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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
Piyush Sood Morgan Stanley
Lucas Pipes B. Riley FBR
Alex Hacking Citi
Chris Terry Deutsche Bank
Timna Tanners Bank of America Merrill Lynch
Paretosh Misra Berenberg
Matthew Korn Goldman Sachs
Justin Bergner G. Research
Michael Dudas Vertical Research
Call transcript
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Operator

Good afternoon, and welcome to the Alcoa Corporation First Quarter 2019 Earnings Release Conference Call. All participants will be in listen-only mode. [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. Please go ahead.

James Dwyer

good and Andrea, 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

In company have Effective Also, presentation. our be in today's from we inventories note a X, financial be A the directly been this included valuing appendix periods addition, to all in its measures some financial reference EBITDA. XXXX, LIFO effects and can found in presentation's Reconciliations accounting in comparable prior discussion on our filed to retrospectively accounting non-GAAP today this found measures the method January most of appendix Any for X-K financial in impacts to the can The have to statements. of EBITDA the presentation. XXXX Form adjusted principle GAAP means to change cost. certain today. in changed applied comparison our average presented.

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

Roy Harvey

a Canada. call. and Thank with everyone on always update we Because today's plant with fire you in start Becancour you, I'll today joining aluminum Quebec, thank then quick Jim, for at s safety, begin to our

that with importantly, injuries incident. most associated grateful we're no were and First there this

I'd have fire time. With do and potline half safe aluminum and to X:XX the Eastern the currently do have so. results. smelter was local and don't at operate details it our to the itself, time. the fire to further today was The for to share As in determine to located of to We p.m. casthouse firefighters assess around turn damage the like impact normally. quarterly a investigating once that, this financial at continues unaffected we one cause, nor We're extinguished we'll the

environment Our Alumina healthy profits decline stability our in Bauxite to affecting of and market operations, to we results. focus through today's conditions condition progress the we're the in our two segment on ahead. strengthening first importantly, in improve we our alumina portfolio they're made changes prices, tough cost highest quarter we're our an market prices. in make profitability addressing with lower in in optimal that an making Through even the most while but this our our Aluminum, operational achieved of And we turn and and grew more commodity reflects safety realized strides performance XX% returning improved intense cycle Despite smelters. the our excellence, segment to so assets in of

the $XXX first smelters restructuring charges that, clearly responsible those largely results, EBITDA first loss basis, reported adjusted share. quarter. solid is While tied to with negative $X.XX million let's special those an visible. overview items started for were an GAAP two a of performance get or With net our on operating excluding of a We quarter

cash. plan and adjusted quarter special with $X.XX an report injuries operations, of in safety. workers' with second happy our and performance with perspective, and We're in quarter. priority for the the Excluding billion ended our operations In over operational per this no specific to careful this remains Reflecting key for From to and basis, Alcoa, agreement quarter. pricing safety in share. we Safety or of with solid Stability capital area. our first progress continue a in top the efforts the control EBITDA business hallmarks reduced Alumina and adjusted million million items, reached increased segments Bauxite Spain, improved loss begin straight let's serious reported the operating expenditures in net production we a environment. Coruña announced $XXX capacity rates in excluding special we metric $XX an we On are $X dismissal generated of as tons per of smelters February. were Under XXX,XXX and October process combined the of year the collective of part that items, Avilés La curtailed with agreement, representatives smelters of last year.

cycles. portfolio we'll assets ability ahead, our for review to all to compete of continue their Looking across

Moving to our markets.

global for While in global in deficit to an we're a We'll project inventory favorable look aluminum the at demand estimate XXXX, aluminum levels. we also growth reducing for aluminum our trend continue year.

improvements overview build plan an provide and safety across we'll of we've to operations. our operational Lastly, made upon the

As part a detailed business review systems of are a successfully and future Bill us on driving market of With Alcoa's turn to that that, through to effort, excellence I'll quarter it this for focus renewed cycles. reliability and over our results. take businesses first

William Oplinger

Thanks, Roy.

shares in $XXX to of collective additional are $XXX share process our diluted Let's Of of XXXX. the declined Avilés $XXX on dismissal on engaged $XXX the of the outlays related when net per prices. in $XXX after second non-controlling and quarter, plan. items declined In and social is agreement which to calculation at amount, not million attributable million to the share The million million may of outcome tax the we're share $X.XX are La of with X.X or year-over-year dismissal in fulfill income there to Coruña count million per share a that $XXX that assets. Revenues curtailed lower million net Depending Corporation process Approximately Special interest. totaled shares outstanding. primarily are because shares sale equivalent per loss to loss. the and $X.XX included Alcoa start process, $XX non-cash. estimated $X.XX cost smelters XXX.X the seeking aluminum XXXX million be would sequentially XX% and XX% on smelters the was statement. or million range that to cash the of collective amount the quarter from incur The million, in charges were Alcoa

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

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

quarter million R&D customer. first includes was margin other related first to the and charge aluminum $XX XX%. a Two of expenses Canadian SG&A items: EBITDA quarter Our bankruptcy a

of first no was Our as larger jurisdictions earnings. XX.X%, sequentially with became rate losses a tax tax little XX.X operational quarter in percentage points portion increasing or the total benefit

rates. gains slightly they higher-margin more power higher Wagerup cast drove Let's and million maintenance smelter key sequentially. prices true-ups production quarter shipments; favorable points: together of alumina Taking pricing pot for unfavorable shipment few and driving improved look prices, to refinery shifted of Higher segment saw and and million from increased relining caustic quarter. Aluminum the EBITDA volumes the the posted foreign other on closer of maintenance cost, pricing resulted impacts A primarily in than sequentially the Pinjarra. cost and customer $X as based rolled Aluminum in change. more at market favorable factors timing aluminum due and activity. fewer adjusted offset outages to to currency lower Improved products. the raw $XXX improved Lower and alumina, We calciner non-recurrence segment all material days in

