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Alcoa (AA)

Participants
James Dwyer Vice President, Investor Relations
Roy Harvey President and Chief Executive Officer
William Oplinger Executive Vice President and Chief Financial Officer
Timna Tanners Bank of America Merrill Lynch
Alexander Hacking Citigroup Inc.
Christopher Terry Deutsche Bank
Matthew Korn Goldman Sachs & Co. LLC
Piyush Sood Morgan Stanley & Co.
Lucas Pipes B. Riley FBR
Justin Bergner Gabelli & Company
Call transcript
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Operator

Good afternoon, everyone, and welcome to the Alcoa Corporation Fourth Quarter and Full-Year 2018 Earnings Presentation and Conference Call. All participants will be in listen-only mode. [Operator Instructions] And please note that today's event is being recorded. And I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. Please go ahead.

James Dwyer

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

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

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

OPEB In have Consistent with Also, the presentation. XXXX previous our been be in today's recent in of accordance we note a financial directly prior presentations, included addition, Standard to measures such other some financial costs reference EBITDA. of the comparative can in presentation Reconciliations comparable discussion EBITDA change on in our non-GAAP today non-service this This updated out and found income/expense. all measures Board's most our three appendix Any into Accounting and financial change in Financial to the resulted costs. with Alcoa to to moving statements. periods have earnings EBITDA the presentation. adjusted pension GAAP means

available the and earnings as turn Finally, announced, previously website. slide on presentation With over Roy. release are to our it I’ll that,

Roy Harvey

Thank you, Jim, and thank for joining you earnings call. everyone today's to

and we're results annual increased determination in our markets, We've built strengthened prices sheet we made pricing. drive accelerate And cash strengthen through is markets trade. to returns of has market in have earlier profits uncertainty by for the product our XXXX our to and the created upon began profits, and progress the This our to return Alcoa. liabilities, priorities reflect there with full-year the executing increased since help stockholders. addressed units. trended a environment had we cycles. business a weaker lower and to balance positioned and significantly market strong we Despite we've XXXX, better turn with to and balance sheet dynamic Alumina year, reduce Bauxite higher and surrounding But of quarter to as global sequentially strategic fourth fourth complexity, Our our higher strengthening thrive launch, pricing quarter input the

$XX income Our reported an million that, a special EBITDA urgency drive adjusted million overview items, challenges, special an businesses, On adjusted to for operations, however, solid $XXX are these of our generated we excluding a generation. and or cash and strengthen million excluding and share. We let's quarter. determined ready with conditions reported started to market and get $X.XX or smartly an foundation. are income the On share. further With with basis, of changing we basis, Company's net to react net improved was items, $XXX fourth $X.XX

Australia, a one safety. Turning to Operationally, the quarter happy fourth We're look of world, forward largest we of building as our businesses, and Pinjarra free production fourth in with beginning refinery year in this our was The and injuries. with record. Western it Alumina, quarter progresses. the to achievement upon very attained in the serious

to at segment our salaried In a we line of reflecting enable revolving financial buy the successfully we began to amended reaching the workforce. Also to will our this profit. run contract smaller to back Meanwhile, smelter unionized profile. quarterly program a safely the improving month curtailed the Alumina This and on portion work with stock we repurchase agreement, credit quarter, under a the Our Canada. half shares operating last rise with this the Quebec, we quarter, reported Aluminum, new one our third announced labor workforce. in continue also of in potline employees in continue Becancour

in we agreement related Spain, process our The workforce the the at to with we in the collective vote casthouses each Avilés the La aluminum announced expected plant on operate. plants. tentative smelters Coruña dismissal the Coruña of The reached overnight that plants calls by for plan remain representatives the and Lastly, October. workers’ La paste plan at operation at both is a month. end curtailment tentative will at continue plant the in the of The will and to to

and jobs in included San facility. to our of plan the preserves includes broader the social retirement Our agreement facilities at look of a portion Ciprián tentative Taking packages a potential and two XXXX. the relocation

our balance performance. billion. our last We OPEB by and our In XX%, net and in three enhancing I and As we maintaining cash by it's liabilities to to a Alcoa, year. serious pension income, all sheet reaching excluding fatalities financial sheet, while we mentioned net have we were a reduced safety, a strengthening no across grateful but our EBITDA, items, XXXX, and experienced revenue see $X.X increased injuries visible Compared earlier, balance third, balance. safety, special and we adjusted XXXX, can we healthy grew

given a behind market volatility, this drivers that in results accomplished us quarter information more point-in-time describe our us details with amending our I'll joint focus has of outlook beyond. look we will more earlier mines. the this for and With review launched Bill this Furthermore, and operational and annual we've the aluminum Our Bill of support Despite actual year smelting what carbon-free to safety it detailed to offer to bauxite business of sheet a partial to are program and to rather We're issues been the that, growing estimates. to aluminum plants venture our the in two XXXX way than can year, at the and we provide smelter our work years practice fourth years. coming develop completed profitably improve of business results. of our fully on Warrick positioned how We production has industry for over saw change. our further safety now technology. two across we annual two and of revitalize restart proud we turn we records and year

William Oplinger

Thanks, Roy.

