Making an Economic Impact

 

We understand the importance of the economic value we create for our shareholders, customers, employees, and the communities in which we operate.

 

Disciplined financial management is essential to ensure long-term success for Alcoa and our stakeholders. We maintain robust financial controls, a strong dedication to financial returns, and an intense focus on creating value through top-line growth, strategic capital spending, and cost-reduction activities.

 

2013 Financial Performance
Objective
Key 2013 Results/Actions
Reposition the Portfolio Our Global Rolled Products (GRP) and Engineered Products and Solutions (EPS) business groups, which are our value-add businesses, generated 57% of our revenues and 80% of segment profits. This is a profit increase of 10 percentage points over 2012.

We closed or curtailed 321,000 metric tons, or 8%, of our global smelting capacity to lower our position on the global aluminum cost curve and improve our competitiveness.
Profitable Growth Our Global Primary Products business group improved its position on the alumina cost curve to the 27th percentile and the aluminum cost curve to the 43rd percentile from 30th and 47th, respectively, in 2012. The group also generated US$481 million in productivity gains.

GRP experienced a decline in revenue of US$272 million, but generated US$268 million in productivity gains. Compared to 2010, GRP achieved US$829 million in revenue growth, including approximately US$740 million from value-add innovation, while exceeding its average historical high for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) per metric ton.

EPS realized an increase in revenue of US$208 million and generated US$356 million in productivity gains. Compared to 2010, EPS delivered US$1.1 billion in revenue growth, including approximately US$970 million from share gains though innovation, while growing its adjusted EBITDA margin.

The Ma’aden-Alcoa joint venture produced 190,000 metric tons from the aluminum smelter and the first hot coil in the rolling mill. The venture will achieve full integration of the bauxite mine, alumina refinery, aluminum smelter, and rolling mill in 2014.
Disciplined Execution We achieved the following:
  • Productivity gains of US$1.12 billion;
  • A four-day reduction in days working capital equivalent to approximately US$240 million in cash;
  • Debt-to-capital ratio of 38.1%, which includes a negative impact of 3.3 percentage points due to an impairment of goodwill and valuation allowances on certain deferred tax assets; and
  • Positive free cash flow.

All productivity figures represent gross productivity and are presented pre-tax and pre-minority interest.


Complete details on our 2013 financial performance can be found in the Alcoa Annual Report.

 

Contributions to Communities

We operate in many communities throughout the world. Our contributions to those communities, and to society at large, are significant and bring social and economic benefit to regions wherever we operate.

 

The contributions we make annually include:

  • Wages that we pay to 60,000 employees;
  • Payments for services and supplies to thousands of contractors and suppliers that support our local operations;
  • Dividends to our shareholders;
  • Payments for income taxes to national, state, and local governments; and
  • Significant charitable contributions we make both financially through our business operations and Alcoa Foundation and in-kind from employee volunteers.

 

We consider it an honor and a privilege to be able to operate in the various local communities where we exist around the world. As a neighbor, we have an obligation to contribute positively to those communities each and every day. That accountability is what earns us the privilege to continue to operate there.

 

2013 Value Added by Region
U.S. dollars
  Asia Australia Europe North
America
South
America
Total
Sales 0.6 billion 3.2 billion 6.0 billion 11.9 billion 1.3 billion 23.0 billion
Wages & Benefits 0.1 billion 0.8 billion 1.0 billion 3.5 billion 0.3 billion 5.7 billion
Procurement Spend 0.3 billion 2.7 billion 4.2 billion 8.6 billion 2.2 billion 18.0 billion
Income Taxes 17.7 million 71.7 million 62.3 million 37.9 million 10.0 million 199.6 million
Alcoa/Alcoa Foundation Community Investments 0.7 million 4.0 million 5.4 million 26.6 million 4.2 million 40.9 million

 

In addition to the contributions above, we paid US$132 million combined in dividends to our common and preferred shareholders and US$433 million in interest (net of interest capitalized) under our financing arrangements in 2013.

 

We understand that business decisions we make have an impact in the communities where we operate, including when we curtail or close operations. In 2013, we curtailed or closed 321,000 metric tons, or 8%, of our global smelting capacity to lower our position on the global aluminum cost curve and improve our competitiveness. The affected communities were in Baie-Comeau, Québec, Canada; São Luís and Poços de Caldas, Brazil; Massena, New York, USA; and Fusina, Italy (idle since 2010). We reached out to each location’s major stakeholders, provided information to affected employees, and opened up the relevant information and consultation processes with unions, government agencies, and more. For the Fusina Smelter, we ensured open and broad dialogue to determine the most appropriate future use for this closed location.

 

In the first quarter of 2014, we permanently closed the remaining two potlines (84,000 metric tons) at our Massena East Smelter. In February 2014, we announced the closure of our Point Henry Smelter (190,000 metric tons) and two rolling mills in Australia. Approximately 500 employees work at the smelter, which will close in August 2014, and 480 people are employed at the two rolling mills, which will close by the end of 2014. In March 2014, we announced the temporary curtailment of 147,000 metric tons of smelting capacity at our São Luís (Alumar) and Poços de Caldas smelters in Brazil. The curtailments are expected to be complete by the end of May 2014. We continue to conduct extensive stakeholder engagement surrounding these closures and curtailments.