Effectively managing operations during
pandemic; cash balance exceeds $950 million
Alcoa Corporation (NYSE: AA) today released preliminary second
quarter 2020 results that show the Company’s cash balance rising to
more than $950 million with improved productivity and continued
stability in operations during the coronavirus pandemic.
M, except per share amounts
2Q20 preliminary
1Q20
2Q19
Revenue
$2,100 - $2,175
$2,381
$2,711
Net (loss) income attributable to Alcoa
Corporation
$(205) - $(190)
$80
$(402)
(Loss) earnings per share attributable to
Alcoa Corporation
$(1.10) - $(1.02)
$0.43
$(2.17)
Adjusted net loss
$(15) - $0
$(42)
$(2)
Adjusted loss per share
$(0.08) - $0.00
$(0.23)
$(0.01)
Adjusted EBITDA excluding special
items
$175 - $190
$321
$455
The information regarding second quarter 2020 results is
preliminary, based upon information available as of today and is
subject to change and finalization based on completion of all
quarter end close processes. Alcoa will announce its second quarter
2020 results on Wednesday, July 15, 2020.
“At Alcoa, we focus first on the safety and health of our
employees, and that commitment has become even more apparent
throughout this pandemic,” said President and Chief Executive
Officer Roy Harvey. “We’ve not only managed to sustain our
operations during these challenging times, but we’ve also continued
to drive for sustainable improvements.”
“In the second quarter, we realized gains in productivity, cost
savings and also increased our cash balance,” Harvey said. “Now,
we’re working to increase overall liquidity and gain even greater
flexibility as we execute on our strategy, including the ongoing
portfolio review and the sale of non-core assets.”
In response to the coronavirus pandemic, Alcoa continues to
protect the health of the Company’s workforce, prevent infection in
our locations, and mitigate impacts. All of Alcoa’s bauxite mines,
alumina refineries, and aluminum manufacturing facilities remain in
operation with comprehensive measures in place for health and
business continuity.
Production at the Company’s mining and refining locations is
expected to increase approximately 5 percent and 2 percent,
respectively, compared with the first quarter 2020 production
results. Primary aluminum production is expected to increase
approximately 3 percent compared with the first quarter of 2020.
The expected sequential production increases are consistent with
historical expectations as the Company typically has higher
maintenance in the first quarter than other quarterly periods.
Alcoa’s results are dependent upon market conditions that drive
the price of alumina and aluminum. During the second quarter of
2020, both alumina and aluminum prices initially declined and have
since increased slightly compared with the prices in the beginning
of the second quarter of 2020.
For the quarter ended June 30, 2020, revenue is expected to
range between $2,100 million and $2,175 million. Demand for
aluminum value-added products declined in the second quarter 2020
compared with the first quarter 2020, with volume shifting into
lower priced commodity-grade ingot. Additional volume from the
progressing restart at the Bécancour smelter in Québec, Canada is
expected to partially offset the premium price decline.
The Company is expecting a net loss attributable to Alcoa
Corporation between $205 million and $190 million, as compared to
net income attributable to Alcoa Corporation of $80 million in the
first quarter 2020. The expected sequential decrease was driven
primarily by the non-recurrence of the gain recorded in the first
quarter of 2020 from the sale of the waste processing facility in
Gum Springs, Arkansas, in addition to the previously mentioned
lower alumina and aluminum prices.
For the quarter ended June 30, 2020, Adjusted EBITDA is expected
to be between $155 million and $170 million. Compared with the
first quarter of 2020 Adjusted EBITDA of $289 million, lower
alumina and aluminum prices have driven the expected sequential
decrease. After the removal of special items, which are primarily
related to Bécancour smelter restart costs, Adjusted EBITDA
excluding special items is expected to be between $175 million and
$190 million.
For the second quarter of 2020, diluted earnings (loss) per
share (EPS) is expected to be between $(1.10) and $(1.02). After
the removal of special items, which are primarily related to
interim tax impacts, Adjusted diluted earnings (loss) per share for
the second quarter 2020 is expected to be between $(0.08) and
$0.00.
