Alcoa Corporation reports Third Quarter 2017 results

Alcoa Corporation, a global leader in bauxite, alumina and aluminum products, today reported a sequential increase in third quarter 2017 revenue and earnings, driven primarily by improved pricing in the aluminum business segment and higher shipments of aluminum and bauxite. In addition, the Company’s cash balance as of September 30, 2017 reached $1.1 billion.

Based on stronger alumina and aluminum prices, Alcoa has increased its projection for full-year adjusted EBITDA to approximately $2.4 billion2. This adjusted EBITDA forecast, up from the second quarter projected range of $2.1 billion to $2.2 billion, includes higher input costs to be reflected in net performance reported with fourth quarter 2017 results.

“Alcoa continues to benefit from favorable commodity markets, and we’ve raised our projections for profitability in 2017 and global aluminum demand growth for the balance of the year,” said Roy Harvey, President and Chief Executive Officer. “We continued to execute on our three strategic priorities—our strong cash generation aligns with our priority to strengthen the balance sheet, while our recent Rockdale announcement advances our priorities to reduce complexity and drive returns.”

Mr. Harvey continued: “As we approach our first anniversary as an independent, publicly-traded company, we’ll continue to be guided by our three strategic priorities to further strengthen our Company and Alcoa’s foundation for the future.”

In third quarter 2017, Alcoa reported net income of $113 million, or $0.60 per share, up 51 percent, mostly due to an improvement in the combined results of the Company’s business segments. This compares to second quarter 2017 net income of $75 million, or $0.40 per share. The third and second quarters of 2017 include a negative impact for special items of $22 million and $41 million, respectively.

Third quarter 2017 special items were largely related to restructuring charges associated with previous actions, a legacy tax settlement in Brazil, unfavorable mark-to-market impact on certain energy contracts, and a net benefit related to the partial restart of the Warrick smelter in Indiana (reversal of previous closure costs partially offset by restart costs).

Excluding the impact of special items, third quarter 2017 adjusted net income was $135 million, or $0.72 per share, up 16 percent sequentially from $116 million, or $0.62 per share.

In the third quarter 2017, Alcoa reported $561 million of adjusted EBITDA excluding special items, up 16 percent from $483 million in second quarter 2017. The improvement was driven by several positive factors, including higher energy sales in Brazil, improved aluminum pricing and increased shipments for both aluminum and bauxite, partially offset by unfavorable currency exchange rates and raw material price inflation.

Alcoa reported third quarter 2017 revenue of $3.0 billion, up 4 percent sequentially, with higher energy sales in Brazil, higher shipments in the Company’s aluminum and bauxite segments and increased aluminum prices, somewhat offset by a decline in alumina volume.

Cash from operations in third quarter 2017 was $384 million and free cash flow was $288 million. Cash used for financing activities and investing activities was $115 million and $100 million, respectively, in the third quarter of 2017. Cash used for financing in third quarter 2017 included the early repayment of a $41 million loan from Brazil’s National Bank for Economic and Social Development (BNDES).

Alcoa ended third quarter 2017 with cash on hand of $1.1 billion with $1.4 billion of debt, for net debt of $0.3 billion. The Company reported 17 days working capital, a one-day improvement from second quarter 2017.

Earlier this month, Alcoa announced the October 1 termination of a power contract tied to the curtailed Rockdale Operations in Texas. The termination, which included a lump sum cash payment of $237.5 million, is expected to result in an annual improvement to net income and adjusted EBITDA of $60 million to $70 million, beginning in the fourth quarter of 2017.

Alcoa continues to see strong global aluminum demand growth and increased its full-year 2017 estimate to a range of 5.0 to 5.5 percent, from 4.75 to 5.25 percent in the second quarter. The Company expects the global aluminum market to be in relative balance for full year 2017, a change from the second quarter projection of a slight surplus. The improvement is mostly due to planned and actual curtailments in Chinese smelting capacity as well as increased Chinese demand.

Global markets for both bauxite and alumina are expected to remain in relative balance for the year.