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Alcoa (AA)

Participants
James Dwyer VP, IR
Roy Harvey President and CEO
William Oplinger EVP and CFO
Piyush Sood Morgan Stanley
David Gagliano BMO Capital Markets
Chris Terry Deutsche Bank
Curt Woodworth Credit Suisse
Timna Tanners Bank of America Merrill Lynch
Matthew Korn Goldman Sachs
Lucas Pipes B. Riley FBR
Justin Bergner Gabelli & Company
Alex Hacking Citi
Paretosh Misra Berenberg
Andrew Cosgrove Bloomberg Intelligence
Call transcript
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Operator

Good afternoon, and welcome to the Alcoa Corporation third Quarter 2018 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] Please note this event is being recorded. I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. ahead. go Please

James Dwyer

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

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

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

with prior to resulted in first Board’s addition, the presentation. quarter comparable a Also, well been into non-service moving updated included In and earnings and be to our for our have presentations some our EBITDA change the OPEB period we current on measures note today Any pension accordance out financial to costs such non-GAAP found statements, second directly means financial expense. presentations most Alcoa Financial EBITDA adjusted presentation. other consistent measures presentation the of with appendix our and as in costs. today's has periods this change EBITDA. the in financial can Reconciliations reference GAAP income the to the This Accounting in as today in of recent Standards discussion

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

Roy Harvey

brighter pushed addressed we’ve our sheet to returns, our to structure portion liabilities. complexity, our and two third position and priorities joining we’ve earnings drive we’ve reduce a future. an ago, launched that In time, everyone Thank we’ve Since balance appreciate streamlined significant publicly-traded Corporation our and today’s quarter strengthen independent, operations drive years of you, processes, And returns, a our strategic almost Jim. company I used the for to as Alcoa call. company we

As much launched in a XXXX. we stronger is when late result, Alcoa today

and repurchase million $XXX $X.XX today on review XXXX is a we The the We we’re stockholders. or stock net details strategy’s net In we On of commitment our excluding million adjusted $XX program $X.XX proactively pleased pension our we framework a the share. of to our basis, of a success, net proof income continue share million to key allocation repurchase results. made cash debt. address As adjusted used our quarter liability. announce third million component we cash up program. we perspective, call, repay capital items, loss as more reported but provide an now, the a to a in a later basis net was third let’s to liability $XXX for quarter $XXX the and pension special EBITDA million, in further an quarter, XX% per billion $X OPEB On And balance. closed a or reduce items, generated year-over-year. with $XXX from both We’ll and to available special excluding our

safety. to business start Turning update, with our I’ll

improve operations. importantly, now across leadership critical how all this is this safety recovering as strengthened every incident, manage an We at evaluate reminder, heat and employee life-threatening specifically suffered was his had Our injury most preventing of seizure. and the locations. and one standard on from our Most of included intense altering. the standard we home. prevention and that we transported or across defined experienced stress our case our re-communicated our smelters After of at the an after of will serious as care a focus at ending one global our quarter, improvement risks as important for He measure shift part operations, a our ending injuries one stress U.S. an life heat life is ongoing serious during to facility initiative unit, is a employee and

a made This stands $XXX quarter, from at of XXXX. from sequentially in further billion, the $X.X It and end billion benefits. other improvement down the million now reducing progress and we sizable pensions post-employment $X.X liability at

the who refineries at These walked them will work personal had all in of affect the and Aviles easy new because out uncompetitive. technology, we process our structural union the are On to less-efficient that on plants. voting at intention issues, But back never and have collective proposed including agreement. Australia and mines Today, have Coruna in aluminum employees, two of these Western are their front, and communities. week on consultation makes our which this globally for types labor inherent families, announced formal in older, labor dismissals Spain, employees impact a employees La our they plants Spain communications of are begin

to of employees, the committed plan. on we'll with and a workers' impact negotiate on are any We representatives minimizing outcomes social reaching

high deficit global operator-centric the level, announced Presidents growth. directly project projection to modifying EBITDA, to our with the range strengthen Turning the alumina, to items November year. last remain organization bauxite, we while for excluding quarter. between our our continue and markets full-year special segment interesting aluminum may of markets, surplus and been to outlook to targeting effective very $X.X upper X, of and a our we $X.X of market alumina adjusted approach, will for and support half will are and remainder the aluminum see the And stockpile and volatile me. increasing the we provide billion, And bauxite what our a in billion a for At range lastly, both remaining has report volatile,

Senior Officer report assume me is managing and In responsibilities the for quarter that, results. look our primary role relationships. The Alliances. third of Chief addition, with to President, key developing us will ready strategic the at a company's He Vice Operating eliminated. give Strategic be to continue at With Tomas that to detailed time, will will Sigurdsson Bill role

William Oplinger

Thanks, Roy.

$XXX which assets and we actions million. netted providing and OPEB for Alcoa the plants. up relates the of participants. lower prices assumed XX% Sequentially, of million are non-controlling August and In share $XX million XXXX, alumina to recent statement. $X.XX revenues effective items who the with was to for interest, Compared or per totaling Special income ceased Also, XX,XXX U.S. to million higher loss start on million benefit our payments XXX.X a annuitization, liabilities third-party $XXX impact X% year, are roughly approximately tax Corporation quarter insurance. on quarter, on we All both transferred retiree shares revenues after plan million attributable totaled prices. in outstanding. positive Let's In pension down and aluminum. aluminum the pension last to a in other to net $XXX September $XX life X, salaried insurer, items

down million quarter $X.XX special metal adjusted sequentially, lower per third income due to Adjusted special was $XXX primarily $XXX Our EBITDA, was net items excluding million items share. prices. $XXX million, or excluding

the comparison third a impacted on quarter margin XX%. expenses other quarter, currency drive several well depreciation. statement Our as EBITDA R&D including was areas lower sequential as basis, note and lower helping of moves this Few on income items SG&A