share or aluminum on shares are XXX.X allowance on million lower quarter, Brazil on alumina quarter tax VAT the non-controlling million $XX items up In alumina Let's Sequentially, million down to net non-controlling Corporation income $X.XX the higher outstanding. prices. primarily establish million $XXX interests. $XXX state to revenues Compared of and the start interests, Special after per income an and on are with was million, $XXX credits. million million the and tax in year, Alcoa $XX restructuring before attributable was $XX prices. statement. last the to Of totaled revenues

to the in the of the Other still restart the smelter inability credits million Sao of valuable pension We believe facilities. obtain current we opportunity credits. future the include future, additional note favorable provides to ability for Luis the and an to maintain for power establish with and the actions and market While current to on the restructuring Luis the assets the at unfavorable VAT idled balances. smelter take-or-pay for allowance contracts million utilize Sao conditions the are Company the only necessary charges and recording contract, $XX Amid assets. felt our to it credit and continue retains $X smelter OPEB a to stop monetize

at items. excluding the income look special statement, let's Now

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

joint quarter side expenses and fourth sequential of margin lower few venture of the EBITDA other to A Saudi Our was a items note $XX million our comparison other Aluminum due XX%. on currency basis: in foreign benefits. increased losses

lower In changed earnings Our our full-year in non-taxable tax we the operational XX.X%, taxable had the catch rate and sequentially. losses. prices X.X alumina third rate mix rising of to quarter, points tax our rate quarter a percentage as higher was up

lower decreased the X.X slightly with production all compared improved true-ups to energy and drove in three pricing Alumina Brazil. due drivers share and Negative million quarter an favorable Our and to segments. stock this to and sequential X.X higher shares true-ups lower count volume changes last Commodity our segment even negative prices million, both volume, repurchased $XX prices, a repurchases from average fourth pricing came unfavorable share price positives improved result. for due in quarter, In contract $XX.XX. quarter, Major common in impacts positive were equivalents. million of shares sales had in decrease we metal lower

driving slight The prices other quarter-end compared came accounting impacts last positive from quarter. inventory even increases corporate negative provided major materials Raw have moderated cost lower benefit this to impacts benefit quarter. and a

EBITDA sequentially Brazil segments. the costs production million. of million, the $XXX hydro positive year-over-year. business. lower a quarter non-segment from our and In $XX CBG the and was In million. quarter. $X Corporate to EBITDA primarily shift favorable Bauxite production $X.X volume the adjusted million higher the recovery the we up $XXX as the through prices pricing $X the increased to segments, metal The Aluminum Huntly lower and Now from million our turning Strong improved $XX the true-ups adjusted mines. API last earnings prices this on improved segment down offset were Alumina from on from the negative prices Outside quarter-end. segments inventory netted assets. gains ended let's alumina and segment, for impacts fourth which million billion, by Higher down accounting to offset benefit at of was aluminum flow and continued alumina quarter, quarter, year dropped cash the with focus

venture sources the in debt of benefits with noted in and distributions pre-funding pension, sources $XXX Uses of billion million issuances We and net of $XXX to major partner review of matching million funding, required largest categories, million related our and million funded building joint of comprised and May’s other were expenditures $X.X total reduce from quarter, cash to the proceeds major make amount with debt distributions million cash $XXX capital retirement repurchases uses $X.X interest place and billion were of of offering. a contributions. post for took minority of to contributions in $X.X pension/OPEB, $XXX million roughly XXXX, million annuitizations our and our As balance other. $XX of $XXX and including programs, Separate pension interest three flow used expenditures. A outflows in $XXX and pension quick billion earlier, a the $XXX of were and share and bond million operating capital minority discretionary cash sources.

the Now at sheet. balance let's a take look

the strengthening balance continued we quarter, sheet. This

debt net X.Xx. to XX.X%. is year EBITDA down XXXX to Our on capital for Return is fiscal adjusted

days overshadowed X.X quarter billion, The at fourth the started third OPEB down unfavorable it fourth due decline lower returns and not vendor XXXX stock the earlier Most treasury remeasurements. offset our completed $X.X was activities increase interim as remeasurement year-end higher $XXX XX-day liability reflecting importantly, previously remeasurement and asset working a down was the capital improved favorable program and pension as buy million million ended days mentioned, discount up We've days, an and year were framework global the and repurchased of slightly retired Sequentially prices, year-over-year $X.X raw shares year-over-year. rates. material Our payments. stock. from quarter in to net and timing XX repurchase These we billion allocation quarter, held shares. market four resale in our a capital year-end after

capital XXXX. future follows framework Our allocation a similar to theme

many market light drive opportunities, business balancing factors investments foremost, value. to conditions, and challenges continue but will We liquidity maintaining and sustain we’ll expected of the managing be in and

structure, discount over adjusted target pension be achieved expected our achieve returning this value our a OPEB creating XXXX, to by capital the capital asset when $X.X measure that The billion to drive billion. basis. was investing payments, and growth year optimal years projects. we to billion range structure, assuming to it continue in reduce in an end minimum an stockholders our change making metric toward and appropriate, to we're on in no our attaining $X.X At proportional five is required $X.X next also debt Important will can an optimal three net attaining and using We return to note it and rates. cash

market relevant as repurchase debt based We factors. conditions, will target, our and flows, adjusted on have execute our under $XXX the net we remaining program other existing authorization, with $XXX repurchase million million cash

