together, these two actions resulted in an $86 million improvement in EBITDA in 2020 over 2019.

Importantly, 2020 was a year with significant accomplishments across Alcoa. We started the year with the full implementation of our new operating model, which reduced overhead costs and improved overall efficiency. Before we encountered the impact of the pandemic, we had already put in place aggressive targets for non-core asset sales over a 12 to 18-month period and year-over-year improvements for working capital and productivity in 2020. With the economic uncertainty created by this pandemic, we also implemented additional actions to generate and protect cash.

We finished the year meeting those targets. We met our combined objective on working capital and productivity, and our announced non- core asset sales put us at the top of our expected range. Those and other actions during the year helped us exceed our target of $900 million in cash actions. In November 2020, we announced the divestiture of our single rolling mill, located in Indiana at Warrick Operations, in a $670 million transaction expected to close in March of this year.

Finally, on this slide, our strategic priority to advance sustainably provides many new opportunities, and we will talk later today about how we're leveraging our industry-leading performance to succeed in a marketplace expecting and demanding strong ESG performance.

So, with that, Bill will now detail the results.

Alcoa Corporation Wednesday, January 20, 2021, 5:00 PM Eastern

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William Oplinger	Thanks, Roy.
	The 2020 fourth quarter saw revenues exceed third quarter levels, on
	stronger aluminum prices. Revenues were up $27 million compared to
	the prior quarter and lagged the fourth quarter of 2019 by $44 million on
	lower alumina prices.
	Fourth quarter earnings improved versus both the third quarter and year
	ago quarter, either including or excluding special items. Special items in
	the fourth quarter were $53 million primarily related to U.S. pension lump
	sum settlements. The net loss attributable to Alcoa Corporation improved
	$45 million to $4 million, up $0.24 per share and was $1.61 per share
	better than the prior year. The adjusted net income of $49 million, or
	$0.26 per share, was $1.43 per share better than the prior quarter and
	$0.57 per share higher than the prior year fourth quarter.
	Also on an adjusted basis, compared to the previous quarter, EBITDA
	excluding special items improved $77 million to $361 million, and
	improved $15 million compared to the fourth quarter of 2019.
	For the full year, revenues declined $1.1 billion to $9.3 billion on lower
	alumina and aluminum prices while the net loss attributable to Alcoa
	improved $955 million to $170 million primarily due to lower restructuring
	charges. Adjusted net loss for full year 2020 was $215 million, down $31
	million from 2019.
	Let's look closer at factors driving adjusted EBITDA in the fourth quarter.
	Adjusted EBITDA excluding special items increased $77 million in the
	fourth quarter, with $39 million higher earnings in the segments and $40
	million from favorable intersegment eliminations. Overall, favorable
	market price impacts totaled $92 million where higher metal and alumina
	prices were partially offset by a weaker U.S. dollar. All other factors
	combined were unfavorable $15 million.
	Energy costs were higher in smelters in Norway and Spain, and at Brazil
	refineries.
	In price/mix, lower CBG bauxite prices and unfavorable Alumina segment
	contract mix outweighed improved product mix in the Aluminum segment.
	Volume was unfavorable primarily due to lower CBG and Juruti third party
	bauxite shipments.
	Production costs were up sequentially in the Aluminum segment, where
	labor costs increased after summer holidays, increased pot relining and
	timing of maintenance activities, and Warrick power plant outage and
	related costs. Production costs were also up slightly in Alumina on higher
	bauxite freight costs, and in Bauxite on maintenance timing.
	Other impacts totaled $54 million sequentially and reflect the impact of
	many of our strategic key actions. The Intalco curtailment contributed $10
	million EBITDA improvement and $12 million was related to Section 232
	tariff refunds and reversals. Trading activities and equity earnings in non-
	operated mines in Bauxite contributed $21 million.
	Moving to cash.

Alcoa Corporation Wednesday, January 20, 2021, 5:00 PM Eastern