the million in lower benefits increased $X higher netted foreign revaluation $XXX currency quarter that May. expenses. the offering to side, unfavorable to the closed million due third bond On other in Interest expense

mix quarter in the was of rates changed $XX increased to by XX.X%, the up as half year. Our prices catch million operational the rising first of our we rate tax recognized our and non-taxable taxable provision losses, the in earnings and alumina lower

mix the adjusted at of the Lower in aluminum change look third the in a take higher alumina prices metal decrease. EBITDA. price segment $XXX of and our drivers the million. provided million Positive in in The stronger our $XX benefits segment. sequential was drove primarily dollar costs of alumina quarter Let's currency

quarter. in the full power of completely both to in benefit the aluminum mix shipment expected, benefit; were million month in did and material to recur Brazil costs and cargos And in expect up especially pricing higher the trued our and price costs second, recur to timing smelters, in alumina the alumina a of fourth generating quarter First, continue segments. periods tariffs energy raw the prices. priced not increase second full-year meant other. sequential contracts XXX Spain, sales their negative not do $XX market the impact a reset from favorable quarter at of We as more shipment some several offset Section included and in than in were is is Stronger sequential higher sequential

While that's entire paid production the Section tariffs mostly not on Canadian XXX we Tariff story.

regional was Our Midwest U.S. benefitted the the premiums impact smelters Alcoa the of net million. $XX a quarter pushing tariffs tariffs in so to having of up tariffs from to not benefit compared

operational unfavorable $X the favorable bauxite, and lower currency segments to let's improved price EBITDA on and price the lower our adjusted index Alumina alumina offset metal $XX overshadowed by adjusted and from the Aluminum prices improved shift mix, improvement predict. and EBITDA primarily made segments. hydroelectric material the favorable mines. higher partially owned to down it improved costs. $XXX equity earnings segments, The of sequential currency million Now prices, accounting at the million mix In focus sequentially, corporate million, lower and raw difficult alumina prices higher spots the Bright volatile segment rolled energy but costs. flat inventory have were on and alumina products. strong Outside facilities Brazil impacts

from the outlook end, the $XXX alumina substantially prices at so two $XXX from For example, the September, to we’ve at last results weeks month dropped of actual in changed mid-month. provided

to cash. Turning

points balance use billion third balance of improve the to Our continue $X slightly business, strengthen to two cash and end to make sheet here. the the the at we over is quarter, cash available

over settlements. repayment, the million funding, flows including First, debt discretionary to the totaling three payments one-time strong additional nearly cash additional, and payments, have allowed and balance sheet, $XXX make to quarters, last legacy us and pension strengthen

alone, allocation U.S. minority of our part to of cash million payments in payments of including million million and in of in funds, $XXX dividend pension $XX including substantial payments debt Second, $XX our of quarter a million funding flows debt our prepaying framework. million us certain to OPEB partner capital $XXX into Brazil, discretionary third interest of and pension as the $XXX allowed make

net pension on down capital continued X.XX XX% annualized year-to-date to EBITDA on OPEB our quarter, sheet, strengthen and $X.X we down is This at the liability billion times. and is balance an basis. to and to net Return strengthening to continues debt is

Our working work lower year-over-year quarter The third restart. build the outstanding this alumina last days and primarily change related material was prices. days of XX payable capital Higher higher from year. sales and the quarter to due in the and recent X days second to X cost days up are inventory higher primarily inventories days quarter is raw up inventory versus for days days, the system, and

the sequential changes. expect will to fourth dependent from on improvement We third amount the quarter be the DWC, but DWC sales quarter price

discuss pension let's in OPEB. and the Now improvements

the at pension decrease XXXX second said, liabilities, and $X.X is $X.X down billion $X.X continue end of billion and the OPEB I liability end of to As down our from net we billion of from the net and at quarter.

actions net many our life and and for U.S. sensitivity of in liabilities interim pension million our liability demographic taken from All points our liability this Canada effective other factoring XXXX investment Taken be changes, the applicable this the pension a will throughout million. re-measured changes $XXX and pension our $XXX usually the change we end the plants almost net after re-measured every in discretionary quarter, $XXX the plants we annuitized is actions discount rate plan. of U.S., in year, insurance ceased we based rate our in liability salaried the as rates, these We taken plants funding to of retiree year-end, year. in in the U.S. our basis net approximately we for million in million actions performance, to million in factors, gross discount These and April and million, discount reduction XX that in reduced Canadian July, program. actions approximately XX% drove current related with the down at in re-measured $XXX do XX% OPEB $XXX $XXX actions, the the of plants re-measurements from changes and that's and we've on in change by contributed

will expect quarter million stock will fully our market this of stock. not with and has aligned program, authorized and held capital XXXX start retired in we a treasury factors. relevant repurchases mentioned Roy purchased based program other conditions the to on repurchase and $XXX Directors framework, allocation be our cash Shares be As flows, Board

allocation at For XXXX maintained $XXX billion, of year, returning in of sustaining to that capital approximately drive liquidity, did required and completed for balancing be and expecting we now iteration XXXX expenditures allocation as capital with optimization our an seeking will return lower newly conditions, recently the expenditure all future spent, maintaining XXXX, capital $XXX market for cash many the cash the in million liability We've capital investments expect factors The components cash stock sustain opportunities, program stockholders. value, the including, balance allocation light next been the addressed provide roughly challenges in update on we rest we announced to repurchase on million. capital January, framework to focused structure optimal million to program of year, stockholders. expected of have throughout and returning framework, business $X $XXX the we'll least the capital and

review let's XXXX. Now full-year the outlook for

We are tightening sales regional to and outlook full-year $X.XX API adjusted at $X.X based $XXX Midwest billion unpriced premium. $X.X $X,XXX EBITDA our LME, to on