As of June 30, 2020, Alcoa’s cash balance is expected to exceed
$950 million with improvement from the March 31, 2020 cash balance
of $829 million, primarily due to effective working capital
management and cash preservation actions. Throughout 2020, Alcoa
will continue various initiatives to preserve cash:
- Reducing non-critical capital expenditures planned for 2020 by
$100 million;
- Deferring non-regulated environmental and asset retirement
obligations payments of $25 million;
- Deferring approximately $220 million in pension contributions
from 2020 to January 1, 2021 in the U.S., as permitted under the
CARES Act; and
- Implementing hiring restrictions outside of critical production
roles, implementing and extending travel restrictions throughout
the organization, and utilizing other appropriate government
support programs to save or defer approximately $35 million.
The cash preservation initiatives have strengthened the
Company’s cash position as of June 30, 2020 without the use of
other available liquidity options. As of June 30, 2020, the
Company’s total debt balance of $1.8 billion remains consistent
with the balance as of March 31, 2020.
Preliminary Unaudited Financial Information for 2Q20
Interim consolidated financial statements as of and for the
quarter ended June 30, 2020 are not yet complete and are not
available as of the date of this press release. The preliminary
financial information, production information and shipment
information presented above for the quarter ended June 30, 2020
remain preliminary, based upon information available as of the date
of this press release and is subject to change and finalization
based on completion of all quarter end close processes.
Accordingly, undue reliance should not be placed on this unaudited
preliminary financial information. Please also refer to
“Forward-Looking Statements.”
Conference Call
Alcoa will hold its quarterly conference call at 5 p.m. Eastern
Daylight Time (EDT) on Wednesday, July 15, 2020, to present second
quarter financial results and discuss the business and market
conditions.
The call will be webcast via the Company’s homepage on
www.alcoa.com. Presentation materials for the call will be
available for viewing on the same website at approximately 4:15
p.m. EDT on July 15, 2020. Call information and related details are
available under the “Investors” section of www.alcoa.com.
Dissemination of Company Information
Alcoa intends to make future announcements regarding company
developments and financial performance through its website,
www.alcoa.com, as well as through press releases, filings with the
Securities and Exchange Commission, conference calls and webcasts.
Alcoa does not incorporate the information contained on, or
accessible through, its corporate website into this press
release.
About Alcoa Corporation
Alcoa (NYSE: AA) is a global industry leader in bauxite,
alumina, and aluminum products, and is built on a foundation of
strong values and operating excellence dating back more than 130
years to the world-changing discovery that made aluminum an
affordable and vital part of modern life. Since developing the
aluminum industry, and throughout our history, our talented Alcoans
have followed on with breakthrough innovations and best practices
that have led to efficiency, safety, sustainability, and stronger
communities wherever we operate.
Forward-Looking Statements
This press release contains statements that relate to future
events and expectations and as such constitute forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements include those
containing such words as “anticipates,” “believes,” “could,”
“estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,”
“outlook,” “plans,” “projects,” “seeks,” “sees,” “should,”
“targets,” “will,” “would,” or other words of similar meaning. All
statements by Alcoa Corporation that reflect expectations,
assumptions or projections about the future, other than statements
of historical fact, are forward-looking statements, including,
without limitation, forecasts concerning global demand growth for
bauxite, alumina, and aluminum, and supply/demand balances;
statements, projections or forecasts of future or targeted
financial results or operating performance; statements about
strategies, outlook, and business and financial prospects; and
statements about return of capital. These statements reflect
beliefs and assumptions that are based on Alcoa Corporation’s
perception of historical trends, current conditions, and expected
future developments, as well as other factors that management
believes are appropriate in the circumstances. Forward-looking
statements are not guarantees of future performance and are subject
to known and unknown risks, uncertainties, and changes in
circumstances that are difficult to predict. Although Alcoa
Corporation believes that the expectations reflected in any
forward-looking statements are based on reasonable assumptions, it
can give no assurance that these expectations will be attained and
it is possible that actual results may differ materially from those
indicated by these forward-looking statements due to a variety of
risks and uncertainties. Such risks and uncertainties include, but
are not limited to: (a) current and potential future impacts of the
coronavirus (COVID-19) pandemic on the global economy and our
business, financial condition, results of operations, or cash
flows; (b) material adverse changes in aluminum industry
conditions, including global supply and demand conditions and