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

expiration cash to business investors in to on Outside accounting, and Suriname. a to to alumina we $XX the the be the revenues market XXX,XXX bauxite segments, will to will more XXXX, lower to X be XXX,XXX translate partially XXXX. XXXX, to tolling shipments the utility and Alumina flat another full-year quarterly $XX in In production be expect decline As tons of limited power be the Tennessee impact. income information expect LIFO year. using We transformation segments in page the up included eliminating due but we're appendix. million Aluminum that into gains impact statement, tons XXXX million will will compared the fewer with of insignificant intercompany range lag to page financial the tons. will for EBITDA XXX,XXX and the we the the in flow agreement. Starting first flat time eliminations its unprecedented as adding due stop of adding Aluminum of profit the outlook purchase leaving XXXX volatility, primarily shipments outlook. million the point year-over-year, corporate tons we result at be commentary inventory results restate metal the mentioned, inventory in shipments in in Roy plan will will quarter, to and Instead, segment, sole up

levels, anticipated we're in XX% on period will expense to is million corporate the due will expense EBITDA $XX to depreciation, a vary $XX eliminations and million. flat million and improving depletion $XXX increase $XXX including down prices amortization, labor is approximately line, Other inventory to and higher essentially there unit appendix. OPEB are Below the and profit costs. improvements expense forward, $XX roughly down year-over-year. pension and Interest Moving based resource million intercompany and in sensitivity million net ending

down non-tax on We some XX% section, XX%, to rate we would XXXX expectations. today’s conditions. million dependent operational our pension/OPEB top In to XX% and required that is range. range end Based we spot the $XXX losses to paying result expect be in of funding our toward have from million. jurisdiction expanded from our cash upon Minimum that's tax of prices, market $XXX flow key

XXXX Additional on liability as expenditures the Sustaining by set because reduction tax million we optimization based or in as million $XXX million tax paid as a to increase and on saw same period pension market and in $XXX payments lag at million cash targets via jurisdictions debt return be year's well we funding seeking respectively, repurchases previous last in XXXX. $XXX to $XXX approximately availability. stock conditions basis, and earnings are will higher expect capital approximately

targeted is the million. in completed $XXX SEC XXXX. for its our $XXX have Wenatchee Environmental We ARO restructuring schedule million of and previously range, back cash to to charges, In settlement. expected be DOJ, million payment power $XXX for spending example, impacts we're to payment,

smelters. reached million. have and expect Avilés Roy Councils would with the restructuring noted impacts As Upon workforce, agreement million our by from ratification the to we cash XXXX we Works earlier, tentative at $XX La Coruña range $XXX to

Company the as In key appendix, outlays the ultimate and ranging the sensitivities process, you'll considerations. sequential in a $XX of charges could of further find expected from earnings non-cash. XX% example, cost maintenance on million to addition, In contractual the impacts to lower and in to would increased segment be million as the in XX% of considerations cost of after remaining the well unfavorable million would smelters incur The impacts discussion alumina $XX and for EBITDA alumina of approximately depending $XXX lower include, million of result $XX cash the which anticipated million, in activities $XX well Aluminum the as outcome as million of rolling million approximately pricing of business. continue roughly $XXX the Those XXXX. business favorable $XX

back with to So Roy. it I'll turn you, that,

Roy Harvey

Bill. you, Thank

our to outlook. market Turning

growth, future expected robust market. next demand the the of years. of to the competing is on at about excited left aluminum Beginning continues hand consumption growth remain the portion we're why highlight, outpace five When to to long-term like in I'd First, our looking expected materials. aluminum slide,

annual remain a demand compound to X.X% that rate primary aluminum for XXXX. at We growth will strong expect growth

base a consume well that diversified have sectors of are fortunate We aluminum. also to

up sector about worldwide aluminum next transportation expected sectors, fact, growth one no to more each demand. The In are packaging three than largest of XX% makes in construction, years. five and the significant have

is up rising contribute trends wealth most tons We expected X developed XXXX. fleets. outpace example, of for end critical almost our the will by that X.X% in of for and growth expect particularly, weighting grow a near-term that GDP aluminum emerging while is chains, period. located, Electrical supported electrification compound to significant overall these rely Positive their therefore in by North vehicle over include will In products supply production country expect sector years. America Europe, growth the growth new growth aluminum markets steady is demand economies five expected growth for Especially also and on in India, economic that at for and of keep demand The a not during mature responsible is demand source supply aluminum, that positive in we aluminum transportation of on with consumption the to come line the In growth growth. where to emerging markets will this of million many supply both growth rate provide a in consumption. light annual

to permitting a China, the new deficit expect more a cost we Given outside and XXXX. deficit aluminum approach inside supply clear for saw capital restricting primary disadvantage restrictive XXXX of another worldwide and China operational

