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Alcoa (AA)

Participants
James Dwyer VP, IR
Roy Harvey President and CEO
Bill Oplinger EVP and CFO
David Gagliano BMO Capital Markets
Jorge Beristain Deutsche Bank
Novid Rassouli Cowen & Co.
Timna Tanners Bank of America Merrill Lynch
Piyush Sood Morgan Stanley
Alex Hacking Citi
Curt Woodworth Credit Suisse
Justin Bergner Gabelli & Company
Call transcript
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Operator

Good afternoon, and welcome to the Alcoa Corporation Third Quarter 2017 Earnings Presentation and Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions). is event this note being recorded. Please like Dwyer, Vice now to turn James to over conference President the I'd of Relations. Investor ahead. go Please

James Dwyer

Thank President day Roy good Vice President and you, joined Financial Executive Denise, by Officer. Chief today William everyone. Oplinger, Harvey, Chief and I'm Corporation and Executive Officer; Alcoa and

questions by take Roy We Bill. your will and after comments

Factors the subject forward-looking events and future actual a As to assumptions differ these relating various statements materially reminder, cause and today's in statements discussion to our that and to results are caveats. that SEC filings. company's today's will are may in contain from expectations presentation included

standalone in non-GAAP November to results are financial Any presentation. methodology; prior as appendix in addition, have comparable a Corporation because Alcoa to Corporation our Alcoa measures actual from directly X, reference In EBITDA of financial to statements to discussion Also in found thereafter. operations this financial Alcoa EBITDA. financial commenced the the included Inc. means the November on XXXX, most note public presentation. adjusted Reconciliations a a some carved today's GAAP we out today XXXX, and on of be company financials measures can combination statements X,

quarter entirely quarterly basis, while results For XXXX the results example, on the XXXX are third are a carve-out entirely actuals.

available announced, Finally, and website. our on is that, earnings With as Roy. presentation the previously slide here's release

Roy Harvey

Group our commodity in Alcoa favourable continued to Thank benefit our we welcome and profits the you, segment to third markets. Jim. like I’d most aluminum call. over quarter, notably to from

we XXXX. higher based of nine-months profit the outlook alumina for the and our Given in our solid and pricing, aluminum raising results on are first year

reduce segments. built position exciting It three for in our been balance three continue complexity achievement our returns quarter strategic strengthen our to stockholders. our took we priorities; on the We additional and company with drive our steps across execute to cash we sheet and has to to an

few adjusted we We income higher of strong assets. and a our in million per up highlights; with or excluding growth prices, metal reported XX% bauxite on net in EBITDA items, $XXX Let energy from start earnings million share. aluminum and $X.XX special $XXX volume adjusted generated sequentially

increased long-term quarter, is cash and support beginning we partial earnings the million consecutive balance two of for our our at end second restart month, $XXX billion. focus value of cash Indiana in our quarter the the tied and expected is was Earlier position operations, to now Texas, our Rockdale the the on completed curtailed this in more terminated smelter power a from growth underway the improve than to segment aluminum For we action our With a restarts rolling to contract mill. Warrick in adjacent quarter. driving that $X.X an next third smelter

moving the markets, in resulting in the We are relative side change continue The increased dynamic raising we’re demand. global where and is aluminium supply view China, curtailments. our pull our slight is strength is This market reforms to capacity a aluminium to in full global for enacting in surplus that year balance. see also from government aluminium of related to

its financials raw the full the aluminium closer adjusted EBITDA As look estimated prices This $XXX for push and million $X.X on to EBITDA from remainder improved year implies year to I’ll of prices billion our stoked adjusted year. has continues for quarter’s projection last X.X With projection that, quarter third Bill the aluminium billion. in to higher of in the the full Based over and a in pressure inflationary X.X alumina at to turn billion over outlook. it up and and the quarter, approximately for higher last alumina strength on has and market Alcoa materials increased energy.

Bill Oplinger

or revenues attributable revenues $XX Sequentially, to segments up income per Compared was higher XX% aluminium and prices. $XXX Alcoa $XXX last Corporation Roy. higher aluminium alumina million shipments share and Net year a $X.XX both million and to bauxite prices. up increasing are or sequentially to aluminium statement billion $X present in million are X% our XX% with on higher an Thanks items after higher primarily increasing as a income per segment to and special special sorted transparency excluding by earnings. Adjusted tax. due the pre-tax $XX net we $X.XX pre-non-controlling $XXX them more interest share. items million on million provide category Special Roy was and a items To business income totalled said or basis. unfavourable

by each we have schedule settling of included New income charges to the settlement COGS the have including cases restructuring approximately Within and related take-or-pay closures net the reversed exposure. Brazilian million related By office plus million, million. items contracts impact. We with these several locations. for Portland $XX we offset appendix we the smelters Within of also partially were and to for tax in Warrick York tax million special special at its and Warrick eliminate item future $XX now, of SG&A, closure reserves cases $XX $XX curtailed office of an and restart the

our and Now statement income at adjusted after special just EBITDA items. look

$X.XX percentage XXX Our XX.X% per XXX basis third third third share $X.XX reached alumina $X.XX the of year-over-year and higher aluminium In items our EBITDA per at Adjusted our revenue. sequentially aluminium basis up improved totalled $XXX in points to million. our due and margin a and expenses expenses on net million earnings $XX higher Year-over-year absolute share in and $XXX prior margin sequential year-over-year nearly doubled XX%. $XXX grew terms. improved up special X.X% to quarter, declined R&D and sequentially earnings income quarter quarter, segment. or diluted are adjusted On EBITDA higher primarily sequentially Adjusted year-over-year. basis, SG&A and the prices. our points than to SG&A million excluding increased both R&D second and in million year share per the million $XXX quarter. improved income to net the XX% adjusted Compared

expense line, primarily primarily the income Juruti EBITDA million $X the sequentially, currency million sequentially below translation of million of decline Other $XX lower items to increased income. depreciation to and equity volume due $XX increased at effects For foreign expense due mine.

