October 18, 2023--
Alcoa Corporation (NYSE: AA) today reported third quarter 2023 results that include increased third-party shipments in the Company’s two segments and a sequential improvement in cash generated from operations despite lower sequential average realized prices for alumina and aluminum.
Financial Results and Highlights
M, except per share amounts 3Q23 2Q23 3Q22
------------------------------------------ -------- -------- --------
Revenue $2,602 $2,684 $2,851
Net loss attributable to Alcoa
Corporation $(168) $(102) $(746)
Loss per share attributable to Alcoa
Corporation $(0.94) $(0.57) $(4.17)
------------------------------------------ -------- -------- --------
Adjusted net loss $(202) $(62) $(60)
Adjusted loss per share $(1.14) $(0.35) $(0.33)
------------------------------------------ -------- -------- --------
Adjusted EBITDA excluding special items $70 $137 $210
------------------------------------------ -------- -------- --------
-- Increased third-party shipments of alumina by 11 percent and aluminum
by 1 percent sequentially
-- Generated $69 million in cash from operations, a sequential improvement
of $82 million
-- Finished the third quarter with a cash balance of $926 million
-- Paid quarterly cash dividend of $0.10 per share of common stock,
totaling $18 million
-- Progressed process for Western Australia mine plan approvals
-- Achieved multiple production records across the Canadian smelting
system
-- Initiated cost reduction program at the Kwinana refinery in Australia
-- Gained greater market penetration for Alcoa's Sustana(TM) line of
low-carbon products
“It is a true honor to take the helm at Alcoa as we further position the Company for long-term success,” said Alcoa President and CEO William F. Oplinger, who was appointed to the role last month. “In the third quarter, we saw positive improvements in raw material and production costs, but lower average realized pricing for alumina and aluminum had the biggest impact on our results,” he said. “Moving forward, we are laser-focused on improvement, and we’re working across our global system to increase margins through operational productivity,” Oplinger said.
“We are already beginning to see progress with better, year-on-year safety results, as well as production records from our smelters in Quebec,” Oplinger said. “And we will build on that momentum across our business as we progress, to remain well positioned to deliver today and in the future.”
Third Quarter 2023 Results
-- Revenue: The Company's total third-party revenue of $2.60 billion
decreased from $2.68 billion in the prior quarter with lower average
realized third-party prices for alumina and aluminum. Alumina decreased 2
percent and aluminum fell 9 percent, although those lower prices were
partially offset by higher shipments in both the Alumina and Aluminum
segments.
-- Shipments: In the Alumina segment, third-party shipments of alumina
increased 11 percent sequentially, primarily due to increased trading and
shipments across the worldwide refining system. In Aluminum, total
shipments increased 1 percent sequentially.
-- Production: Alumina production increased 10 percent sequentially to 2.8
million metric tons primarily due to higher production at the Alumar
refinery in Brazil after the conclusion of elevated maintenance and
higher output from Australian refineries that are adapting to lower grade
bauxite. In Aluminum, Alcoa produced 532,000 metric tons, a sequential
increase of 2 percent from the second quarter's strong output, including
multiple quarterly and year-to-date production records across the
Canadian smelters.
-- Net loss attributable to Alcoa Corporation was $168 million, or $0.94
per share. Sequentially, the results reflect lower alumina and aluminum
prices and unfavorable currency impacts of $83 million, which were not
offset by the benefits of lower raw material and production costs in both
the Alumina and Aluminum segments. Additionally, the third quarter
results include the benefit of a $58 million valuation allowance reversal
on the deferred tax assets of the Company's subsidiaries in Iceland.
-- Adjusted net loss was $202 million, or $1.14 per share, excluding the
impact from special items of $34 million of income. Notable special items
include $58 million in a net benefit for discrete tax items primarily
related to the reversal of the tax valuation allowance described above,
partially offset by a mark-to-market loss of $21 million related to
energy contracts.
