Alcoa successfully tracking against business targets, portfolio transformation advancing

Alcoa executives today said that they continue to aggressively reposition the Company and that they are on track to successfully deliver against business targets introduced last year. Alcoa is transforming its portfolio by building out its innovative, multi-material value-add businesses to capture profitable growth and by creating a globally competitive commodity business. Alcoa hosted its 2014 Investor Day event at the New York Stock Exchange.

“Alcoa’s transformation is in high gear and driving sustainable shareholder value,” said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. “With our strong portfolio of value-add businesses we are building a lightweight, multi-material innovation powerhouse, and at the same time we’re creating a globally competitive commodity business. This is a winning formula.”

Operationally, Alcoa continues to drive process improvements and procurement savings across the business. Productivity gains totaled $862 million through the third quarter and are expected to reach $1.1 billion for the full year, exceeding the $850 million 2014 annual target. Additionally, through continued operational discipline, Alcoa is on track to achieve its 2014 annual financial targets.

In addition, Alcoa’s four business segments, Engineered Products and Solutions, Global Rolled Products, and Alumina and Primary Metals together comprising Global Primary Products, updated their progress against business targets for the 2013 to 2016 time period, with the following highlights:

Engineered Products and Solutions

• Innovation to drive continued profitable growth:
o $125 million of organic aerospace investments to expand jet engine offerings; on track for completion by fourth quarter 2015
o Opened world’s largest aluminum-lithium casthouse for advanced aircraft; $100 million in revenues already contracted for 2017
o Wheels business targeting $300 million of incremental revenues between 2013 to 2016 achieved through share gains and innovation
• Growing inorganically through $2.85 billion Firth Rixson acquisition; on path to close by year-end, regulatory approvals nearly complete; expected to contribute incremental $1.6 billion revenues and $350 million EBITDA in 2016
• Majority of key end markets growing strong from 2015 to 2017, including aerospace which will drive 52 percent of 2014 revenues
• Reaffirmed $1.2 billion in incremental revenue growth by 2016; $900 million coming from share gains through innovations
• Adjusted EBITDA margin on track to exceed historical highs in 2016

Global Rolled Products
• Investments in value-add growth projects, including $190 million for Davenport, IA aerospace manufacturing technology, $600 million for two North American automotive sheet expansions, and $40 million for aseptic foil in Brazil
• Shifting to higher margin product mix, increasing aerospace and automotive revenue by 7 percentage points from 25 percent in 2014 to 32 percent in 2017
• More than 75 percent of 2015 to 2016 revenue growth already committed with customer contracts
• Reaffirmed $1.0 billion in incremental revenue growth by 2016; $900 million through share gains and innovations
• On track to deliver adjusted EBITDA per metric ton at or above average historical highs in 2016

Global Primary Products
• Continue reshaping upstream portfolio to create globally competitive commodity business, improve productivity and lower the cost base
• Conversion to Alumina Pricing Index (API)/spot pricing continues to grow with 68 percent of third-party shipments on API/spot pricing estimated for 2014 and expected to increase to 84 percent in 2016
• Stronger value-add sales enhancing profitability, value-add products increased from 57 percent in 2010 to 65 percent of total shipments in 2014, and expected to grow to 70 percent in 2016
• Position on alumina cost curve improved to 25th percentile in 2014 from 27th percentile in 2013; reaffirmed goal to improve position to 21st percentile by 2016
• Improved smelting cost per ton of production while maintaining 43rd position on global aluminum cost curve in 2014; goal to improve by 5 percentage points to 38th percentile in 2016 reaffirmed
• On track to reduce 549,000 metric tons of high-cost smelting capacity this year
• Aluminum demand continuing to grow, current run-rate surpassing expectations of demand doubling between 2010 and 2020