Our million an operational was profit profit LIFO the rate heavily income tax XXX million third to market earnings our tax have rate rate unfavourable basis attributable tax points. The of earnings due inter-company a the increase based increased XX%, jurisdictions XXXX. in to lower where $XX million quarter average of losses unfavourable we higher Net net due when impact the first $XX the non-controlling joint-venture. losses. and on interest variety had against eliminations. factors an this comparing depends rate $XX including to to In adjustments AWAC half quarter operational the approximately on in and sequentially US increased decreased

aluminum to dollar than and million caustic deeper smelting higher offsetting improvements the Higher at take in with US drove carbon improvements Favorable $XX was partial Let’s power driven The raw Rockdale the price These a $XX at higher prices performance segments results factors quarter, increases and maintenance the second mix us currency offset and refining. productivity. comp due cost million added prices increases materials weaker Improvement houses seasonal inflation. net volumes lower up the market alumina product for materials Intalco more that. the of cost. majority due a of $XX smelters higher energy improvements. weaker and the in to The other mines by to segments raw positives. in segment adjusted is drove $XX the foreign driven improved a To the million factors and $XX was plant Brazil, $XX outage occurring contributed adjusted mainly were the driving in against due million the and aluminum bauxite equity mix better dollar metal by category lime price changes picked numerous production benefit EBITDA. productivity two offset look were workmen’s first unfavourable volume and cover in million. million $XX both than Sequentially, increased more for materials mix $XX million net earnings up primarily however the and cast in and in inflation in driven The in negative spending million labor and were bauxite to the by many pricing Australian EBITDA impacts and $X million, improvement by dollar. especially

As aluminum for performance, segment business our segment drove segment improved earnings.

EBITDA our quarter segments ’XX in million totalled Third $XX adjusted million, sequentially. up $XXX

lower comparison, cost. bauxite segment segment material raw from were by EBITDA partially declined alumina $XX adjusted and segment million segment largely the and in million of negative adjusted and primarily up $XX million These million Brazilian and $XX higher as gains metal and $XX adjusted lower XX each sequential up EBITDA look a the million. EBITDA prices. offset and of rebound earnings. alumina Take at impact produced of particular, to a volumes, partially at closer third prices partially cost. $XXX volume by prices to $XX cost our we energy XX Higher aluminum, million API quarter prices Energy million drove material the unfavourable In adjusted was jumped assets alumina of EBITDA shift in XX%, lower due impact higher higher on to foreign raw currencies million aluminum In caustic Our was energy improvement. million, $XX hydroelectric executed $XX offset drivers offset unfavourable $XX increased. million, bauxite up

quarter is of year’s sequentially Brazil conditions to approximately the however and million $XX current the the EBITDA a the drought Hydros region. third The adjusted decrease to the for expected watermark high in due

EBITDA improved $X adjusted non-segment adjusted and our at results. million. three look let’s $XX items Combined million line non-segment our Now sequentially EBITDA totalled

increased totalled million price outage $XX was quarter, this expense Our the the unfavourable lag metal completed legacy, $XX of Rockdale and year-to-date. that due Rockdale quarter. turned pension in transformation the million In second total Year-to-date its third LIFO transformation decreasing the quarter lag entities metal million. to LIFO OPEB planned primarily sequentially in totalled and cost and $XX million our was maintenance million and $XX million. quarter, plus cost and at $XX price negative $XX the

pension years’ better this matching to pension/OPEB add back benefits on Finally year’s EBITDAC will EBITDA, when place. accounting retirement excludes update an our adjusted now accounting next costs standards take service

making Looking in billion is Rockdale cash October at Roy paid dividends of free cash quarter. the had $XXX balance to; financing $X.X before third is partner our the $XXX quarter billion, used payment to over third minority million the million joint-venture AWAC million cash $X.X and our flow as key of totalled the year-to-date. driver The to cash $XX at alluded and cash to contract of generation, the in for the This for primarily balance due quarter, settlement. grown end dividends

from The proceeds of quarter, million stock in by included related Additionally, payment for the exercise million $XX our options. expenditures employee Brazilian key rolling $XX to from which early provided increased of of additional partially third in capital investment in its cash quarter, the financing, to Ma’aden million mill. is includes in it facilities driver debt hydro also investing third cash offset $X of the an

Now let’s move to financial the metrics.

