Alcoa Reports Fourth Quarter Income From Continuing Operations of $0.21 Per Share; Income of $0.06 Per Share Excluding Special Items

Company Ends 2012 in Strong Liquidity Position; Record Results in Mid and Downstream

Forecasting 7 Percent Growth in Global Aluminum Demand in 2013

4Q 2012 Highlights
Income from continuing operations of $242 million, or $0.21 per share; excluding special items, income from continuing operations of $64 million, or $0.06 per share
Revenue of $5.9 billion, up 1 percent sequentially, down 2 percent from 4Q 2011
Cash from operations of $933 million, up $670 million from 3Q 2012
Free cash flow of $535 million
Strong liquidity with cash on hand of $1.9 billion
Record low 24 days working capital
Record results in Global Rolled Products, Engineered Products & Solutions
Forecasting 7 percent growth in global aluminum demand in 2013


Full-Year 2012 Highlights
Income from continuing operations of $191 million, or $0.18 per share; excluding special items, income from continuing operations of $262 million, or $0.24 per share
Revenue of $23.7 billion, down 5 percent from 2011, on lower LME pricing
Cash from operations of $1.5 billion
Free cash flow of $236 million
Debt-to-capital ratio 35 percent; Net debt-to-capital ratio 30 percent
Debt of $8.8 billion; Net debt of $7 billion, lowest level since 2006
Record results in Global Rolled Products, Engineered Products & Solutions
531,000 metric tons of smelting capacity taken offline to improve competitive position


NEW YORK--(BUSINESS WIRE)--Alcoa (NYSE:AA) today reported income from continuing operations of $242 million, or $0.21 per share, in fourth quarter 2012. Excluding the net positive impact of special items, income from continuing operations was $64 million, or $0.06 per share.

Fourth quarter 2012 income compares to a loss from continuing operations of $143 million in third quarter 2012, and a loss of $193 million in fourth quarter 2011.

For the full-year 2012, Alcoa reported income from continuing operations of $191 million, or $0.18 per share, compared with $614 million, or $0.55 per share, in 2011. Year-on-year the realized aluminum price fell 12 percent, equating to roughly $1 billion in market impact.

Despite low aluminum prices, Alcoa generated full-year income and met all of its cash sustainability targets for the fourth consecutive year, ending 2012 in a strong cash position. The Company delivered $1.3 billion in productivity and overhead improvements, reduced days working capital by three days, and ended the year in a strong liquidity position with net debt at its lowest level since 2006 and $1.9 billion cash on hand.

“Alcoa hit record profitability in our mid and downstream businesses, and continued to drive efficiency in our upstream businesses in the fourth quarter, all while cutting debt and maintaining our cash position,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer.

“We overcame volatile metal prices and global economic instability to deliver on our targets for the fourth year in a row. We enter 2013 in a strong position to maximize profitable growth.”

In 2013, Alcoa sees global aluminum demand growth of 7 percent, up from 6 percent in 2012 and ahead of the 6.5 percent rate required to meet the Company’s forecast of a doubling in global aluminum demand between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of 13 percent growth in 2010.

In 2013, Alcoa projects global growth in the aerospace (9-10 percent), automotive (1-4 percent), commercial transportation (2-7 percent), packaging (2-3 percent), building and construction (4-5 percent), and industrial gas turbine (3-5 percent) markets.

Fourth Quarter 2012

Alcoa reported fourth quarter 2012 net income of $242 million, or $0.21 per share, compared to a net loss of $143 million, or $0.13 per share, in third quarter 2012 and $191 million, or $0.18 per share, in fourth quarter 2011. Adjusted EBITDA in fourth quarter 2012 was $597 million, an increase of $315 million over third quarter 2012 and an increase of $152 million over fourth quarter 2011.

Special items in fourth quarter 2012 delivered a net gain of $178 million, primarily associated with the closing of the Tapoco Hydroelectric Project asset sale, which resulted in a $161 million after-tax gain. Another $78 million in gains, including those associated with discrete income tax items and the positive impact of mark-to-market changes on certain energy contracts, were mostly offset by the negative impact of restructuring, primarily related to plant curtailments and asset impairments, and the Massena, New York site fire.

Revenue for fourth quarter 2012 was $5.9 billion, up 1 percent compared with third quarter 2012, but down 2 percent compared with fourth quarter 2011 revenue of $6 billion.

Sequentially, the higher fourth quarter revenues were primarily due to improved realized pricing for aluminum (up 5 percent).

