Alcoa Corp

Previous wording

During the first quarter of 2024, Alcoa entered into a binding agreement to acquire Alumina Limited, which holds a 40 percent ownership interest in the AWAC joint venture. The acquisition is intended to enhance Alcoa’s position as a leading pure play, upstream aluminum company globally, while simplifying the Company’s corporate structure and governance, resulting in greater operational flexibility and strategic optionality. In addition to announcing the Alumina Limited acquisition, the Company continued to make progress on key near term actions to further optimize its portfolio and to reduce controllable costs during the first quarter of 2024.

Current wording

Alcoa continued to progress the acquisition of Alumina Limited during the second quarter of 2024 and announced the completion of the acquisition on August 1, 2024. The acquisition is intended to enhance Alcoa’s position as a leading pure play, upstream aluminum company globally, while simplifying the Company’s corporate structure and governance, resulting in greater operational and financial flexibility and strategic optionality.

Previous wording

For Alcoa shareholders, the transaction will enhance Alcoa’s vertical integration along the value chain across bauxite mining, alumina refining, and aluminum smelting, increases Alcoa’s economic interest in its bauxite and alumina assets, simplifies governance, and reaffirms Alcoa’s commitment to Western Australia.

Current wording

For Alcoa shareholders, the transaction enhances Alcoa’s vertical integration along the value chain across bauxite mining, alumina refining, and aluminum smelting, increases Alcoa’s economic interest in its bauxite and alumina assets, simplifies governance, and reaffirms Alcoa’s commitment to Western Australia. In addition to the implied premium over prior share prices, Alumina Limited shareholders’ ownership is diversified to a large-scale, global upstream aluminum portfolio.

Previous wording

Under the terms of the Agreement, Alcoa also agreed to provide a shareholder loan to AWAC in place of required capital contributions by Alumina Limited if Alumina Limited’s net debt position exceeds $420. Based on AWAC’s current 2024 cash flow forecast, Alcoa does not expect any support to be required in 2024. Subject to certain accelerated repayment triggers, Alumina Limited would be required to pay its equity calls (plus accrued interest) no later than September 1, 2025 in the event the transaction is not completed. Alcoa’s fees and expenses related to the transaction include financial advisor fees, filing fees, legal and accounting fees, and regulatory fees, some of which will be paid regardless of whether the transaction is completed. Alcoa and Alumina Limited are also subject to termination fees in the event the transaction is not completed.

Current wording

Additionally, under the terms of the Agreement, Alcoa agreed to provide a shareholder loan to AWAC in place of required capital contributions by Alumina Limited if Alumina Limited’s net debt position exceeded $420 prior to the acquisition closing. Alcoa was not required to and did not provide any shareholder loans to AWAC under this provision.

Previous wording

In January 2024, Alcoa announced the full curtailment of the Kwinana refinery which will be completed in the second quarter of 2024. The refinery has an annual nameplate capacity of 2.2 million metric tons and has been operating at approximately 80 percent of its nameplate capacity since January 2023, when the Company reduced production in response to a domestic natural gas shortage in Western Australia due to production challenges experienced by key gas suppliers. The Company’s decision to fully curtail the refinery was made based on a variety of factors, including the refinery’s age, scale, operating costs, and current bauxite grades, in addition to market conditions. The refinery currently has approximately 780 employees and this number will be reduced to approximately 250 in the third quarter of 2024, after alumina production has ceased. Certain processes will continue until about the third quarter of 2025, when the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 150 employees will either terminate through the productivity program announced in the third quarter of 2023 or redeploy to other Alcoa operations.

Current wording

In June 2024, Alcoa completed the full curtailment of the Kwinana refinery, as planned, which was announced in January 2024. The Company’s decision to fully curtail the refinery was made based on a variety of factors, including the refinery’s age, scale, operating costs, and current bauxite grades, in addition to market conditions.

