Alcoa reports strong full-year 2013 profit up from 2012, excluding special items

Alcoa today reported solid operating performance in the fourth quarter and full-year 2013 as the Company’s repositioning gains traction, offset by special items primarily to address legacy matters in the Primary Metals business. As a result, Alcoa reported a fourth quarter 2013 net loss of $2.3 billion, or $2.19 per share.

Special items in fourth quarter 2013 totaled $2.4 billion and included a non-cash goodwill impairment of $1.7 billion related to Primary Metals. The impairment has no impact on the Company’s liquidity and does not affect the ongoing operating performance of Primary Metals.

Excluding the negative impact of special items, Alcoa reported net income of $40 million, or $0.04 per share, in fourth quarter 2013. Engineered Products and Solutions (EPS) reported record fourth quarter after-tax operating income (ATOI), the upstream business improved performance for the ninth consecutive quarter, and all business segments produced productivity gains in the fourth quarter. The Company reported fourth quarter revenue of $5.6 billion.

"We delivered strong operating performance in the fourth quarter, led by record downstream profitability, as our strategy to build-out the value-add businesses and lower the cost base in the commodity segment gains traction,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. “In addition, we put a number of legacy matters behind us, clearing a path for Alcoa’s continued transformation in 2014.” Kleinfeld added, “We started growing our value-add businesses and lowering the cost base of our commodity businesses at the height of the economic crisis. Today, this transformation is paying off, with the value-add businesses driving 57 percent of our revenues and 80 percent of our segment profits.”

Alcoa’s value-add businesses comprise EPS and Global Rolled Products.

In 2014, Alcoa projects global growth in the aerospace (7 percent to 8 percent), automotive (1 percent to 4 percent), packaging (2 percent to 3 percent), and building and construction (4 percent to 6 percent) markets. After a strong 2013, Alcoa projects a steady commercial transportation market (-1 percent to 3 percent), and a decline in the industrial gas turbine market (-8 percent to -12 percent) on lower orders for new gas turbines and spare parts.

Alcoa sees global aluminum demand growth of 7 percent in 2014, after 7 percent growth in 2013.

4Q 2013 Highlights

• Net loss of $2.3 billion, or $2.19 per share; excluding special items, net income of $40 million, or $0.04 per share
• $1.7 billion in non-cash goodwill impairment tied to legacy smelting acquisitions
• Solid revenue of $5.6 billion, despite 7 percent lower realized aluminum prices year-over-year
• Engineered Products and Solutions fourth quarter record after-tax operating income, up 20 percent year-over-year
• Upstream business improves performance for ninth consecutive quarter
• Cash from operations of $920 million, up $706 million sequentially
• Positive free cash flow of $498 million
• Strong liquidity with $1.4 billion cash on hand and the lowest year-end net debt since December 2006
• Record low 20 days working capital, a year-over-year decrease of 4 days, equal to approximately $240 million of cash

Full-Year 2013 Highlights

• Net loss of $2.3 billion, or $2.14 per share
• Excluding special items, net income of $357 million, or $0.33 per share, up 36 percent from 2012
• Revenue of $23.0 billion
• Record results in Engineered Products and Solutions
• Cash from operations of $1.6 billion
• Free cash flow of $385 million; fourth consecutive year of positive free cash flow generation
• $1.1 billion in year-over-year productivity gains
• 16 percent of Alcoa global smelting capacity offline