fluctuations in London Metal Exchange-based prices and premiums, as
applicable, for primary aluminum and other products, and
fluctuations in indexed-based and spot prices for alumina; (c)
deterioration in global economic and financial market conditions
generally and which may also affect Alcoa Corporation’s ability to
obtain credit or financing upon acceptable terms or at all; (d)
unfavorable changes in the markets served by Alcoa Corporation; (e)
the impact of changes in foreign currency exchange and tax rates on
costs and results; (f) increases in energy costs or uncertainty of
energy supply; (g) declines in the discount rates used to measure
pension liabilities or lower-than-expected investment returns on
pension assets, or unfavorable changes in laws or regulations that
govern pension plan funding; (h) the inability to achieve
improvement in profitability and margins, cost savings, cash
generation, revenue growth, fiscal discipline, or strengthening of
competitiveness and operations anticipated from portfolio actions,
operational and productivity improvements, cash sustainability,
technology advancements, and other initiatives; (i) the inability
to realize expected benefits, in each case as planned and by
targeted completion dates, from acquisitions, divestitures,
restructuring activities, facility closures, curtailments,
restarts, expansions, or joint ventures; (j) political, economic,
trade, legal, public health and safety, and regulatory risks in the
countries in which Alcoa Corporation operates or sells products;
(k) labor disputes and/or and work stoppages; (l) the outcome of
contingencies, including legal and tax proceedings (including the
Australian Taxation Office matter), government or regulatory
investigations, and environmental remediation; (m) the impact of
cyberattacks and potential information technology or data security
breaches; and (n) the other risk factors discussed in Item 1A of
Alcoa Corporation’s Form 10-K for the fiscal year ended December
31, 2019, the Quarterly Report on Form 10-Q for the quarter ended
March 31, 2020, and other reports filed by Alcoa Corporation with
the U.S. Securities and Exchange Commission (SEC). Expected second
quarter 2020 results are subject to change and finalization based
on completion of all quarter end close processes. The statements in
this release are made as of the date of this release, even if
subsequently made available by Alcoa Corporation on its website or
otherwise. Alcoa Corporation disclaims any obligation to update
publicly any forward-looking statements, whether in response to new
information, future events or otherwise, except as required by
applicable law. Market projections are subject to the risks
described above and other risks in the market.
Non-GAAP Financial Measures
Some of the information included in this release is derived from
Alcoa Corporation’s consolidated financial information but is not
presented in Alcoa Corporation’s financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America (GAAP). Certain of these data are
considered “non-GAAP financial measures” under SEC regulations.
Alcoa Corporation believes that the presentation of non-GAAP
financial measures is useful to investors because such measures
provide both additional information about the operating performance
of Alcoa Corporation and insight on the ability of Alcoa
Corporation to meet its financial obligations by adjusting the most
directly comparable GAAP financial measure for the impact of, among
others, “special items” as defined by the Company, non-cash items
in nature, and/or nonoperating expense or income items. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP.
Reconciliations to the most directly comparable GAAP financial
measures and management’s rationale for the use of the non-GAAP
financial measures can be found in the schedules to this
release.
Reconciliation of Non-GAAP Financial
Measures
Adjusted Income (amounts in millions, except per-share
amounts)
(Loss) Income
Diluted EPS(4)
Quarter ended
Quarter ended
Estimated
June 30,
2020
March 31,
2020
June 30,
2019
Estimated
June 30,
2020
March 31,
2020
June 30,
2019
Net (loss) income attributable to Alcoa
Corporation
$
(205) – (190)
$
80
$
(402)
$
(1.10) – (1.02)
$
0.43
$
(2.17)
Special items:
Restructuring and other charges, net
~35
2
370
Other special items(1)
~15
(137)
8
Discrete tax items and interim tax
impacts(2)
~140
22
32
Tax impact on special items(3)
~0
(8)
(10)
Noncontrolling interest impact(3)
~0
(1)
–
Subtotal
~190
(122)
400
Net (loss) income attributable to Alcoa
Corporation – as adjusted
$
(15) - 0
$
(42)
$
(2)
$
(0.08) – 0.00
$
(0.23)
$
(0.01)
Net (loss) income attributable to Alcoa Corporation – as
adjusted is a non-GAAP financial measure. Management believes this
measure is meaningful to investors because management reviews the
operating results of Alcoa Corporation excluding the impacts of
restructuring and other charges, various tax items, and other
special items (collectively, “special items”). There can be no
assurances that additional special items will not occur in future
periods. To compensate for this limitation, management believes it
is appropriate to consider both Net (loss) income attributable to
Alcoa Corporation determined under GAAP as well as Net (loss)
income attributable to Alcoa Corporation – as adjusted. The Net
(loss) income attributable to Alcoa Corporation – as adjusted
presented may not be comparable to similarly titled measures of
other companies.