Previous wording

During the first quarter of 2024, Alcoa completed the restart of approximately 6 percent of pots at the San Ciprián smelter in compliance with the February 2023 updated viability agreement. Although both purchase prices for energy and sales prices improved during the first quarter of 2024, the San Ciprián complex remains unviable for the long-term based on current and forward market assumptions for delivered energy in Spain and sales prices, and near-term government support remains unlikely. While continuing to optimize the smelter and refinery operations and preserve cash, and as part of Alcoa’s efforts to find a long-term solution for the complex, Alcoa initiated a process for the potential sale of the complex during the first quarter of 2024 and anticipates completing the bid process by June 2024. Any long-term solution requires the support of the government and workers’ representatives.

Current wording

During the second quarter of 2024, Alcoa continued its focus on improving the competitiveness of both the San Ciprián refinery and smelter, while progressing the process for the potential sale of the complex. Alcoa completed the restart of approximately 6 percent of pots at the San Ciprián smelter in the first quarter of 2024, in compliance with the February 2023 updated viability agreement.

Previous wording

The refinery and smelter incurred significant losses in the first quarter of 2024 and in prior years, which have been funded with internal credit lines that are now nearing their limits (with less than $100 available to be drawn), and which the operations have no ability to repay. While the Company had restricted cash of $86 remaining at March 31, 2024 (see Aluminum below) to be made available for capital improvements at the site and smelter restart costs, the workers’ representatives have rejected the use of this cash to fund operating losses at the smelter. Based on current economic conditions, and barring reaching an acceptable outcome on either achieving economic viability or completing a sale of the complex, the San Ciprián operations are expected to incur substantial losses in the remainder of 2024 and Alcoa anticipates that available funding will be exhausted in the second half of 2024. At that point, Alcoa will not provide additional funding and difficult decisions will have to be considered regarding the future of the San Ciprián complex.

Current wording

The refinery and smelter incurred substantial losses in the first half of 2024 and in prior years, which have been funded with internal credit lines that are nearing their limits and for which the operations have no ability to repay. The operations have approximately $100 of available funding with cash on hand and availability under internal credit lines. Although aluminum and alumina prices improved during the first half of 2024, the San Ciprián complex remains unviable based on current and forward market assumptions for delivered energy in Spain and sales prices. While the Company had restricted cash of $86 remaining at June 30, 2024 (see Aluminum below) to be made available for capital improvements at the site and smelter restart costs, the workers’ representatives have rejected the use of this cash to fund operating losses at the smelter. Based on current economic conditions, and barring reaching an acceptable outcome on either achieving economic viability or completing a sale of the complex, the San Ciprián operations are expected to incur losses in 2024 and Alcoa anticipates that available funding will be exhausted by the end of 2024. At that point, Alcoa will not provide additional funding and difficult decisions will have to be considered regarding the future of the San Ciprián complex.

Previous wording

On March 21, 2024, the Company completed an offering of $750 aggregate principal amount of 7.125 percent senior notes due in 2031. This was the Company’s first notes issuance under its new Green Finance Framework, which prioritizes climate change mitigation expenditures related to circular or low carbon products, pollution prevention technologies, renewable energy, and water management. Net proceeds from the issuance, which can be allocated to qualifying expenditures on a two-year look back and three-year look forward, are expected to cover expenses associated with both new and existing decarbonization and water management projects, research and development, renewable energy, and the production of low carbon alumina and aluminum products. The net proceeds will also support the Company’s cash position and ongoing cash needs, including with respect to its previously announced portfolio actions. The Company does not expect to allocate part of the net proceeds to significant capital investments in breakthrough technologies as those are not expected to occur within the applicable time period.

Current wording

In March 2024, the Company completed an offering of $750 aggregate principal amount of 7.125 percent senior notes due in 2031. This was the Company’s first notes issuance under its Green Finance Framework, which prioritizes climate change mitigation expenditures related to circular or low carbon products, pollution prevention technologies, renewable energy, and water management. The Company is utilizing net proceeds from the issuance, which can be allocated to qualifying expenditures on a two-year look back and three-year look forward, to cover expenses associated with both new and existing decarbonization and water management projects, research and development, renewable energy, and the production of low carbon alumina and aluminum products. The net proceeds also support the Company’s cash position and ongoing cash needs, including with respect to its previously announced portfolio actions. The Company does not expect to allocate part of the net proceeds to significant capital investments in breakthrough technologies as those are not expected to occur within the applicable time period.