Now likely In disruptions extraordinary alumina, an in XXXX the enable and sourcing this other pushed each both to as Guinea, them XXXX supply bauxite three And balance bauxite surplus strategically and our into as factors of again we'll exports the outside Brazil and Starting within our that estimates as market with bauxite was a know, continuing at market. Australia customers China. Indonesia you uncertain more stockpile XXXX, for to due closely year We into Chinese stockpile this will see year-over-year. climb look grow third-party deficit. from surplus markets. the year.

and production the expansions world expect expected refinery XXXX, and For environmental than we China, smelting we're surplus ex-China, to economic in alumina In the due lower an driven demand. about third-party will information reasons. by forecasting pace concrete that refining as be continue. status or approximately rising quo market balanced, resolved, our if with keep estimates assume Lacking disruptions maybe expansions to the previously when

see that of continue in aluminum several during XXXX. led including to part as their Finally, a quarter. in we XXXX, deficit did many China smelting in we the margins plants during have or to all economic curtailments curtailed Lower capacity of fourth

and As to elsewhere. I with by consumption XXXX the growth for primary slide, in China aluminum of is to demand developing range previous growth be continued strong well X% on in as expected in driven robust, growth developed mentioned markets X%, in a as global

today recent aluminum What's currently prices. time. creating global in about million of XXXX. margins the global this in That's tons have aluminum the but pricing. negative the weakening of playing for We is lowering and China aluminum exported field. of low projected at XX% XX% quantity, Today's of million X.X past XX% XXXX. While very aluminum short we're XXXX. therefore year, cash periods The depressed prices government only to more, ex-China to primary tons for not and sustain X.X outflow again are margins occurred over that contributes yuan That the depressed viable equivalent of metal XX% years, unsustainable the seeing competes and primary industry. and ex-China market be and significant enabled our industry several large are also a margins with a deficit cannot to in production, consumption is demand, unwrought estimate products smelters between are long-term. unlevel semi-finished those exports semi-finished Chinese outsized over by an increase support, are in

our progress made publicly we've great Looking November traded an first of two years back, as since full in XXXX, company. independent

we prices were from stand-alone to aluminum prepared improve of the weak. to we and operating entity as multi-year positioning lows alumina to continually prices remained To across executed strived be aluminum industry our to products. leader November with began and our comprehensive at XXXX, separate company future. we parent a bauxite, strengthen for low-cost strategy our excellent independent as an that we In company, year, be early a aluminum in portfolio a prospects As

from processes reduce blocks major XXXX building as benefit returns drive associated a our our from our drive and also items, financial on the to smelter our drag excluding $X.X Alcoa. closed an closed to able launch we grown that three our of the capital complexity, XXXX, and but repurchase a key priorities of a stock assets. to and in With strategy's pension markets, our EBITDA, $XX long-term we've our to priorities, We've carve-out proof the we as were used our million. success, introduced financials. nearly special to adjusted in our XXXX three balance streamline Rockdale approximately procedures such $XX of stronger strengthen was execute in and XXXX framework. strategic the also power liabilities, $X.X significant billion We net adjusted annual times address a Due as items, of for that million with contract these XXXX us, performance of our we've other portion down favorable with and returns announced notably, billion behind earnings items component program, and our most of legacy started debt, allocation With OPEB sheet,

on strengthening As our foundation as a drivers and year our and we assets our Corporation judiciously solid value third for long-term, to the begin we'll sustainable creep were focus Company enter exist. use our grow with to Alcoa

like the We our of will industry the innovation use future. Elysis technology aluminum to also disrupt

with lead will our we Lastly, reputation.

uniquely stockholders. to of and on as will be of returns In choice Alcoa the smartly these which cycles drive markets we our of and conditions. closing, the at through Our to with to and our for here is makes goal trend new with start partner values, be us react continue providing competitive what the can expertise, consistent all we XXXX, urgency lower all so dynamic projects improvements

into system prioritize XXXX performance. continue operational we'll an We to progresses, and between connection across direct effective safety efficient financial the our and see As Company. safety a

we issues long-term operations, in remain priorities. be unfavorable within prioritize performance, strategic operational favorable labor our conditions. nimble to volumes enough to accomplished an and capital our the globe evaluate of be across either company Throughout with in this as drive stand the We ready or stronger viability employees to the resolve challenges Bill our prior address and businesses, will improve of bring. could than the flexible operations. our We the and enhances be year business, With your would and on I optimize We questions. by but and the while increase increase Alcoa proud if market to to year, even of changes continue that future I to please what plan Bill stability we'll and and options past supported that William, remind focused in We the that we all opportunities creep seize also glad you and are our take alumina or improvement protocol us a to structure. in the XXXX growth to may can started. controllable this react our get we've year. areas plan way

Operator

the will now the be Bank ahead. Instructions] of Thank Timna question-and-answer will America first session. And we [Operator questioner you. Tanners Lynch. today of Please And begin Merrill go

Timna Tanners

Hey, New guys. Year happy

Roy Harvey

Timna. Hey

Timna Tanners

still I when I for the XX laugh simplification went to the had is and really Slide I because priority guess got detail. great Thanks saw a to I confused. all I

sensitivity So are could what I reflected getting the you that are? hoping of earlier? without Are components and discussion those Or beyond too the us sort minutia, help Bill through guidance? already gave something those of For the you into example, in something or was kind above the be tables that is charts or and talk is separate? that's pricing, already would those in your that mix about that when

