Alcoa Corporation (NYSE: AA) today reported second quarter 2022
financial results that included an 11 percent sequential increase
in revenue and strong cash flow that enabled stock buybacks and the
payment of cash dividends.
Second Quarter Highlights
- Revenue increased sequentially to $3.6 billion, primarily due
to improved shipments and higher pricing
- Net income increased sequentially to $549 million, or $2.95 per
share
- Adjusted net income of $496 million, or $2.67 per share
- Adjusted EBITDA excluding special items of $913 million
- Cash balance of $1.6 billion at quarter end
- Strong cash flows; increased capital returns with $275 million
of common stock repurchased and $19 million in cash dividends
- Improved the Company’s revolving credit facility with terms
that provide more flexibility to execute on Alcoa’s strategies
“We had a strong first half of 2022 with nearly $2 billion in
Adjusted EBITDA and cash flows that have enabled more buybacks
under our existing stock repurchase program as well as continued
quarterly dividend payments,” said Alcoa President and CEO Roy
Harvey. “We have returned more than $380 million so far this year
to our investors, and today we announced an additional $500 million
authorization for future stock repurchases.
“As we progress into the remainder of this volatile year, we
remain focused on our strategic priorities and our vision to
reinvent the aluminum industry for a sustainable future,” Harvey
said.
Financial Results
M, except per share amounts
2Q22
1Q22
2Q21
Revenue
$3,644
$3,293
$2,833
Net income attributable to Alcoa
Corporation
$549
$469
$309
Earnings per share attributable to Alcoa
Corporation
$2.95
$2.49
$1.63
Adjusted net income
$496
$577
$281
Adjusted earnings per share
$2.67
$3.06
$1.49
Adjusted EBITDA excluding special
items
$913
$1,072
$618
Second Quarter 2022 Results
- Revenue: On a sequential basis, the Company’s total
third-party revenue increased 11 percent, driven primarily by
improved shipments in Alumina and Aluminum. In Alumina, third-party
revenue increased 26 percent sequentially with the average realized
alumina price improving 18 percent to $442 per metric ton. In the
Aluminum segment, revenue increased 6 percent with higher shipments
and regional premiums. The Company’s average realized third-party
price per metric ton of aluminum was $3,864 in the second
quarter.
- Shipments: Outbound transportation logistics improved in
the second quarter with greater availability of railcars and
vessels, positively influencing Alumina and Aluminum. In Alumina,
third-party shipments increased 7 percent sequentially. In
Aluminum, shipments of commodity grade aluminum were up 9 percent
sequentially, and value add products increased 3 percent.
- Production: In the second quarter, Alumina produced 3.23
million metric tons, and Aluminum produced 499,000 metric tons,
largely consistent with the first quarter output.
- Net income attributable to Alcoa Corporation improved to
$549 million, or $2.95 per share, from the first quarter’s net
income of $469 million, or $2.49 per share. The second quarter GAAP
net income in comparison to first quarter includes several notable
items:
- Reversal of valuation allowances on Brazil value added taxes
(VAT) recorded as $83 million in restructuring and other charges
and $46 million in cost of goods sold. With the restart of the
Alumar smelter in Brazil and its first metal sales in June 2022,
the Company regained the ability to monetize state VAT credits that
were fully reserved in 2018 and will be recovered in coming years
with future domestic metal sales.
- Absence of first quarter restructuring charges of $125
million.
- Mark-to-market gains of $106 million related to energy
contracts.
- Charge of $39 million to cost of goods sold for estimates of
expected work on impoundments in Brazil.
- Higher tax and noncontrolling interest impacts on above items
of $115 million.
- Adjusted net income was $496 million, or $2.67 per
share, excluding the impact from net special items of $53 million
of income. Notable special items include restructuring and other
reversals of $75 million net, primarily related to the Brazil VAT
item discussed above, a net favorable change of $106 million in
mark-to-market energy derivative instruments, costs of $25 million
related to the restart process at the Alumar smelter in Brazil and
of modest capacity at the Portland Aluminium smelter in Australia,
and tax and noncontrolling interest impacts on above items of $98
million.
- Adjusted EBITDA excluding special items decreased 15
percent sequentially to $913 million, primarily on lower metal
prices late in the second quarter and higher costs for raw
materials, energy, and production.