Previous wording

The Company paid a quarterly cash dividend of $0.10 per share of the Company’s common stock in March 2024, totaling $19.

Current wording

The Company paid a quarterly cash dividend of $0.10 per share of the Company’s common stock in June 2024, totaling $18.

Previous wording

Increased offtake from a joint venture supply agreement

Current wording

Increased offtake from an aluminum joint venture supply agreement

Previous wording

Cost of goods sold as a percentage of sales decreased 1% primarily as a result of:

Current wording

Cost of goods sold as a percentage of sales decreased 5% primarily as a result of:

Previous wording

Higher production costs, primarily in the Aluminum segment

Current wording

Lower production costs primarily in the Aluminum segment

Previous wording

Cost of goods sold as a percentage of sales increased 2% primarily as a result of:

Current wording

Cost of goods sold as a percentage of sales decreased 2% primarily as a result of:

Previous wording

Other expenses (income), net was $59 in the first quarter of 2024 compared with $(11) in the fourth quarter of 2023. The unfavorable change of $70 was primarily a result of:

Current wording

Other (income) expenses, net was $(22) in the second quarter of 2024 compared with $59 in the first quarter of 2024. The favorable change of $81 was primarily a result of:

Previous wording

Decrease in equity losses from the Ma’aden aluminum joint venture primarily due to higher sales volume, partially offset by higher production costs

Current wording

Increase in equity income from the Ma’aden aluminum joint venture primarily due to higher aluminum prices

Previous wording

Decrease in equity losses from the Ma’aden bauxite and alumina joint venture primarily due to higher shipments, partially offset by increased raw material and production costs

Current wording

Decrease in equity losses from the Ma’aden bauxite and alumina joint venture primarily due to lower raw material and production costs, and higher alumina prices

Previous wording

Unfavorable currency revaluation impacts primarily due to losses recognized in the current quarter primarily due to the U.S. dollar strengthening against the Brazilian real, partially offset by the absence of gains recognized in the first quarter of 2023 due to the U.S. dollar weakening against the Brazilian real

Current wording

Unfavorable currency revaluation impacts primarily due to losses recognized in the current quarter due to the U.S. dollar strengthening against the Brazilian real, partially offset by the absence of gains recognized in the first quarter due to the U.S. dollar strengthening against the Norwegian krone

Previous wording

Decrease in equity losses from the Ma’aden aluminum joint venture primarily due to the absence of a charge for a utility settlement and higher shipments, partially offset by lower aluminum prices

Current wording

Decrease in equity losses from the Ma’aden aluminum joint venture primarily due to the absence of a charge for a utility settlement and higher shipments

Previous wording

Mark-to-market results on derivative instruments primarily due to the absence of gains in the first quarter of 2023 driven by elevated power prices

Current wording

Mark-to-market results on derivative instruments primarily due to higher power prices in the current year

Previous wording

Unfavorable currency revaluation impacts primarily due to the absence of gains recognized in the fourth quarter of 2023 due to the U.S. dollar weakening against the Brazilian real and losses recognized in the current quarter primarily due to the U.S. dollar strengthening against the Brazilian real

Current wording

Unfavorable currency revaluation impacts primarily due to the U.S. dollar strengthening against the Brazilian real in the current year, partially offset by the absence of gains recognized in the prior year due to the U.S. dollar weakening against the Brazilian real

Previous wording

$197 for the curtailment of the Kwinana alumina refinery

Current wording

$197 for the curtailment of the Kwinana refinery

Previous wording

The Benefit from income taxes in the first quarter of 2024 was $(18) on a loss before taxes of $(325) or 5.5%. In comparison, the fourth quarter of 2023 Provision for income taxes was $150 on a loss before taxes of $(77) or (194.8)%.

Current wording

The Provision for income taxes in the second quarter of 2024 was $61 on income before taxes of $92 or 66.3%. In comparison, the first quarter of 2024 Benefit from income taxes was $(18) on a loss before taxes of $(325) or 5.5%.