shipments Some million we've is ranges shipment year adjusted tons the Alumina, slight down tons alumina, Bauxite Bauxite XXX,XXX aluminum full unchanged. and changes shipments in & the in for X to outlook outlook outlook downward, in

improvements improving primarily selenium. transformation expecting million categories, lower on in full modest several $XX net XXXX For spending, earnings, is year impact we're in

on is result improving and and million amortization due our $XX benefits. pension million foreign is lower corporate $XX benefits. actions OPEB currency and recent overhead currency is of to million spending as $XX primarily Our depreciation improving improving Net a and

end to to be $XX $XXX projected, are year tax use to OPEB funding we some rate lower be slightly approximately approximately to range Australia Roy. the benefits. than back low And environmental $XX million also, expect million, the slower cash full what $XXX and turn port to down and is return-seeking spending expect full-year previous ARO spending $XXX to will expansion XX%, be previously expenditures million. pension it our capital of We is had million, the of lastly, required operational approximately I'll on currency down at million over minimum due Western we

Roy Harvey

look I'll our at begin a Thanks, Bill. markets. with

to both in see aluminum markets, continue surplus. expect now a in larger but We XXXX bauxite the deficits alumina and

in throughout presentations see our year, in XXXX. noted likely we've grow we're Chinese to As this stockpiles

bauxite demand a higher demand by in expecting increase [ph] bauxite, supply. is it slight we're While seaborne in Chinese offset than for more

to As past, has to the alumina, use continues stockpiles. customers operational in in deficit. be the In surplus been Chinese the case market bolster the

alumina While alumina levels. our that offset compared last that at supply demand lower by estimate is relatively supply are is quarter ongoing disruptions down to keeping being

projecting pricing tightness continued expectation World being markets to Alumina that be revised will tons flows of exporter aluminum, the for We alumina for forecast This a two our is have In driven XXX,XXX now deficit China by continue XXXX. approximately a trade metric and year. are ex-China. relative between of the net we and in in the

to We estimate have and reduced our of Chinese aluminum delayed due curtailments supply expansions.

by than come that economic a reduction figures Data and However, lower year-over-year XXXX demand growth our this have China Outside growth with projected. to that the reduction China, rest countries in causes been from shown forecasting Turkey, weaker growth, Iran, X.XX% basis electrical points last The released XX issues, matched X.XX% have to sectors in global to China, this demand months we in X.XX% supply several we particularly and are demand has result, quarter past by lower of X.XX% dealing from transportation of a both growth as world. quarter. the growth two significant the including demand Argentina Venezuela. in the the had over of reduced

elsewhere. we by this trade in the supply States, These and quarter markets, into As considerable last disruptions could have China taken mentioned and the and XXXX conditions actions driven policy United remains and in earlier in XXXX. uncertainty impact governments by year, of our dynamic

of the on here cost our global Next, three markets, is XXXX represented curves. view

they portion cost do of provide inside. reflect our important a curve While only some story, positions

year customers value move Alumina, consistently metric structure XX the the XX high to bauxite percentile. to approximately year. quality that bauxite curve XXth cost Our with the continue small at Alcoa year, tons a that delivered partner per last this competitive from percentile the we third-party made XXth provide. remains million highly Producing cost up to percentile

will million than our producer party of XX externally. the the alumina, of thirds third metric largest approximately tons more largest Alumina two As and outside segment of sold with alumina commercializer China produce

year. the a to more such cost discuss I'd aluminum percentile fundamentals year shows the the underlying With like this depth. curve change, increase third The XXth last XXth in an from percentile to

a Let's the prices for what extraordinary has look closer at truly raw start alumina year and material. with a been

As usually are its in prices Australian Chinese alumina see world is flow you higher rest left, pricing fill Since short the deficit. from depicted alumina, alumina has gray can to relationship than into the on China typically China prices. the its to alumina enabled of

ex-China a disruptions alumina has and lot has prices. inversion alumina refining to ex-China in in This up segment and outside world net for elsewhere. This on produced the unique This margins that has has number slide. XXXX. from of had the impacts experienced Chinese by the pricing our a a has of situation a However, world direct impacts exports for China The of market. happened including of Brazil aluminum shown pushed in supply alumina alumina driven lesser something turbulence, knock over producers graph prices in Alumina higher China market largely extent also and mentioned interesting below prior we

to slide. right has the increased see this quartile smelting Alcoa's to position the side that Turning year moved from We smelting the second last year. that costs cost third the of up quartile and have

of the prices. slightly significant more to by the While contributed our alumina smelter this move, far driver restart Warrick has partial been

Alumina fact curve portfolio prices $XXX relative a our about the up cost relative China moved quartile. smelting higher has and In That of alumina year-over-year. ton in of cost the have benefit outside per our competitors third given into Chinese change

smelters value disruptions alumina are that rest which in recognized is current world likely ex-China Chinese are be to dynamics, persist. may resolved supply prices above expected our the are quartile products prices of dotted have new the exports line. at we alumina materials back rest smelting to pushed china. restore to and world demand those then position second of ways strong on the of and increase our in world to efficiency dramatic the focus have dynamic alumina continue that times building essentially This in However, China illustrates move global the alumina into third our alumina factors changes while moves returns world prices and market price restarting the China out including Those the our in raw point. maintain happens, and aluminum if segments. of improving expect we cost importing could party for that cost our would Alcoa sales integrated above each we from by traditional three benefit continuously as of move if our rest unpredictable that assets. If prices some volatile, driving illustrated markets at a of situation back to position our not to chain,

Our China. is producer the world's of largest unrivaled. business We're outside alumina