Alcoa delivered outstanding results across all businesses in the fourth quarter. Alcoa’s Primary Metals business delivered After-Tax Operating Income (ATOI) of $316 million in the fourth quarter, up $348 million over fourth quarter 2011 despite a 2 percent drop in realized metal prices. Fourth quarter 2012 ATOI was favorably impacted by the closing of the Tapoco asset sale. At the end of fourth quarter 2012, Global Primary Products had moved down the smelting cost curve by 4 percentage points.

The Company’s midstream and downstream businesses continued to turn in record performance, hitting new profitability highs. Global Rolled Products achieved record fourth quarter ATOI of $69 million, up $43 million year-on-year, and record fourth quarter adjusted EBITDA per metric ton of $344. Engineered Products and Solutions delivered record fourth quarter ATOI of $137 million, up 12 percent year-on-year, and achieved record fourth quarter adjusted EBITDA margin of 17.7 percent, the fourth consecutive quarter a year-over-year record was established.

Alcoa ended the quarter with strong cash results. The Company generated $535 million in free cash flow in the quarter, with cash from operations of $933 million, up $670 million sequentially. Alcoa also maintained its strong liquidity position, ending the quarter with cash on hand of $1.9 billion.

Following the record low in days working capital achieved in each quarter throughout 2012, the Company also achieved an all-time low for the fourth quarter at 24 days, three days lower than the previous fourth quarter record set in 2011, and 19 days lower than fourth quarter 2008. This is the 13th successive quarter the Company has demonstrated year-over-year improvement.

In fourth quarter 2012, the debt-to-capital ratio stood at 34.8 percent, 130 basis points lower than the sequential quarter, while net debt-to-capital stood at 29.7 percent.

2012 Full-Year

For the year 2012, revenue was $23.7 billion, compared to $25 billion in 2011. Income from continuing operations was $191 million, or $0.18 per share, in 2012 compared with $614 million, or $0.55 per share, in 2011. Excluding the impact of special items, income from continuing operations was $262 million, or $0.24 per share, for 2012, compared to $812 million, or $0.72 per share, for 2011.

Full-year 2012 net income was $191 million, or $0.18 per share, compared to $611 million, or $0.55 per share, in 2011.

Alcoa’s midstream and downstream businesses achieved record performance in 2012 with ATOI of $358 million and $612 million, respectively. Adjusted EBITDA per metric ton for Global Rolled Products was a full-year record at $390, 66 percent higher than the 10-year average and 19 percent higher than 2011. Engineered Products and Solutions ended the year with a record annual adjusted EBITDA margin of 19.2 percent, more than double where it was 10 years ago.

Alcoa turned in strong performance against its financial targets in 2012, delivering strong cash results in a challenging market. Despite a drop in both realized alumina prices and realized aluminum prices year-on-year, and $561 million in cash contributions to the pension plan, the Company generated $1.5 billion in cash from operations and $236 million of free cash flow in 2012. At the same time, Alcoa reduced net debt by over $450 million to its lowest level since 2006 ($7 billion), while maintaining a strong cash position of $1.9 billion.

Alcoa ended 2012 with a debt-to-capital ratio of 34.8 percent, within its 30 to 35 percent target range.

Alcoa exceeded its productivity and overhead target for 2012, delivering $1.3 billion in productivity and overhead improvements, 52 percent more than target.

Capital spending for 2012 was $1.26 billion, $89 million below the annual target. For the year, capital expenditures and cash investment in the Saudi Arabia joint venture were approximately $1.4 billion, more than $270 million below the 2012 target.

Sustainable improvements in days working capital reached an all-time low of 24 days. This reflects a year-over-year improvement of 3 days, twice Alcoa’s target of 1.5 days.

Alcoa has taken significant action in the past four years to protect its investment grade rating and is in a stronger financial position today than 2008. Through a disciplined approach to capital spending and focus on liquidity in the past four years, the Company has generated $5 billion in productivity gains, reduced working capital by 19 days, contributed stock to the pension plan two of the last four years, and successfully monetized assets.

In addition, Alcoa has taken action to manage its debt maturity schedule. Excluding 2014 convertible debt, bond maturities have been minimized to $422 million over the next four years.

Alcoa has now completed its planned closure or curtailment of 531,000 metric tons, or 12 percent, of its highest-cost system smelting capacity, further improving the Company’s competitive position.

http://www.alcoa.com/global/en/news/news_detail.asp?pageID=20130108006984en&detailType=invest&newsYear=2013

Presentation pdf
http://www.alcoa.com/global/en/investment/pdfs/Alcoa_4Q12_Earnings_Presentation.pdf

 

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