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July 10, 2006

Alcoa Announces Highest Quarterly Income and Revenue in Company History

NEW YORK--(BUSINESS WIRE)--July 10, 2006--Alcoa (NYSE:AA):



Highlights:

-- Second quarter 2006 income from continuing operations of $752 million, or $0.86 per share.

-- Results include negative impact of previously announced charges of $0.04 per share for labor contract and strike preparation.

-- Quarterly revenues of nearly $8 billion.

-- First-half 2006 net income of $1.35 billion was higher than full-year results for every year in Company's history except fiscal 2000.

-- Record ATOI in Alumina and Primary Metals, up 15 and 10 percent, sequentially.

-- Engineered Solutions ATOI a record $100 million, up 64 percent from year ago quarter, and Flat Rolled Products ATOI up 20% sequentially.

-- Annualized ROC year-to-date stood at 15.4 percent.

-- Debt-to-capital ratio down slightly to 32.0 percent, within target range while making strategic investments in growth.

Alcoa (NYSE:AA) today announced second quarter 2006 income from continuing operations of $752 million, or $0.86 per diluted share, the highest quarterly profit in the company's more than 115-year history.

Income from continuing operations of $752 million, or $0.86, was 52 percent better than the $496 million, or $0.56, in the second quarter of 2005, and 22 percent higher than the $615 million, or $0.70, in the previous quarter.

Net income for the quarter was a record $744 million, or $0.85, 62 percent higher than the $460 million, or $0.52, in the second quarter of 2005, and 22 percent higher than the $608 million, or $0.69, in the previous quarter.

Included in the second quarter results are previously announced after-tax charges of $35 million, or $0.04 per share, associated with ratification of a U.S. labor contract and costs to prepare for a potential work stoppage.

For the first half of 2006, income from continuing operations was $1.37 billion, up 79 percent from last year's $764 million first-half results. First half 2006 net income of $1.35 billion was higher than the full-year results of all but one year in the company's history.

Revenues for the quarter increased 10 percent sequentially to $7.96 billion, the highest quarterly sales in the company's history, as each of the company's six global business segments achieved higher volumes. Results were driven by higher LME prices and strong market demand in the aerospace, building and construction, commercial vehicle and can sheet markets. Compared to the year-ago quarter, sales have grown 19 percent.

"Alcoans have generated another record quarter - delivering today while we continue building for the future," said Alain Belda, Alcoa Chairman and CEO. "By creating solutions for our customers and continuously improving productivity, we have driven record top and bottom line performances.

"We are consistently delivering returns well in excess of the cost of capital, generating cash to fund strategic growth projects, and keeping our balance sheet strong," added Belda.

Balance Sheet and Growth Projects

In the quarter, capital expenditures were $729 million, 64 percent of which was devoted to growth projects designed to capture opportunities in global aluminum consumption, which is expected to double by 2020. Year to date, the company's capital expenditures stand at $1.32 billion, primarily dedicated to growth projects such as the 341,000 mtpy Alcoa Fjardaal smelter in Iceland, the Mosjoen anode plant in Norway, and the Pinjarra alumina refinery upgrade in Australia.

Cash from operations for the quarter was $699 million, a $912 million improvement from the previous quarter, and $315 million better than the second quarter of 2005.

Days of working capital improved three days in the quarter compared to the second quarter of last year. Working capital dollars increased from the previous quarter due to the building of strategic inventories in the event of a work stoppage, higher prices, and continued strong markets. The debt-to-capital ratio declined slightly to 32.0 percent at the end of the quarter, within the Company's target range and while continuing capital investments in strategic growth projects around the world.

During the quarter, Alcoa took several additional strides in its strategic growth program, including: the acquisition of a 70% stake in a brazing sheet facility in Kunshan, China to serve the automotive market; the signing of an MOU with Vinacomin for a possible bauxite and alumina refinery joint venture in the Dak Nong Province of Vietnam; the opening of the Company's first plant in Bulgaria to produce consumer packaging products; and a sales operation in South Africa to serve the aluminum wheels market. During the quarter, the Company also announced its plan to divest its Home Exteriors business to free up resources to invest in strategic growth opportunities.