- Cash: Alcoa ended the quarter with cash on hand of $1.6
billion. Cash provided from operations was $536 million. Cash used
for financing activities was $349 million, primarily related to
$275 million in share repurchases, $19 million in cash dividends on
common stock, and $46 million in net distributions to
noncontrolling interest. Cash used for investing activities was $93
million, which includes $107 million of capital expenditures and
$10 million of proceeds from the April 30, 2022 sale of Alcoa’s
entire ownership interest in the Mineração Rio do Norte (MRN)
bauxite mine.
- Working capital: The Company reported 43 days working
capital, a sequential improvement of six days. Inventory days
improved by four days with higher shipments in the second quarter.
The decrease in accounts receivable of three days reflects the
lower metal pricing late in the quarter. The accounts payable
balance increased sequentially but reduced on a days basis by one
day with higher sales in the second quarter.
Strategic actions:
- Returns to stockholders: In the first half of 2022, the
Company returned $387 million of capital to stockholders through
$37 million in cash dividends and $350 million in share
repurchases. In July 2022, the Company announced an additional $500
million share repurchase program; $150 million remained available
for share repurchases at the end of the second quarter from a prior
authorization.
- Revolving credit facility: On June 29, the Company
announced that it successfully amended and restated its revolving
credit facility (the "Facility") from $1.5 billion to $1.25 billion
and extended the maturity date from November 2023 to June 2027. The
Facility, which has not been drawn, includes terms that provide
improved flexibility to execute on Alcoa's long-term strategies.
Among other improvements, the Facility removes prior restrictions
on both share repurchases and the payment of dividends. It released
the prior collateral package, based on the Company maintaining
specific credit ratings. Reaffirming the Company's commitment to
its strategic priority to Advance Sustainably, the Facility now
includes metrics on greenhouse gas intensity in the Alumina and
Aluminum segments and the percentage of renewable energy
consumption for smelters in the Aluminum segment.
- San Ciprián alumina refinery: In July, the refinery
reduced its daily production rate to help offset some of the
financial impact from rising natural gas prices in Spain. The
refinery has experienced a significant increase in natural gas
costs, climbing from approximately $45 per ton of alumina produced
in early 2021 to more than $215 per ton in the second quarter 2022.
The refinery, which has an annual capacity of 1.5 million metric
tons per year, has reduced up to 15 percent of its capacity, moving
to average production of approximately 4,000 metric tons per
day.
- Aluminum updates: On July 1, the Company announced that
one of its three operating potlines at the Warrick smelter in
Indiana was curtailed due to operational challenges, which stem
from workforce shortages in the region. Separately, the planned
restart of the full smelting capacity at the Alumar smelter in São
Luís, Brazil is now scheduled to be complete in the first quarter
of 2023. The smelter is owned by Alcoa and South32 Limited. Alcoa
owns 268,000 metric tons of the site’s 447,000 metric tons of
capacity, and the Company announced in September 2021 that it would
restart its share of the capacity. The Company announced in June
that it has started a project to increase the Mosjoen, Norway
site’s nameplate capacity by 14,000 metric tons per year (mtpy).
The work on improved electrical infrastructure, which will boost
efficiency and output, is expected to increase the Norway site’s
capacity to 214,000 mtpy by the end of 2026. Alcoa announced in
July that its Deschambault smelter in Quebec, Canada will be adding
additional casting capability to produce standard ingots,
supplementing the site’s larger T-bar ingots. It is being developed
to support customer needs for foundry alloys, which are used in a
variety of automotive applications.
2022 Outlook
The Company expects total Aluminum segment shipments to remain
unchanged from the prior forecast, ranging between 2.5 and 2.6
million metric tons in 2022.
In Alumina, the Company has decreased its 2022 projection for
shipments to range between 13.6 and 13.8 million metric tons, a
reduction of 0.6 million metric tons from the prior forecast
primarily due to the lower shipments in the first half of 2022.
In Bauxite, the Company has decreased its 2022 projection for
annual bauxite shipments to range between 44.0 and 45.0 million dry
metric tons, a change of 2 million dry metric tons from the prior
projection due to continuing disruptions in the Atlantic bauxite
market and lower demand from refineries in the first half of
2022.
For the third quarter of 2022, Alcoa expects higher sequential
profitability in the Bauxite segment with increased shipments, as
refinery demand improves in the third quarter. In Alumina and
Aluminum, shipments are expected to increase but will not fully
offset higher costs for energy and raw materials.
The Company anticipates an approximately $20 million negative
impact to net income in the third quarter as a result of the
Warrick line curtailment. The decrease in production volume at the
San Ciprián refinery reduces the impact of the continuing rise in
natural gas prices but is not expected to improve net income
significantly on a sequential basis.