million on lower our index shipment $XX EBITDA were Non-segment Aluminum and products. million shift segments. impacts Alumina netted and prices increased Bauxite alumina $XX declined lower to $XX was higher a higher let's positive prices benefit relining and activity, and aluminum $XXX lower EBITDA Now segment margin Intersegment focus million inventory. sequential volumes. released costs pricing adjusted on profit in primarily and the to eliminations In segments, pricing. maintenance the as the adjusted down dropped adjusted shift on alumina partially and million, million $XX The million EBITDA $XX offset improved held sequentially. metal by to alumina better

eliminations. corporate have be what mentioned, lag no the accounting, use accounting inventory Aluminum is inventory netted had We LIFO intersegment as was simplified Jim metal longer in We and to segment. formerly now solely

balance from and similar down days million of to sheet. year's working quarter to the primarily first $X to This capital We first is increased year-end. cash Turning with change ended relates in our which X to change last year-end days, quarter billion, to $XX sequentially. compared the

billion. debt remains Our $X.X net proportional at

cash cash in to non-controlling cash capital to and interest from and flow flow operations, corporate minority distribution correlates cash partner cash of cash alone. was million. our $XX from This calculation from from venture and our joint Our negative free change and contributions flows to expenditures operations net and the better than

We have under share our authorization. existing available $XXX repurchase million

results outlook page Our to for the A updated show full actual shipments for the The segments. We've to is all unchanged outlook. year first the highlight: unchanged few items outlook items. all quarter. for line is to outlook move Let's

quarter. of the at was rate outlook tax in operational the end first range the high Our

their dependent on alumina OPEB, restructuring totaling hit approximately and pension full full taxes inventories from for include has the requirements impacts future start. slow their prior through for also quarter sorry, Coruña of sequential flow not from costs and segment. listed in cost Cash the sensitivities cash year, upon outlook the in uses year the million second the for expenditures our the impacts the updated for additional $XX the statement. cash for expect Avilés million average second but further $XX to move smelters, which impacts considerations be primarily include period We determined. despite capital our LIFO to These -- the and and which could smelter alumina color lower we've Aluminum are recent business quarter. We've La to that yet at costs for appendix, which $XX speed provided XXXX changed in I'm income $XXX Note positive In million million to will curtailments. range

accounting a non-recurrence and statement comparative primarily for items customer and the Form smelter rolling quarter's profits and financial For businesses bankruptcy. in power Brazil change, moderating provided costs, costs, adjusted quarterly today lower purposes, caustic higher filed raw in the first X-K XXXX the inventory hydros we've of material

to turn me back Now you, Roy. let it

Roy Harvey

We continued estimates, market, Bill. surplus this to market XXXX balance which now bauxite we turn the year. the expect new, with presenting easier-to-follow Thanks, a we're Beginning in format. our

refineries pockets and by is in Southeast Asia domestic Australia, XXXX. will Even as from Guinea additional inland new market bauxite, of emerged, oversupplied which Chinese keep sourced demand suppliers the historically

country. bar chart long as a the sourcing as persists As and the grow strategic outside of maintain short They critically illustrates, of stockpile remains and will bauxite. within uncertainty China

a and from and well year. a this as to Moving market in short by as refinery expect expected demand Chinese market to long alumina, growth continue The downward China of driven smelting. China outside revisions is surplus Chinese we restarts balance to expansions

we've world the deficit China, ex For maintained projection. alumina our

we that at quo of the information of due Alunorte continues refinery idled a lack did occur. when last about status in a we restart Brazil As to might quarter, assume capacity

the in global reduced is previous quarter. reducing for X% from our to demand so, we've projected growth aluminum transportation X% sectors. China demand aluminum Finally, X% we're our deficit X% growth and between lower electrical XXXX to to slightly in in global projection only change expectation our XXXX. due This especially the aluminum, predominantly Even for to range in

In continued with While a outside the will last exports contribute to to X.X market last disruptions China, as the World incentives contributes enacted America in pricing Section expected dynamics, have growth country's a new, the help last North million grow. these market by demand of as growth revised world tons growth and Metal outflow in million trade quantities of country And export resulting greater semifinished U.S. Chinese offset down coupled also imbalance market, ever estimates for were policy are Exchange. existing quarterly see out projections of ex this to XXX of the same of is on yet trade America in are deficit we and outside revisions despite overcapacity make Europe, majority production, our smelting said competes the Further, X.X growth downward Rest primary large exports global levels export the China, to with to and up aluminum Chinese South to year the increased U.S. China curtailment. higher projection. quarter, the tariffs metal year, smelting products. and remaining demand London Under Since mostly being expanded this short of to world of we flows primary China demand aluminum aluminum range has industry in that semi-fabricated market intended as demand barriers. of depressed metal lowers address Chinese from

and a Our industry individual operation, through workforce. needs playing field, where players strong succeed products engaged can level sustainable a highly

aluminum from the Economic achieving evidenced As Organization for we the ideal. are and by report Co-operation on industry far Development, the this from

North capacity to stemmed may North already in industry's subsidized of replace inputs U.S. key on importantly, to from metal consumers. tariffs the smelting U.S. surplus more that become and competitors. has American aluminum important not Additionally, And we've Canadian have source highly resulted the which tariffs. concerned production. disrupt increasingly supply solved aluminum chain likely imports are the consumers Canada that Most an aluminum challenges, for the for market is to quotas their China hurt also global than paying quotas in their American and

are in addresses government-led, for China's continue a this government representatives We solution regular to with and advocate that in communication overcapacity. we'll multilateral issue,