Moody’s continue X, sheet BAX rating and to balance and outlook. upgraded related Our a September our on stable debt strengthen financial metrics with to

Our minus by BB with debt not outlook a positive by BB rated plus and Moody’s BAX is Fitch, S&P. by

billion position, our throughout has Capital quarter In now totalled quarter second the compared year-to-date. now expenditures days been the working the quarter. $X.X cash first XXXX, million addition in in XX steadily days days improving to and at capital XX third $XXX today’s in XX to

was The was was spend million. anticipate fourth $XX spending sustaining to quarter the million return this form Third second quarter. to $X seeking million capital capital in accelerate $XX spend million the We continue $XX up quarter. and

return liability with Our continues Leverage times. X.X% XXXX as net level. $XX year-to-date point capital million before X.X and compared percentage XXXX and up year-end. pension’s net quarter. funds’ debt-to-adjusted re-measure assets on Net our $X.X at to mentioned EBITDA in X.XX the debt pension billion. I repayment year is at debt We of The the $XXX of improvement full is reflects only debt million annualized net Brazilian OPEB

first quarters three reflect the changes pension in in So the the liability. only changes

full Now XXXX our let’s outlook. review year

and lower full our LIFO higher and cost. $X.X to This billion our $X.X increasing earnings from based of EBITDA Hydros improved from cost As $X.X billion, to partially pricing, Roy approximately a on market the range mentioned, input Brazil and expected drought, EBITDA outlook are due outlook year by accompanied eliminations we up offset to higher is higher billion.

are noted using our October set September ton As from is we spot already ATI while the per assumptions alumina sales. prices, in on $XXX unpriced

holding our unchanged shipments segments. for We’re outlook all

Other million is On now contract and transformation full resolving from several metrics the the improving our solely made to tax prices. OPEB a due change costs the improvements. improving me our million. profit Interest further financial $XXX them XX%. key to let We are inter-company adjustments other to approximately approximately corporate are year million This is increasing run million. market $XXX million expected we prior and and $XX Rockdale pension rate $XXX to between from defined quickly. million expenses higher $XX eliminations legacy is XX% through $X and lower Transformation operational outlook,

the many major pension jurisdictions. it seeking a OPEB earnings based to timing tax our relationship million spend million million As million. projects. of approximately $XXX on improved prices in on reduced depends and our our you $XXX outlook know $XX few return We’ve $X to We’ve capital by market of

range ARO $XXX and approximately million environmental of million. to improved we’ve Finally, to from down million a $XXX spending $XXX

value. we on comments stockholder Before back I approach in turn capital it few allocation a driving Roy, to how

end a we conservative volatility, allocation. that a approach capital and foremost are to we operating sector significant see company take price First entire markets commodity so

target we’ve stability cash. billion. we in flexibility provides which today’s needing at to to cash to or assets without roughly healthy set the cash sell downturns This First reserve, balance a sacrificing weather operating generate market market $X

to the current sustain base spend required capital in we asset our Second, our operations.

our spending uneven, year. is can million per the be target $XXX sometimes While

activities, invest conditions our and million excess Depending value we the per typically and target spending a return target of $XXX Third, cost pipeline market on capital. high creation project year. $XXX capital [MPVs] to to capital well returns seeking expenditures in million we with in a

From a as to creation sustainable Fourth, of value activity. way in priorities, of expenses for the our weighted capital years in all businesses a next business dividends in By our capital or Alcoa. our possible average not as cash we managing of greatest enterprise optimizing to stockholders create reductions. there When enterprise we our highest Rockdale eliminate resolution optimize such you buybacks. think cost our the value and contract to reduce decisions, capital improve sheet of reduce and and we we liability our over each our for expect through to balance these stockholder through to capital the the a accounting framework. to structure convert allocating share value significant While minority look several keep to value valuation and of interest. mind by We can aim non-segment return project, enterprise value of

turn Roy. let me it So to with that, back over

Roy Harvey

Thanks Bill. fundamentals overview with driven the an our of outlook I’ll markets and bauxite, and alumina for begin aluminum.

For Chinese remains last bauxite, balance. the relative quarters’ believe stockpile be our market anticipate in we factors, the we those Malaysia Indonesia, and since last demand two-thirds We China more exports will and to quarter, now outlook. growth estimate two in potential from lower Due expect than lower Guinea.

alumina, our For balanced. remains forecast

China demand This is growth and operational to basis of on reductions by impact a environmental two voltage are China. during In and outlook and we aluminum China, in transportation government for capacity strong We demand strong China’s have includes season program aluminum expect increased Aluminum, of construction. expected electrical winter met same consuming in capacity. China to demand the and to points range in XX see by heating across enforcement refining again curtail well incorporated X% our demand increasing due This enforced applications, effect growth considered lower annual revision the environmental global forecast also as demand sectors, the a reasons we the as to largest also continue supply from Chinese in by growth to We’ve due smelting curtailments. higher driven X.X%. permits ultra-high to

figure has shows demand XXXX we are are for market In growth surplus expectation. Outside balance supplier reducing forecast China. now aluminum China, our lowering XXXX. and our of our in sum, predicted improved our maintaining forecast without So we relative the

Last reforms side a I’ll from Now to quarter side A supply for policy two in supply discussed Chinese spend policies we China. quarter, few through China. aluminum the government managed the global minutes driver has mandated key activities market been significant over agencies. describing last

the Commission operating licenses NDRC. Reform and or concerns enforced first The the and National is by Development

Environment capacity by of for offline. as note the capacity which existing could winter July, that we’ve we about permits restart Since X.X forced. have curtailment of Ministry currently available tons capacity managed MEP. this as be curtailed transfer now as in seen important heating the in of X.X second and of of as million X.X transfer is quality. million could unlicensed program seen operating new a per permits, metric season assuming a continues capacity or NDRC come scarce million The or to the to totalling And inflating tranche NDRC estimate smelters. metric the prices. of important the improve to winter already during is of would Approximately It is an tons much policy million the shuttered X.X annum. result order curtailments the result of to the We annual the of Protection metric shuttered with curtailments annual approval existing require be of become MEP’s air have tons still total

