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October 7, 2003

Alcoa's Income From Continuing Operations Rises 40 Percent Over Previous Year's Result

NEW YORK--(BUSINESS WIRE)--Oct. 7, 2003--Alcoa (NYSE:AA)

Highlights of the quarter:

  • Income from continuing operations at $283 million, or $0.33 per diluted share, is up 24 percent from the $229 million, or $0.27 per share, in the previous quarter and up 40 percent from the $202 million, or $0.24 per share, in the year-ago quarter
  • Gross margin improves to 20.8 percent, strongest in two years; administrative and sales expense down 12 percent from the previous quarter to 5.7 percent of sales
  • Cost savings at $23 million in the quarter, bringing the company within $9 million in quarterly cost savings toward its $1 billion goal
  • Significant progress on debt reduction with the company's total debt-to-capitalization ratio falling 160 basis points from the previous quarter to 38.8 percent


Alcoa today reported third quarter income from continuing operations of $283 million, or $0.33 per diluted share, compared to $229 million, or $0.27 per share, in the second quarter. This quarter's results were a 40 percent improvement over income from continuing operations of $202 million or $0.24 per share in the third quarter last year.

Net income in the third quarter was $280 million, or $0.33 per share, up 30 percent from the $216 million, or $0.26 per share, in the second quarter, and up from $193 million, or $0.23 per share, in the third quarter of 2002. Both income from continuing operations and net income are measures recognized by Generally Accepted Accounting Principles.

"We achieved a double-digit increase in profitability despite traditional seasonal weakness in the automotive and European markets," said Alain Belda, Chairman and CEO of Alcoa. "Strength in the alumina market and continued focus on productivity and cost control helped deliver the most profitable quarter in two years. As business conditions improve, we are well positioned to drive greater profitability."

Market Overview

Sales were $5.3 billion, up 3 percent over the third quarter of 2002 and down 3 percent on a sequential basis. A robust alumina market helped the company reach its highest level of third party alumina shipments since the first quarter of 2001. Stronger aluminum prices overcame weaker metal shipments, due in part to the disruption at the Alumar smelter in Sao Luis, Brazil. The building and construction and commercial transportation sectors both showed improvement, while European industrial and North American automotive markets demonstrated typical seasonal weakness.

Driving Cost Savings

The company's margins improved from the previous quarter to 20.8 percent, their strongest level in two years. Sales and administrative expense fell 12 percent in the quarter with lower spending across the board.

The company achieved $23 million in cost savings in the quarter and has now achieved $964 million toward its $1 billion cost savings goal set for the end of 2003. The company remains on track to meet that challenge.

The third quarter tax rate of 22 percent includes tax benefits associated with the expiration of a prior international audit period. The tax rate for the fourth quarter is expected to be 30.5 percent.

Strengthening the Balance Sheet

The company has reduced its debt by nearly $1 billion in the past 6 months, cutting its debt-to-capital ratio by 460 basis points. The debt-to-capital ratio now stands at 38.8 percent, 160 basis points lower than the close of the second quarter.

The substantial improvement in the balance sheet was driven by improved profitability, lower working capital, tight control on capital expenditures, and the closing of a previously announced acquisition in South American operations, primarily the facilities of Alcoa Aluminio S.A. in Brazil. Capital expenditures were below last year's level by approximately 33 percent and ran at 70 percent of depreciation.

The fourth quarter will show additional improvement as asset sales are completed. The recently completed sale of the company's Latin American PET packaging business will be reflected in the fourth quarter, and the company continues to pursue its previously announced divestiture of non-core businesses. Proceeds from those sales will be used primarily to pay down debt.

Expanding Low-Cost Facilities

In the quarter, Alcoa continued to seize opportunities to improve its low cost position as a supplier of primary metals and alumina. The company took steps forward on two low-cost greenfield smelter projects, signing memoranda of understanding in both Bahrain and Brunei. It is moving ahead with brownfield alumina expansions at its facilities in Pinjarra, Australia and Suriname.

In addition, the company continued to drive costs down at its U.S. smelters and approved the expansion of a mine operation at Rockdale, Texas that will be a source of low-cost power for its smelter there.

Providing Solutions to Customers

Alcoa continued to strengthen its performance this quarter by developing solutions that add value for its customers. During the quarter, Alcoa's AFL Automotive business was named by Volkswagen of Mexico as the design and development supplier for electrical distribution systems on the 2005 model year Jetta/Bora programs. This follows on the heels of Alcoa being awarded the contract to supply aluminum for the hoods of Ford Motor Company's recently re-designed F-150 pick-up truck. The 2004 F-150 is an all-new version of the country's best-selling truck for the past 25 years and the best-selling vehicle of any type for the past 20 years.