Turning consumption to consistent since the downtrend days over another decline an been topic. measured of discuss financial industry, in aluminum global a namely of in I'd to the see decade that trend market crisis. last consumption. overlooked the clear inventories days in on We like global have the

so the X an levels projected and about average demand have have Chinese volume stubbornly remained growth and pre-crisis aluminum doing through demand In long-term years to rate. for Nevertheless, however, accelerating remains the the fact, global far prices, positive and market. over the prospects on our the for growing growth China's X% Aluminum days due annual of over been approaching to track. of outlook lower XXXX unreactive XXXX exports at overshadowed globally. significant years X exports of in hitting consumption over have days consensus are last inventory consumption decline thus this

globally. aluminum stocks further years, that As of the and will market we fed deficits the have the future past potential inventory few days current consumption reduce expect deficit over

heart the company are our and stable Now operations. Alcoa's I'll Strong, at in our are key to of turn future. operations to improvements

determine operational some That returning of we've causes operating spanned and instability to to Following root to a committed stability with three locations. last our close review been began year, our our each all business work of of units. assets

power grew improving [ph], business, higher improvement, alumina a per increased Alumina rate we've issues metric by on systems made at asset manufacturing and our units, mine while segments XXX,XXX higher our rates and The level for sustain per X operations. we've of mix system by improvement, And refineries. its targeted part Juruti our our these supply to reliability also addressed and rolling casthouses, X% measured through predictable production and been day. integrity to at focus rate stability production for production reliable able reliability. of tons each training day, We've operational review an tons day. As to operational as improve in-depth the and asset expenditures, bauxite, all drive refineries tons we're in asset average reinvigorating segment's while capital achieve on across to And bauxite programs Alcoa products. standardized our aluminum product continuous improve Through XX,XXX the at and initiative, both health Bauxite and provide renewed especially Together, improved work we're our our to levels that operational completing of our margin example, of segment Alumina rose Bauxite maintenance. X% operator per selling our strategies employee and handling business preventative performance business teams. promote efficiency, and excellence and Reflecting also

have by in facilities taken actions reduce smelting capacity deliberate Lastly, curtailing two Spain. to in Aluminum, high-cost uncompetitive we

As the has a X%. day of segment's result, tons Aluminum average decreased per production

returns executing By Now to overall improvements we strengthen sheet, to we I'll foundation lever and Alcoa. complexity, created operational how strong use in reduce these balance our as business. firm a improve priorities strategic for offer have our some this insight the three drive

position manufacturing function by best and programs stability world-class to portfolio. optimally supports benefits the realizing on look of We'll keep perform and cycles. of maintaining all the cycle we to excellence towards our that research last course, our development. late while Financially, we'll review the across focused in so a excellence, of safety To strengthen also portfolio of the the long-term continue on reliability industry the operational innovation market and year created lead to our our across manufacturing we'll for current remain promoting and assets work facilities and full training bottom improvements drive practices market future and future, decisions progress company. the As competitiveness make practices, we'll line to we current we robust aluminum the from benefits

I Andrea, Our success. and take environmental, is all key remind to we'll arise, our get of your providing reputation of started. future as would and programs important aim to with continue current And be opportunities the assets, that, Bill of stockholders. lastly, and questions. protocol the With to returns strengthen community please most us to happy are consistent our and our one and customer our we'll sheet balance our

Operator

our And Please Instructions] go first question Sood Stanley. Piyush ahead. from Morgan [Operator come of will

Piyush Sood

congratulations on the Bill, quarter. Roy,

Roy Harvey

Thanks, Piyush.

William Oplinger

Thanks, Piyush.

Piyush Sood

So sequential old And increase as run in as that's an you if talk question, to beyond rate was the of there? this, of, million $XXX Bauxite think rate the first about rate? extension should run XQ million, - could say, the something let's over pricing use? we run $XXX new EBITDA is still Or drivers right is there of of to the

William Oplinger

first better So the associated extent, so did in pricing better and Piyush, is, the the they the well and recovery had Alumina in some volumes. business. better with quarter, volumes to And Bauxite

a was quarter. do will we've guidance in how the quarter. don't specific around it second good it think given I So

So leave think at it I just we'll that.

Piyush Sood

saw you But quarter? Okay. or the a holds onetime reset you do in happened the was think for probably benefit pricing now that this

William Oplinger

pricing the hold. benefit think will I

reset. I'm a So not onetime aware of

Piyush Sood

on one ABI. And Thanks. and it's the Perfect. is second -

ongoing. understand you have negotiations I the So

you're probably color that the you together and question some probably further And some good. issues, closer far come whatever So apart. union you probably you have on guys -- The can give, is on that's issues.

are there's of time of line if looking at? is overcome, restart CapEx kind if it sticking just And point. and a what what we So wondering some

Roy Harvey

best can. try that I to let answer Piyush, me

can So we workforce our as Becancour. engage at with to in you imagine, dialogue continue

attempting bridge today, way that what into just help we're not process. Just hypothesis to discussion was about to thing in actively the the I'm and We're a a we is what our To to called at we the conciliate the important specific continued - with working details that very union. there going they've are find that get solution. honest, is quite with were looking of But negotiating. government to midst try be difference a

that as that plant can intention make plant and purpose just We possibly is. that clear as see can we negotiations. the so want operate is Our as not those long at we that to because invest term competitive is and grow for The but to facility it needs plant's to necessary to production to more have can the competitive on a that so continue is productively and compete it very scale. run global we a tools

will those So discussions continue.

plant now, that make productive. made right that with that the the time. also and kind that and have is make the for term actively managers our it also management that engaged long briefly those what the government, doing team I to bringing can half for actively to you and to the be we looking will we a I that and we are highlight can to because a good say about very process progress processes run at us that improvement the are We helps term more potline well there. operating process also with continues secure, workforce. understand engaged safe, long and firsthand just back, of would job think is takes potline that competitive engineers in When make would it continue We're improvement keeping more our seeing

to course, that much brought XX-month functioning very financial pots leave there Bill, order up to get availability X market number As are of I'll it's X materials, be and cetera. to can to imagine, of a online. the of fully depending, conditions, back on repercussions ordeal and raw you et in to need that a but

