Key Challenges
Profitable Growth
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Converting Growth Opportunities to Cash on an Accelerated Basis by Alcoa Businesses
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Support of Capital Growth Strategy
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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 stringent 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 2007, input costs, including caustic, fuel oil, carbon, and ocean freight, were once again significantly higher than in the previous year. The U.S. dollar also weakened considerably against currencies in which we operate across the globe, such as the Australian and Canadian dollars, the Brazilian real, and the euro. Furthermore, we encountered production outages at our operations in Guinea, Jamaica, Tennessee, and Rockdale, Texas.
We were able to offset these challenges through continued higher realized prices for alumina and aluminum, improved volumes and productivity, and the net favorable impact of various portfolio actions.
Highlights of our performance include the following:
- Highest annual sales in our company’s history—US$30.7 billion—despite the absence of seven months of revenue from the soft alloy extrusion business;
- US$2.6 billion in income from continuing operations, or US$2.95 per diluted share—the highest in company history;
- Highest cash from operations in company history (US$3.1 billion); and
- Debt-to-capital ratio of 30.2%, which is at the low end of our target range despite substantial share repurchases.
In 2008, we will strive to continue to improve margins through productivity and value-added products to help offset the significant increases in energy, raw materials, and other input costs.
We will also work toward investing in strategic growth projects, such as potential smelter development in Greenland and Iceland and smelter positions in China and the Middle East. Additionally, we will continue to deliver new products and applications to new and existing markets, including the defense and oil and gas markets.
2020 Framework Economic Goal
| Target |
Metric |
Progress Achieved Through Year-End 2007 |
| Maintain a strong balance sheet |
Debt-to-total capitalization consistently between 30% and 35% |
30.2%
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|
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