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January 8, 2004

Alcoa Fourth Quarter Income from Continuing Operations at $0.39; Up $486 Million from Year-Ago Quarter; Full-Year Up 117 Percent Over 2002

NEW YORK--(BUSINESS WIRE)--Jan. 8, 2004--Alcoa (NYSE:AA):

Highlights:

-- $340 million of income from continuing operations for the fourth quarter up from a loss of $146 million in the same quarter 2002

-- $1.034 billion, or $1.20 per diluted share, in income from continuing operations for the full year - up 117 percent over 2002

-- $1.2 billion of debt reduction in 2003 with the company's debt-to-capital ratio declining from 43.1 to 35.1 percent

-- The company surpasses its goal of $1 billion in annual cost savings

-- Every segment showed improved profitability over 2002

Alcoa (NYSE:AA) today reported fourth quarter income from continuing operations of $340 million, or $0.39 per diluted share, up 21 percent from the previous quarter's $282 million, $0.33 per share. The results were a substantial improvement over the loss from continuing operations of $146 million, $0.17 per share, in the fourth quarter of last year.

Net income in the fourth quarter was $291 million, up 4 percent from $280 million in the third quarter of 2003, and significantly improved from a loss of $223 million in the fourth quarter of 2002.

The difference between net income and income from continuing operations in the fourth quarter of 2003 is due primarily to an adjustment to the anticipated proceeds from the sale of discontinued operations. Both measures are recognized by Generally Accepted Accounting Principles.

For the full year, income from continuing operations was $1.034 billion, $1.20 per diluted share, the highest in three years. Net income was $938 million, $1.08 per diluted share, a 123 percent improvement over 2002.

"Over the year, we improved productivity, managed capital, and worked every lever in our control to offset cost increases for raw materials, energy, benefits, and the impact of a weakened dollar," said Alain Belda, Chairman and CEO of Alcoa. "The result was consistently improving profitability, a considerably stronger balance sheet, and a company that is well positioned for future growth as world markets continue to strengthen. That is what we promised last year, and our team delivered."

Market Overview

For the full year, revenues increased 6 percent to $21.5 billion after integration of newly acquired packaging and fastener businesses. "As global demand for alumina and aluminum continues to increase, we expect to realize the benefits of the improved market," said Belda.

In the fourth quarter of 2003, sales were $5.5 billion, increasing 9 percent over 2002 and 4 percent over the third quarter. Sequentially, strong alumina shipments and higher aluminum prices overcame slightly lower volumes in markets that typically experience weakness in the fourth quarter: closures, can sheet, and building and construction.

Solid Improvement of the Balance Sheet

"Aggressive capital controls, management of working capital, and the initial benefits of a well-designed divestiture plan helped us retire more than $1.2 billion in debt over the year," said Belda. The company cut its debt-to-capital ratio in 2003 from 43.1 to 35.1 percent, an improvement of 370 basis points from the third quarter. In 2003, capital expenditures were $867 million, 32 percent below last year's level of $1.27 billion.

The balance sheet will improve further in the first half of 2004 as the divestiture program outlined last January is completed. To date, the company has shed its Latin American PET business and an equity interest in Latasa, a South American can producer. In the first quarter, the company expects to close on the sale of its specialty chemicals, automotive fasteners, and packaging equipment businesses. The total proceeds of the divestiture program should be in line with the company's earlier estimates -- $750 million to $1 billion.

In addition, a strong return of 19.75 percent on the company's pension investments essentially offset the impact of a 50 basis point decline in discount rates. As a result, the company did not record a material charge for minimum pension liability to its balance sheet in 2003.

Cost Savings and Management Actions

In the fourth quarter, the company surpassed its three-year $1 billion cost savings goal, marking the second time in six years that the company has achieved more than $1 billion in sustainable savings. That intense focus on profitability was critical as the company faced considerably higher costs for energy, raw materials, and benefits, as well as the impact of a weaker dollar on manufacturing operations outside the U.S. this year.