So alumina added represent to prices while overall alumina the cost for party increased sales. in strength Alcoa smelters, an due third our benefit

both that objective, give This in simple slide three on model lever. how strategic of financial a across a to we've let's examples our in been market long-term each at an value cycles. creation as with and priorities. we through the our we Now the To been through business parts all traded launching company, for succeed illustrate value we how independent few to approach look create of like focused Since cycles. creating all the pulling on can I'd levers business publically for value both sustainable areas. can market demonstrates so alignment we've achieve

the to and in We underlying true of due mill, three businesses. operational restart reach this its end of focus benefit The work performance. conclusion year each our improving results smelter the of on our operations rolling our continue to financial of a to provides improving at the

or investments and improve in will $XXX further future of at this year. in efficiencies flat we're several us capital growth cost enable promote our smelters, production approximately projects seeking keep in million Additionally, our operational return business and help refineries to reductions These investing rolled bauxite.

but portfolio. at the efficiency to also actions, has and such our improve issue required difficult our control the some stability We’re announcements assets long-term and costs ongoing today’s This in we overall Spanish not actively managing employees in affects affect success of operating smelters. always of Actions of Bécancour of that as labor the our smelter and the each two employees our that consider announcement are Quebec, must operations. taken at lightly,

of and stockholder size Aligned liability substantially as because on several associated important obligations. risk lowers strategic our liability value also and our reduced include volatility ability strengthen with our reduce overtime. we Our it it look to focused year. will maximize liability levers. Bill and balance the priority OPEB company’s with financial also Reducing and opportunities have pension is of detailed, net the the to this OPEB to the sheet we remained for our further pension We this

of to also cash sites. While we minimize cash our either available the liabilities, we’ve used seek or or assets, impact generate income to sell from regularly offset to opportunities optimize idled at help these some

side, continue the cash focused for with progress we our the investment cash equity are make balance to target we maintaining On business ventures. on and and joint our

May. shared carbon-free company we and clear which of addressed These used to in with you for we is quarter, from while our the how is we priorities joint strength still balance stockholders, our our and example Alcoa for with to it are a thoughtfully of commercialize since rigorously strengthen liabilities. to have launched are launch there Elysis In develop future, are As returns smelting we our structure, and sheet generated our simplified we’ve and brighter value assets we’re underlying making progress. strategic our that our closing, improving our working last much do our venture, technology

strategy. nearly As point pension the our today was since launching a years in liability, and and our repurchase and plan is ago than result, OPEB smaller of success operating two the our stronger XXXX company to our it stock significantly results

volatile the $X.X between half mindful of targeting quarter. announced range and EBITDA market persist, the billion projection is $X.X conditions last may billion. upper we’re new now projected we’re that While The

questions. the be get us company year. and fourth ahead quarter, protocol happy Now our could Operator and if let’s your remind the forward With look to strengthening started. and the go take that, into further strong of for to will close please I you we to even Bill a

Operator

Thank questioner you. today be with session. now Morgan Please the we the And Stanley. And go will will Instructions] first Sood Piyush question-and-answer [Operator begin from ahead.

Piyush Sood

Bill, a congratulations X% thinking a your a buyback not to buyback a a say, remaining of large strong what and buyback. a quarter. about regular small and and with dividend million starting was Roy plan, see the on Good $XXX through only mix

Just to thinking the want understand decision? behind the

Roy Harvey

Thanks provides of question, then in a since -- the talking the over over felt and desire, the Piyush. flexibility and us year, allocation dividend, it to a we've opportunity investors also, return reason for to lot shareholder on the we the being course it advantage to buyback of Sure. the we during a execute it. We capital upon announced provides that if is been the they framework last when of the favored And investors for take general, the that capital year.

ended with we the going So up buyback.

Piyush Sood

Fair from enough. back And get one me, the queue. more in I'll and

quaters. a Section we see in Tariffs and MCA signed, has could that possibility So is there converted the XXX into been calendar U.S.

your if So to floor think a point? it's more this premium come point the happens, that pound bill will that you this high expect cents does we what duty U.S. premiums? to assuming teens in do that import at paid Should like Midwest per down, at but

Roy Harvey

where honest, regional typically Piyush, other. question. Yes, To will I speculate don't one the direction the quite we or on premiums go be appreciate

be to highlight. focused continue to things We I'd very two on like

our of sure trying level market-based ensure of reel we're for with order very to in the so partners can China make Section it that that on kind ensuring States, XXX try exports and overcapacity, all trying in focused administration into global Canada that we're that, of to on we of that comes we a the we're elsewhere, to the the free applying Canada, economies we in around to we playing and sure right the -- in is make pressure important align and as Chinese First discuss also world United to focused and to on When field being possible. Tariffs, have production. States, tariff how deal have of increasing and the all most United with talk we're the and remains able can we're

think understand the I was somewhat the And also will unpredictable Canada. are this where it's the a United process Section so, where XXX whether issues MCA between as part up I but it's it's your separate States part or as whether resolved process, going, and of end to U.S. of question where

Piyush Sood

one comment. you to clarify Bill, more the million XQ mix we any this XQ, it's versus Alumina were a benefit and sorry question, XQ item a sequential other And thinking we is segment? And more in just bridge when making there is should $XX price bridge about exclude think non-repeatable?

William Oplinger

the I the $XX in was non-recurrence it's the pretty we've going And positive side think alumina of negative that of during the up difficult the will into million a mix prices quarter and end the second With said, having course volatility seen, had impact on benefit occurred million, predict. quarter, prices was in the out the third of that of $XX that shipments in million to the a quarter. $XX being price the depending fourth vary the what quarter. API with of

So in recur occurred you're the the say anything back out, I fourth. will not $XX the in to quarter if million that would going third

Piyush Sood

right. Thanks, on All And congratulations the guys. once again quarter.

Roy Harvey

Piyush. Thanks,

Operator

And Markets. our ahead. next questioner today Capital David will go Gagliano Please be BMO with

David Gagliano

relatively just a the three, wanted taking in for terms thanks questions, two the list numbers my I have cross here. of off or a but have Hi, to few a -- of I minor questions. just I

versus improvement EBITDA new quarter, second flat-rolled flat-rolled quarter-over-quarter contribution business that from EBITDA million $XX contribution is the all, of in level for reasonable of the First moving forward?

