We understand the importance of the economic value we generate to our shareholders, customers, employees, and the communities in which we operate.
Disciplined financial management is essential to ensure long-term success for us and our stakeholders. We maintain robust financial controls, a strong dedication to financial returns, and an intense focus on creating value through top-line growth, strategic capital spending, and cost-reduction activities.
We are subject to a multitude of risk factors that could affect our results and that are not in our control. We also face numerous financial challenges in today’s global marketplace.
In 2008, raw materials, energy, and other input costs were once again significantly higher than in the previous year. The U.S. dollar also weakened considerably against the Brazilian real, one of the main currencies in which we operate. Additionally, global economic markets began an unprecedented decline, which resulted in a historic drop in the London Metal Exchange (LME) cash price per metric ton of aluminum in the second half of 2008.
Our 2008 financial performance included the following:
Sales of US$26.9 billion, despite the absence of 10 months of revenue related to the Packaging and Consumer businesses;
US$229 million in income from continuing operations, or US$0.28 per diluted share, which includes US$670 million of restructuring and other charges;
Cash from operations of US$1.234 billion, which was reduced by pension contributions of US$523 million;
Cash on hand of US$762 million, which was almost double historical levels; and
Debt-to-capital ratio of 42.5%.
In 2009, we will conserve cash and preserve liquidity through every possible avenue to manage Alcoa through the global economic downturn. This will be accomplished through the actions we initiated during the second half of 2008, which will continue throughout 2009. In March 2009, we launched an additional series of operational and financial actions to significantly improve the company’s cost structure and liquidity. (See the Key Challenges box)
We will also work toward the completion of the São Luís alumina refinery expansion and Juruti bauxite mine development in Brazil as soon as possible and as efficiently as possible. Additionally, we will seek out and take advantage of unique opportunities that arise during the global economic downturn, as governments around the world look to stimulate their economies.
2020 Framework Economic Goal
Target
Metric
Progress Achieved Through Year-End 2008
Maintain a strong balance sheet
Debt-to-total capitalization consistently between 30% and 35%