William Oplinger

a it's little combination. bit a of probably Timna,

of see stability about So the of we alumina, and if operational it run out through the highlighted some it, improvement first talks we we difficult all, we which expect times that had the briefly – to and this just expecting the saw up overcoming mix of fourth column. – price picking on some quarter alumina year in of negativity from we're the some picking the to we of up the that, recover some that we're

or two So into right. products million next alumina flow-through an is estimate there, don't like spend you rolled $XX picking going on in and smelting the then flat to And are really giving the a We of sensitivities, first that's you maintenance up million. give outsider sensitivity $XX what of quarter. the look the

you. very, provided so last about second raw a going to very we've raw difficult materials to There's around raw where is end It's the right materials here for the So that then uncertainty And much materials. now. are year. one predict

the just what trying of And to we've you is prior they guidance profit quarter. really substitution like the bullet to for So look given the then out intercompany a around first we're point elimination. that last point in some

now off of I that You in comments. LIFO. alluded know that we're my to

So LIFO is now gone.

is help something understand different profit this the So prices. just intercompany you where will be API that on based will elimination

So answer your it's to a mixture question.

Timna Tanners

going the helpful, landscape separately. conditions. forward detail was year, know, wondering, But I'll know in more about you market to the And where Company's in go I that That's Okay. advances just through in wants talk and it's you about current the then Spain. over I the footprint talking fresh be as that about had really just, past it me thinking

refinery restart You've on to in talked potential the the Brazil.

talk the circumstances? the in the less Spanish is for can any give on Canada. impact ideal producing little footprint this us you you Can Thanks. how shutdown current Company color in you And the about that footprint evolving see a of or the operations? You're bit for the

Roy Harvey

Yes, Timna.

having our a So get different for of at think it a facilities. and me start at let When because little portfolio that that right answer then Spanish more look level bit in discussions different portfolio, from a been Spain now, obviously I'd we've living around right think for we've and it's which been we in I the restructuring. I feel remove I'll becomes we the each this question year, past the high the because world granular a and the

very conditions set at new future. of our at do both facilities what looking the focused trying are we're we footprint with pricing thinking this about that that on our mean and also it doesn't that is However, given to looking current and

And the of that in but the simply, capacity fact job also strengthening to the in the at our have low-cost, do a a current when And we ourselves that so that constant produce, at improving portfolio our we is are number process. we weather isn't and both but us very tons value locations better. see also that downturns, production smart that times high-quality allows a

the So was basis, smelter, lacks sort Brazil example world. that the that to find inside That's outside and a shift on of you can relatively zoom contract ability quickly. it both a Brazil. that when power market regional makes a a in this government to in competitive And on both case-by-case negotiate of also you depends but national then Brazil and mentioned conditions relatively on Brazil It's depends where and of so something been look on of with in It depends smelter. that it power today's real. long-term our have idle It competitive government, one at contract. and we the Brazilian

longer-term look and see each our times any can continue to see at we We we part we on where parts, cost restart, actually strong portfolio a restart and failed choose like today or do relatively make aluminum to particularly that to things. there a which our we again, justification electrolytic we exercise or of whether at what at is for weaker to alumina much is choose to a whether all them two prices facility. this additionally, bring when the line whether look back one, at variable a Number curtailment do stronger, and we locations prices, important make of look also sure of becomes to them very

your rather a to question. answer long-winded So it's

our of what then be that that where that constant and ask it is evaluating long-term and ensuring of and businesses, each a fundamentals they are matches we Bauxite, exercise Alumina our to with Aluminum, However, constantly something the see as up we business. really

Timna Tanners

that. for Okay. Thanks

Operator

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

Alexander Hacking

around question the the would adjusted first guess Thank Yes. the question. be goal. net you I debt for

You on payments. I you mentioned just mandatory or Would get minimum the to Thanks. cash just to accelerate those what can above that in pension trigger be trigger what on free that you OPEB based would based levels? to that flow target levels guess would pay target? order it you

William Oplinger

Alex. Yes. Good question,

If we and don't to without rates any there. we've able assets achieve five discretionary portfolio would make ourselves discount the don't the in sit contributions pension return be debt said, a have got out that of target where that three then X.XX% position target asset on were I or As to net decline expected we years target. the achieve achieve to contributions where that rates today, assets on we discount and to to the making above to expected for they our we mandatory. to the we a would find in If return change, pensions were is from beyond achieve

get the So net achieve return why the assets if be us mandatory hey, discount there considerably we putting we debt or on on should if basically the out we able rates change that's contributions. with expected saying, need it but to contributions, target don't we are to make would

Alexander Hacking

Okay.

this or anticipate to voluntary contributions XXXX in just asset unless therefore no would performance? So clarify, year unexpectedly making you there's poor

William Oplinger

of sheet. considerable choose amount pension considerable to But on would be of this is, able to into level mandatory. at point, a in that pension the only anticipating that XXXX. take We the further off caveat in billion whatever, of would done balance the Yes, not de-risking, cash the have $X to that beyond if the contributions liability I plan some we do we contributed de-risking make I'm the plan we've

Alexander Hacking

in half. it you rolled. on in would but first then my expect quarter comfortable first be a you last be a commentary Okay, I $XX rate? And the the that you you say it the million did call that, quite Are of the quarter, still the weaker just question second guidance last I run weaker than that with to flat on bit that thanks. noticed in around gave guess

previous that is guidance still So good?