However, mid-November early lacked to required said and still too rules start for to their are curtailments curtailments, impact. in as it is final these determine strict calculating

capacity alumina, to global impacts reduction the aluminum smelting in Chinese markets. Chinese operating significant Turning and in also the

prices that inevitably nearly over alumina still few global we and in Chinese explain the smelters in four XX% factors key developments. critical increase demand, than help have seen are sellers past more buyers reduce markets have There the months weeks. and last curtailed in While a these these to three alumina seen

aluminum supply in become announced tons program the would XXXX. China, has million partial due to up a program, and with offset program. week, more the annualized the impact and tangible outside MEP’s the curtailment unsold in little last to MEP demand of to First, refining end metric erosion of due but available see Thus natural China to NDRC the MEP’s of XX.X smelting you

as regulators buffer environmental Second, response that’s in incidents to that bauxite. to bauxite inspection reduced continued for domestically only are source consume that Chinese curtailing and and government in have region such impact period. Inventories highlighted Shanxi serious potential a refineries safety further mining Hunan recent supply limited

and higher represent smelters prices continue higher term prices for sourced raw is Chinese coal including a yet activities. and basis. Chinese for are global finally, alumina push materials on and contributing stockpiling winter trend, expansion but an This for not inflexion bauxite point. longer to normal caustic, Fourth Third, Chinese a projects domestically to demand cost reached alumina

mines, While consumed will value chain These demand occurring this to in alumina be XXXX and smelters. are responsible demonstrate aluminum performance, prices to of track experienced. the to some in all refineries management bauxite and China, the of supply industry along impacts sensitivity add aluminium not and permitting side alumina year. and In be curtailments this both their before are on environmental alumina buyers summary, Through appears impacting XXXX China more not and today.

tailwinds these consider pricing create from with EBITDA published stockholder and our Now goal operating line let’s sensitivities, to improved how market our the is value. to bottom clear. our revised With connect impacts our assets

discuss to cycle. influenced value other sustainable market how throughout value stockholder like factors create company I’d Now of across and our our business the the

position results, business decisions look continuously at better a closer across segments, in to each a to improve second As look earnings. Taking quartile earlier, have of as acts a bauxite Bill operational the the value strength advantage. catch our competitive drive growth very said of low us we to enabled and improve and our businesses

And our Juruti, continuing Our production while our bauxite growing meet in meet refineries. also to rising to segment sales party we export rising demand. supply demand, Chinese to increasing and in ability are is to Australia, third bauxite expanding Brazil

assets cost to our alumina refineries and quartile position. first Our Atlantic markets. cost With in and access has very competitive low with alumina both the Brazil, a business Spain segment Pacific Australia, operates

to growth Our production led ability assets. Pinjarra these alumina system successfully is our in refinery seeing strong by demonstrating Australia, operate our

make focused completed sight anode the cost the support our US, the capacity rolling profitability In year, with Warrick supply. on a we Our make restart calcine this anodes. mid-second restored smelter a a should are power the integrated In solution reduces restart our to in aluminium smelter of vertically that and Australia plant the outage term mill. production restart coke of Charles the competitive Louisiana longer the loss four growth beyond and we of portfolio of Alcoa carbon and the our is agreements. aluminium calciner anticipated to Portland from significantly And Lake the year quartile improve internally produce profitable more partial for the enables to own integrated last

restarts our We not operations. will variety to review weigh maximize the for curtailed end value our stockholder ability does and assets to factors. of a continue against But potential our with

long make We company the also reduced term have and stronger financial our Rockdale In costs corporate, we by value. have drive power levers that can future terminating contract.

combined, expect decisions is we improve end smelter Warrick the the more and of once year. by fully the on Rockdale the first next million annualized $XXX operational to adjusted With restart basis, of an EBITDA by half

third Bill In addition, in of priorities. important accountable combination we million strong as balances our financial strengthening and finally, through continue are our balance hold sheet. we with to continuously we our our considerations, manage the in our repaid stated This debt Brazilian all to And ourselves steps look mentioned cash quarter. $XX

driving adjusted What with quarter, strategy, approximately each three of to quarter meeting our this year returns responsibilities. and and We pricing, EBITDA these focus third with We while billion. balance sheet. alumina we strong the profitability fits capital to in delivered higher strengthening the complexity, fourth simple remain XXXX, priorities. year enter ideas; aluminium disciplined a focused we’ve reducing on end strong As very fully allocation so of these a far and $X.X the continue on we legacy we within expect done

invite so for XXXX, like I’d questions driving With those to me. value. or have any sustainable might stockholder we believe actions our you in guided Bill far and gains have are actions Our that three strategic either priorities in that,

Operator

Gagliano David Mr. Please you be Thank question (Operator Capital Harvey. And of Instructions). Markets. from ahead. BMO go your will first

David Gagliano

some of the question picky knit of couple a have assumptions. or behind numbers just types I

prepared one the You may your first on in touched remarks. have

want the for clarify for the for just XXX of bit, we’ve outlook to based XX got is XX your what a day says API wondering little quarter. of on I – outlook fourth And the text is, on alumina the I’m prices. the price price lags to So unpriced sales

mean mean So all for the remainder that to of dos of quarter price for XXX? that volumes XXX QX the assumptions does or

Bill Oplinger

a question It’s Dave try and lag release, great clear to That it even means a we tried pricing. we as me clarify that to let but make have on further. it the in

we approximately quarter on quarter. So approximately alumina half remainder so lag a the day have the XX around that pricing would and the of at be of prices assumption this and already point the is

So that’s was that billion baked to $X.X in estimate.