The Company's year-to-date annualized return on capital (ROC) stood at 15.4 percent.

Innovation/New Products and Sustainability

Alcoa continued its leadership position in applying technologies to generate innovation on behalf of customers and the company. Examples this quarter included: an agreement with Nike to supply aluminum for two new lines of baseball bats globally; the introduction of Reynobond with Kevlar, a new hurricane-resistant architectural panel system; and a new natural media filtration system as a low-cost environmental control solution that saves the company millions.

During the quarter, Alcoa continued its leadership position in sustainability. The company was recognized for its stewardship of rivers by the U.S. Hydropower organization; and donated 20 Million ISK (US$280,000) to help create national parks in Iceland, including Europe's largest conservation area. The Alcoa Foundation invested in an innovative land conservation program in the Palos Verdes peninsula. And the Company launched a new sustainability report and website detailing the company's commitment to sustainable development.

Segment and Other Results

Alumina -- After-tax operating income ("ATOI") was $278 million, up 15% over the previous quarter. Higher pricing was partially offset by the effect of a weaker dollar. Additionally, alumina production for the quarter was a record 3,746 thousand metric tons (kmt), up by 44kmt from the previous quarter.

Primary Metals - Segment ATOI was $489 million, up 10% over the prior quarter. The ATOI increase was driven by higher LME prices and premiums, partially offset by higher energy, a weaker dollar, and strike preparation costs. Third party realized metal prices increased $194 per ton, or 8%, to $2,728 per ton. Primary metal production for the quarter increased 15 kmt to 882 kmt, due to the completion of the Alumar, Brazil expansion and partial return to service in Portland, Australia. The Company purchased roughly 145 kmt of primary metal for internal use as part of its strategy to sell value-added products.

Flat Rolled Products - ATOI for the segment was $79 million, up 20% over the prior quarter. Higher volumes in can sheet, aerospace, commercial transportation and common alloy distribution, coupled with lower natural gas prices, more than offset strike preparation and related costs.

Engineered Solutions -- Segment ATOI rose $17 million to an all-time high of $100 million, 64% above the prior year quarter and 20% higher than the record performance delivered in the sequential quarter. Strong demand in the aerospace, commercial vehicle, and industrial markets, continued productivity gains and price increases led to the improved results.

Packaging and Consumer -- Segment ATOI was $37 million, an increase of $29 million over the previous quarter. Higher volume due to seasonal strength, improved pricing, and productivity gains led to the improved results.

Extruded and End Products -- ATOI improved $20 million from the prior quarter and all businesses achieved higher revenues including the soft alloy business which saw increased demand in Europe and productivity advances. Global building and construction and hard alloy extrusion businesses continued their strong performance and also improved profitability.

Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on July 10th to present the quarter's results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under "Invest."

About Alcoa

Alcoa is the world's leading producer and manager of primary aluminum, fabricated aluminum and alumina facilities, 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 closures, fastening systems, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 44 countries and has been named one of the top sustainable corporations in the world at the World Economic Forum in Davos, Switzerland. More information can be found at www.alcoa.com

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) material adverse changes in economic or aluminum industry conditions generally, including global supply and demand conditions and prices for primary aluminum, alumina and other products; (b) material adverse changes in the markets served by Alcoa, including the transportation, building, construction, distribution, packaging, industrial gas turbine and other markets; (c) Alcoa's inability to mitigate impacts from rising energy and raw materials costs, or other cost inflation; (d) Alcoa's inability to achieve the level of cost savings, productivity improvements or earnings or revenue growth anticipated by management; (e) Alcoa's inability to complete its expansion projects and integration of acquired facilities as planned and by targeted completion dates, including the integration of its recently acquired Russian facilities; (f) unfavorable changes in laws, governmental regulations or policies, currency exchange rates or competitive factors in the countries in which Alcoa operates; (g) significant legal proceedings or investigations adverse to Alcoa, including environmental, product liability, safety and health and other claims; and (h) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2005, Form 10-Q for the quarter ended March 31, 2006 and other reports filed with the Securities and Exchange Commission.