William Oplinger

gave little quarter be as And say, the of $XXX $XXX bit will weaker year. We're the we for fourth. year. targeting million first We guidance about for the previous than million the a still for Yes.

Alexander Hacking

Thanks a lot.

Operator

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

Christopher Terry

Hi, year? you're $XXX of the in XX program just the in Roy and latter and off feed buyback you're remaining also fourth just cash. around the the for of that Alex trying just On Yes. you XX, of Slide to wanted the in question you tying excess the back the Is to bought cash required Slide million the now. Just program the was the the XX that actually $XXX speed against asking generating dependent on still terms prioritize are minimum the other that EBITDA mentioned to Bill. actually that quarter. what Thanks. and flows have part I buybacks the an of the you get this going buckets how pension during million you time that of spend to at entirely buyback the spend idea and on

William Oplinger

on excess cash. based so it be Yes, having will

hey, it having capital out we'll long-term opportunities cash shareholders, answer translates I framework, cash. delevering options cash, is a the weigh will that that's And as ultimately of course have think into looking question, we three laid it based the the during the returning will So the your that other we based EBITDA. said, EBITDA potentially talked we allocation about excess make be to be versus Yes, will and excess determination. that you cash there, things in which if year, at I mean on – and and growth the determination flow, to further we've on make

So long-term if evaluate we'll three, that the cash we've there is flow, allocation announced. program given excess capital those free

Christopher Terry

thanks. Okay,

So and it the the Slide expenditures. XXXX million going $XXX pretty side like sounds all FY so it's right hand down capital of like fixed looks the outlook, is XX

items So would just at framework? thinking you look CapEx what come during the generate example, down buyback year, really it about for just to the back, within that other or back going program,

William Oplinger

$XXX target return million we XXXX. the underspent out look And good target few few We is pretty projects of – capital. how years, it's the over at but over that's return million, seeking up sustaining last But seeking, number. for $XXX those. Goes implement around $XXX if then steady that million bit came decisions that historically, for you $XXX million Yes. the came been made with return or as a We be years, down of XXXX. $XXX million available. The seeking pretty would to the last the little us quickly

Christopher Terry

one alumina me. markets. the What The on just for thanks. balances you end balance? have XX, Slide for assumed last Thanks. the And Okay, on Alunorte each of the

Roy Harvey

balance, we the today. on essentially So assume quo of status as alumina

on And is we look stake that, position it's because ground is the impact what not but in does to assumed there which because with on as Alunorte. prior Albras, wanted a simply no and aluminum we're well the like as taking a the So market to to return. put the same restart, connected over

Christopher Terry

me. you. That's for Thank it Okay.

Operator

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

Matthew Korn

evening, my Hey, questions. Thanks taking good everybody. for

Roy Harvey

Hey, Matt.

Matthew Korn

there? you're the any more steps on forward other there? situation you vote approval hurdles there's worker at on explain say move before need question to provincial Does that release, to the going little of there Could you a next by negotiations clear the bit the Spain. Are end a month. A need You the in the that government? can

Roy Harvey

me at let that Yes, Matthew, take stab one. a

So well I'll some laid caveats essentially out from pretty process is the going give happen. and you here about what forward, will

that. have we option So a and first agreement the very next to of The that opine week, this so will is is that with about all, have then representatives the and a in an happen step. their about positive workers' step will workers

defined. go assuming into it's the they essentially that So means agree, already as that we program

then there. activities curtailment And so of to and on we'll what and seen participate you've rest those will continue the we workforce the in start

casthouses. will to We operate continue the

program months, operating the to that's choose to step have into Spain. restarted, a XX will laid it where days positions. choice. we wants if to is a be We Again, to legal decide inside those end process can until of would six not we'll there that very we If for those see position look out, as order that prescripted workforce then to with how the react keep plants and June agree in in the someone of

foreshadow be want at the would decision However, to moment. I wouldn't try what and that particular

Matthew Korn

refining to outlooks different I some is little bit the the commodities. for on also are in Thanks base China more I into additional in it. want your Then, supply your XXXX? that market for linchpin on How case smelter of there. the Chinese alumina, much on next guess appreciate a you counting In dig clarity. view connected, I what's ever year? next capacity production alumina because on Chinese it's

Roy Harvey

is, be. the Matthew, because that hard think be if fact it's what pricing anything, the the to pin down And Yes. should you're And to number Chinese, reactive touching this, are way the on them. the to exact happens pointing very I

their when And saw quickly between so that end when export global they the pricing and Chinese gap were exporting. closed in at quickly favor was that very that and year of this they gap pricing to we very able stopped

think how should ground. always we the account on balances, our into build take we as so And we conditions develop

capacity that, how then of to that about that's a ourselves. adapt bit so has of new then try capacities find think that And build to of we will announced, how a particular And that. we inside situation caveat what been we the

that was of back what into of I'm mind, curtailments, I that what supply/demand be alumina, And it announced don't on for done – have we've consideration balance the China. taken one few I the think a in did would So have the my to relatively don't there line, front then of brought we right taken short-term and those. acted we into trying have curtailment that been also coming and We've and upon. winter think has Essentially facilities right have we and inside been announced we've new me number either. in is

Matthew Korn

guys, year. with everything, Good in been challenging a I job appreciate it. really what's

William Oplinger

Thank you.