Based on current alumina and aluminum market conditions, the
Company expects third quarter tax expense to approximate $100
million to $110 million, which may vary with market conditions and
jurisdictional profitability.
Conference Call
Alcoa will hold its quarterly conference call at 5:00 p.m.
Eastern Daylight Time (EDT) on Wednesday, July 20, 2022, to present
second quarter 2022 financial results and discuss the business,
developments, and market conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EDT on July 20, 2022. Call information and related details are
available under the “Investors” section of www.alcoa.com.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite, alumina
and aluminum products with a vision to reinvent the aluminum
industry for a sustainable future. Our purpose is to turn raw
potential into real progress, underpinned by Alcoa Values that
encompass integrity, operating excellence, care for people and
courageous leadership. Since developing the process that made
aluminum an affordable and vital part of modern life, our talented
Alcoans have developed breakthrough innovations and best practices
that have led to improved safety, sustainability, efficiency, and
stronger communities wherever we operate.
Discover more by visiting www.alcoa.com. Follow us on our social
media channels: Facebook, Instagram, Twitter, YouTube and
LinkedIn.
The Company does not incorporate the information contained on,
or accessible through, such websites into this press release.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and
webcasts.
Forward-Looking Statements
This news release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “aims,” “ambition,” “anticipates,”
“believes,” “could,” “develop,” “endeavors,” “estimates,”
“expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,”
“potential,” “plans,” “projects,” “reach,” “seeks,” “sees,”
“should,” “strive,” “targets,” “will,” “working,” “would,” or other
words of similar meaning. All statements by Alcoa Corporation that
reflect expectations, assumptions or projections about the future,
other than statements of historical fact, are forward-looking
statements, including, without limitation, forecasts concerning
global demand growth for bauxite, alumina, and aluminum, and
supply/demand balances; statements, projections or forecasts of
future or targeted financial results, or operating or
sustainability performance (including our ability to execute on
strategies related to environmental, social and governance
matters); statements about strategies, outlook, and business and
financial prospects; and statements about capital allocation and
return of capital. These statements reflect beliefs and assumptions
that are based on Alcoa Corporation’s perception of historical
trends, current conditions, and expected future developments, as
well as other factors that management believes are appropriate in
the circumstances. Forward-looking statements are not guarantees of
future performance and are subject to known and unknown risks,
uncertainties, and changes in circumstances that are difficult to
predict. Although Alcoa Corporation believes that the expectations
reflected in any forward-looking statements are based on reasonable
assumptions, it can give no assurance that these expectations will
be attained and it is possible that actual results may differ
materially from those indicated by these forward-looking statements
due to a variety of risks and uncertainties. Such risks and
uncertainties include, but are not limited to: (a) current and
potential future impacts to the global economy and our industry,
business and financial condition caused by various worldwide or
macroeconomic events, such as the COVID-19 pandemic and the ongoing
conflict between Russia and Ukraine, and related regulatory
developments; (b) material adverse changes in aluminum industry
conditions, including global supply and demand conditions and
fluctuations in London Metal Exchange-based prices and premiums, as
applicable, for primary aluminum and other products, and
fluctuations in indexed-based and spot prices for alumina; (c)
changes in global economic and financial market conditions
generally, such as inflation and interest rate increases, and which
may also affect Alcoa Corporation’s ability to obtain credit or
financing upon acceptable terms or at all; (d) unfavorable changes
in the markets served by Alcoa Corporation; (e) the impact of
changes in foreign currency exchange and tax rates on costs and
results; (f) increases in energy or raw material costs, or
uncertainty of or disruption to energy or raw materials supply, and
to the supply chain including logistics; (g) the inability to
execute on strategies related to or achieve improvement in
profitability and margins, cost savings, cash generation, revenue
growth, fiscal discipline, environmental- and social-related goals
and targets (including due to delays in scientific and
technological developments), or strengthening of competitiveness
and operations anticipated from portfolio actions, operational and
productivity improvements, technology advancements, and other
initiatives; (h) the inability to realize expected benefits, in
each case as planned and by targeted completion dates, from
acquisitions, divestitures, restructuring activities, facility
closures, curtailments, restarts, expansions, or joint ventures;
(i) political, economic, trade, legal, public health and safety,
and regulatory risks in the countries in which Alcoa Corporation
operates or sells products; (j) labor disputes and/or work
stoppages and strikes; (k) the outcome of contingencies, including
legal and tax proceedings, government or regulatory investigations,
and environmental remediation; (l) the impact of cyberattacks and
potential information technology or data security breaches; (m)
risks associated with long-term debt obligations; (n) the timing
and amount of future cash dividends and share repurchases; (o)
declines in the discount rates used to measure pension and other
postretirement benefit liabilities or lower-than-expected
investment returns on pension assets, or unfavorable changes in
laws or regulations that govern pension plan funding; and, (p) the
other risk factors discussed in Part I Item 1A of Alcoa
Corporation’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2021, the Quarterly Report on Form 10-Q for the
quarter ended March 31, 2022, and other reports filed by Alcoa
Corporation with the U.S. Securities and Exchange Commission. Alcoa
Corporation disclaims any obligation to update publicly any
forward-looking statements, whether in response to new information,
future events or otherwise, except as required by applicable law.