William Oplinger

quarter, there was -- really Yes, two and in the we but good it. saw flat-rolled things in third improvement driving

think of the is in that inventory that is year. we some into better from one-time flat-rolled targeting suggest that first which the I really Dave segment we're you did -- catch-ups to were flat-rolled, The quarters second volumes that in first would around have was positive impacts And sustainable. I the There's going two adjustments run were the half., basis. of the a around in little a the on vary may is result during as not seasonality and as in rate in flat-rolled year. level strong our That the flat-rolled business. the course half that second performance that we'd first typically million business be targeting business, quarterly of that $XX the bit XXXX of but

David Gagliano

Okay, alumina through give that's that then the us third Thanks. the flowed alumina -- -- quarter? could the cost you costs average aluminum segment And in just helpful. just

William Oplinger

have don't to have that you'll the after call. Jim with one, up I Dave, so follow

David Gagliano

could And profitability small two relative from realize give bit I us EBITDA the one, a perspective, want relatively frame I the benefits, most closures, but a basis was the shutdown? to contribution and of an the on I you Spain, those in on then will. however, were Okay, last perhaps you it from likely they framework around a smaller once quarter just recent smelters if to expected wondering even are

Roy Harvey

Dave process be starting just you're to it appreciate workers' doing. how discussions process honest, I Yes, Roy. this the of we're consultation It's is and formal quite for a the because -- question, very Spain, representatives. with

be to think would I now, changes right on too comment early quarter-over-quarter. it simply

discussion one we'll end the So, of that process. for a leave once reach we I future think that

David Gagliano

much. very Thanks Understood. Okay.

William Oplinger

Thanks.

Roy Harvey

Thanks, Dave.

Operator

Bank. with the Chris question. Please ahead questioner your Terry go be will next And with Deutsche

Roy Harvey

Hi, Chris.

Chris Terry

the smelting cetera. A Bill. and talk the detail XQ. the up et you electricity in following conversion Hi from through me, Can from there. around Hi on just I'm the costs just few carbon just Roy

I think the versus came expectations. that's of break where a analysts' lot

numbers gauge just of to XQ? into heading So a the trying get

Roy Harvey

we pitch million, the costs analysts' came to say in probably that's go we million is from side, we're expectations, We about maybe refining. prices areas look bit it, looking flattened less, at in from a where we hard we're products costs a far on on business bit Year-over-year, continue always expected. where it. about right? did little couple I -- talked business of be just the quarter. think them. the then lower that did we were a had not XXX flat-rolled came cost very people out the business of anticipated, as where And as year-over-year it's Yes, the and smelting in in line, around there have versus The material a as little refining where where we we are what bit, the smelting raw a Brazil a anticipating improvement So at But in than costs overall judge would very, smelting up. well essentially coke better bit little is was, bit clear, but third more seeing But, have against to prices little little to expected. seemed in $XXX business, is the taking down that that that hydros

Chris Terry

next actual for million just What's overall, buyback do dividend the realistic the Thanks And complete actually then about that buyback do expect buyback the Is there. and pension will to details the to you how actually that? Okay. that when year? debate. thinking in you decide timing $XXX the versus you it versus

Roy Harvey

we kick year that remind buyback was capital that will you part -- quarter. it program allocation in the fourth over we'll start an a I'd integral Well, off ago. it we the the announced of

timeline on excess talked quarter. the how given projecting the do including we'll we about return shareholders, point, million that above to million, we commitment to and we'll $X that was in we're of quickly be kicked return $XXX the at on the done holding we it get will done, after cash of cash sustaining it billion, various $XXX a $X do billion. had investors haven't would our of this a balance off but to liabilities, million optimizing And $XXX sheet So that committed having capital, things the fourth all

Chris Terry

I one-off one payments the Australian through last expect the the in -- result? fees coming quarter from me should fourth operations, guess the And any or just Western great. on there Okay, bonus are we

Roy Harvey

I'd have road in Western of ahead that still a we us Australia. say

payments, to. to agreement I think and bonus ratified have still to an we that we our need kind could get workers because on So agreed of speculate don't any

So still work some ahead on one. that

Chris Terry

I'll Thanks Okay. guys. leave it there.

Roy Harvey

Chris. Thanks,

Operator

And ahead with your from the Woodworth next go with question Credit question. Suisse. Curt Please

Curt Woodworth

Hi, good evening.

Roy Harvey

Curt. Hey,

Curt Woodworth

of my $XX went pie calculate given if quarter just ton, $XXX flat versus alumina do XX% drilling sort your structure for pie $XXX. that would to from chart just quarter you provide your a at smelters, And down it’s delta So, seems be the price the $XXX. looking breakout. chart at about the implied that little cost odd numbers delta per from alumina into alike And you it the cost a a

talk that you maybe part that’s a in to the that? have I can modeling, So of the delta feeling here

William Oplinger

yes, Yes, it’s but -- go model to you the walk call, difficult ahead. really on through essentially your

Curt Woodworth

be a cost the would sequentially. when quarters, XX% both you alumina massive had in Why inflation

William Oplinger

XX you look right. Well, API, if just lag at the of -- day the

impact in the So, alumina jump saw the yes, in we of that did the the smelters. quarter. alumina bit a lag on fourth see the third point, reflected is day of the quarter into had timing as quarter have this in an little bit a of We'll really And more third It in we dependent increase in the we our alumina results. a shipments are cost that into cost at little some in associated get fourth we quarter with up API. in of XX

Curt Woodworth

like of And It lag a -- Because a alumina. just API pretty of about guess $XXX, outside $XXX say then so the that's I on number, the going Okay. seems just is XX cadence the smelters it cost like big question delta. fine. call cost is forward in second thinking okay,

inflation think So assume quarter, XQ peak you think where flat was cost are? about up, stay get higher the kind I further or that coal-fired you If power this XQ do that flat, lags given into do we was we flat coke talked the pit of in you you are? Spanish going where