Piyush Sood

helpful. look at an as the Warrick That's Should we expense involved? example for

William Oplinger

expenses was ultimately Warrick think million said done. and when I it all about $XXX

Bauxite because the Bauxite. than a time for newer a just second technology less back And rate at can your it's quarter was Warrick circle than that Piyush, ABI let done been to I was. and for think question. lesser has what me through I glancing be curtailed

a it's think I to probably safer get to. assumption

quarter million Bauxite did did take outages is you have think, looking at million if million as that $XXX in being run is $XXX the your the I the in this that quarter. you not $XXX some back rate, Bauxite maintenance about quarter occur and reason first the to it to second

will quarter. Willowdale Juruti typically they like or occur that do maintenance places second quarter So in not did first at the the in

while So second will alluded we cost to, some have that sticks higher the quarter. in the we pricing

Piyush Sood

best. Thanks, guys. all And the

Roy Harvey

Thanks, Yes. Piyush.

Operator

go question comes B. Pipes Lucas Please next ahead. FBR. of from Riley Our

Lucas Pipes

sounds you. maybe look it. good - the cost-cutting first of afternoon, I if provide morning you undertaking. Roy, out, efficiency and kind year potential Hey, numbers I that to of wondered wanted on been It what If have good some savings? you everybody. touch initiatives we at intriguing some the are Thank could very around

Roy Harvey

Yes.

So numbers specific to forward, Lucas. haven't about to honest, put quite project we be what we're trying

the and I give things I about where appreciate doing reach. we can what types can question. What about the we're -- some guideposts you some provide So that is then of color

looks these parts each of obviously a Bauxite, different And to of offers portfolio that our to of each set Alumina, initiatives. piece from So across Aluminum.

get refineries. it's reserve it So more our use alumina when look efficiently you at you and then how how about Bauxite, that to you all

up So understanding to for long-term the that of make so really little tons. better then opportunities it reserve those it's profitable lots just of or it's it there, and allows a extra overall increase Whether those use for up in cost to very at - variable cost, external to fixed us for evaluating, customers, us cost. do internal to a right pick allows making with then more opportunities pick good job us, and decisions a

that conveyor that side, stability. the some full which ability operational order running of turn sure kind of creep at reliability about most of before. had belts, the making speed, then to to about importantly, the both our relatively We're important it's control of all that also predict and overhauls, On to our we we process midst keep reliability in type it's and any But are talked Alumina projects those have the we small business. around need Alumina extremely in and plants in good the

into then So in the are Alumina, that extent we last of stable QX last operations that to really see really of back to can year you is saw year certain and on QX a what return the a very back and not working of the debottleneck build fact actions that but improve ways just type to to we I'm constantly about really talking yield. And facilities. brownfield nuts-and-bolts trying of creep constantly, and

So then that guidepost as you there. use can a and build from

can same XXXX In than As have well. the pot of was as QX last type the think turnaround. better year's than some of better you I reliability, -- QX, which we see, was QX Aluminum, of

lot making. about a type importantly, it's decisions some stability those opportunities. opportunities more reliability and strategic of excellence have We of same But we're that the of

we've on would coming I and million illustrate believe, the two between But down profitability. those potlines to estimated the that potlines I So based $XX fact down, $XX bringing improvement last continue million the and casthouses. two year's we of run

So as Coruña you a current relevant important think we bottom impact in changes about on like La and how our have very line. that Avilés with have making and today's very environment, flexes

to can the And use make can we you in estimate portfolio. model think, kind of and what so I order improvements those, to

Lucas Pipes

for What's be under occur? different much. worst what What question the potential case, second the Can your a case detail. U.S. a could And quotas what have towards a you are to if you are the That's in to such we'd best shift for et you a be then Thank for more quota could little implications that Thank potential very scenarios consider? what about a you business case, bit my helpful. very the regards opine base - cetera, were switch system?

Roy Harvey

Lucas, impact and on that that can put the scheme really game one vary is of it's in the predict place. the of depending so might hard the significantly to Yes, be - because simply rules

consumers aluminum Europe, them with are what competition at start So back our at looking of trying and basics The some I of and simple in successful, and, starting would we're can the more fact United Australia how China. make the beating from is to that position. let's successful see sort say we more States importantly,

that the to we're sure make so they have foot And trying best forward.

when their in more is fact so competitors environment think are about import-dependent the they overseas. that an for consumer, live and the you U.S. means that today their tariff it And aluminum paying that we are the aluminum than now

cans, creates more so like cans can more China also events, Mexico And and aluminum going coming more from it sheet Mexico. strange from into

this market so makes compete distortions harder creates And to and it the U.S. in consumer. a for

standpoint, is, The next So hurting put happens into impact depending quotas? of rush is metal quota against up are what tariffs industry. and step then percentage the and downstream can hard place, having see running the on of not you desired from production what our the the in coming prior year's is they on what then regime are with quota Depending the considered.

for consumers, worse their because that material find in, not cannot simply even aluminum for actual reasons. the place. situations consumption U.S. brought the financial just source reasons, than where been cost products that U.S. could increasing other in you brought And have speaking, need of in so consumers And be actually can realistically they

other production been destined into Canada, consumers. casthouse like the Warrick much could of China, is shortages - from some of of than paradoxically, plants U.S. coming it products of import metal go the drive directly which the so parts drive could primary the or natural could it what to of world material has And that of key or primary supplier, of rather drive the it material where from is the from the import other of

I we've not talked specific are we think, So is numbers. a quota system very fact an through paying, makes standpoint it From Alcoa very The right now, complex. $XX million. specifically,

William Oplinger

million. $XX it's Yes,

Roy Harvey

million $XX of...