Market projections are subject to the risks described above and
other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Quarter Ended
June 30,
2022
March 31,
2022
June 30,
2021
Sales
$
3,644
$
3,293
$
2,833
Cost of goods sold (exclusive of expenses
below)
2,767
2,181
2,156
Selling, general administrative, and other
expenses
52
44
54
Research and development expenses
7
9
6
Provision for depreciation, depletion, and
amortization
161
160
161
Restructuring and other charges, net
(75
)
125
33
Interest expense
30
25
67
Other income, net
(206
)
(14
)
(105
)
Total costs and expenses
2,736
2,530
2,372
Income before income taxes
908
763
461
Provision for income taxes
234
210
111
Net income
674
553
350
Less: Net income attributable to
noncontrolling interest
125
84
41
NET INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
549
$
469
$
309
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income
$
3.01
$
2.54
$
1.66
Average number of shares
182,499,574
184,550,123
186,705,311
Diluted:
Net income
$
2.95
$
2.49
$
1.63
Average number of shares
186,068,663
188,536,773
190,195,453
Alcoa Corporation and subsidiaries
Statement of Consolidated Operations
(unaudited)
(dollars in millions, except per-share
amounts)
Six Months Ended
June 30,
2022
June 30,
2021
Sales
$
6,937
$
5,703
Cost of goods sold (exclusive of expenses
below)
4,948
4,448
Selling, general administrative, and other
expenses
96
106
Research and development expenses
16
13
Provision for depreciation, depletion, and
amortization
321
343
Restructuring and other charges, net
50
40
Interest expense
55
109
Other income, net
(220
)
(129
)
Total costs and expenses
5,266
4,930
Income before income taxes
1,671
773
Provision for income taxes
444
204
Net income
1,227
569
Less: Net income attributable to
noncontrolling interest
209
85
NET INCOME ATTRIBUTABLE TO ALCOA
CORPORATION
$
1,018
$
484
EARNINGS PER SHARE ATTRIBUTABLE TO ALCOA
CORPORATION COMMON SHAREHOLDERS:
Basic:
Net income
$
5.55
$
2.60
Average number of shares
183,489,221
186,473,781
Diluted:
Net income
$
5.44
$
2.56
Average number of shares
187,282,228
189,497,440
Common stock outstanding at the end of the
period
179,921,896
186,855,060
Alcoa Corporation and subsidiaries
Consolidated Balance Sheet
(unaudited)
(in millions)
June 30,
2022
December 31,
2021
ASSETS
Current assets:
Cash and cash equivalents
$
1,638
$
1,814
Receivables from customers
898
757
Other receivables
124
127
Inventories
2,556
1,956
Fair value of derivative instruments
224
14
Prepaid expenses and other current
assets(1)
423
358
Total current assets
5,863
5,026
Properties, plants, and equipment
19,647
19,753
Less: accumulated depreciation, depletion,
and amortization
13,190
13,130
Properties, plants, and equipment, net
6,457
6,623
Investments
1,238
1,199
Deferred income taxes
445
506
Fair value of derivative instruments
15
7
Other noncurrent assets(2)
1,691
1,664
Total assets
$
15,709
$
15,025
LIABILITIES
Current liabilities:
Accounts payable, trade
$
1,752
$
1,674
Accrued compensation and retirement
costs
341
383
Taxes, including income taxes
343
374
Fair value of derivative instruments
232
274
Other current liabilities
567
517
Long-term debt due within one year
1
1
Total current liabilities
3,236
3,223
Long-term debt, less amount due within one
year
1,725
1,726
Accrued pension benefits
369
417
Accrued other postretirement benefits
626
650
Asset retirement obligations
634
622
Environmental remediation
254
265
Fair value of derivative instruments
867
1,048
Noncurrent income taxes
204
191
Other noncurrent liabilities and deferred
credits
502
599
Total liabilities
8,417
8,741
EQUITY
Alcoa Corporation shareholders’
equity:
Common stock
2
2
Additional capital
9,313
9,577
Retained earnings (deficit)
606
(315
)
Accumulated other comprehensive loss
(4,255
)
(4,592
)
Total Alcoa Corporation shareholders’
equity
5,666
4,672
Noncontrolling interest
1,626
1,612
Total equity
7,292
6,284
Total liabilities and equity
$
15,709
$
15,025
(1)
This line item includes $42 and $4 of
restricted cash at June 30, 2022 and December 31, 2021,
respectively.