Roy Harvey

few and that well. additional maybe details you Bill jump hit as me a Let can in

the important the of going rest one on components, of North at in what's lot on factors look depend depends or is you when world. the America that energy around different markets on So will a and Europe power

a from pitch of two to year will off flattening conditions. and have on one a the our point Coke been environment reached that both rising last carbon over market are depend they where in have seem bit So half. materials and

so on growth water. both that the you those And sits structure you materials opposite. other what's we and aluminum environment relative for should inside And industry. China, or that would expansions additional you half If general with of to at these to it's those of going China to look today, cash a What operate of is over The that demand plants where of incentive negative start the aluminum. depends would in invest. caveat many for happening under stability means of when growth alumina, that pricing in components see also no might of with to full start to it little incentive outside and happening that those of the I to tied in where the point see certainly all are smelters cost some that I say very is And then make what's you're simply and continue but costs aluminum lot forward. means think we there price some is that about now at a see

I cash prices aluminum think supply the raw operate see continue a how without when you think, go to losses. in can't increase types reduction. to continue of there for with materials that look connect isn't of Because -- plants what's at So happening unless lot to up to to starting significant room these raw at a I really pricing environment the materials today

Curt Woodworth

Totally agree.

William Oplinger

prices should they've our we Pitch the the high. our put through little think in around around coke the should peaked business. of results And to pitch at stay some largely view flat, Roy should And off alumina finer start quarter, come has some the decline coke in prices been a in persistently bit it. for look instance, quarter. seeing we fourth we said has flowing as third out in When caustic point

Curt Woodworth

all right. really Thanks it. Got your time. Well, I for it, appreciate

Roy Harvey

Thanks, Curt.

Operator

questioner And Lynch. the ahead today go be Bank will Tanners Merrill of Please Timna of question. with your next America

Timna Tanners

Good guys. hey Yes, afternoon.

Roy Harvey

Timna. Hey,

Timna Tanners

was uncertain talk or because of RUSAL’s RUSAL of status a affecting to is perhaps Curious if negotiating operating of if bit could season that's about status the little the off factor. operating wondering I us First how you you. uncertainty a -- or

You you that are alumina their affected how being largest you elaborate the see world's extent then I'm you affecting uncertain. status that the you how on just can curious how that that and supplier to and near-term?

Roy Harvey

there the market. the so think will an I happen that Timna, around impact uncertainty with general Yes, whether is on impacts sanctions what RUSAL on

or stand And I are you us people how the enter into enter contracts. and on like have think into you can continue where of time we period we pricing impacts going are to where everybody so entering much else that a think contract. not how When trends about

that physical inability create if to you supply those assurance supply. them to product Western of an Because sanctions don't sell for However into of continue, any have going that's companies.

The just at our early what get contract. into with types subject because be supplier when call start very that us of arguments beginning of discussions to mating customers of to we're still the that we those and process. is from the So we XXXX they some supports our won't in see reliable that the elsewhere, season, and But aluminum perspective, fact pretty certainly these sanctions. a we're our as our

everybody's these so, to in some waiting seen still in premiums From also next standpoint, in increases say And I premium in critical I'd a is happens we've but North think Europe. both that America, weeks. see what

we're season into starting to go this next we the see As some well. as opportunities premiums in

beginning at come. period, so just critical the we're again, to of that more still Although

Timna Tanners

assuming not supplier second -- is reluctant mean, if a get can say those can more as that there in say smelters understanding of this getting that given in just kicked. your supply going if that uncertain RUSAL. you're that is aluminum you’re else alumina not supplier mean, depend likely -- you, to there's to benefit that to just something continues and is on? I'm I you're used on a it I because Or to you alternative Okay. an not as appetite some supplier or Is to negotiations not

Roy Harvey

shortness China market of specifically, important. so of think, for outside important I very but the alumina RUSAL the is Yes, also is also

longer there's particularly is interest do period basis six, that the these because on when but now over typical aluminum, quality twelve sell try us basis, places amount next important a it of contracting have we around instabilities because of there on a high of absolutely, that we term and interest. same we when three, uncertainty keep for But And certain contracts. cargoes that's supply have cargoes, around be think but type typically I of uncertainty an of So is the significant in we and and additional RUSAL, pretty other very we have year lot or API next also of cargoes available months. spot a uncertainty can forward to a where And look of either alumina. not the we number tends it's any

Timna Tanners

Okay, question, And I’m high aluminum. just alumina thanks. to level, relative my just price performance second continued this then out fascinated with

for alumina Chinese about this it mentioned And I seen You’ve while did economists also in but some the there’s producers just for And been U.S., are aluminum the talking a really China this here just your forecast wondering restarting we’ve despite high your are capacity know these while. in a results profitable. in prices. you’ve out? even And playing project not how I’m not

capacity, I'm So divergence of see discussed you do some point between the it we new just think a period are the stifles some wondering, at or as prices? restarts of that you could being a do think Thanks. commodity protracted

Roy Harvey

or mix alumina between The aluminum specifically alumina. aluminum So in and prices.