In the fourth quarter alone, those costs increased by more than $150 million before tax over the last quarter of 2002. Management actions that offset the higher costs included:

-- Drove $12 million of new cost savings in the fourth quarter;

-- Reduced the company's fourth-quarter effective tax rate to 21 percent by recognizing benefits from foreign net operating losses, offsetting higher taxes from the Latasa sale;

-- Recognizing $105 million in pre-tax gains from insurance settlements of a series of historical environmental matters in the U.S.; and

-- Achieved higher gross margins of 20.3 percent in 2003, up from 19.8 in 2002.

Together with higher metal prices, these management actions more than compensated for higher costs in the quarter.

The company will announce a new set of long-term cost challenges at the 4th quarter analyst workshop on January 22, 2004.

Positioning the Company for Future Growth

Despite tight capital restraint, Alcoa continued to make long-term investments to improve its world-class position in alumina refining and smelting, and expand other high-growth businesses. Through Alcoa World Alumina and Chemicals (AWAC), Alcoa's global alliance with Alumina Ltd., the company moved forward this year on its plan to add 1.1 million metric tons of annual capacity at its alumina refineries in Jamaica, Suriname, and Western Australia.

Final approvals were granted for the company's new aluminum smelter in Iceland, and the company signed an MOU for a stake in the low-cost Alba facility in Bahrain. The company scaled back higher-cost production at its smelters in Massena and Intalco, where higher energy costs had made the plants less competitive.

Providing Solutions to Customers

Through disciplined deployment of the Alcoa Business System, Alcoa intensified its focus on its customers in 2003. The company's Market Sector Lead Teams developed a more coordinated approach to customers in all of Alcoa's major markets. As a result, Alcoa was awarded significant new aerospace contracts, working with Airbus toward launch of its landmark new A380; and continued its expansion of new products such as Dura-Bright(R) wheels for the commercial transportation market, new customized siding for the home construction market, and Reynolds Wrap(R) Release(R) non-stick foil for the consumer.

In the automotive market, Alcoa collaborated with GM on its Cadillac 16 concept car, with Ford on its new F-150 truck and Jaguar XJ, with Toyota on a lightweight engine cradle for the Lexus RX330, with Ferrari on the 612 Scaglietti, and with Audi on its second-generation A8 sedan. The company also announced plans to create a single automotive customer center in Detroit.

In the fourth quarter, Alcoa's AFL Automotive group announced that it is working with Pacific Insights on a new contract to design and supply a hi-tech component for new PACCAR and Peterbilt trucks. Alcoa Closure Systems International (CSI) business developed a new closure for the dairy market that is easy to open and offers improved tamper-proof capability.

Quarterly Analyst Workshop

Alcoa's quarterly analyst workshop will be at 4:00 p.m. EST on Thursday, January 22, 2004. The meeting will be web cast via alcoa.com. Call information and related information will be available at www.alcoa.com under "Invest."

About Alcoa

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) foils and plastic wraps, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 120,000 employees in 41 countries. More information can be found at www.alcoa.com

Alcoa Business System

The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.

Forward Looking Statement

Certain statements in this release relate to future events and expectations and as such constitute forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of Alcoa to be different from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include (a) the company's inability to complete or to complete in the anticipated timeframe pending divestitures, acquisitions or expansion projects or to realize the projected amount of proceeds from divestitures, (b) the company's inability to achieve the level of cost savings or productivity improvements anticipated by management, (c) unexpected changes in global economic, business, competitive, market and regulatory factors, and (d) the other risk factors summarized in Alcoa's 2002 Form 10-K Report and other SEC reports.

Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)

                                           Quarter ended
                              December 31   December 31   September 30
                                  2003          2002 (a)      2003 (a)
                              ------------  ------------  ------------
Sales                         $     5,532   $     5,096   $     5,335

Cost of goods sold                  4,435         4,121         4,226
Selling, general
 administrative and other
 expenses                             346           343           305
Research and development
 expenses                              47            59            47
Provision for depreciation,
 depletion and amortization           312           297           295
Impairment of goodwill                  -            44             -
Special items                         (26)          386             1
Interest expense                       71            97            75
Other income, net                    (139)          (67)          (42)
                              ------------  ------------  ------------
                                    5,046         5,280         4,907

Income (loss) from
 continuing operations
 before taxes on income               486          (184)          428
Provision (benefit) for
 taxes on income                      103           (36)           92
                              ------------  ------------  ------------
Income (loss)from continuing
 operations before minority
 interests' share                     383          (148)          336
Less:  Minority interests'
 share                                 43            (2)           54
                              ------------  ------------  ------------

Income (loss) from
 continuing operations                340          (146)          282

Loss from discontinued
 operations                           (49)          (77)           (2)

Cumulative effect of
 accounting change                      -             -             -
                              ------------  ------------  ------------

NET INCOME (LOSS)             $       291   $      (223)  $       280
                              ============  ============  ============

Earnings (loss) per common
 share:
   Basic:
     Income (loss) from
      continuing operations   $       .39   $      (.17)  $       .33
     Loss from discontinued
      operations                     (.06)         (.09)            -
     Cumulative effect of
      accounting change                 -             -             -
                              ------------  ------------  ------------
        Net income (loss)     $       .33   $      (.26)  $       .33
                              ============  ============  ============

   Diluted:
     Income (loss) from
      continuing operations   $       .39   $      (.17)  $       .33
     Loss from discontinued
      operations                     (.06)         (.09)            -
     Cumulative effect of
      accounting change                 -             -             -
                              ------------  ------------  ------------
        Net income (loss)     $       .33   $      (.26)  $       .33
                              ============  ============  ============

Average number of shares
 used to compute:
   Basic earnings per common
    share                     866,243,592   844,456,673   855,477,116
   Diluted earnings per
    common share              871,969,592   844,456,673   859,375,461

Shipments of aluminum
 products (metric tons)         1,320,000     1,325,000     1,262,000


Alcoa and subsidiaries
Condensed Statement of Consolidated Income (unaudited)
(in millions, except per-share, share and metric ton amounts)

                                          Twelve months ended
                                      December 31       December 31
                                         2003                 2002 (a)
                                    ----------------  ----------------
Sales                               $        21,504   $        20,351

Cost of goods sold                           17,138            16,327
Selling, general administrative
 and other expenses                           1,295             1,157
Research and development expenses               194               214
Provision for depreciation,
 depletion and amortization                   1,194             1,111
Impairment of goodwill                            -                44
Special items                                   (26)              425
Interest expense                                314               350
Other income, net                              (274)             (179)
                                    ----------------  ----------------
                                             19,835            19,449

Income from continuing operations
 before taxes on income                       1,669               902
Provision for taxes on income                   404               291
                                    ----------------  ----------------
Income from continuing operations
 before minority interests' share             1,265               611
Less:  Minority interests' share                231               135
                                    ----------------  ----------------

Income from continuing operations             1,034               476

Loss from discontinued operations               (49)              (90)

Cumulative effect of accounting
 change                                         (47)               34
                                    ----------------  ----------------

NET INCOME                          $           938   $           420
                                    ================  ================

Earnings (loss) per common share:
   Basic:
     Income from continuing
      operations                    $          1.21   $           .56
     Loss from discontinued
      operations                               (.06)             (.11)
     Cumulative effect of
      accounting change                        (.06)              .04
                                    ----------------  ----------------
        Net income                  $          1.09   $           .49
                                    ================  ================

   Diluted:
     Income from continuing
      operations                    $          1.20   $           .56
     Loss from discontinued
      operations                               (.06)             (.11)
     Cumulative effect of
      accounting change                        (.06)              .04
                                    ----------------  ----------------
        Net income                  $          1.08   $           .49
                                    ================  ================

Average number of shares used to
 compute:
   Basic earnings per common share      853,352,313       845,438,913
   Diluted earnings per common
    share                               856,586,189       849,848,984

Common stock outstanding at the
 end of the period                      868,490,686       844,819,462

Shipments of aluminum products
 (metric tons)                            5,047,000         5,236,000

(a) Prior periods have been adjusted to reflect the reclassification
of certain businesses between discontinued operations and continuing
operations in the third and fourth quarters of 2003.