Previous wording

The Benefit for income taxes in the three-month period of 2024 was $(18) on a loss before taxes of $(325) or 5.5%. In comparison, the three-month period of 2023 Provision for income taxes was $52 on a loss before taxes of $(180) or (28.9)%.

Current wording

The Provision for income taxes in the six-month period of 2024 was $43 on a loss before taxes of $(233) or (18.5)%. In comparison, the six-month period of 2023 Provision for income taxes was $74 on a loss before taxes of $(279) or (26.5)%.

Previous wording

The decrease in tax expense of $70 is primarily attributable to lower income in the jurisdictions where taxes are paid.

Current wording

The decrease in tax expense of $31 is primarily attributable to lower income in the jurisdictions where taxes are paid.

Previous wording

Net loss attributable to noncontrolling interest was $(55) in the first quarter of 2024 compared with $(77) in the fourth quarter of 2023. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities.

Current wording

Net income (loss) attributable to noncontrolling interest was $11 in the second quarter of 2024 compared with $(55) in the first quarter of 2024. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities. Alcoa will recognize Net income (loss) attributable to Noncontrolling interest through the closing of the Alumina Limited acquisition.

Previous wording

The change is primarily a result of lower taxes and higher average realized price of alumina, partially offset by higher restructuring costs.

Current wording

The change is primarily a result of lower restructuring costs, favorable mark-to-market results on derivative instruments, and higher average realized price of alumina, partially offset by higher production costs and higher taxes.

Previous wording

Net loss attributable to noncontrolling interest was $(55) in the three-month period of 2024 compared with $(1) in the three-month period of 2023. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities.

Current wording

Net income (loss) attributable to noncontrolling interest was $(44) in the six-month period of 2024 compared with $(20) in the six-month period of 2023. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities. Alcoa will recognize Net income (loss) attributable to Noncontrolling interest through the closing of Alumina Limited acquisition.

Previous wording

The change is primarily a result of higher restructuring costs and higher production costs, partially offset by lower raw material and energy costs, and lower taxes.

Current wording

The change is primarily a result of higher restructuring costs, higher elimination of intercompany profit in inventory, and higher production costs, partially offset by higher average realized price of alumina, lower raw material and energy costs, and favorable mark-to-market results on derivative instruments.

Previous wording

Business Update. The average API of $356 per metric ton trended favorably compared to the prior quarter reflecting a 6% sequential increase. During the first quarter, the Alumina segment also experienced lower energy and raw materials costs compared to the fourth quarter of 2023.

Current wording

Business Update. The average API of $392 per metric ton trended favorably compared to the prior quarter reflecting a 10% sequential increase.

Previous wording

On January 8, 2024, Alcoa announced the full curtailment of the Kwinana refinery which will be completed in the second quarter of 2024. The refinery currently has approximately 780 employees and this number will be reduced to approximately 250 in the third quarter of 2024, after alumina production has ceased. Certain processes will continue until about the third quarter of 2025, when the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 150 employees will either terminate through the productivity program announced in the third quarter of 2023 or redeploy to other Alcoa operations.

Current wording

In June 2024, Alcoa completed the full curtailment of the Kwinana refinery, as planned, which was announced in January 2024. As of March 2024, the refinery had approximately 780 employees and this number will be reduced to approximately 250 in the third quarter of 2024 to manage certain processes that will continue until about the third quarter of 2025. At that time, the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 150 employees will either terminate through the productivity program announced in the third quarter of 2023 or redeploy to other Alcoa operations.

Previous wording

In the first quarter, Alcoa recorded a restructuring charge of $197 related to the curtailment of the refinery. The charge includes $123 for water management costs, $41 for severance and employee termination costs, $15 for asset retirement obligations, $13 for take-or-pay contracts, and $5 for asset impairments. Related cash outlays of approximately $215 (which includes existing employee related liabilities and asset retirement obligations) are expected through 2025, with approximately $140 to be spent in 2024. During the first quarter of 2024, cash outlays were $2.