Roy Harvey

Matt. Thanks, Yes.

Operator

next the Morgan will today Piyush go Please questioner Sood with And be ahead. Stanley.

Piyush Sood

Roy, of Bill, congratulation on couple questions. the quarter. A

in you XXXX, were forecasting in in now, XXXX. First a bigger and deficit deficit one, aluminum a

in Just Just now they aluminum those also, flows. deficits? where prices China's for a your – you do how want for despite deficit? are Chinese to would these without much do ton million bigger And understand are you understand think how account right account ex-China want large why exports you be this? plus exports, to So world X in

Roy Harvey

first answer little question. price So your the let can more bit step we about a and me and then question deficit in talk

with look aluminum you when remember So page, primary dealing it at specifically balances. is that

has that has disadvantages. view. and simplified advantages so world And relatively it It's a

actually becomes is of take products then of inside consuming exported, they China in export, that intended input as it's that, China. If that is that of semi-fabricated as balance basic an producing the Inside let's specifically. very Chinese consumed that, into then demand. material or are for primary So molten demand counts either metal as are outside it that because still being first, that's Chinese primary very if product included what

X.X of demanding out. aluminum So actually is million of There not now tons there primary to at when products. falling that impact negative world into because just you're look those you are a the demand, semi-fabricated rest those go an is impact

some that of actually consuming You're Chinese material.

So these balances doing essentially, primary on is because global way the it we're aluminum the is the embedded negligible balances. that impact in

two China. overcapacity But does ways. to in those sold and that connection products – and It of serve markets. are be exported then between it it as the then – turned China outside this a serves serves it products into then However, allows in two also

what's And on it and what's demand in does very balances, much has impact an have happening impact it an pricing. on so supply happening but aluminum with global also

So I'll second question. use into your move that right to

economic foremost, and talk what I feel think a et lot investors now future right cetera. of and first activities, about So that there's trade, obvious about demand it's about global

the an of when about on look prices, of of some developments, specific also now you the size general the that to on both impact overlay market, that the that at Inside China overarching its to domestic study happening inside I own So there the that producers. much certainly in an producers, much are of overcapacity that's very of most is subsidies looked but very aluminum are short-term our given at those the right industry availability discussions of the subsidies OECD outlier, subsidies found market. happening recent that was what's the think it's specifically, having an

just we essentially broader it being a pall develop market. to tends a producer producer, moves give overcapacity as from and that the a negative so as see to primary And semi-fabricated into China

it's flow the necessarily example, that form And U.S., that parts or that market, world. saw being in global believe as negative exported of we of semi-fabricated the but on so pricing has Europe whether for in to the the million products, a extra other tons Asia flow material impact that or market can it's had doesn't as the eastern seen into we

now China, to believe having back fact beginning, One at I'll we over simple which live then comment prices. pricing look and today, inside is both at of the also in more outsized an comments when the the you of the link and my overproduction look environment but in economics sustainable. tends impact And They prices of capacity sustainable again, China it because in is when cash. aluminum, these be the types currently rationally China When cannot that half decisions. losing toward act whole can't the And China, and weighted these producing all losing dynamics to are we the economics, of overcapacitization at are that smelters, though, economically XX% at be on of to look world, this XX%, so we of broader somewhere this and you comes then when it's things money and between as those all well. pretty

much And come production ever it capacity now online. sustain certainly incentivize levels, doesn't at so right pricing new to means continued that is that these as the less

unsustainable been an to it therefore it's so continue that by because and is that something prior pretty self-correct not trend has in And continuing simply but to can has quick we years, produce. margin justify found occurred

Piyush Sood

should Alumina XX. a split anything Limited, of versus period understand million, The we talk question if attributable want A you assume to Slide or prior what's helpful. that? That's around just taxes to XX/XX you on could $XXX about

William Oplinger

sure that that makes a predominantly do enterprise in a we tax payments our and the have to the we that it's line it right, and making be trailing It's in note lot Yes. largely Australia. should AWAC made a past, makes question. of money have that because Australia, be that should great – that it item understand And you provided in we're haven't people

piece would split So the be it's in that AWAC enterprise. XX/XX a a because of big

question, good Piyush. So

Piyush Sood

XQ And happen right. you. we a stability, of one. transition operational thank XX, it of should as that All think or And alumina Slide or maybe think second-half when can we last XQ? in

William Oplinger

see to I I'll my already. of talk let stability back quarter the that it, about in fourth but started come is, view Roy guess some we

what the the system. regained we view, to my see in fourth that versus of If you second look numbers, had quarter. the we And seen the much third we started in the stability stability around have at and that quarter we've largely

half I to in that So already. think see first the should we start

Roy Harvey

completely with Yes. agree I Bill.

that we entire see the XX is months. expectation Alumina business Our stable through a