Alcoa and subsidiaries
Condensed Consolidated Balance Sheet (unaudited)
(in millions)

                                               December 31 December 31
                                                  2003        2002(b)
                                               ----------- -----------
ASSETS
Current assets:
  Cash and cash equivalents                     $     576   $     344
  Receivables from customers, less allowances:
   $105 in 2003 and $124 in 2002                    2,521       2,361
  Other receivables                                   350         171
  Inventories                                       2,524       2,414
  Deferred income taxes                               267         469
  Prepaid expenses and other current assets           502         506
                                                ----------  ----------
     Total current assets                           6,740       6,265
                                                ----------  ----------

Properties, plants and equipment, at cost          24,797      22,818
Less: accumulated depreciation,
 depletion and amortization                        12,240      10,708
                                                ----------  ----------
Net properties, plants and equipment               12,557      12,110
                                                ----------  ----------

Goodwill                                            6,549       6,379
Other assets                                        5,316       4,438
Assets held for sale                                  549         618
                                                ----------  ----------
     Total assets                               $  31,711   $  29,810
                                                ==========  ==========

LIABILITIES
Current liabilities:
  Short-term borrowings                         $      56   $      39
  Accounts payable, trade                           1,976       1,621
  Accrued compensation and retirement costs           948         936
  Taxes, including taxes on income                    703         814
  Other current liabilities                           878         966
  Long-term debt due within one year                  523          83
                                                ----------  ----------
     Total current liabilities                      5,084       4,459
                                                ----------  ----------
Long-term debt,
 less amount due within one year                    6,692       8,366
Accrued postretirement benefits                     2,220       2,319
Other noncurrent liabilities
 and deferred credits                               3,389       2,867
Deferred income taxes                                 804         520
Liabilities of operations held for sale               107          59
                                                ----------  ----------
     Total liabilities                             18,296      18,590
                                                ----------  ----------

MINORITY INTERESTS                                  1,340       1,293
                                                ----------  ----------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock                                        55          55
Common stock                                          925         925
Additional capital                                  5,831       6,101
Retained earnings                                   7,850       7,428
Treasury stock, at cost                            (2,017)     (2,828)
Accumulated other comprehensive loss                 (569)     (1,754)
                                                ----------  ----------
     Total shareholders' equity                    12,075       9,927
                                                ----------  ----------
     Total liabilities and equity               $  31,711   $  29,810
                                                ==========  ==========

(b) The prior period has been adjusted to reflect the reclassification
of certain businesses between discontinued operations and continuing
operations in the third and fourth quarters of 2003.

Alcoa and subsidiaries
Segment Information (unaudited)
(in millions, except realized prices)

Consolidated
 Third-Party
 Revenues:          4Q02    2002   1Q03    2Q03   3Q03   4Q03    2003
                  ------- ------- ------- ------ ------ ------ -------
 Alumina and
  Chemicals          430   1,743     449    491    526    536   2,002
 Primary Metals      830   3,174     732    805    816    876   3,229
 Flat-Rolled
  Products         1,130   4,640   1,152  1,200  1,176  1,287   4,815
 Engineered
  Products (c)     1,161   5,150   1,390  1,455  1,369  1,375   5,589
 Packaging and
  Consumer (c)       845   2,838     749    836    812    818   3,215
 Other               700   2,806     668    710    636    640   2,654
----------------- ------- ------- ------- ------ ------ ------ -------
    Total          5,096  20,351   5,140  5,497  5,335  5,532  21,504
================= ======= ======= ======= ====== ====== ====== =======

Consolidated
 Intersegment
 Revenues:         4Q02     2002   1Q03    2Q03   3Q03   4Q03    2003
                  ------- ------- ------- ------ ------ ------ -------
 Alumina and
  Chemicals          258     955     240    248    258    275   1,021
 Primary Metals      619   2,655     840    690    740    828   3,098
 Flat-Rolled
  Products            14      68      20     15     17     14      66
 Engineered
  Products             8      34       9      5      5      5      24
 Packaging and
  Consumer             -       -       -      -      -      -       -
 Other                 -       -       -      -      -      -       -
----------------- ------- ------- ------- ------ ------ ------ -------
    Total            899   3,712   1,109    958  1,020  1,122   4,209
================= ======= ======= ======= ====== ====== ====== =======