(2)
This line item includes $68 and $106 of
noncurrent restricted cash at June 30, 2022 and December 31, 2021,
respectively.
Alcoa Corporation and subsidiaries
Statement of Consolidated Cash Flows
(unaudited)
(in millions)
Six Months Ended June
30,
2022
2021
CASH FROM OPERATIONS
Net income
$
1,227
$
569
Adjustments to reconcile net income to
cash from operations:
Depreciation, depletion, and
amortization
321
343
Deferred income taxes
93
48
Equity earnings, net of dividends
(61
)
(46
)
Restructuring and other charges, net
50
40
Net loss (gain) from investing activities
– asset sales
5
(124
)
Net periodic pension benefit cost
28
24
Stock-based compensation
20
18
Provision for bad debt expense
—
1
Premium paid on early redemption of
debt
—
25
Gain on mark-to-market derivative
financial contracts
(123
)
(5
)
Other
28
33
Changes in assets and liabilities,
excluding effects of divestitures and foreign currency translation
adjustments:
Increase in receivables
(119
)
(270
)
Increase in inventories
(657
)
(184
)
Decrease in prepaid expenses and other
current assets
15
58
Increase in accounts payable, trade
98
32
Decrease in accrued expenses
(103
)
(20
)
(Decrease) Increase in taxes, including
income taxes
(79
)
40
Pension contributions
(9
)
(570
)
Increase in noncurrent assets
(105
)
(34
)
Decrease in noncurrent liabilities
(59
)
(58
)
CASH PROVIDED FROM (USED FOR)
OPERATIONS
570
(80
)
FINANCING ACTIVITIES
Additions to debt (original maturities
greater than three months)
—
495
Payments on debt (original maturities
greater than three months)
—
(776
)
Proceeds from the exercise of employee
stock options
22
14
Repurchase of common stock
(350
)
—
Dividends paid on Alcoa common stock
(37
)
—
Payments related to tax withholding on
stock-based compensation awards
(19
)
(1
)
Financial contributions for the
divestiture of businesses
(9
)
(13
)
Contributions from noncontrolling
interest
83
—
Distributions to noncontrolling
interest
(245
)
(137
)
Other
(3
)
(3
)
CASH USED FOR FINANCING ACTIVITIES
(558
)
(421
)
INVESTING ACTIVITIES
Capital expenditures
(181
)
(154
)
Proceeds from the sale of assets
4
705
Additions to investments
(21
)
(3
)
Sale of investments
10
—
Other
2
—
CASH (USED FOR) PROVIDED FROM INVESTING
ACTIVITIES
(186
)
548
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS AND RESTRICTED CASH
(2
)
(2
)
Net change in cash and cash equivalents
and restricted cash
(176
)
45
Cash and cash equivalents and restricted
cash at beginning of year
1,924
1,610
CASH AND CASH EQUIVALENTS AND RESTRICTED
CASH AT END OF PERIOD
$
1,748
$
1,655
Alcoa Corporation and subsidiaries
Segment Information (unaudited)
(dollars in millions, except realized
prices; dry metric tons in millions (mdmt); metric tons in
thousands (kmt))
1Q21
2Q21
3Q21
4Q21
2021
1Q22
2Q22
Bauxite:
Production(1) (mdmt)
11.9
12.2
11.7
11.8
47.6
11.0
10.2
Third-party shipments (mdmt)
1.5
1.1
1.5
1.6
5.7
0.8
0.6
Intersegment shipments (mdmt)
10.5
10.8
10.5
10.6
42.4
10.1
10.0
Third-party sales
$
58
$
39
$
56
$
83
$
236
$
43
$
34
Intersegment sales
$
185
$
179
$
172
$
175
$
711
$
170
$
165
Segment Adjusted EBITDA(2)
$
59
$
41
$
23
$
49
$
172
$
38