Piyush Sood

all and best. the guys Thanks

Roy Harvey

Piyush. Thanks,

Operator

And be the Please Lucas next Pipes FBR. will with today questioner ahead. B. go Riley

Lucas Pipes

ask to share million buying stock? purchases increase fourth during you at on more? question Hey, buyback why again? Wanted And price when the you Could of good you. afternoon, Thank quarter. not then what do to kind quick us And a everyone. with were $XX of the back you intend also,

William Oplinger

Sure.

that that a it in looking window minimum of question why quarter. $X the And a – billion. I fairly think $XX of which wanted we the allocation could had average at target capital We the other $XX.XX program of we in we the the And back. course coming threshold price We were that's more. spent. not really million cash short as keeping was at a to buy then is had key the during aspect in we was

we renegotiating You know out. blacked we renegotiated were our revolver in the quarter fourth also. In our revolver,

So associated we we of period to at with time before buying short fourth end back be in earnings the quarter blackout we were year. the period of only had a able then the the into which in went

we more. why do reason the did that's So not

Lucas Pipes

it. Hopefully, get helpful. but... you $XX, will Got at opportunity That's buy to another not

William Oplinger

$XX.XX. sorry, I'm

Lucas Pipes

facetious. being was I No.

William Oplinger

with I'm an don't No. to buy I at you. we hope get opportunity $XX.

Lucas Pipes

But just another follow-up.

alumina rate. for a you price. bit Could lower given gave versus it's the about confused operational was driving little XXXX? a guidance in on page higher what's it XXXX I'm share the maybe you. think more where XXXX little that Thank color XX the increase I tax why you

William Oplinger

you're you which comes the It profits profits. where all making jurisdictions to make in and your down

clearly, with rate, full-year given right. prices at, today's anticipate guidance, so would tax we EBITDA And aluminum but and it's where a didn't provide that alumina you we the

current essentially my alumina, what I in that's just losses. would I comments to we're So to that we're did you where for upper taking that trying we'd XX%. it and the end market determine prices that to and probably have today's also clear aluminum XX% make be point going to that. profits And at basically the prices of generates make at

range. XX% to XX% it's So

Lucas Pipes

Got it.

and luck. Okay. you of much Well, very best thank

William Oplinger

Thank you.

Roy Harvey

Lucas. Thanks,

Operator

Justin Company. & Gabelli Please with will be today last the questioner go And ahead. Bergner

Justin Bergner

for fitting afternoon. Good me Bill. and you Roy Thank in

Roy Harvey

Justin. Hey,

Justin Bergner

cash questions. Hi, of the tax tax quick XX% that the rate be to is to XX% cleanup in cash book range? Is couple – in a the tax expected also

William Oplinger

I to Justin. would have look,

that that tax you I really thing modeling catch-up, for right. key understand think is the purposes cash the

why incremental in $XXX that to in XXXX we catch-up that we pointed profits that's was cash an So made million tax pay with XXXX. we have that out that of associated it's

Justin Bergner

I'll curtailment $XX proposed for Yes, you I I reduced great. assume ex more that some the to related Okay, the a later. but up of In million is was from on impairment benefit some income catch-up, press assume and benefit the Spain. line loop in depreciation. asking the net I mention million $XX clarity the release, to

So can should give much you aid that to EBITDA? how a sense as

William Oplinger

top it have head. don't I of the off my

the valuation got one in with allowance pre-tax are Jim post-tax the how circle largely to much So mean keep you a have on rate that? to I in mind same because we've thing back on in and Spain, Spain. tax that is

So top of I'm the much $XX I'm million off income, of how to – of how not million depreciation, EBITDA, not the head. $XX of the million is much of that million net pre-tax, certain $XX of that is that to $XX of my certain the

Justin Bergner

you spend spent maintenance just then Okay, is quarter Or XXXX? continue thanks. And lastly, the to throughout phenomenon? that going in first to is tick-up, what that relative XXXX a

William Oplinger

guidance. phenomenon. a given that said, The item. to extent extra quarter page, try circle specifically EBITDA reason provided a to full-year we some where guidance better with the the That's providing felt that's question, full-year. much But guidance is the – into to and not quarter we why Roy the I compelled to We first give bullet insight you fact answer And guess we're some as quarter your Timna's first first because back question. both point that started to as

Roy Harvey

just give southern happen to just little of bit be to And facilities hemisphere. of The an more part you to piece of more one the in in our Justin, add explanation. largest information, refining a

summer months maintenance some see we tend now tend see activities. the It's so the when more we of trend. or larger a happening maintenance to to And reverse

So tends for beginning to be most be it months important the cyclical maintenance the the to that year us. one of tends pretty of

Justin Bergner

Okay, my great. Thank you questions. for taking

Roy Harvey

you, Thank Justin.

Operator

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

Roy Harvey

stronger priorities call joining late than you. results launched William. And once our today. Today's reflect in thanks earnings the our success Thank we strategic Great, Alcoa XXXX. how for again, much and to is everyone today of when

again opportunities drive to We of first stockholders have forward look to the the and this more value at quarter. year you for updating end we

William, back you. and to you, thank So

Operator

today's presentation. may your And And the attending Thank has conference now now disconnect you lines. concluded. you for