Current wording

In the second quarter of 2024, Alcoa recorded restructuring charges of $8 related to the curtailment of the refinery including $6 for water management costs and $2 for contract terminations. In the first quarter of 2024, Alcoa recorded restructuring charges of $197 including $123 for water management costs, $41 for employee related costs, $15 for asset retirement obligations, $13 for take-or-pay contracts, and $5 for asset impairments. Related cash outlays of approximately $225 (which includes existing employee related liabilities and asset retirement obligations) are expected through 2025, with approximately $145 to be spent in 2024. The Company spent $22 and $24 against the reserve in the second quarter and six-month period of 2024, respectively.

Previous wording

Capacity. The Alumina segment had a base capacity of 13,843 kmt with 1,452 kmt of curtailed refining capacity. There was no change in curtailed capacity during the quarter.

Current wording

Capacity. The Alumina segment had a base capacity of 13,843 kmt with 3,204 kmt of curtailed refining capacity. In the second quarter of 2024, curtailed capacity increased 1,752 kmt due to the full curtailment of the Kwinana refinery (see above).

Previous wording

Increased production at the San Ciprián refinery as the refinery was operating at 50 percent capacity in the first quarter of 2024, and 35 to 50 percent capacity in the first quarter of 2023

Current wording

Increased production at the San Ciprián refinery as the refinery was operating at 50 percent capacity in the six-month period of 2024 and 30 to 50 percent capacity in the six-month period of 2023

Previous wording

Higher shipments of alumina primarily due to increased trading activity

Current wording

Lower shipments of alumina primarily due to the full curtailment of the Kwinana refinery

Previous wording

Higher shipments, primarily due to the Warrick smelter restart

Current wording

Higher alumina shipments primarily due to the Warrick smelter restart

Previous wording

Lower alumina shipments primarily due to lower alumina production

Current wording

Lower alumina shipments primarily due to lower production at the Australia refineries

Previous wording

Lower energy costs across the refineries primarily due to favorable natural gas prices

Current wording

Lower energy costs primarily due to favorable natural gas prices

Previous wording

Higher production costs primarily related to operating certain of the Australia refineries with lower grade bauxite and higher labor costs

Current wording

Higher production costs primarily related to operating certain of the Australia refineries with lower grade bauxite

Previous wording

Forward Look. For the second quarter of 2024 in comparison to the first quarter of 2024, the Alumina segment anticipates increased costs due to seasonal maintenance and other mining costs.

Current wording

Forward Look. For the third quarter of 2024 in comparison to the second quarter of 2024, the Alumina segment anticipates increased production costs related to lower bauxite grades in Australia.

Previous wording

Business Update. Aluminum prices increased sequentially with LME prices on a 15-day lag averaging $2,201 per metric ton in the first quarter of 2024. During the first quarter, the Aluminum segment also experienced lower energy and raw materials costs compared to the fourth quarter of 2023.

Current wording

Business Update. Aluminum prices increased sequentially with LME prices on a 15-day lag averaging $2,486 per metric ton in the second quarter of 2024.

Previous wording

In March 2024, Alcoa completed the restart of approximately 6 percent of total pots at the San Ciprián smelter as required by the February 2023 updated viability agreement. The Company incurred restart expenses of $2 in the first quarter of 2024. In connection with the December 2021 agreement and the February 2023 updated viability agreement, the Company has restricted cash of $86 remaining at March 31, 2024 to be made available for capital improvements at the site and smelter restart costs. The workers’ representatives have rejected the use of this cash to fund operating losses at the smelter.

Current wording

In March 2024, Alcoa completed the restart of approximately 6 percent of total pots at the San Ciprián smelter as required by the February 2023 updated viability agreement. The Company incurred restart expenses $2 during the six-month period of 2024. In connection with the December 2021 agreement and the February 2023 updated viability agreement, the Company has restricted cash of $86 remaining at June 30, 2024 to be made available for capital improvements at the site and smelter restart costs. The workers’ representatives have rejected the use of this cash to fund operating losses at the smelter.