Consolidated
 Third-Party
 Shipments
 (KMT's):          4Q02     2002   1Q03    2Q03   3Q03   4Q03    2003
                  ------- ------- ------- ------ ------ ------ -------
  Alumina and
   Chemicals       1,926   7,486   1,794  1,939  1,982  1,956   7,671

  Primary Metals     546   2,073     453    495    488    516   1,952
  Flat-Rolled
   Products          433   1,774     434    453    450    482   1,819
  Engineered
   Products (c)      208     919     223    221    222    213     879
  Packaging and
   Consumer           55     162      36     42     40     49     167
  Other               83     308      52     56     62     60     230
----------------- ------- ------- ------- ------ ------ ------ -------
    Total
     Aluminum      1,325   5,236   1,198  1,267  1,262  1,320   5,047
================= ======= ======= ======= ====== ====== ====== =======

Average realized
 price - Primary    0.66    0.66    0.69   0.68   0.71   0.73    0.70
================= ======= ======= ======= ====== ====== ====== =======

After-Tax
 Operating Income
 (ATOI):           4Q02     2002   1Q03    2Q03   3Q03   4Q03    2003
                  ------- ------- ------- ------ ------ ------ -------
 Alumina and
  Chemicals           84     315      91     89    113    122     415
 Primary Metals      157     650     166    162    163    166     657
 Flat-Rolled
  Products            47     220      53     56     59     53     221
 Engineered
  Products (c)       (30)    105      29     46     47     33     155
 Packaging and
  Consumer (c)        64     197      53     57     52     52     214
 Other               (43)     (9)      9     17      8     17      51
----------------- ------- ------- ------- ------ ------ ------ -------
    Total            279   1,478     401    427    442    443   1,713
================= ======= ======= ======= ====== ====== ====== =======

Reconciliation of
 ATOI to
 consolidated net
 income: (c)       4Q02     2002   1Q03    2Q03   3Q03   4Q03    2003
                  ------- ------- ------- ------ ------ ------ -------
  Total ATOI         279   1,478     401    427    442    443   1,713
  Impact of
   intersegment
   profit
   eliminations        3      (6)      7     (4)     2      4       9
  Unallocated
   amounts
   (net of tax):
   Interest
    income             5      31       5      6      7      6      24
   Interest
    expense          (62)   (227)    (57)   (52)   (49)   (46)   (204)
   Minority
    interests          2    (135)    (59)   (75)   (54)   (43)   (231)
   Corporate
    expense          (83)   (234)    (57)   (81)   (65)   (84)   (287)
   Special items    (279)   (304)      4     (2)    (1)    25      26
   Discontinued
    operations       (77)    (90)      3     (1)    (2)   (49)    (49)
   Accounting
    change             -      34     (47)     -      -      -     (47)
   Other             (11)   (127)    (49)    (2)     -     35     (16)
----------------- ------- ------- ------- ------ ------ ------ -------
  Consolidated
   net income       (223)    420     151    216    280    291     938
================= ======= ======= ======= ====== ====== ====== =======

(c) Prior periods have been adjusted to reflect the reclassification
    of certain businesses between discontinued operations and
    continuing operations in the third and fourth quarters of 2003.