$
5
Depreciation, depletion, and
amortization
$
57
$
32
$
30
$
34
$
153
$
35
$
35
Alumina:
Production (kmt)
3,327
3,388
3,253
3,291
13,259
3,209
3,226
Third-party shipments (kmt)
2,472
2,437
2,426
2,294
9,629
2,277
2,438
Intersegment shipments (kmt)
1,101
1,054
1,011
1,121
4,287
940
984
Average realized third-party price per
metric ton of alumina
$
308
$
282
$
312
$
407
$
326
$
375
$
442
Third-party sales
$
760
$
688
$
756
$
935
$
3,139
$
855
$
1,077
Intersegment sales
$
364
$
343
$
349
$
530
$
1,586
$
418
$
489
Segment Adjusted EBITDA(2)
$
227
$
124
$
148
$
503
$
1,002
$
262
$
343
Depreciation and amortization
$
46
$
50
$
47
$
55
$
198
$
50
$
49
Equity (loss) income
$
(5
)
$
(1
)
$
(1
)
$
11
$
4
$
1
$
(5
)
Aluminum:
Primary aluminum production (kmt)
548
546
545
554
2,193
498
499
Third-party aluminum shipments(3)
(kmt)
831
767
722
687
3,007
634
674
Average realized third-party price per
metric ton of primary aluminum
$
2,308
$
2,753
$
3,124
$
3,382
$
2,879
$
3,861
$
3,864
Third-party sales
$
2,047
$
2,102
$
2,295
$
2,322
$
8,766
$
2,388
$
2,539
Intersegment sales
$
2
$
3
$
8
$
5
$
18
$
7
$
8
Segment Adjusted EBITDA(2)
$
283
$
460
$
613
$
523
$
1,879
$
713
$
596
Depreciation and amortization
$
73
$
73
$
72
$
71
$
289
$
69
$
71
Equity income
$
13
$
28
$
38
$
37
$
116
$
39
$
40
Reconciliation of total segment
Adjusted EBITDA to consolidated net income (loss) attributable to
Alcoa Corporation:
Total Segment Adjusted EBITDA(2)
$
569
$
625
$
784
$
1,075
$
3,053
$
1,013
$
944
Unallocated amounts:
Transformation(4)
(11
)
(13
)
(10
)
(10
)
(44
)
(14
)
(11
)
Intersegment eliminations
(7
)
35
(8
)
(121
)
(101
)
102
20
Corporate expenses(5)
(26
)
(28
)
(30
)
(45
)
(129
)
(29
)
(35
)
Provision for depreciation, depletion, and
amortization
(182
)
(161
)
(156
)
(165
)
(664
)
(160
)
(161
)
Restructuring and other charges, net
(7
)
(33
)
(33
)
(1,055
)
(1,128
)
(125
)
75
Interest expense
(42
)
(67
)
(58
)
(28
)
(195
)
(25
)
(30
)
Other income, net
24
105
18
298
445
14
206
Other(6)
(6
)
(2
)
(10
)
(20
)
(38
)
(13
)
(100
)
Consolidated income (loss) before income
taxes
312
461
497
(71
)
1,199
763
908
Provision for income taxes
(93
)
(111
)
(127
)
(298
)
(629
)
(210
)
(234
)
Net income attributable to noncontrolling
interest
(44
)
(41
)
(33
)
(23
)
(141
)
(84
)
(125
)
Consolidated net income (loss)
attributable to Alcoa Corporation
$
175
$
309
$
337
$
(392
)
$
429
$
469
$
549
The difference between segment totals and consolidated amounts is
in Corporate.
(1)
The production amounts can vary from total
shipments due primarily to differences between the equity
allocation of production and off-take agreements with the
respective equity investment.
(2)
Alcoa Corporation’s definition of Adjusted
EBITDA (Earnings before interest, taxes, depreciation, and
amortization) is net margin plus an add-back for depreciation,
depletion, and amortization. Net margin is equivalent to Sales
minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development
expenses; and Provision for depreciation, depletion, and
amortization. The Adjusted EBITDA presented may not be comparable
to similarly titled measures of other companies.