Timna Tanners

in these producers the right? Chinese divergence alumina that long can be pretty is producers vast that see not said in that and loss making, we can past talk hard hit long that about how restarting prices high economic? play to in how aluminum divergence, some cases, As you how these wondering I’m continues don’t despite The making make lost the out, just them producers U.S. can long

Roy Harvey

of So there’s market. a world difference and that the remember all first rest between the Chinese significant pretty of

in to that aluminum it’s not So are $XXX ton there’s that finding alumina. I cost a of we’re -- again, the Because the necessarily underwater that one slide world going and China. today, presented actually aluminum difference producers rest per back the it’s of the

rest then such because starting this And world connection to alumina is pull, starts It’s outside of for of China. that create creating price the supply export there this to market. high so it’s a

RUSAL. in that’s also happening all to certain like were on you upon just extent what’s Brazil Now asking predicated a

that open also inefficient cost very they laborious Alunorte when and refinery a process conditions. can a then it of from put It on question it’s go carrier. big really exports to out. can long a And get is the cut it’s restart to a how and again much So under big onto China to bulk dependent bags what can last, how bags

system. in So that it creating up frictions whole inefficiencies ends and

on? So to you hard it’s smelter think, in haven’t have inflation divergence be alumina of real very in alumina it reaction shown market how I And particularly when matter to where to operate, a that back there outside the supply a means this is long that a find aluminum it to no prices really really China. comes around opportunity an when it’s -- it’s that sell, but certainty stay of to those it that, cargos, spot makes will meantime, prices, like

Timna Tanners

Got you.

you. thank Okay,

Roy Harvey

Timna. Thanks,

Operator

questioner Matthew be ahead. next with the And will from go Korn Please Goldman Sachs.

Matthew Korn

of I want my some making thanks your over change years. you. had the primary, North for appreciate the in to of more a these in In end, where lift for question. has two-three Does taking in bit to of any that market markets. on of this view non-ferrous been scrap next aluminum the substantial as aggressive think markets the you particular, scrap are other metals at matter see go you’re there’s primary, for policy investing guys, Hey, users that calculus Do in use potential America looking secondary. into? metals selling question the of cost ex-Chinese does you for a China signals costs they their they import or the

Roy Harvey

Yes, and question. Matthew thank the you for

impact. an is the think have answer I does yes, it

the take that an specifically, -- U.S. that means scrap it is less the flows there example, the scrap the U.S. the China scrap you’re So available from more that plentiful as United inside less flows State to and

starting to metal. what see increase of is the you’re PXXXX an prime or so downwards discount change regular And to

so start and a to attractive bring where actually a starts that more because time their metal into avoid it to cost becoming process. them to actually that in way even as in, starting the increasing, happens, of bringing imports metal seeing And the to you’re scrap it’s use importing for the act and

of which down in it is the the than world. rest offset now is that the general the So, it metal does in price the U.S. do, it U.S., has been helps fact of the to by what bring for expensive production in more

an offset the of this order of I U.S. fill bit right metal the a -- to a because been impacts country. a have U.S. but in being that those right the aluminum more happening the think takes market, of or the because situation of It so there used consumption less elsewhere. such now, hasn’t so in imports some impact end significant that in of tariff are short up now. is more the that will of the China scrap are don’t many because And to

to the and of starts more more future. it into an impact have going So

Matthew Korn

it. Got

see the lot any Let going question China There pollution mix out up messages that applied are coming indeed there that the to been arguably of me another then. has on be on controls government follow a that this of with way the substantially play the over year risk for that restrains coming Do around out last being versus the production how and you if this winter season. case? might aluminum versus diluted alumina

Roy Harvey

including and we then all most into importantly, what balances and estimate incorporated XXXX we’ll Yes, our so balances, best and the curtailment. of the our have winter first particularly XXXX also incorporate our into impacts

important more but winter that argue less in being the that, operational your last winter important of and enforcement much changes I’ll the the also the first to think we curtailment than time, is the curtailments expect important second curtailments they program same year. were be lesser winter was China, in well I At two the permit. the taken of point was

that there the what is to permits shutter new unpermitted before capacity inside any are is that China. the serious bring existing down older still or So, ever I capacity requirement transfer is start impact operating to or those can order has biggest in think fact it expansions of

yes, in a lot been start winter of of bauxite was enforcement bauxite controls be does so bauxite the constraining that’s China. that bring already action about. seeing down as long think export part there’ll But China more and talking a seeing lot less alumina to is what they it’s to of up field. also that permit, we’ve are a the operating cost already level bauxite of path less inside of of point is environmental already active, I mines more it those again, that tend And we’re permits think incorporated balances, have this I continues so practices, the aluminum ensuring pretty into that work but our inside we’re So playing well as place. now curtailments, operational And of refiners for following in it create

Matthew Korn

appreciate it. luck. Best Got it. of I

Roy Harvey

Matthew. Thanks,

Operator

today Please [Operator with Riley B. ahead Instructions] our And Pipes questioner next FBR. go with be will your Lucas question

Lucas Pipes

strategy. Thanks, for and taking progress bit lot on And optimizing my quarter. and great questions on I a job this liability. capital of your your Roy you've a to little Bill allocation follow-up made wanted

you obviously But we excess between continue about and returns and into XX-XX pretty look in as XXXX, capital $X liabilities is market a cash has to it split if should conditions of optimizing billion? think So volatile. been of

William Oplinger

allocation through and potentially and for Lucas, early we'll come us for longer program XXXX. a in XXXX XXXX Yes, with than let get XXXX out capital even

on achieved the still capital we the to addition execute goals delevering. of be the returning the have talked about the fact -- to we XXXX, in they buyback through go $XXX we'll shareholders once to we share that once program of cash further all We've As allocation million.

have So still that do. we to

at like. XXXX through allocation early we'll the look let you get and us know what XXXX let what see So balances the the end looks and program XXXX of like

Lucas Pipes

the I more think quarter. fourth and year on cash the correctly, the at XXXX. end If half quickly more of I And recall even in really the second balance you maybe of in generate the

cash do So have sense rough shake at the guidance, repurchases where midpoint a out XXst. would your you of excluding any balances share December

William Oplinger

We've excess that guidance what the $XXX would above further about provide repurchases But program. on and talked tell we We splitting announced an don't you share $X billion is between million exact that. I cash delevering.

a it cash end any So before indication pretty share give good you should anticipate of repurchases. we where to

Lucas Pipes

okay. Got it,

William Oplinger

lot of cash [indiscernible] we typically in fourth fourth you're as generated quarter you cash back quarter. our And even part right. at in the of a lot a if look quarter generate of fourth We the

Lucas Pipes

detail. the appreciate Well, you. right. All I Thank Okay.