-- Adjusted EBITDA excluding special items was $70 million, a $67 million
sequential decrease primarily due to lower prices for aluminum and
alumina, partially offset by lower raw material and production costs.
-- Cash: Alcoa ended the quarter with a cash balance of $926 million. Cash
provided from operations was $69 million. Cash provided from financing
activities was $35 million, primarily related to $40 million of net
contributions from noncontrolling interest and $32 million of net
short-term borrowings, partially offset by $18 million of cash dividends
on common stock. Cash used for investing activities was $166 million,
primarily related to capital expenditures of $145 million. Free cash flow
was negative $76 million.
-- Working capital: For the third quarter, Receivables from customers of
$0.7 billion, Inventories of $2.2 billion and Accounts payable, trade of
$1.5 billion comprised DWC working capital. The Company reported 50 days
working capital, a sequential improvement of five days. Inventory days
improved by four days primarily due to lower raw material costs.
Key Strategic Actions:
-- Western Australia Mine Plan Approvals: During the third quarter of
2023, the Company continued to make progress with relevant state
government agencies in support of the annual mine approvals process for
bauxite mining at the Huntly and Willowdale mines. The Company submitted
a revised Mine Management Program (MMP) for the period 2023-2027 with
enhancements meant to address stakeholder needs and expectations. The
submission to regulators includes additional controls for the protection
of drinking water, including distances from reservoirs, and biodiversity
that includes a plan to accelerate rehabilitation. The Company is working
toward an MMP approval during the fourth quarter of 2023. Separately,
following a public comment period that concluded in August, the Western
Australian Environmental Protection Authority (WA EPA) continues to
consider a third-party request on whether to formally assess all or part
of the current and next MMPs and, if so, at what level. The WA EPA has
indicated it expects to make a decision before the end of the year.
The Company supports moving toward a modernized approvals framework for
new major mine regions. In June 2020, Alcoa proactively requested an
assessment by the WA EPA on two new mine regions (Myara North and
Holyoake) for the Huntly mine. The Company expects the bauxite quality
at Myara North and Holyoake to be more consistent with the historic
higher quality at the existing Myara Central. Alcoa continues to work to
secure approvals for these new regions, and anticipates mining in the new
regions no earlier than 2027. Until then, the Company expects bauxite
quality similar to recent grades. During the third quarter, the
Company continued to pursue cost reduction measures and initiated
productivity programs across its operations in Australia to mitigate the
financial impacts of lower bauxite grade and to optimize current
operating levels. As a first action under these programs, Alcoa initiated
a restructuring program at the Kwinana refinery and incurred a $6 million
charge in the third quarter of 2023 for employee severance costs to be
paid through the first quarter of 2024. The Company anticipates
approximately $10 million in annual savings from this action.
-- Energy Contract: In August 2023, Alcoa announced a new power agreement
with AGL Energy Limited (AGL) to support future operations at Portland
Aluminium Smelter in the State of Victoria in Australia. The nine-year
agreement for 300 megawatts of power supply is effective July 1, 2026,
when current contracts with AGL end. This volume represents approximately
50 percent of the energy required to meet the facility's total capacity
of 358,000 mtpy.
-- Commercial: The Company sold its first non-metallurgical variety of
EcoSource(TM) low-carbon alumina, which is now marketed in both
non-metallurgical and smelter grades. Also, Alcoa has grown sales of
EcoLum(TM) low-carbon aluminum, which has realized more than a 60 percent
increase in year-over-year sales, including new purchases in North
America. Both EcoSource and EcoLum are part of Alcoa's Sustana(TM) family
of products.
-- Sustainability: As a member of the International Council on Mining and
Metals (ICMM), Alcoa is committed to the Global International Standard
for Tailings Management (GISTM). Alcoa disclosed before an August 2023
deadline its progress for applicable facilities, in accordance with the
ICMM Conformance Protocol.
2023 Outlook