(1)
Other special items include the
following:
•
for the quarter ended June 30, 2020, costs
related to the restart process at the Bécancour, Canada smelter
(~$20) and a net benefit of other special items (~$5);
•
for the quarter ended March 31, 2020, a
gain on the sale of a waste treatment facility in Gum Springs,
Arkansas ($180), costs related to the restart process at the
Bécancour, Canada smelter ($32), and a net unfavorable change in
certain mark-to-market energy derivative instruments ($11);
and,
•
for the quarter ended June 30, 2019, costs
related to union negotiations in the U.S. ($5), costs related to a
work stoppage at the Bécancour, Canada smelter ($2), and costs
related to a collective employee dismissal process in Spain at the
Avilés and La Coruña smelters ($1).
(2)
Discrete tax items and interim tax impacts
are the result of discrete transactions and interim period tax
impacts based on full-year assumptions and include the
following:
•
for the quarter ended June 30, 2020, a net
charge of interim tax impacts (~$140);
•
for the quarter ended March 31, 2020, a
net charge of interim tax impacts ($21) and a net charge of several
other items ($1); and,
•
for the quarter ended June 30, 2019, a net
charge of interim tax impacts ($31) and discrete tax items
($1).
(3)
The tax impact on special items is based
on the applicable statutory rates in the jurisdictions where the
special items occurred. The noncontrolling interest impact on
special items represents Alcoa’s partner’s share of certain special
items.
(4)
In any given period, the average number of
shares applicable to diluted EPS for Net (loss) income attributable
to Alcoa Corporation common shareholders may exclude certain share
equivalents as their effect is anti-dilutive. However, certain of
these share equivalents may become dilutive in the EPS calculation
applicable to Net (loss) income attributable to Alcoa Corporation –
as adjusted due to a larger and/or positive numerator.
Specifically, for all periods presented, the average number of
share equivalents applicable to diluted EPS had an anti-dilutive
effect, and therefore, are excluded from the diluted EPS
calculation.
Adjusted EBITDA (amounts in millions)
Quarter ended
Estimated
June 30,
2020
March 31,
2020
June 30,
2019
Net (loss) income attributable to Alcoa
Corporation
$
(205) – (190)
$
80
$
(402)
Add:
Net income attributable to noncontrolling
interest
~45
59
109
Provision for income taxes
~45
80
116
Other expenses (income), net
~50
(132)
50
Interest expense
~30
30
30
Restructuring and other charges, net
~35
2
370
Provision for depreciation, depletion, and
amortization
~155
170
174
Adjusted EBITDA
$
155 – 170
$
289
$
447
Special items(1)
~20
32
8
Adjusted EBITDA, excluding special
items
$
175 – 190
$
321
$
455
Alcoa’s Corporation’s definition of Adjusted EBITDA is net
margin plus an add-back for depreciation, depletion, and
amortization. Net margin is equivalent to Sales minus the following
items: Cost of goods sold; Selling, general administrative, and
other expenses; Research and development expenses; and Provision
for depreciation, depletion, and amortization. Adjusted EBITDA is a
non-GAAP financial measure. Management believes this measure is
meaningful to investors because Adjusted EBITDA provides additional
information with respect to Alcoa Corporation’s operating
performance and the company’s ability to meet its financial
obligations. The Adjusted EBITDA presented may not be comparable to
similarly titled measures of other companies.
(1)
Special items include the following:
•
for the quarter ended June 30, 2020, costs
related to the restart process at the Bécancour, Canada smelter
(~$20);
•
for the quarter ended March 31, 2020,
costs related to the restart process at the Bécancour, Canada
smelter ($32); and,
•
for the quarter ended June 30, 2019, costs
related to union negotiations in the U.S. ($5), costs related to a
work stoppage at the Bécancour, Canada smelter ($2), and costs
related to a collective employee dismissal process in Spain at the
Avilés and La Coruña smelters ($1).
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200708005481/en/
Investor Contact James Dwyer 412-992-5450
James.Dwyer@alcoa.com
Media Contact Jim Beck 412-315-2909 Jim.Beck@alcoa.com
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