In the Commercial Transportation market, Alcoa's Dura-Bright(R) Wheel Finish received RoadStar magazine's Most Valuable Product Award and the Alcoa Wheels and Forged Products business expanded the availability of Dura-Bright wheels into the wide base line and they are now included in several truck and trailer data books.

And in its consumer products businesses Alcoa's Reynolds(R) consumer products and Presto(R) products were named best in class by retailers throughout North America and by readers of PLBuyer magazine.

Quarterly Analyst Workshop

Alcoa's quarterly analyst workshop will be at 4:00 p.m. EDT on Thursday, October 23, 2003. 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 127,000 employees in 40 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
                         September 30     September 30       June 30
                             2003            2002 (a)         2003 (a)
                          --------------------------------------------
Sales                    $      5,322     $      5,160   $      5,485

Cost of goods sold              4,213            4,095          4,368
Selling, general
 administrative and
 other
  expenses                        303              265            345
Research and
 development
 expenses                          47               53             50
Provision for
 depreciation,
 depletion and
  amortization                    295              287            303
Special items                       1               39            (15)
Interest expense                   74               95             81
Other income, net                 (41)             (23)           (57)
                          ------------     ------------   ------------
                                4,892            4,811          5,075

Income from
 continuing
 operations before
  taxes on income                 430              349            410
Provision for taxes
 on income                         93               98            106
                          ------------     ------------   ------------
Income from
 continuing
 operations before
  minority
   interests' share               337              251            304
Less:  Minority
 interests' share                  54               49             75
                          ------------     ------------   ------------

Income from
 continuing
 operations                       283              202            229

Loss from
 discontinued
 operations                        (3)              (9)           (13)

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

NET INCOME               $        280     $        193   $        216
                          ============     ============   ============

Earnings (loss) per
 common share:
   Basic:
     Income from
      continuing
      operations         $        .33     $        .24   $        .27
     Loss from
      discontinued
      operations                    -             (.01)          (.01)
     Cumulative
      effect of
      accounting
      change                        -                -              -
                          ------------     ------------   ------------
        Net income       $        .33     $        .23   $        .26
                          ============     ============   ============

   Diluted:
     Income from
      continuing
      operations         $        .33     $        .24   $        .27
     Loss from
      discontinued
      operations                    -             (.01)          (.01)
     Cumulative
      effect of
      accounting
      change                        -                -              -
                          ------------     ------------   ------------
        Net income       $        .33     $        .23   $        .26
                          ============     ============   ============

Average number of
 shares used to
 compute:
   Basic earnings
    per common share      855,477,116      844,272,163    845,601,440
   Diluted earnings
    per common share      859,375,461      847,289,635    847,468,083

Shipments of
 aluminum products
 (metric tons)              1,255,000        1,312,000      1,260,000

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

                                               Nine months ended
                                         September 30     September 30
                                              2003           2002 (a)
                                         -----------------------------
Sales                                   $     15,941     $     15,218

Cost of goods sold                            12,672           12,171
Selling, general administrative and
 other expenses                                  944              810
Research and development expenses                147              156
Provision for depreciation,
 depletion and amortization                      883              813
Special items                                    (18)              39
Interest expense                                 243              253
Other income, net                               (135)            (112)
                                         ------------     ------------
                                              14,736           14,130

Income from continuing operations
 before taxes on income                        1,205            1,088
Provision for taxes on income                    308              328
                                         ------------     ------------
Income from continuing operations
 before
  minority interests' share                      897              760
Less:  Minority interests' share                 188              137
                                         ------------     ------------

Income from continuing operations                709              623

Loss from discontinued operations                (15)             (14)

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

NET INCOME                              $        647     $        643
                                         ============     ============

Earnings (loss) per common share:
   Basic:
     Income from continuing
      operations                        $        .83     $        .74
     Loss from discontinued
      operations                                (.01)            (.02)
     Cumulative effect of accounting
      change                                    (.06)             .04
                                         ------------     ------------
        Net income                      $        .76     $        .76
                                         ============     ============

   Diluted:
     Income from continuing
      operations                        $        .83     $        .73
     Loss from discontinued
      operations                                (.01)            (.02)
     Cumulative effect of accounting
      change                                    (.06)             .04
                                         ------------     ------------
        Net income                      $        .76     $        .75
                                         ============     ============

Average number of shares used to
 compute:
   Basic earnings per common share       849,336,567      845,712,344
   Diluted earnings per common share     851,679,620      850,999,801

Common stock outstanding at the end
 of the period                           864,759,968      844,244,257

Shipments of aluminum products
 (metric tons)                             3,707,000        3,888,000

(a) Prior periods have been adjusted to reflect the reclassification
of the protective packaging business (acquired in the Ivex Packaging
Corporation acquisition in 2002) from discontinued operations to
continuing operations in the third quarter of 2003.