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

                                               Quarter ended
                                       June 30    March 31    June 30
                                        2005(a)     2006        2006
                                        ----        ----        ----
Sales                                  $6,693      $7,244      $7,959

Cost of goods sold                      5,408       5,459       5,967
Selling, general administrative,
 and other expenses                       348         369         368
Research and development expenses          47          48          51
Provision for depreciation,
 depletion, and amortization              314         308         326
Restructuring and other charges           216           1          (9)
Interest expense                           87          92          98
Other income, net                        (347)        (35)        (61)
                                       ------      ------      ------
  Total costs and expenses              6,073       6,242       6,740

Income from continuing operations
 before taxes on income                   620       1,002       1,219
Provision for taxes on income              64         282         343
                                       ------      ------      ------
Income from continuing operations
 before minority interests' share         556         720         876
Less:  Minority interests' share           60         105         124
                                       ------      ------      ------

Income from continuing operations         496         615         752

Loss from discontinued operations         (36)         (7)         (8)
                                       ------      ------      ------

NET INCOME                             $  460      $  608      $  744
                                       ======      ======      ======

Earnings (loss) per common share:
   Basic:
     Income from continuing
      operations                       $  .57      $  .71      $  .86
     Loss from discontinued
      operations                         (.04)       (.01)       (.01)
                                       ------      ------      ------
        Net income                     $  .53      $  .70      $  .85
                                       ======      ======      ======

   Diluted:
     Income from continuing
      operations                       $  .56      $  .70      $  .86
     Loss from discontinued
      operations                         (.04)       (.01)       (.01)
                                       ------      ------      ------
        Net income                     $  .52      $  .69      $  .85
                                       ======      ======      ======

Average number of shares used to
 compute:
   Basic earnings per common
    share                         872,149,447 870,560,769 869,811,164
   Diluted earnings per common
    share                         877,950,254 875,971,920 877,005,617

Shipments of aluminum products
 (metric tons)                      1,400,000   1,359,000   1,410,000

(a) Prior periods financial statements have been reclassified to
    reflect the Hawesville, KY automotive casting facility in
    discontinued operations in 2006.



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

                                                    Six months ended
                                                  June 30      June 30
                                                  2005(a)       2006
                                                  -------       ----
Sales                                             $12,914     $15,203

Cost of goods sold                                 10,341      11,426
Selling, general administrative, and other
 expenses                                             673         737
Research and development expenses                      93          99
Provision for depreciation, depletion, and
 amortization                                         626         634
Restructuring and other charges                       261          (8)
Interest expense                                      165         190
Other income, net                                    (383)        (96)
                                                  -------     -------
      Total costs and expenses                     11,776      12,982

Income from continuing operations before taxes
 on income                                          1,138       2,221
Provision for taxes on income                         254         625
                                                  -------     -------
Income from continuing operations before
 minority interests' share                            884       1,596
Less:  Minority interests' share                      120         229
                                                  -------     -------

Income from continuing operations                     764       1,367

Loss from discontinued operations                     (44)        (15)
                                                  -------     -------

NET INCOME                                        $   720     $ 1,352
                                                  =======     =======

Earnings (loss) per common share:
   Basic:
     Income from continuing operations            $   .88     $  1.57
     Loss from discontinued operations               (.05)       (.02)
                                                  -------     -------
        Net income                                $   .83     $  1.55
                                                  =======     =======