Roy Harvey

Lucas. Thanks,

Operator

Company. will your question. go with be questioner with And Please Gabelli Justin next ahead & our today Bergner

Justin Bergner

that's Thanks $XX being the fitting is I the in how history. million to due which in. recent is me XXXX. much step about quarter of of in anything and factors? higher in guys alluded much, you just much run-rate of flat-rolled, to guess Warrick Because related run-rate that than up for a much that to restart How per obviously other The profitability

William Oplinger

I of Yes, of that smelter. to less the have the of related breakdown restart But say I than the would don't exact the half percentages. is

in pounds mill our from to XXX are and to the forward. higher million it going We of the we the mill. pounds been of year see have that million through from grown process shipments see We've of mill. results and got volume that stability this a out returns we'd over of when it growing lot XXX would put out of And to stability of and to like able like

XXXX. So I'd future bright can rate projecting that mill than that do and going at run-rate. personally has better believe a And about into that

So today. we're at that's where

Justin Bergner

to benefit question, bump this what mentioned a net you you you one heard that? the from million And to or correctly. additional assume get that, I great. tariff if $XX then regime did Okay, think calculate did Midwest How you quarter, I

William Oplinger

I the bump. front probably of costs have what don't calculations make on guessing a of I'm basis. gross benefit. million around is improvement me, can from $X.XX the $XX I had the in $XX pretty $XX simple. the but would a around What that's the revenue you But the you basis in year-over-year premiums. Midwest improved higher a that's million see tell don't which math we benefit have premiums, I a of $X.XX roughly million roughly And and on

Justin Bergner

questions. taking for Okay, you thank my

Roy Harvey

Justin. Thanks,

Operator

next the question. be your Citi. go today Alex ahead with Please And questioner will Hacking with

Alex Hacking

Roy Hi, and Bill.

Our answered. were main questions

from later. So and a follow-up I'll refrain asking Thanks. Jim with question

Roy Harvey

Thanks, Alex.

Operator

from with be Misra go your ahead Berenberg. Paretosh next the will And Okay. Please questioner question. with

Paretosh Misra

guys. Hi,

Roy Harvey

Hey, Paretosh.

Paretosh Misra

Hey.

a couple just quick ones. So of

caustic that So you baked know the the assumptions all the for you in guidance are on one can call. quarter? and dollar provide But already if don't fourth your I the said that

William Oplinger

believe me the and Aussie in per Don't the front dollar caustic of number I have se $X.XX. is

Paretosh Misra

available bauxite Got then opportunities bottlenecks? what the what on side, and of are is permitting or the still bauxite business, growth Is in what it or second Australia it. infrastructure the in that? And the you kind have

Roy Harvey

a for the that very going so what a bauxite, make prices is any us want to are need we first important moment customer we at believe quality is caustic other is where growth we to and sure project high at that high. most to particularly Yes, end the pay reliable we fair that value have for

customers there quite been couple partnerships. part out of and what them and over to the are simply, years So work there ways those and with we've build is last doing to finding

Western our that's positive in particularly, an production. very million. operating Australia order the ability permit Australia, So have thing. have Right up to now In to increase we $X.X to export we

to mine get from then to very customers. lower coming make need But X.X renew it in economic that that million up we the the a can able do our logistics about and of have some bottlenecks, year. also to do way, essentially port it will tons we’re a cost to close at -- the an to out. logistical economic We over But the get to we sure

growth that process we permitting still And fact, planning makes there. attractive it once on investments that we that see the that we’re So some finish some making in can financially. in more

also We that depends we business freight and the prices Paretosh. that happening to with forward and It helps think attractive -- consistent and you. a on Guinea in make bauxite. qualities the have of very that a rates opportunities Thank I delivery in bauxite again, Brazil. bit going have of what’s But

William Oplinger

it Paretosh, And $X.XX. I check is did

Paretosh Misra

you. thank I see,

Operator

be Intelligence. questioner question. your go last ahead And Please with Cosgrove today our with Bloomberg will Andrew

Andrew Cosgrove

question. Thanks my guys. taking Hi, for

kind prices your costs your back costs Asian they’ve Asia caustic, recently those to Is how Northeast or come the aluminum into on seen? costs collapsed play the considering looking as to the in we -- Just implied might of it just compared XXXX. alumina assume throughout more fair that drop Southeast back mid-XXXX XXXX, and we and move saw quickly how at that we’ve

Roy Harvey

Yes.

seen of peaked Asia $XXX caustic the does prices kind out this metric the from and in of from we’ve quarter of sharply year in at last That’s fourth beginning the year. and have and up a downward hard it’s very ton at say, not caustic we have trended seen there. bifurcate quarter But what and of aggregate third this to between world. So rest

have we costs. lag about on caustic that six-month So a our

to earlier they that will, continue continue prices the will see to those come we’ve prices continue we seen higher So year. they’ll in the But assuming downward, to trend down.

Andrew Cosgrove

Okay.

to double -- just Just check wanted that.

you. any thank Appreciate Won’t keep Okay, guys longer. it. you

Roy Harvey

Andrew. Thanks, Good.

Operator

would our session. Okay. to And over now Harvey I question-and-answer will remarks. for conference turn the Roy to any back conclude this like closing

Roy Harvey

I’d like again, Good. for thank us today. Once to joining everyone

our to priorities strategic drive anniversary and As we we complexity, focused month, approach on returns, two sheet. balance strengthen our reduce next year remain the

Our foundation today. and clear company William, and even we to our strategy future. solid will is an our continue much that brighter build working stronger to you, back Thank you. over for upon is It’s

Operator

Thank now all you, Thank your today’s concluded. you and for the may lines. you this disconnect has conference now time attending at presentation. And