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

                                             September 30  December 31
                                                2003         2002 (b)
                                             ------------ ------------
ASSETS
Current assets:
  Cash and cash equivalents                      $   393      $   344
  Receivables from customers, less
   allowances:
   $104 in 2003 and $120 in 2002                   2,563        2,389
  Other receivables                                  261          174
  Inventories                                      2,534        2,450
  Deferred income taxes                              484          468
  Prepaid expenses and other current assets          571          509
                                                  -------      -------
     Total current assets                          6,806        6,334
                                                  -------      -------

Properties, plants and equipment, at cost         24,490       23,167
Less: accumulated depreciation, depletion and
  amortization                                     12,096      11,010
                                                  -------      -------
Net properties, plants and equipment              12,394       12,157
                                                  -------      -------

Goodwill                                           6,397        6,365
Other assets                                       4,819        4,450
Assets held for sale                                 573          504
                                                  -------      -------
     Total assets                                $30,989      $29,810
                                                  =======      =======

LIABILITIES
Current liabilities:
  Short-term borrowings                          $    34      $    37
  Accounts payable, trade                          1,807        1,624
  Accrued compensation and retirement costs          908          934
  Taxes, including taxes on income                   754          821
  Other current liabilities                          964          972
  Long-term debt due within one year                 164           85
                                                  -------      -------
     Total current liabilities                     4,631        4,473
                                                  -------      -------
Long-term debt, less amount due within one
 year                                              7,657        8,365
Accrued postretirement benefits                    2,256        2,320
Other noncurrent liabilities and deferred
 credits                                           3,373        2,878
Deferred income taxes                                567          502
Liabilities of operations held for sale              108           52
                                                  -------      -------
     Total liabilities                            18,592       18,590
                                                  -------      -------

MINORITY INTERESTS                                 1,280        1,293
                                                  -------      -------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY
Preferred stock                                       55           55
Common stock                                         925          925
Additional capital                                 5,879        6,101
Retained earnings                                  7,560        7,428
Treasury stock, at cost                           (2,156)      (2,828)
Accumulated other comprehensive loss              (1,146)      (1,754)
                                                  -------      -------
     Total shareholders' equity                   11,117        9,927
                                                  -------      -------
     Total liabilities and equity                $30,989      $29,810
                                                  =======      =======

(b) The prior period has been adjusted to reflect the reclassification
of the protective packaging business (acquired in the Ivex Packaging
Corporation acquisition in 2002) from discontinued operations to
continuing operations in the third quarter of 2003.

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

Consolidated
 Third-Party
 Revenues:        1Q02   2Q02   3Q02   4Q02    2002  1Q03   2Q03  3Q03
                ------------------------------------------------------
 Alumina and
  Chemicals         425    419    469    430  1,743    449   491   526
 Primary Metals     764    788    792    830  3,174    732   805   816
 Flat-Rolled
  Products        1,156  1,192  1,162  1,130  4,640  1,152 1,200 1,176
 Engineered
  Products        1,319  1,330  1,238  1,131  5,018  1,361 1,420 1,333
 Packaging and
  Consumer (c)      618    672    768    870  2,928    772   859   835
 Other              618    757    731    700  2,806    668   710   636
----------------------------------------------------------------------
    Total         4,900  5,158  5,160  5,091 20,309  5,134 5,485 5,322
======================================================================

Consolidated
 Intersegment
 Revenues:        1Q02   2Q02   3Q02   4Q02    2002  1Q03   2Q03  3Q03
                ------------------------------------------------------
 Alumina and
  Chemicals         229    233    235    258    955    240   248   258
 Primary Metals     629    770    637    619  2,655    840   690   740
 Flat-Rolled
  Products           15     18     21     14     68     20    15    17
 Engineered
  Products            8     10      8      8     34      9     5     5
 Packaging and
  Consumer            -      -      -      -      -      -     -     -
 Other                -      -      -      -      -      -     -     -
----------------------------------------------------------------------
    Total           881  1,031    901    899  3,712  1,109   958 1,020
======================================================================