   Diluted:
     Income from continuing operations            $   .87     $  1.56
     Loss from discontinued operations               (.05)       (.02)
                                                  -------     -------
        Net income                                $   .82     $  1.54
                                                  =======     =======

Average number of shares used to compute:
   Basic earnings per common share            871,817,999 870,195,464
   Diluted earnings per common share          878,211,268 876,595,985

Common stock outstanding at the end of the
 period                                       872,246,965 869,315,328

Shipments of aluminum products (metric tons)    2,689,000   2,769,000

(a) Prior periods financial statements have been reclassified to
    reflect the Hawesville, KY automotive casting facility in
    discontinued operations in 2006.



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

                                                December 31   June 30
                                                   2005(b)      2006
                                                   ----         ----
ASSETS
Current assets:
  Cash and cash equivalents                       $   762     $   453
  Receivables from customers, less allowances:
     $80 in 2005 and $85 in 2006                    2,914       3,625
  Other receivables                                   427         370
  Inventories                                       3,446       4,087
  Fair value of derivative contracts                  520         345
  Prepaid expenses and other current assets           713         989
                                                  -------     -------
     Total current assets                           8,782       9,869
                                                  -------     -------

Properties, plants and equipment, at cost          26,944      28,387
Less: accumulated depreciation, depletion and
 amortization                                      13,787      14,352
                                                  -------     -------
Net properties, plants and equipment               13,157      14,035
                                                  -------     -------
Goodwill                                            6,249       6,296
Investments                                         1,370       1,411
Other assets                                        4,090       4,132
Assets held for sale                                   48          28
                                                  -------     -------
     Total assets                                 $33,696     $35,771
                                                  =======     =======

LIABILITIES
Current liabilities:
  Short-term borrowings                           $   300     $   361
  Commercial paper                                    912       1,898
  Accounts payable, trade                           2,659       2,822
  Accrued compensation and retirement costs         1,102       1,018
  Taxes, including taxes on income                    874         947
  Other current liabilities                         1,460       1,100
  Long-term debt due within one year                   58          62
                                                  -------     -------
     Total current liabilities                      7,365       8,208
                                                  -------     -------
Long-term debt, less amount due within one
 year                                               5,279       5,158
Accrued pension benefits                            1,500       1,464
Accrued postretirement benefits                     2,105       2,111
Other noncurrent liabilities and deferred
 credits                                            1,823       2,098
Deferred income taxes                                 875         833
Liabilities of operations held for sale                11           5
                                                  -------     -------
     Total liabilities                             18,958      19,877
                                                  -------     -------

MINORITY INTERESTS                                  1,365       1,474
                                                  -------     -------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock                                        55          55
Common stock                                          925         925
Additional capital                                  5,720       5,807
Retained earnings                                   9,345      10,431
Treasury stock, at cost                            (1,899)     (1,952)
Accumulated other comprehensive loss                 (773)       (846)
                                                  -------     -------
     Total shareholders' equity                    13,373      14,420
                                                  -------     -------
     Total liabilities and equity                 $33,696     $35,771
                                                  =======     =======

(b) Prior periods financial statements have been reclassified to
    reflect the Hawesville, KY automotive casting facility in
    discontinued operations in 2006.



Alcoa and subsidiaries
Condensed Statement of Consolidated Cash Flows (unaudited)
(in millions)