David Gagliano

on corporate to to is all of which XXX expected in other notice the closer; looks the running been per closer XX quarter. then that We be line items. And fourth number slide million million the have did it just quarter XX, expenses like there’s

as So well? behind $X.X the that EBITDA two-part question is the in there, target that billion to what’s factored and jump

Bill Oplinger

billion. in It $X.X factored is that to absolutely

as bauxite not in sell and upstream we segments, things alumina profitability So just to clear. And aluminum We of we’ve around shipped. the very that up if our to the corporate corporate let in and today. make me so parts other has as expenses product that segment that X.X eliminate they discussed clear again question do be all that includes business our billion of great runs profitability eliminations really a

have you So any inventory the has eliminate profitability. there for to that content, still alumina that sits aluminum

segment it sits alumina to sole due our in for that in other corporate is higher profitability that the reason So inventory. higher expense,

David Gagliano

continue So down just the then sort to start at to come rate, profitability fourth quarter level would would the clarify, at so it that stayed as that rate again? that forward moving of or

Bill Oplinger

good XXXX full for said, year that on got inventory I in on so give like in you it it’s is, up But XXXX alumina starting and prices we does sitting the run have in profit XXXX. that inventory. what you’ve quickly Well and depends will guidance fact based

Operator

will Please Beristain question The from come of ahead. Jorge Deutsche next go Bank.

Jorge Beristain

to got another we Rockdale start once you’ve reconciliation of of corporate in like that those but or money? line, where flow guess going the just EBITDA where also pre-pay I make with financial like, your a saving are we a benefit adjustments got minutia and see adjusted the should the expense kind start [cable] you you’ve to question,

Bill Oplinger

Well OPEB. legacy believe. will corporate expenses, it page be in transformation going be reconciliation And to it the XX; is pension I not don’t on it on is and the in

in I the other probably Jorge. think be category it will

Jorge Beristain

second first it’s or the category Sorry, category? other the other

Bill Oplinger

in the last category. It’s other

Jorge Beristain

got question remaining, just was of on late. there? a still of other decision everything to think on turned the that moves what Okay, obviously on the it. you line get China’s a environmental idle tons Warrick; it dime guys has are restarting And Warrick a across on take because would But I it’s XXX,XXX

Bill Oplinger

let’s the we on very committed cost making and you we focused up three sure quicker other those Well we’ll when on point, restart get one the get first running are we had lines or time that three to have and and lines first and this delivering what up running, we At evaluate that control. the two lines.

Roy Harvey

of And across our facilities. scan Jorge, curtailed We all Roy. it’s

against expected what at assets, we and or market it So whether look sense. factors, prevailing weigh fully to against see take in it’s order whether any restarts and to future also pricing it those that weight curtailed And would make restart we partially of would we it. curtailed

it So seriously. started we so very just getting a take question is that on ask are restarts, Warrick, and question we two frequently. ourselves finished We just we very

Jorge Beristain

XX I million’, that to or Brazil Got wanted it. just verify, Bill energy XX? the And ‘XX you for headwind in is quickly mentioned

Bill Oplinger

$X.X question in factored back that’s to the Dave’s again to going And already billion. XX.

So quarter at assumptions. in even quarter with of we’re the headwind in those that anticipating the fourth greater fourth than EBITDA $XXX million

Operator

Please question ahead. Company. Rassouli The from be next go Cowen will Novid & of

Novid Rassouli

steady party quarters. future guys wonder you if speak a seen in maybe primary you we’ve the kind there, bauxite, to with that and see starting driver developing realized the So in just prices. third how trend I can increase what’s of your

Roy Harvey

hit if me from and standpoint that see that question. a then Let your qualitative answers

CIF. So to contracts as also and the whether that from, based bauxite location you off can imagine our coming of bauxite happen or be about is sales those source FOB where are

paying freight. whose for depends it So

we’ve So here we start sure the beginning build the the any to that but to also in we can good investment and place, bauxite we make wanted solid ground want approached we returns put to in with the for customers. relationships our market get at that real

grow really question. as profile place in the the in of of the more and mines, bauxite, come on as the contracts and the so these in margin revenue and quality our is to then we going importantly source customer each And new mine production profile depend to

place where those it’s to growth sure we opportunities demands. with lots customer we that a So look business, a are it’s have make But matched opportunities. of

Novid Rassouli

sustainability Got it. laying later wanted and of have of of big done price doing. because that other drivers comes kind out forward, what prices increase loosened And seen China they one where a seen you spike. action to guys in the sense then of They job prices taken China on we’ve things caused moving But and great you these to and is that get I then really think guys actions, different has just alumina the the of mind. of to responded markets the we’ve And a up. kind

that? your I given guess So seen thought moving just wondered if prices. how process we’ve these on the you alumina commitment to guys is actions. are What violent thinking, this