Consolidated
 Third-Party
 Shipments
 (KMT's):         1Q02   2Q02   3Q02   4Q02    2002  1Q03   2Q03  3Q03
                ------------------------------------------------------
  Alumina and
   Chemicals      1,825  1,796  1,939  1,926  7,486  1,794 1,939 1,982

  Primary Metals    503    507    517    546  2,073    453   495   488
  Flat-Rolled
   Products         439    456    446    433  1,774    434   453   450
  Engineered
   Products         221    244    223    203    891    217   214   215
  Packaging and
   Consumer          30     31     46     55    162     36    42    40
  Other              58     87     80     83    308     52    56    62
----------------------------------------------------------------------
    Total
     Aluminum     1,251  1,325  1,312  1,320  5,208  1,192 1,260 1,255
======================================================================

Average realized
 price
-Primary           0.66   0.67   0.66   0.66   0.66   0.69  0.68  0.71
======================================================================

After-Tax
 Operating
 Income (ATOI):   1Q02   2Q02   3Q02   4Q02    2002  1Q03   2Q03  3Q03
                ------------------------------------------------------
 Alumina and
  Chemicals          65     73     93     84    315     91    89   113
 Primary Metals     143    175    175    157    650    166   162   163
 Flat-Rolled
  Products           61     66     46     47    220     53    56    59
 Engineered
  Products           58     44     33    (28)   107     29    44    46
 Packaging and
  Consumer (c)       28     55     51     66    200     55    59    54
 Other                7     19      8    (43)    (9)     9    17     8
----------------------------------------------------------------------
    Total           362    432    406    283  1,483    403   427   443
======================================================================

Reconciliation
 of ATOI to
  consolidated
  net income: (c) 1Q02   2Q02   3Q02   4Q02    2002  1Q03   2Q03  3Q03
                ------------------------------------------------------
  Total ATOI        362    432    406    283  1,483    403   427   443
  Impact of
   intersegment
   profit
   eliminations      (3)    (1)    (5)     3     (6)     7    (4)    2
  Unallocated
   amounts
   (net of tax):
   Interest
    income           10      9      7      5     31      5     6     7
   Interest
    expense         (49)   (54)   (62)   (62)  (227)   (57)  (52) (49)
   Minority
    interests       (41)   (47)   (49)     2   (135)   (59)  (75) (54)
   Corporate
    expense         (58)   (53)   (40)   (83)  (234)   (57)  (81) (65)
   Special items      -      -    (25)  (261)  (286)     4    10   (1)
   Discontinued
    operations        -     (5)    (9)  (100)  (114)     1   (13)  (3)
   Accounting
    change           34      -      -      -     34    (47)    -     -
   Other            (37)   (49)   (30)   (10)  (126)   (49)   (2)    -
----------------------------------------------------------------------
  Consolidated
   net income       218    232    193   (223)   420    151   216   280
======================================================================

(c) Prior periods have been adjusted to reflect the reclassification
of the protective packaging business (acquired in the Ivex Packaging
Corporation acquisition in 2002) from discontinued operations to
continuing operations in the third quarter of 2003.

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

                              Net Income            Diluted EPS
                         --------------------- -----------------------
                           3Q03   2Q03  3Q02    3Q03    2Q03    3Q02
---------------------------------------------- -----------------------
GAAP Net income           $ 280  $ 216  $ 193   $0.33   $0.26   $0.23
  Cumulative effect of
   accounting change          -      -     -       -       -       -
  Discontinued operations
   - operating (income)
   loss                       3      -     9       -       -     .01
  Discontinued operations
   - loss on divestitures     -     13     -       -     .01       -
----------------------------------------------------------------------
GAAP Income from
 continuing operations    $ 283  $ 229  $ 202   $0.33   $0.27   $0.24
----------------------------------------------------------------------
Special items (2):
  Restructurings              1     12     23       -     .01     .03
 (Gain)loss on
    divestitures              -    (10)     -       -    (.01)      -
----------------------------------------------------------------------
Income from continuing
  operations excluding
  charges for
  restructurings
  and divestitures (1)    $ 284  $ 231  $ 225   $0.33   $0.27   $0.27
======================================================================

Average diluted shares
 outstanding                                      859     847     847

(1) Alcoa believes that income from continuing operations
excluding charges for restructurings and divestitures 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.
        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 current 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 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.

(2) Special items totaled $15 of income for the second quarter
before taxes and minority interests. The amount is comprised of
adjustments to the estimated proceeds on several businesses to be
divested that resulted in net gains, and was offset by additional
layoff charges primarily for businesses serving the aerospace and
primary metals markets. After tax and minority interests, special
items amounted to a loss of $2 in the quarter.