William Oplinger

estimated the a year the but month, first number had million is $XX first it around $XX million. quarter We versus as quarter last actual around in

Roy Harvey

consumption. system that simply and no the hey, demand aluminum where elimination quota the tariff is can expense for for of Alcoa is, a then U.S. you if tariffs long-term take say, at so And as aren't of if the improvement the material those there's available the be of

can can the market a in long-term much a customers where positive where be we level playing for all right there on fair. our and and Alcoa, the impact what we compete, the and we where level we more is we can also of field, to the the orderly of plants that So competition focused need is and an really where - are really dynamics market, but business all U.S. better make work make short-term global right see products

Lucas Pipes

very I'll very many I you much. it That's but turn have over. Thank helpful. questions, more

Roy Harvey

Thanks, Lucas.

Operator

ahead. Our next Please question comes from of Alex go Citi. Hacking

Alex Hacking

question My thanks is and if which Canadian call. so, charge related first that was segment through? for XQ? The EBITDA an $XX included it adjusted Thanks. - for accounting the million Yes, if the did bankruptcy, And in to question. flow

William Oplinger

Yes.

So try make our in an It included EBITDA. is as very let adjusted clear. expense this to me

So you smelting view, be In were EBITDA. choose were exclude in it, would million to we our EBITDA segment. -- included if And the adjusted if adjusted that to we $XX impacts better.

- out quarter. in page, in to then expect and second recur So as clearly we that point the don't we the considerations

in an only that impact hits the first quarter. it's So

Alex Hacking

mines their dams. been this a color know possible? tailings And you tailing investment, Thanks. a if and some to there, extent give some what minority of question, the don't because but potential perfect. it's then around you upstream there's use that, second MRN bauxite Okay, situation in noise Brazil I us on can Could answer

Roy Harvey

Yes, can that, do and Alex. I

let's a start out So from from Brazil perspective. a -

how government the particular of regulators, midst everyone reacting is still can imagine, how in to the citizens, you As event defined. being local - that is how

Pará footprint for the São and how in Juruti with do [ph] so Luís like really evolve? Maranhão in that is And in an or becomes, those question in a important And footprint state. direct and us, Brazil places regulations

close to very they've of asked an very of both designed and specifically impact those for that. MRN. it right stability is has long-term staying very residue But review what And short-term facilities specifically now, we're on any course, and each a impoundment. of tailings of kind and detailed Of also, stability,

and and assure also of midst is those the our that. so the and can to in our for ensure premise And is also facilities doing premise stability to - we're In that of the livelihood MRN midst starting of long-term course, in starting doing facilities. share that each I the of of MRN

those MRN specifically, to have have on Brazilian regulators. They studies. submitted been they the working for So been

of has made. I MRN that some seen think you've the statements

a sort and possible. surrounding regulators. employees studies make as near-term done, through are We the submit each caution we as safest for communities sort are to get the -- we operation significant to we that we we are as impacts view how it exercising of sure those we through the then some those amount for facilities how as our and of There operating

we coming of For is essentially quarter. a us, tons off-take XXX,XXX normally an of That about million about it the of would will in have drop $XX that impact have.

the However, good on government. we our also see really our progress between discussion ongoing and joint local venture facility, MRN, that

quarters good So QX is still a uncertainty further but more there amount of for down so for the less road.

William Oplinger

be that based evolving an situation. said, will evolve million that's MRN to can back in clearly, And million and how capacity. in the quarter. to $XX will of And earnings, $XX impact Roy that get on - estimate full as But be second quickly our the probably

Roy Harvey

And provided the one already deck. note inside That too, we in is considerations the embedded that more Alex.

consideration. So additional that not an is

Alex Hacking

- just they perfect. MRN, are Okay, have those dams using have dams? specifically not if upstream may tailings a very that I And like upstream follow-up, dams those that Or any may, they are or actively are historical active? on

Roy Harvey

think There how regulations those an in any how dams operating we're back the do I'm those but some on are dams. trying not to now, believe upstream that could develop. Right component are future current -- I the have upstream of regulations Yes. depending

moment, not are However, facilities. at the they upstream

William Oplinger

impoundment facilities and that minority-owned - X showing joint are in the upstream have, inactive ventures. latest we're that data we Yes,

considered So the MRN dams of inactive. would be upstream all in

Roy Harvey

can in the for have It larger how mining. use long, of and - depending then to have are you, regulations needed an those how will upstream it's on that our And impact an is what tells that you much on you it So how what the facilities, imagine order to smaller some impact operations. formed. tend than will Alex, impoundments continue be investments

Alex Hacking

Okay. clarifications. the That Thanks for very was helpful.

Operator

question of Please Chris comes Terry next Deutsche Our ahead. go from Bank.

Chris Terry

from questions me. Bill. and Roy Hi, Three

down? Firstly, policy the exports? in the closures see price China the need continuing to itself, to you tick a question. market just Or the do change further it what do inventory on aluminum potential think from on just catalyst? That's see industry? first Do the days you you as it's Is my

limit because to that could just in around start has the What you for to And in $X Thank that come the above through that they purchases below the to reason a you billion year? is slightly expect retained? XQ should Was billion see got cash Would Or opportunities. When if you've lack of The strictly is third ever benefit? you. the balance the just repurchases, despite working quarter those second opportunity? we the capital it of the an the be stay share the level? share around go $X weaker price, $XXX the million.

William Oplinger

I'll take three. and two So

You take one.