Roy Harvey

NDRC So one. essentially. the program two programs; There is of them me address with deals permits let that one that are operating

they the started whether are operations. these simply gone driven asked had are they in the fact are and and So curtailments by before permit completed already that about for

expensive its retirement permits the means return market. to not on long one, until permits And those operating. that capacity are purchased or quite the prices those program on becoming purchase cannot of and That enforced they open actually markets as plants either new as increase. they we’ve seen are simply they permits So permitted be the that

but thinking depends seems a any had the it give in that So rolling impact. across upon the us of sense we’ve have that Again don’t a move about lasting to that see are back. program they that that Chinese policy, any in we discussions markets

winter officially is MEP XXXX-XXXX curtailments, the one the side, announced the On season. been for that heating which has

depends critical that that in through Olympics. operating about are again will we XXXX balances watch occur. at We’ve Winter going the the they and be here have total what they enforce asking or look to policy months. in they this XXXX, that occur about talking very The what We how going rumour a clarified are just There’s in November But it take this question continue few still of basis. interesting years? Beijing, But at whether happens and pretty Olympics that; when to future we a will the much certain to also able the obviously on over they on is how confident some they deep heard it’s it we very certain those with will province-by-province that months, based that that market XX. on we’ll XX March develops point towards between breathe. calculate capacity, feel be to in production capacity questions And So to a these course trying citizens bring provinces; a bit very get are to their line. targeted tune and much are you’re

gets it time. very That that’s sensible it’s right a desired said, up down. pretty at the cycle ways the because to So action policy, and smelters difficult in many

it XX% restart. a we hard Alcoa hard would doing in that be costly to curtailment just So basis. for an on it’s and us is to a annual imagine smelter It’s

Operator

Tanners be Your Timna Lynch. of from Merrill Bank next Please will of ahead. go America question

Timna Tanners

come amazing any to our wild cutting move. XX ask wanted where Obviously at aluminum I a capacity another just think (inaudible) and since if And alumina months the What of was about producer. it’s you you’ve from. more forefront than an

you of color little in in and and talked in which If past about Brazil. bit assets would conditions? ones know you you Wenatchee about I could what restarting perhaps the the consider give you us think under that a how

give that. a on color little you more if bit us can So

Roy Harvey

signal market. not to actually haven’t we going we’re it’s that any restarts combination between the in happening already signalled Again on and the ground. Yeah, a what’s

So consumption do if the discussion example, real, it’s with it take has to aluminum. domestic Brazilian the you supplier, happening what’s an Brazilian as of Brazil energy with with

and still States, do There’s back we’re our of appreciate work. to as online, in opportunities later Wenatchee. a order about the coming to So we that life cycle reference it’s call. XX a bring complicated Brazil, the particularly when it’s United in couple question. But lines its out you real think additional we end and to where our month capacity I

and There’s bring have curtailed as some in have to capacity Spain, in curtailed we these challenges. We energy to challenges of well challenges on different market capacity as Portland some obviously capacity Australia bear. top can some bring smelter. additional order that in the particularly very Each a the also online them and technology

at point forever I take and in those we on have that say pricing, happening we the to very pricing what So think address a we markets question. segment but lasting was also year SGA current the It fundamentals very are $XXX rely a could how in little don’t than point That deeply. we a particular opportunity look in place and another this look an prices we in or And like less the think we would think per where market. what’s close comfort of the about have of one a curtailed a ton bit That’s is alumina that a ago. ago Texas. we analysing year about of at US, alumina. serious down We

Timna Tanners

And anode know mitigate then advantage drivers a we are your can some could mentioned one coke cost at higher obviously the you there alumina But pet do on the you higher if Lake the that prices, of I of items? position, to and of you talk inflation other the those and measures any bauxite Charles. costs the But basis. my about little follow-up caustic is big know and

Roy Harvey

produce uncalcine to. the to to that we that turn and calcine can integration, chose we and buy the a a of smartly. in ways Charles have should Lake ability the calcine across great do is procure We coke try place worked board to to to example anodes coke also find Part backward and where is of

So each these raw we look materials. at of

that to the look Southern at cost and On is ways got markets, when for improve low the China look leverage low consumption have a – caustic, that US you you’ve order you got also of We an to as you have in between well. so relatively using is ability you pricing advantage and caustic bauxite as example, them. of between which is advantage an

So because is each it looking much we’re of competition. advantage, can always to a how the find across materials an very raw we see

to be that before. have on improve hadn’t or brand consumption coke factors smelters. day new preserve or different competitiveness out thought to time And to buy that and the sources in might our And about we we the in we of quality also to find a us maintain spend in that so side of it’s ways allows to operational order each from order that actually our day and pitch a of fight consume

Bill Oplinger

that’s very we we comments curves And did, two it. pretty caustic good that Timna. and more seeing and and of I is curve producer. One job quarter We on a the tried some thing low that advantage as last to put numbers are have are steepening thought cost steeper a we clearly is for around cost expected cost alumina that better a explaining

calcine coke calciner the secondly, that and think Just cost have to can to calcine remarks of gives the and have have and up eluded when us coke of can tremendously and cost And we’re facility, you improved green Roy advantage appendix metal buying the Charles both generate to mentioned around prepared businesses on curves buying facility coke be alumina the XXX,XXX you the metric tons clear your see running. in it an we in and which I Roy, restart latest that then Lake curves.