                                                      Six months ended
                                                           June 30
                                                      2005(c)    2006
                                                      -------    ----
CASH FROM OPERATIONS
Net income                                            $  720   $1,352
Adjustments to reconcile net income to cash from
 operations:
   Depreciation, depletion, and amortization             627      634
   Deferred income taxes                                (102)      (3)
   Equity loss (income), net of dividends                 64      (42)
   Restructuring and other charges                       261       (8)
   Gains from investing activities-sale of assets       (342)      (8)
   Provision for doubtful accounts                        10       11
   Loss from discontinued operations                      44       15
   Minority interests                                    120      229
   Stock-based compensation                               12       50
   Other                                                 (59)     (66)
Changes in assets and liabilities, excluding
 effects of acquisitions and divestitures:
   Increase in receivables                              (656)    (525)
   Increase in inventories                              (472)    (559)
   Increase in prepaid expenses and other current
    assets                                               (25)    (130)
   Increase (decrease) in accounts payable and
    accrued expenses                                      89     (374)
   Increase in taxes, including taxes on income           12       29
   Cash paid on long-term aluminum supply contract       (93)       -
   Pension contributions                                 (46)    (102)
   Excess tax benefits from share-based payment
    arrangements                                           -      (15)
   Net change in noncurrent assets and liabilities       (21)       -
                                                      ------   ------
      CASH PROVIDED FROM CONTINUING OPERATIONS           143      488
      CASH PROVIDED FROM (USED FOR) DISCONTINUED
       OPERATIONS                                          2       (2)
                                                      ------   ------
      CASH FROM OPERATIONS                               145      486
                                                      ------   ------

FINANCING ACTIVITIES
Net changes to short-term borrowings                      (9)      54
Common stock issued for stock compensation plans          17      136
Repurchase of common stock                                 -     (210)
Dividends paid to shareholders                          (263)    (262)
Dividends paid to minority interests                     (72)    (200)
Net change in commercial paper                           475      986
Additions to long-term debt                              200        8
Payments on long-term debt                               (47)     (27)
Excess tax benefits from share-based payment
 arrangements                                              -       15
Other                                                      -       40
                                                      ------   ------
      CASH  PROVIDED FROM FINANCING ACTIVITIES           301      540
                                                      ------   ------

INVESTING ACTIVITIES
Capital expenditures                                    (829)  (1,321)
Capital expenditures of discontinued operations           (5)       -
Acquisition of minority interests                       (176)      (1)
Acquisitions, net of cash acquired                      (257)       8
Sale of investments                                    1,077        7
Change in short-term investments and restricted
 cash                                                   (228)     (21)
Additions to investments                                 (10)     (44)
Other                                                     (9)      20
                                                      ------   ------
      CASH USED FOR INVESTING ACTIVITIES                (437)  (1,352)
                                                      ------   ------

      EFFECT OF EXCHANGE RATE CHANGES ON CASH             (9)      17
                                                      ------   ------
Net change in cash and cash equivalents                    -     (309)
Cash and cash equivalents at beginning of year           457      762
                                                      ------   ------
      CASH AND CASH EQUIVALENTS AT END OF PERIOD      $  457   $  453
                                                      ======   ======

(c) Prior period financial statements have been reclassified to
    reflect the Hawesville, KY automotive casting facility in
    discontinued operations in 2006.



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

                       1Q05   2Q05   3Q05   4Q05   2005   1Q06   2Q06
                       ----   ----   ----   ----   ----   ----   ----
Alumina:
 Third-party
  shipments (Kmt)     1,923  1,951  2,017  1,966  7,857  2,023  2,108
 Alumina production
  (Kmt)               3,583  3,621  3,688  3,706 14,598  3,702  3,746
 Third-party sales     $505   $533   $531   $561 $2,130   $628   $713
 Intersegment sales    $393   $439   $424   $451 $1,707   $555   $515
 ATOI                  $161   $182   $156   $183   $682   $242   $278
 Depreciation,
  depletion and
  amortization          $41    $43    $44    $44   $172    $43    $46
 Income taxes           $61    $66    $47    $72   $246    $93   $112
 Equity (loss) income   $(1)    $-     $-     $1     $-    $(1)    $-
======================================================================