(3)
Until the sale of the Warrick Rolling Mill
on March 31, 2021, the Aluminum segment’s third-party aluminum
shipments were composed of both primary aluminum and flat-rolled
aluminum. Beginning April 1, 2021, the segment’s third-party
aluminum shipments include only primary aluminum.
(4)
Transformation includes, among other
items, the Adjusted EBITDA of previously closed operations.
(5)
Corporate expenses are composed of general
administrative and other expenses of operating the corporate
headquarters and other global administrative facilities, as well as
research and development expenses of the corporate technical
center.
(6)
Other includes certain items that impact
Alcoa Corporation’s Statement of Consolidated Operations that are
not included in the Adjusted EBITDA of the reportable segments.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited)
(in millions, except per-share
amounts)
Adjusted Income
Income
Diluted EPS
Quarter ended
Quarter ended
June 30,
2022
March 31,
2022
June 30,
2021
June 30,
2022
March 31,
2022
June 30,
2021
Net income attributable to Alcoa
Corporation
$
549
$
469
$
309
$
2.95
$
2.49
$
1.63
Special items:
Restructuring and other charges, net
(75
)
125
33
Other special items(1)
(76
)
(2
)
(65
)
Discrete tax items (2)
—
2
—
Tax impact on special items(3)
52
(8
)
3
Noncontrolling interest impact(3)
46
(9
)
1
Subtotal
(53
)
108
(28
)
Net income attributable to Alcoa
Corporation – as adjusted
$
496
$
577
$
281
$
2.67
$
3.06
$
1.49
Net income attributable to Alcoa Corporation – as adjusted is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because management reviews the operating
results of Alcoa Corporation excluding the impacts of restructuring
and other charges, various tax items, and other special items
(collectively, “special items”). There can be no assurances that
additional special items will not occur in future periods. To
compensate for this limitation, management believes it is
appropriate to consider both Net income attributable to Alcoa
Corporation determined under GAAP as well as Net income
attributable to Alcoa Corporation – as adjusted.
(1)
Other special items include the
following:
- for the quarter ended June 30, 2022, a net favorable change in
mark-to-market energy derivative instruments ($106), costs related
to the restart process at the Alumar, Brazil smelter ($22), an
adjustment to the gain on sale of the Warrick Rolling Mill in
Evansville, Indiana for additional site separation costs ($5), and
costs related to the restart process of the Portland, Australia
smelter ($3);
- for the quarter ended March 31, 2022, a net favorable change in
mark-to-market energy derivative instruments ($15), costs related
to the restart process at the Alumar, Brazil smelter ($12), and
charges for other special items ($1); and,
- for the quarter ended June 30, 2021, gains on asset sales
($96), primarily related to the former Eastalco site sale, a charge
for debt redemption expenses ($32), and a net benefit from other
special items ($1).
(2)
Discrete tax items are generally unusual
or infrequently occurring items, changes in law, items associated
with uncertain tax positions, or the effect of measurement-period
adjustments and include the following:
- for the quarter ended March 31, 2022, net charge for discrete
tax items ($2).
(3)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa’s partner’s share of certain special
items.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Adjusted EBITDA
Quarter ended
June 30,
2022
March 31,
2022
June 30,
2021
Net income attributable to Alcoa
Corporation
$
549
$
469
$
309
Add:
Net income attributable to noncontrolling
interest
125
84
41
Provision for income taxes
234
210
111
Other income, net
(206
)
(14
)
(105
)
Interest expense
30
25
67
Restructuring and other charges, net
(75
)
125
33
Provision for depreciation, depletion, and
amortization
161
160
161
Adjusted EBITDA
818
1,059
617
Special items(1)
95
13
1
Adjusted EBITDA, excluding special
items
$
913
$
1,072
$
618
Alcoa’s Corporation’s definition of Adjusted EBITDA (Earnings
before interest, taxes, depreciation, and amortization) is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because Adjusted EBITDA provides additional
information with respect to Alcoa Corporation’s operating
performance and the Company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies.
(1)
Special items include the following (see
reconciliation of Adjusted Income above for additional
information):
- for the quarter ended June 30, 2022, costs related to the
restart process at the Alumar, Brazil smelter ($22) and costs
related to the restart process of the Portland, Australia smelter
($3). Additionally, due to unprecedented price increases in the
Australian power market, the mark-to-market contracts associated
with the Portland smelter have generated gains ($70) in Other
income, net which economically offset a portion of the cost of
power recorded in Cost of goods sold. This non-GAAP reclass
presents the net cost of power within Cost of goods sold;
- for the quarter ended March 31, 2022, costs related to the
restart process at the Alumar, Brazil smelter ($12), and charges
for other special items ($1); and,
- for the quarter ended June 30, 2021, external costs related to
portfolio actions ($1).