Operator

Stanley. from Sood go Piyush Please Morgan question next come And will ahead. of

Piyush Sood

question, decision going a First start. around reason you a asking the The a which off date have question year. and next the on figure it it make out Timna’s will is, I’m help Wenatchee us for is transformation its when

in XXX XX of was dropped say in. was the XQ guide which So about

if this don’t you expenses may from So restart transformation have that doesn’t year, smelter. you but affect in XXXX, you Wenatchee next

commentary next levels any pieces? think we around should or the stay we positive should on about for So how moving year XXXX

Bill Oplinger

I’m around glad a because we to haven’t don’t specifically Rockdale to clear Rockdale XXXX you because US to right, announced associated be be it lot post-tax pieces, will the million of we in Rockdale. we deal a hit benefit, enough. said the $XX going and is have it with to be if in tax million pre-tax expense and $XX moving moving transformation, just

in that’s fairly impact So large transformation. a favorable

We will be Wenatchee, evaluating evaluating of in are we Wenatchee. process the

have substantial needs we that facility. we that be don’t next if first know to half restart a large You year, of in made that the payment

So next months. all the the analysis, we’ll that curtailed as said few through be that and Roy other going facilities over

like So to come January transformation more around year. in specifically transparency this just we did

Piyush Sood

what but the business the from EBITDA XQ? one, this was missed rolling in I Maybe

Bill Oplinger

of issues on we expected But It to target couple quarter us that the $X than We down lower out smelter. million. said this do wanted rolling a had shipments EBITDA basis. mill. that to in was still operational business what a of of the on do year. rolling as was caused the mill get the And we’ll sequential a significant is we benefit to with restart have

Roy Harvey

And I’ll take in. the opportunity chime just to

to business attractive for is that to order rolling in real where make do us. an Our asset have one work serious we

it. However are aspect one we just is it’s very on. that The restart of work smelter focused

in to more looking much and also make volumes business our customers We’re mill, bring new improve attractive. the to running the to look rolling through

Operator

ahead. Citi. go will question next from come Alex of Please And Hacking

Alex Hacking

And from Just cost NFX, sort quantify of inflation you to you that, coming expect can back any if And FX something is the there way on you the attached quarter? impact any that do do there incremental evaluating? to fourth material seeing don’t then you today around or raw do that in now the that is are cost? hedging you input it you’re

Bill Oplinger

Yes.

far around we Aussie dollar. $X.X any as As the billion we in $X.XX guidance have further assumed quarter, fourth that have

cost that we bit higher quarter. $X.XX down in at it have So that in little was anticipated third of raw And the material the end from number. a returning the back

already. that billion top head around and off $XX So is included in of believe I the million raw my approximately $X.X cost material higher of

you is We hedging. asked So that all in hedging. had hedging minimal that And number. about do inclusive

We small a specific hedging for of will amount asset. from do time time to

in when So place have the we time decided restart we for when our programs to time some or significant restart will currency be put manage we currency. either Portland, know a in we Portland Portland to exposure. large no From the hedge spending will we side hedging capita instance occasionally on to on input that, that but cost the non-US and project callers dollars, money we

Alex Hacking

then a time think a we if back which does seem like again ago And just follow-up, ago. as a long year

think Thanks. see some later something where could I would EBITDA it year on benefits. Maybe like and on you spend kind program XXXX. that of start XX update the projects million identified, had should in give a coming $XXX that to us through about guys of an was EBITDA we you of those way benefits You generate

Roy Harvey

one that I’ll hit first.

can are start to intention of the what So, putting bear A analyst ongoing. of what the our get lot our doing. of all and over also there out to some changes five some to to really. tend three those next The bring we’re with prioritization was years of projects numbers we help comfortable to market to change

So the our expenditure we’re we’ve this that growth simple increased year. is on track, for fact

they we’ve on because become have invest We’re And good attractive. time is a things across inflating smart growing that that of we’re we our projects The place. many high in interesting been or at to years thing to in in that have not so doing more that return the in put to each of the can opportunity immediately value businesses. bear we chain got prior prices,

New I would So and be. assume will a we we’d have starts. what quantitative to what of that Year update that’s updating the as don’t return number the be project something is the

year, next tell However that at number more for better. have what make working in what we of the to this bringing and what bear we’re look we’re when is already that, couple and years, I attractive to you can we place

Operator

from go come Please Credit The Curt will next ahead. of Woodworth question Suisse.

Curt Woodworth

X.X supply-demand X. of was view a of X.X that surplus this year, now at is to balance us guys the China I between which X.X was the surplus start offered the to and looking at you

potential it XXX,XXX taken from tons, cuts. issue we’ve seasonal around [X.X] down X.X got you’ve close the of So yet permitting

to thinking at permitting curious why of certainly lot year. the down just or the maybe the as of have have kind would relative I’m to giving the I beginning more guess would So that a come the issue thought I surplus

did the offsets in relative Jan So the to you just curious today. were to think analysis I’m what you maybe what

Roy Harvey

sit the it back first I we know don’t put to to together, when whether the announced. of trying the were And are MEP happen beginning But to year. at in when because we our remember were estimates incorporates market, announced Remember the programs expecting I’m I we and pricing what of be today. they different an already had the also we environment expansions, remember would thought be the for had we incredibly for also from we was curtailments. at expectation what where And an expectation what would we year thought the beginning

that was So think in was there under that environment XX% the Chinese water. and moment, pricing absolute something in percentage, that smelting I particular I’ll or like of miss XX%, XX%