Primary Metals:
 Third-party realized
  price - aluminum   $2,042 $1,977 $1,963 $2,177 $2,044 $2,534 $2,728
 Third-party
  shipments (Kmt)       487    520    590    557  2,154    488    508
 Aluminum production
  (Kmt)                 851    899    904    900  3,554    867    882
 Third-party sales   $1,089 $1,124 $1,204 $1,281 $4,698 $1,408 $1,589
 Intersegment sales  $1,303 $1,215 $1,108 $1,182 $4,808 $1,521 $1,696
 ATOI                  $225   $187   $168   $242   $822   $445   $489
 Depreciation,
  depletion and
  amortization          $90    $90    $93    $95   $368    $96   $102
 Income taxes           $92    $75    $50    $90   $307   $197   $209
 Equity income (loss)   $18   $(76)   $20    $26   $(12)   $20    $28
======================================================================

Flat-Rolled Products:
 Third-party
  shipments (Kmt)       509    560    543    544  2,156    562    579
 Third-party sales   $1,655 $1,763 $1,679 $1,739 $6,836 $1,940 $2,115
 Intersegment sales     $34    $36    $29    $29   $128    $49    $66
 ATOI                   $75    $70    $81    $62   $288    $66    $79
 Depreciation,
  depletion and
  amortization          $52    $54    $57    $54   $217    $50    $57
 Income taxes           $24    $27    $30    $30   $111    $26    $25
 Equity income (loss)    $-     $-     $-     $-     $-     $-   $( 1)
======================================================================

Extruded and End
 Products:
 Third-party
  shipments (Kmt)       221    237    224    212    894    232    241
 Third-party sales   $1,037 $1,153 $1,092 $1,022 $4,304 $1,170 $1,328
 Intersegment sales     $14    $19    $14    $17    $64    $23    $31
 ATOI                   $10    $20    $23    $(3)   $50     $-    $20
 Depreciation,
  depletion and
  amortization(1)       $31    $32    $31    $32   $126    $30    $31
 Income taxes           $(2)   $18    $10     $2    $28     $2     $9
======================================================================

Engineered Solutions:
 Third-party
  shipments (Kmt)        38     37     36     34    145     37     38
 Third-party sales   $1,237 $1,282 $1,242 $1,271 $5,032 $1,360 $1,405
 ATOI                   $61    $61    $34    $47   $203    $83   $100
 Depreciation,
  depletion and
  amortization          $47    $45    $42    $42   $176    $40    $42
 Income taxes           $26    $30    $23    $10    $89    $37    $44
 Equity income           $1     $-     $-     $-     $1     $-     $-
======================================================================

Packaging and Consumer:
Third-party shipments
 (Kmt)                   34     46     31     40    151     40     44
Third-party sales      $708   $827   $806   $798 $3,139   $749   $834
 ATOI                   $16    $41    $28    $20   $105     $8    $37
 Depreciation,
  depletion and
  amortization(1)       $32    $31    $31    $32   $126    $31    $31
 Income taxes           $10    $18    $14     $8    $50     $5     $9
 Equity income           $1     $-     $-     $-     $1     $-     $-
======================================================================

(1) Segment depreciation, depletion and amortization has been adjusted
    from the previously reported annual amounts to reflect the
    movement of certain amounts to Corporate.



Alcoa and subsidiaries
Segment Information (unaudited), continued


Reconciliation of ATOI to
 consolidated  net income: 1Q05  2Q05  3Q05  4Q05  2005   1Q06  2Q06
                           ----  ----  ----  ----  ----   ----  ----
   Total ATOI              $548  $561  $490  $551 $2,150  $844 $1,003
   Impact of LIFO and
    intersegment profit
      adjustments(2)         (2)  (18)  (23)  (19)   (62)   24     13
   Unallocated amounts
    (net of tax):
      Interest income         7     9    12    14     42    11     10
      Interest expense      (51)  (56)  (62)  (51)  (220)  (60)   (63)
      Minority interests    (60)  (60)  (59)  (80)  (259) (105)  (124)
      Corporate expense     (69)  (73)  (82)  (88)  (312)  (89)   (82)
      Restructuring and
       other charges        (30) (144)   (5)  (18)  (197)   (1)     6
      Discontinued
       operations            (8)  (36)   (3)   14    (33)   (7)    (8)
      Other(2)              (75)  277    21   (99)   124    (9)   (11)
----------------------------------------------------------------------
   Consolidated net income $260  $460  $289  $224 $1,233  $608   $744
======================================================================

Prior periods segment information has been reclassified to reflect
the movement of the Hawesville, KY automotive casting facility to
discontinued operations in 2006.