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions)
Free Cash Flow
Quarter ended
June 30,
2022
March 31,
2022
June 30,
2021
Cash provided from (used for)
operations(1)
$
536
$
34
$
(86
)
Capital expenditures
(107
)
(74
)
(79
)
Free cash flow
$
429
$
(40
)
$
(165
)
Free Cash Flow is a non-GAAP financial measure. Management believes
this measure is meaningful to investors because management reviews
cash flows generated from operations after taking into
consideration capital expenditures, which are both necessary to
maintain and expand Alcoa Corporation’s asset base and expected to
generate future cash flows from operations. It is important to note
that Free Cash Flow does not represent the residual cash flow
available for discretionary expenditures since other
non-discretionary expenditures, such as mandatory debt service
requirements, are not deducted from the measure.
(1)
Cash provided from (used for) operations
for the quarter ended June 30, 2021 includes a $500 cash outflow
for unscheduled contributions to certain U.S. defined benefit
pension plans. The $500 was funded with the net proceeds of 4.125%
senior notes due 2029, together with cash on hand.
Net Debt
June 30,
2022
December 31,
2021
Short-term borrowings
$
75
$
75
Long-term debt due within one year
1
1
Long-term debt, less amount due within one
year
1,725
1,726
Total debt
1,801
1,802
Less: Cash and cash equivalents
1,638
1,814
Net debt (cash)
$
163
$
(12
)
Net debt is a non-GAAP financial measure.
Management believes this measure is meaningful to investors because
management assesses Alcoa Corporation’s leverage position after
considering available cash that could be used to repay outstanding
debt. When cash exceeds total debt, the measure is expressed as net
cash.
Alcoa Corporation and subsidiaries
Calculation of Financial Measures
(unaudited), continued
(in millions) Adjusted Net Debt
and Proportional Adjusted Net Debt
June 30,
2022
December 31,
2021
Consolidated
NCI
Alcoa Proportional
Consolidated
NCI
Alcoa Proportional
Short-term borrowings
$
75
$
30
$
45
$
75
$
30
$
45
Long-term debt due within one year
1
—
1
1
—
1
Long-term debt, less amount due within one
year
1,725
—
1,725
1,726
—
1,726
Total debt
1,801
30
1,771
1,802
30
1,772
Less: Cash and cash equivalents
1,638
166
1,472
1,814
177
1,637
Net debt (net cash)
163
(136
)
299
(12
)
(147
)
135
Plus: Net pension / OPEB liability
893
16
877
973
15
958
Adjusted net debt (net cash)
$
1,056
$
(120
)
$
1,176
$
961
$
(132
)
$
1,093
Net debt is a non-GAAP financial measure. Management believes that
this measure is meaningful to investors because management assesses
Alcoa Corporation’s leverage position after considering available
cash that could be used to repay outstanding debt. When cash
exceeds total debt, the measure is expressed as net cash.
Adjusted net debt and
proportional adjusted net debt are also non-GAAP financial
measures. Management believes that these additional measures are
meaningful to investors because management also assesses Alcoa
Corporation’s leverage position after considering available cash
that could be used to repay outstanding debt and net pension/OPEB
liability, net of the portion of those items attributable to
noncontrolling interest (NCI).
Days Working Capital
Quarter ended
June 30,
2022
March 31,
2022
June 30,
2021
Receivables from customers
$
898
$
952
$
644
Add: Inventories
2,556
2,495
1,547
Less: Accounts payable, trade
(1,752
)
(1,645
)
(1,392
)
DWC working capital
$
1,702
$
1,802
$
799
Sales
$
3,644
$
3,293
$
2,833
Number of days in the quarter
91
90
91
Days working capital(1)
43
49
26
Days working capital is a
non-GAAP financial measure. Management believes that this measure
is meaningful to investors because management uses its working
capital position to assess Alcoa Corporation’s efficiency in
liquidity management.
(1)
Days working capital is calculated as DWC
working capital divided by the quotient of Sales and number of days
in the quarter.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220715005300/en/
Investor Contact: James Dwyer +1 412 992 5450
James.Dwyer@alcoa.com Media Contact: Jim Beck +1 412 315
2909 Jim.Beck@alcoa.com
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