Roy Harvey

number one, take Chris. I'll

you And can start is the all be off asked above catalysts. D, the about pricing with we'll So which catalyst. choice of

and I add listing I connection a listing is fact that the it of items. in in you what and out would impact couple of a there pricing of also clear a then on both And happening environment the our a of the pretty a job we're seeing has different think amount add aluminum but of particularly the the so equation, pricing in would did between simply number - things. exports one, products good cetera. which China, demand, uncertainties coming I Number direct trade what's et in

long-term trying start that of tariffs aluminum. important think then that, very how think, solution, build also we're the and rather multilateral is traded some we to working I global improving think some start catalysts that about good of to root time be discussions, vitally we government amount on think to are with address spend we can't to in trying the that that those important clouds reacts how speak conversations why issues play need would of the some the the say and see an talked issues the all certainly about our this I'll Chinese and and between ones I and/or that When those And some to global out fundamental and we economy, I also host these than demand specifically, addition quotas some supply talk trying to issues U.S., to would about for price foster we about seeing these global tariff Canada to and when of a overcapacity. of I that over of already eliminating well. - then of those that's So working it And some against issues as improving turn start it listed, And you'd if trade our I'd uncertainty in of quite helpful. to we Bill. start

William Oplinger

Yes.

they'll comments So clearly, my have forward to prices. them be let will working address -- are component And me that projecting a capital.

that We are up first that based materially these that trend the the downward the dollars days to watermark On we the So the don't of we're would basis got fact and at a are forward some year. last would of from cash move these capital would to free the to during comments we a are where day's year. on quarter basis, on prices anticipate -- tend on high assuming about at course where end they that working today.

us. where also. based assuming those basis fact on depends change up, the end prices the all change If are were it would prices change days on prices significantly, on comments and again, don't obviously that significantly So to

$X go far course repurchases, during the clear, a on that the around the of cash But of month the or balance question sheet. be of billion we As as share target doesn't course to we at capital quarter mean to keep that up of during we'd back $X we the a We the have typically end don't the cash billion. usages then and -- course quarter, of quarter. build the working under a

be, during course built target. billion of billion at then quarter, on had the $X the to of sheet. that's And dipped the keep We've of the end So the Is we in up cash quarter, to this execute at billion case we Clearly, under of market $XXX program back $X the and what's in quarter. left the your the outlined the the balance of next program should that conditions $X share of okay, the have the we'll question cash view balance share on but us beginning authorization, and and the we if allocation repurchases? within to, the the year. capital allow the so million repurchase

Chris Terry

Okay.

circle slow-turning your question are back think aluminum of to horizon? the any see listed from Do you of any market. Do you is near-term view? the ship the events that Just Or do listed? that see in point a to you on that this or you just of first those

Roy Harvey

basis. that I on how change can Chris, surprised pretty I things be consistently day-to-day I a say would guess by quickly

think I discussions So China. good on seeing progress we're with

lot on USMCA a going the negotiations. there's think I with

things quite be I think those can quickly to honest. change pretty

a going in where not think And I certainly do basis. live to but daily the that or so weekly shift underlying we pricing a fundamentals world predict can on

Operator

Bank next Merrill of Our ahead. from question comes go of Timna Please Tanners Lynch. America

Timna Tanners

Good Yes, gentlemen. afternoon, hey.

Roy Harvey

Hey, Timna.

Timna Tanners

So I high-level just of questions. wanted to couple ask a

for Just that demand. alumina bauxite, really your aluminum, to understand guidance well-followed --

know status side, for but Or weakness, Chinese side, you alumina assuming in recovery? Alunorte are a including quo? stays you are I of you On it EGA and you you that assuming on aluminum the including And recent balances? your are anything are the softer mentioned was because

Roy Harvey

Okay.

So those two let me remember and try things. Alumina...

William Oplinger

EGA.

Roy Harvey

For balance... alumina

Timna Tanners

aluminum. and Alumina

Roy Harvey

have.... We

William Oplinger

and EGA Alunorte.

Roy Harvey

inside EGA, included expectations have numbers. our our for We of EGA

have we production we will -- year but not They is that this course over it of on so comment ramped continue in. the and it that And folded up.

the quo. assumed For Alunorte, we status

as as to you think the on that believe to then will both that listen Norsk facility, Albras. need come online, And about you says if what alumina about you'll our back and to also about impact think so balances they you Hydro knock-on but add

it On one the me glass so operations. standpoint. quo question which your - balance a in assumes second let half-empty, weakness, recent look that XX% at was around of half-full glass our So Chinese status

we our projections So base glass on data. half-empty,

this the versus out that's but Of quarter from data recently - course, quarter much base come we on there is we've is now first reduction quarter a through China. it. at very the projection last to We're based looked that

the That glass-half-empty see starting a of there the a there's have to and just it in aluminum effects demand quarter What really rest year. program from that first and that here is an about and stimulus the is in reduction into announcement already So that in not the incorporated a not the those impact stimulus half-full incorporated. we standpoint, we're of been projected that glass was recently, says program.

this the That it was part -- expectation of and among I just balance. just we is global as a got therefore So demand example, morning. data an point, not believe the that

those as so that the and any the projection that current we've course of will take takes stimulus of And upside gives considering to be projection. effect, measures made,

Timna Tanners

That's helpful. Okay. really

William Oplinger

that, by we're we're doing to And demand perspective, from just when industry. industry growth, up bottoms-up add Chinese it a to building

how so And we that's come numbers. our up with

In say of to level year. some Some four seeing but of from fairly transportation, packaging slowing was seeing slowing. strong. I the we and is electrical of industries the some we're and new looked it the stayed nothing China hasn't that are Well level that out the the it's this in when the at biggest probably of are three -- Timna, seen, we've that at numbers, probably construction our has you, strong, deteriorated big it industries the of fairly beginning actually that

Roy Harvey

on one driving brick that specifically improvements are improvements much infrastructure very [indiscernible] add very mind me China. I that those with in more in to and Bill's Let keep also wall, comment. But and agree focused

to And China. sources they of the the being argued export so make, are demand. measures really stimulus Rest two pulled there's the to demand of which they demand, the pieces: exports of There's about Chinese that world, essentially that think But semi-fabricated we've is which first that that's of Chinese is as World we rest set real products

of a additive and And to has because inside so global or all positive global very and demand markets. to really a global benefit therefore supply balance those more net the it's actually aluminum consuming and the - are effect demand China