The difference between total segment third-party sales and
consolidated third-party sales is in Corporate.

(2) Prior periods Corporate LIFO expense has been reclassified from
    "Other" to combine the total impact of inventory related items.



Alcoa and subsidiaries
Calculation of Financial Measures (unaudited)
(in millions)

                                                Return on Capital,
             Return on Capital                   Excluding Growth
                 Bloomberg(1) Annualized(2)         Investments
                 ------------ -------------
Net income          $ 1,865       $ 2,704    Net income       $ 1,865

Minority                                     Minority
 interests              368           458     interests           368

Interest expense        268           273    Interest expense     268
(after tax)         -------       -------    (after tax)      -------

Numerator (sum                               Numerator (sum
 total)             $ 2,501       $ 3,435     total)          $ 2,501

                                             Russia and Bohai
                                              net loss             78

                                             Adjusted net
                                              income          $ 2,579

Average Balances                             Average
                                              Balances(1)
Short-term                                   Short-term
 borrowings         $   309       $   331     borrowings      $   309
Short-term debt          55            60    Short-term debt       55
Commercial paper      1,501         1,405    Commercial paper   1,501
Long-term debt        5,335         5,219    Long-term debt     5,335
Preferred stock          55            55    Preferred stock       55
Minority                                     Minority
 interests            1,340         1,419     interests         1,340
Common equity(3)     13,834        13,842    Common equity(3)  13,834
                    -------       -------                     -------
Denominator (sum                             Denominator (sum
 total)             $22,429       $22,331     total)          $22,429
                    -------       -------                     -------
                                             Capital projects
                                              in progress and
                                              Russia and Bohai
                                              capital base     (2,330)
                                                              -------
                                             Adjusted capital
                                              base            $20,099

                                             Return on
                                              capital,
                                              excluding growth
Return on Capital      11.2%         15.4%    investments        12.8%

Return on capital, excluding growth investments is a non-GAAP
financial measure. Management believes that this measure is meaningful
to investors because it provides greater insight with respect to the
underlying operating performance of the company's productive assets.
The company has significant growth investments underway in its
upstream and downstream businesses, as previously noted, with expected
completion dates over the next several years. As these investments
generally require a period of time before they are productive,
management believes that a return on capital measure excluding these
growth investments is more representative of current operating
performance.

(1) The Bloomberg Methodology calculates ROC based on trailing four
    quarters. Average balances are calculated as (June 2005 ending
    balance + June 2006 ending balance) divided by 2.
(2) The Annualized Methodology numerator amounts are calculated using
    the first six months of 2006 balances and multiplying by 2.
    Average balances are calculated as (June 2006 ending balance +
    December 2005 ending balance) divided by 2.
(3) Calculated as total shareholders' equity, less preferred stock.



Alcoa and subsidiaries
Calculation of Financial Measures (unaudited), continued
(in millions)


Days of Working Capital
                                        June 30   December 31  June 30
                                          2005        2005       2006

Receivables from customers, less
 allowances                              $3,195      $2,914    $3,625
Add: Inventories                          3,462       3,446     4,087
Less: Accounts payable, trade             2,339       2,659     2,822
                                         ------      ------    ------
Working Capital                          $4,318      $3,701    $4,890

Sales                                     6,693       6,666     7,959

Days of Working Capital                    58.7        51.1      55.9

Days of Working Capital = Working Capital divided by (Sales/number of
days in the quarter)