SUPPLEMENTAL FINANCIAL INFORMATION 
Alcoa and subsidiaries 
Net Income and EPS Information (unaudited) 
(in millions, except per-share amounts)

                                Net Income           Diluted EPS
                          --------------------- ----------------------
                           4Q03   3Q03   4Q02     4Q03   3Q03   4Q02
----------------------------------------------- ----------------------
GAAP Net income (loss)    $ 291  $ 280  $(223)   $0.33  $0.33  $(0.26)
  Discontinued operations
   - operating loss           4      2     18        -      -       -
  Discontinued operations
   - loss on divestitures    45      -     59        -      -       -
----------------------------------------------------------------------
GAAP Income (loss) from
 continuing operations    $ 340  $ 282  $(146)   $0.39  $0.33  $(0.17)
----------------------------------------------------------------------
Special items (2):
  Restructurings             (4)     1     95        -      -       -
 (Gain)loss on
   divestitures             (21)     -    161        -      -       -
Goodwill impairment           -      -     20        -      -       -
----------------------------------------------------------------------
Income from continuing
  operations excluding
  charges for
  restructurings
  and divestitures and
  goodwill impairment (1) $ 315  $ 283  $ 130    $0.36  $0.33   $0.16
======================================================================

Average diluted
 shares outstanding                                872    859     844


                                Net Income           Diluted EPS
                          --------------------- ----------------------
                              2003     2002         2003     2002
----------------------------------------------- ----------------------
GAAP Net income            $   938  $   420        $1.08    $0.49
  Cumulative effect of
   accounting change            47      (34)           -        -
  Discontinued operations
   - operating loss              4       31            -        -
  Discontinued operations
   - loss on divestitures       45       59            -        -
----------------------------------------------------------------------
GAAP Income from
 continuing operations      $1,034  $   476        $1.20    $0.56
----------------------------------------------------------------------
Special items (2):
  Restructurings                (4)     118            -        -
 (Gain)loss on divestitures    (21)     161            -        -
Goodwill impairment              -       20            -        -
----------------------------------------------------------------------
Income from continuing
  operations excluding
  charges for
  restructurings
  and divestitures and
  goodwill impairment (1)   $1,009  $   775        $1.17    $0.91
======================================================================

Average diluted shares
 outstanding                                         857      850

(1) Alcoa believes that income from continuing operations excluding
charges for restructurings and divestitures and goodwill impairment is
a measure that should be presented in addition to income from
continuing operations determined in accordance with GAAP. The
following matters should be considered when evaluating this non-GAAP
financial measure:

    --  Alcoa reviews the operating results of its businesses
        excluding the impacts of restructurings and divestitures and
        goodwill impairment. Excluding the impacts of these charges
        can provide an additional basis of comparison. Management
        believes that these charges are unusual in nature, and would
        not be indicative of ongoing operating results. As a result,
        management believes these charges should be considered in
        order to compare past, current, and future periods.
    --  The economic impacts of the restructuring and divestiture
        charges are described in the footnotes to Alcoa's financial
        statements. Generally speaking, charges associated with
        restructurings include cash and non-cash charges and are the
        result of employee layoff, plant consolidation of assets, or
        plant closure costs. These actions are taken in order to
        achieve a lower cost base for future operating results.
    --  Charges associated with divestitures principally represent
        adjustments to the carrying value of certain assets and
        liabilities and do not typically require a cash payment. These
        actions are taken primarily for strategic reasons as the
        company has decided not to participate in this portion of the
        portfolio of businesses.
    --  Alcoa's growth over the last five years, and the onset of the
        manufacturing recession led to the aforementioned charges in
        2001 and 2002. Before the start of the recent manufacturing
        recession, Alcoa last recorded charges associated with
        restructuring and divestitures in 1997.
    --  Restructuring and divestiture charges are typically material
        and are considered to be outside the normal operations of a
        business. Corporate management is responsible for making
        decisions about restructurings and divestitures.
    --  There can be no assurance that additional restructurings and
        divestitures and goodwill impairment will not occur in future
        periods. To compensate for this limitation, management
        believes that it is appropriate to consider both income from
        continuing operations determined under GAAP as well as income
        from continuing operations excluding restructuring and
        divestiture charges and goodwill impairment.

(2) Special items totaled $26 of income for the fourth quarter and
full year of 2003 before taxes and minority interests. The amount
principally represents net gains from assets held for sale including
the reversal of previously established reserves for businesses that
Alcoa decided to retain, and a realized gain on the sale of a
business, partially offset by adjustments to estimated proceeds for
ongoing sale activities. After taxes and minority interests, special
items amounted to income of $25 in the fourth quarter and full year of
2003.