Alcoa Corporation Reports Fourth Quarter 2016 Results

Total Segment Profit and Cash Grew Sequentially on Higher Alumina and Aluminum Pricing

4Q 2016 Results

• Net loss of $125 million, or $(0.68) per share, as a result of costs to streamline portfolio
• Excluding special items, adjusted net income of $26 million, or $0.14 per share
• Adjusted earnings before interest, tax, depreciation, and amortization (EBITDA), excluding special items of $335 million, up 18 percent sequentially on rising alumina pricing
• Revenue of $2.5 billion, up 9 percent sequentially, reflecting higher volume in the Company’s rolled products business, and higher alumina pricing
• $853 million cash balance and $1.4 billion of debt for net debt of $0.6 billion as of December 31, 2016
  

New York, January 24, 2017 – Alcoa Corporation (NYSE:AA), a global leader in bauxite, alumina, and aluminum products, today reported fourth quarter 2016 results that reflect profit growth at the combined segment level and an improved cash position, driven by higher alumina and aluminum pricing.  

Since launching as an independent company on November 1, 2016, Alcoa has increased its cash position by $198 million and closed the fourth quarter 2016 with a cash balance of $853 million. 

“Alcoa’s first reporting period as a new, standalone, publicly-traded company points to our ability to deliver shareholder value,” said Roy Harvey, Chief Executive Officer of Alcoa. “Rising alumina and aluminum prices improved the bottom line, our alumina segment had exceptional profit growth in a stronger market environment and doubled margins, while our bauxite business also increased profits and reported robust margins. In addition, we continued to streamline our portfolio and generated cash to strengthen the balance sheet.”

Mr. Harvey added: “We’ve entered 2017 focused on our strategic priorities. We will reduce complexity and costs across Alcoa, remain disciplined with cash, and focus on smart investments with strong returns.” 

In fourth quarter 2016, Alcoa reported a net loss of $125 million, or $(0.68) per share.  Results include $151 million of special items primarily related to the permanent closure of Suralco’s refinery and mines in Suriname and the impairment of Alcoa of Australia Limited’s (AofA) interests in a Western Australia (WA) gas field. Fourth quarter 2016 results compare to a net loss of $10 million, or $(0.06) per share, in third quarter 2016. 

Excluding the impact of special items, fourth quarter 2016 adjusted net income was $26 million, or $0.14 per share. In third quarter 2016, Alcoa reported an adjusted net loss of $95 million, or $(0.52) per share, excluding special items.

Alcoa reported fourth quarter 2016 adjusted EBITDA excluding special items of $335 million, up 18 percent from third quarter 2016. Higher alumina and metal prices drove the sequential change in adjusted EBITDA, more than offsetting increased costs primarily tied to energy.

In fourth quarter 2016, Alcoa reported revenue of $2.5 billion, up 9 percent sequentially, reflecting higher volumes in the Company’s rolled products business, as well as rising alumina and aluminum pricing.

In the fourth quarter, the Company achieved a seasonal low of 13 days working capital. 

2016 Full-Year Results

In 2016, Alcoa reported a net loss of $400 million, or $(2.19) per share. Excluding special items, the Company reported an adjusted net loss of $227 million, or $(1.24) per share. The full year net loss was driven largely by costs associated with portfolio restructuring decisions, including the closure of the Warrick smelter and the Suralco refinery and mines, and the impairment of the WA gas field.

Adjusted EBITDA excluding special items for 2016 was $1.1 billion, compared to $1.8 billion in 2015, due to lower alumina and aluminum pricing during the first three quarters and incremental costs to operate the Warrick, IN rolling mill as a cold metal plant, partially offset by net productivity improvements. Revenue in 2016 was $9.3 billion, down 17 percent from 2015, reflecting lower pricing and volumes in alumina and aluminum, slightly offset by higher third-party bauxite shipments.

In 2016, Alcoa invested in return-seeking capital projects of $82 million, and controlled sustaining capital expenditures to $322 million. Return on capital in 2016 was 5.3 percent.