Timna Tanners

China. question bad finished know all reasons are you that I quotas why the really one why the all from is of of the more articulate explaining have just and reasons problem were I Super. aluminum real production Okay. and

that didn't of not or clear message on that not there's aluminum be on there's Washington? Washington. steel, well-understood can efforts that's expect or just on whether a same topics I and sense still of However, army am and an the well-understood not whether in I same We to if in in lobbyists we know is topic get the a

Roy Harvey

There's a very effort, similar Timna.

than smaller issue I you industry, the steel aluminum is believe well As the but can industry imagine, understood. the is

belief spend Aluminum tell a I so Washington. locked producers a remember that of good in that would you The represents time Association and arm that of -- messaging in And And that standpoint U.S., from level same from my is you and I at also a when the Canadian when consumers. portion next administrations look Canadian, at that you of they interlocutors, look to the you're the through sort Aluminum Association, finding going that Mexican USMCA. message arm sort

give it has them. in Unit taken it Washington to is some I've Aluminum, because and to - how color, there I Business our very just Reyes, them, works about So personal President understanding in an aluminum I it to the truly that personally industry and know taken personally believe I Tim

those However, also there necessarily don't agree. who are

think this, there a And I through sort as we is clear so understanding.

Canada not of some between find be do understand the but the also possible, which, support understand message the are to frank, that agree, of the and best quite have we but And trying and dropping to solution many might U.S. different helping is the and to direct it tariffs players well

Timna Tanners

again. you, Thank Okay.

Roy Harvey

Thanks, Timna.

Operator

comes David Our Markets. question of go Please BMO next from Capital Gagliano ahead.

William Oplinger

can't hear we Dave, you. off the dropped Maybe line. Dave

Operator

Paretosh go Our next ahead. Please question comes of from Misra Berenberg.

Paretosh Misra

set of got questions. Thanks. a I've

that given like about, you're of you're just terms on curious pension billion First, $X EBITDA? what, debt it what net current year is leverage per in target plus running

William Oplinger

discount we billion. debt provided we capital to $X.X target guess assets pension framework, we that year at rates ended the few over change was via first on additional beginning return could the the we We debt That we allocation billion proportional quarter proportional was the We that ended to if billion. don't of said provided the get net expected on just we that provide year contributions I a that at And the target net year, the target. range Paretosh. And $X.X us. Yes, the $X.X framework. and years of beginning thought color at our into next the our capital the mandatory we a with in and - get billion, $X.X allocation

net billion I to So proportional debt debt a of target a should billion. - say net $X $X.X

Paretosh Misra

just And cash thinking year. about flow for the it. on Got the second free then

maybe way guys you a to I tax what's see cash So good cash about QX. $XX this year? the in million for rate tax paid think

Is rate So for XX%-or-so tax the that about that's a good cash use to year? the ballpark rate. of rest

William Oplinger

that quarter. mind the should the move The Yes. on during is course second tax that you we washup have to of big in alluded It the earnings. keep outlook in one the the based that will thing We page. year in

think go me you let see, go you'll the page, just to So if outlook -- there. I

million last for close associated profits year it's I the year. made think the in in $XXX we that Australia the That's with to washup.

million associated last so taxes. payment well, with And prior year, we're this the the period of in -- $XXX projecting year,

Paretosh Misra

this of Got how last -- I the just how another to it. think the clear that to of that - flow, up pick free mean, quick impact a And the is -- pretty flow one year. calculate to how statement actual minority maybe on but cash distribution. calculation CapEx impact you for cash income clear, dividend the

William Oplinger

Yes.

been historically dividends quicker out through changed paid So policy. get When have to partners. we the separation, went what than they dividend our we out today paid

And then we and we clear quarter after then in assume end. And minority pay our do free flow. out that the following the can quarter a out the any that earnings we month month, So of partners. we proportion you prior the cash from the to excess --

Jim that I we think pretty a after but what assume to I -- the will guidance, to the on to need we're I better believe have income call So be close. statement get what just talk and

Operator

ahead. question Our Sachs. next go comes of from Korn Please Goldman Matthew

Matthew Korn

Hey. Good afternoon, gentlemen.

Just a questions from me. couple

levers what of look you're realized And mean the meaningful are relationship your as mentioned any and the part things is What mean exactly? clarify shift changing as pulling does and future between pricing. of you're more the in you that in profitable productivity to kind XX? You -- changing? products indexes are the you're that doing measures, the can Slide you one ahead? foreseeable that the of prices in we First, and How improvements

Roy Harvey

on in particularly smelting. very casthouses That's the Yes. focused

and give energy lose think levers that that they're we focus potline. the sit just of profitability value-added the vibrant when particular have, didn't that -- you So to that want typically, the the consistent the you about markets, issues supply/demand is cycle. they're some of you strategic tend about inside broader to contracts We some product sort to also of tied based on of those and on the very fact aluminum the not have that

want to midst we the generating make into specification which, the in us profitability. that the those end, it that margins as we're total gain to product of build trying and So sure our that that casthouse we helps market are in customers much we're can, share, to we're trying our to as making

very focused on it's casthouses, So Matthew.