So expansions We made about we motivations. going line. occur were financial an from made an about come assumption curtailments what actually to on assumption what could

a than capacity more you capacity the we actually at that assumed seen have beginning happened unpermitted coming when capacity year and about older how smelting add newer to the differently brought much off. is offline. is offline. the we year, sea higher not was it’s had that what that, the interesting is analysis coming cost of change And It large I’ll thing what’s this one other in The very think piece

curve, stuff the it’s cost the sits So at bottom of the that stuff at the top of the the cost sits not curve. that

we that intended we China, themselves by never made decisions in financial a large however or have are idle seeing are partially purposes. smelters those So number of for idle would

that really the for ride the expected So had year. programs it’s we in at these have very the a different taken what beginning Chinese us changes of

Bill Oplinger

to keep mix XXXX to in One numbers. And not with I’ll annual thing number mind is note. minor make one

a giving are occurring you during but going Roy’s far in and occurred course in XXXX as the in of clearly So XXXX. They to bigger going to that’s the that surplus, annualized is November a the deck October on impact impact have deficit very curtailments anything year supply-demand numbers as have the we’re curtailments. and small and

Curt Woodworth

its illegal when that the with basically that already past the aluminum the is you but there’s MEP. cuts makes two months to been the win respect I the up about the if at more price Shanghai discussion down. you from have contribute guess And to mandate the look around aluminum that in occurred, think market Okay, sense. then cuts illegal seasonal And could actually XX%

think the with anything do So you can counting market heard is guys that mandate? of cuts terms Have out in to you seasonal signally play how that illegal that? towards regards the

Roy Harvey

our that impact. the in tried that both or largest particularly So we’ve programs we the is way with think for the what reflect of program, that smallest both is impact we’ve dealt the MEP estimate in to

likely represent So between between them. two the meant the extremes the two with those to that outcome somewhere difference potential of bar is

good a very which is of is that you’ve news amount already a the NDRC curtailed MEP. got bit defined So little and

rules announced of that provinces still have you’ve that that are sits MEP be. with got which the that the in are fill You’ve game going annualized slide to started got within And of which out then play curtailments these to numbers what white the you there. see. is really are section remember already that And

the So driving impact majority. is really the program what’s NDRC XXXX is it’s not on from actual the MEP the for XXXX. but important dynamics

Operator

from come final will Company. ahead. of & Justin the go And question Gabelli Please Bergner

Justin Bergner

of question NDRC in million X.X up pick are the off, expectation curtailments Just What versus changed running last the XQ million where at your now tons in left presentation. there? X.X tons to

Roy Harvey

believe they some XQ the the permits we at the back We estimates. exactly estimate happened were they we the changed, and market and were, what where and What commentary again looked of to in really that’s be. in what went were

what be meant we as analysts, smelter curtailments. now seeing chain supply also well has an benefit alumina these people of sell in total the is was monitor has actually we actually then curtails, aluminum provide. trying on been and producers some each good seeing The of the are of to as to the you confirmed capacity, go and that come through been it ground so that smelting, because the as see we some estimate alumina integrated where have and alumina possibly could as we are out And announced through that those smelting

some to players. more QX between large by So driven really QX of private a impact growth the the aggressive was and

they tranche down regardless politically we’ve to how seen so unpermitted well And of connected be. of come actually capacity happen another to

Bill Oplinger

to And two we have went remember we XX with two then and we plus last comments, plus that to XX cities three. started two plus

really curtailment. to And Just around credit team we’ve that in X.X X.X going give up Shandong around and some annual heard until just million I most because a to were a recently annual million and out came market our tons. ton said research, through we research our want market is days few July

Just this five X.X. three, some of has over curtailments us the most recent potential up the last four, days of bumped to

and China in Pittsburgh here So pretty our accurate. folks been both in have

Justin Bergner

ex-China why versus side on forecast? increasing is aluminum And your prior then the the deficit, that

Roy Harvey

It’s been driven for capacity. supply, disruptions the off direct, a few bit supply by a shaved to our world that’s little there’s rather and that be some of at expectation around smelters

how in shattering earth analysing nothing that. So we’re

Justin Bergner

Warrick and And then million lastly benefit Rockdale you mentioned XXX a on a different topic, from the agreement the restart.

beneficial to million is million to that mentioned XX EBITDA? XX from mean you XX XX are that Does You annualized Warrick the to Rockdale.

Bill Oplinger

operating, fully next be second When of will which in half year. the

will the So we going of will at beginning get fully [balance] half. should the full the it see to at that it operational at of and second we in and XXXX operating half end the first be

Operator

would conclude this will Roy this the ladies conference And Harvey to time back gentlemen, closing session. question-and-answer over hand this to I and At for like remarks. the

Roy Harvey

day, look how trading. And XXX%. we’ve publicly sustainable to an continued first this importantly it stockholder with per stockholders. Since lasting began quickly that value Alcoa create company $XX.XX to to independent back developed. that Corporation for on increased XXXX when are we share, year the more ago stock we With you Thank markets your our our remainder this over for stock value forward you, Thank pleased year traded for our our happy closed are first our was beyond. what with today conclusion, accomplished one you than Denise. momentum have when also was In to of approaching, issued more operator. day anniversary time We and as and

Operator

At Thank you concluded. lines. today’s your disconnect for Ladies this has may time, presentation. you and the attending now conference gentlemen,