4Q 2016 Business Update

In the fourth quarter, Alcoa continued to successfully build its third-party bauxite business and to further streamline its portfolio.

• AofA secured its first major bauxite export contract out of Western Australia (WA), and was granted approval to export up to 2.5 million metric tons per annum of bauxite for five years to third-party customers.

• Alcoa announced the permanent closure of the Suralco alumina refinery and bauxite mines in Suriname, which have been fully curtailed since November 2015. Alcoa also impaired AofA’s interests in a WA gas field. Alcoa determined that the completed exploration activities do not support the current carrying value. AofA and Suralco are part of the Alcoa World Alumina and Chemicals group of companies owned 60 percent by Alcoa and 40 percent by Alumina Limited.

Early this month, Alcoa announced that it will restart capacity at the Portland Aluminium smelter in Australia that had been lost due to a December power outage. Portland Aluminum is an unincorporated joint venture between AofA (55 percent), CITIC Nominees Pty Ltd (22.5 percent), and Marubeni Aluminium Australia Pty Ltd (22.5 percent).

Market Update

For 2017, the Company projects relatively balanced global bauxite and alumina markets and a modest global aluminum surplus of 400 thousand to 800 thousand metric tons. Alcoa is projecting 2017 global aluminum demand growth of 4 percent over 2016.

Conference Call

Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time (ET) on Tuesday, January 24, 2017 to present fourth quarter 2016 results and discuss the business and  market outlook for 2017.

The call will be webcast via the Company’s homepage on www.alcoa.com. Presentation materials for the call will be available for viewing at approximately 4:15 PM ET on January 24, 2017 on the same website. Call information and related details are available under the “Investors” section at www.alcoa.com.

Dissemination of Company Information

Alcoa intends to make future announcements regarding Company developments and financial performance through its website at www.alcoa.com.

About Alcoa Corporation

Alcoa (NYSE: AA) is a global industry leader in bauxite, alumina, and aluminum products, with a strong portfolio of value-added cast and rolled products and substantial energy assets. Alcoa is built on a foundation of strong values and operating excellence dating back nearly 130 years to the world-changing discovery that made aluminum an affordable and vital part of modern life. Since inventing the aluminum industry, and throughout our history, our talented Alcoans have followed on with breakthrough innovations and best practices that have led to efficiency, safety, sustainability, and stronger communities wherever we operate. Visit us online on www.alcoa.com, follow @Alcoa on Twitter and on Facebook at www.facebook.com/Alcoa.

We have included the above website addresses only as inactive textual references and do not intend these to be active links to such websites. Information contained on such websites or that can be accessed through such websites does not constitute a part of this press release.

Forward-Looking Statements

This press 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 “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “plans,” “projects,” “seeks,” “sees,” “should,” “targets,” “will,” “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 financial results or operating performance; and statements about strategies, outlook, business and financial prospects.  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 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) 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, alumina, and other products, and fluctuations in indexed-based and spot prices for alumina; (b) deterioration in global economic and financial market conditions generally; (c) unfavorable changes in the markets served by Alcoa Corporation; (d) the impact of changes in foreign currency exchange rates on costs and results; (e) increases in energy costs; (f) changes in discount rates or investment returns on pension assets; (g) the inability to achieve the level of revenue growth, cash generation, cost savings, improvement in profitability and margins, fiscal discipline, or strengthening of competitiveness and operations anticipated from restructuring programs and productivity improvement, cash sustainability, 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, facility closures, curtailments, expansions, or joint ventures; (i) political, economic, and regulatory risks in the countries in which Alcoa Corporation operates or sells products; (j) the outcome of contingencies, including legal proceedings, government or regulatory investigations, and environmental remediation; (k) the impact of cyberattacks and potential information technology or data security breaches; and (l) the other risk factors discussed in Alcoa Corporation’s registration statement on Form 10 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 discussed above and other risks in the market.

Non-GAAP Financial Measures

Some of the information included in this release is derived from Alcoa’s consolidated financial information but is not presented in Alcoa’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 rules. These non-GAAP financial measures supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. 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.

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