Matthew Korn

Got it.

call, continue early The mentioned second the course review you you profitability. for press say in part, your the assets you through-cycle release, of to over your

which Is minded. later? there for high any productivity this their the -- you're that you're the of press looking advantages those where -- as Over cost than could because and paring are the your appetite making, years, has to side assets because see investments through grow largely through these meant advantages, profile, grow to their the down now very all market volumes sooner of cost portfolio, you higher those opportunity

Roy Harvey

Yes.

refining So portfolio. our the answer profitable our for is that, across And quite look ways alumina to portfolio think grow facilities. about simply we yes,

We Western strong in plants Australia. have very

present very a brownfield. even And debottlenecking Brazil. for each creeping strong activities plant opportunities have or of through We production in those

that alumina. attractive capacity our And lots smelters in competitive quite there's very bauxite. have is and technology, to those are there have that so inside power be And to opportunities opportunities creep of as well. There excess have we also honest, contracts at

think we also at then we that, that be dependent would is look I cash fund later, and how is sooner piece we then making always are and what how the one and we sure selling, say into on I'll with, you assembled the those that market rather which activities. than about So contend that would said, the will we as understand is then investment,

growth we can identifying you you of some be in you know. analysts, on we opportunities understanding we -- that our will those have. and the capital embarking And let and of on first while won't process larger we the projects, while our won't in when see to are that we definitely deciding those start know, So

William Oplinger

return-seeking capital. million it, put $XXX to And year, numbers we around last in some spent about

incremental not $XXX of the is, You across relation can of about but massive study projecting this million three units. million in some the spent in business These return-seeking are that part, being we we're to numbers, year, have debottlenecking of the to right, large size that opportunities company, capital. $XX our

Matthew Korn

Bill. Thanks, Got it. Roy. Fair enough. Thanks,

Operator

question Bergner Please ahead. of next go Research. Our from comes Justin G.

Justin Bergner

Roy. afternoon, afternoon, Good Good Bill.

Roy Harvey

Hey, Justin.

Justin Bergner

but of year. been expecting down rolled the rest took Most in answered of With my you the guess sequentially ones. there quick questions of a steps that improve down have respect Could step a that describe to in the just of of business, products step waterfall sort for sort couple you're the to EBITDA this but it quarter the improvement? just I

William Oplinger

Sure, yes.

included Our of it lines smelter got work smelter in rolled business, the running we've has remember, because there. X a products now

higher aluminum in cost impacted million EBITDA some had $XX and aluminum first was the the in So we that prices. lower cost negatively alumina -- quarter by

half. half, where January. $XXX second said we about I in typical -- our we is half EBITDA the in project business million a first continue in seasonality into do look think the we And than we stronger see of -- As second to the the

$XXX to continue million. that project We

ramp in -- we So a comes get pricing in second that that second better full half power the and volumes runs ramp some unit. and second that in our half fact we half half from second the and the out there's in the that the means that part plant in in

Justin Bergner

there Okay. to about That's sustain anything sequentially EBITDA of forward? be is you just bridge on hope benefit something $XX to I segment was guess, earlier I follow on appendix And or million that aluminum, the guess, plus higher mix benefit the idiosyncratic to -- I then helpful. level up able the, going mean, or was in question, that mix slide, that?

William Oplinger

Yes.

coming slightly the mix of coming in components: better smelting. mix as to, casthouse the mix alluded our the quarter had So X better product first Roy and, of out out business; rolling value-added

that And in quarter we've our into during in prices about, talked and going the increase mix, so first and America the specifically should been able XXXX, and some year. of the course increase value-added stick Roy to North as

Justin Bergner

material segment clarify there? Alumina then Okay. sequentially, could of Great. raw million lastly, you tailwinds the $XX were And the just for the what drivers

William Oplinger

that flow Caustic caustic flow reduction soda. our typically of takes time to price. It in a sharp has through price couple in down sharply income takes statement, Caustic to through. quarters us for come soda for that

that So the we the starting last now the year. second of of are just prices in caustic to see were we buying lower benefit half

Justin Bergner

Great. Thanks for my taking questions.

Operator

Dudas of question Research. Vertical from Our go last comes Michael Please ahead.

Michael Dudas

in Thanks for me squeezing here.

your wanted on deficit follow remarks dislocations your and to Just about expectations. current up smelter

that you. in what from would some World, more to Chinese Western point to and the you and prices World some where are a that get some -- proactiveness Thank going that and just the where going seeing more of to smelters? accelerate? situation? Western Or tariffs Is see conflate to you're is economics that going seeing anticipate happens -- Given or with with

Roy Harvey

Yes.

going quite very alumina, depends. to specifically in think depends I to it So the honest. is happens on be be, it And what answer

one that is the from alumina this to quarter that has of big prices happened So quarter changes changing. last are

so smelting And make with tends unprofitable quickly. elevated alumina an to price, aluminum it very

is tends to move what quickly. of China, it we to that tends QX of others example pretty had taking La And some place about would to taken forward a smelters before. Avilés and and a some we've Chinese of X.X would similar So smelters to in say in happen But starting quicker demand tons that offset online, curtailment of to good of actions. we're very types here talked that that part what alumina and also smelters. have profitability smelters of we've reductions view has have it depending million we will to an our react, aluminum where are come of impact those be which China, have I seen that I your outside been although on see pricing, cash-focused. will on action In then as helps Coruña bring about

a and upside we program, us to China pricing is if start turn of to Alunorte see will the give of it stimulus changes determine the about What a talked to dynamics part really deficit that of of what's and then very that happening. the I important again, as happen will -- Chinese question. plays some So so start to could build in because inside that that. important alumina, But the alumina in in help of -- outcome

Michael Dudas

Roy. Thank fair, you. That’s

Operator

session. over question-and-answer like any to our to for the back closing concludes This conference I would Harvey Roy remarks. turn

Roy Harvey

a over few minutes to today like us. and with Thank I you, we're bearing Andrea. your everyone And I'd X o’clock. thank time know for for

every and quickly, on continue be - So our two further long on future. one facilities very the operational focused continue just of quarter, on be value very and also quarter focused cycle. of each stockholders reliability through drive we We'll to we'll the each pulling into to our stability business that at as increasing our locations, each for market be of levers our to and focused up second sum to through we on the we're at enter

Back to you to thank progress your for sharing you, more we look time and So Andrea. today, in our of July. forward

Operator

for concluded. now The today's presentation. you attending conference has Thank

may disconnect. now You