Alcoa Corp Q4 FY2024 earnings call

• Safety: No fatalities or life-altering injuries, with improved safety metrics.
• Smelter Operations: Nine of 11 smelters increased annual production, five achieving annual records.
• Talent and Culture: Onboarded new talent and promoted a culture prioritizing high performance and continuous improvement.
• Customer/Supplier: Expanded important customer and supplier relationships and invested in growth CapEx.
• Profitability: Exceeded the $645 million profitability improvement program ahead of schedule through various initiatives.
• Debt and Acquisitions: Repaid $385 million of debt, completed the Illumina Limited acquisition, and initiated the sale of the Ma'aden joint ventures.
• San Ciprian: Progressed cooperation with stakeholders to improve the long-term outlook of the operations.

Revenue was up 20% sequentially to $3.5 billion. In the Alumina segment, third-party revenue increased 45% due to higher average realized third-party price and higher shipments. In the Aluminum segment, third-party revenue increased 5% primarily due to the increase in average realized third-party price. Fourth quarter net income attributable to Alcoa was $202 million, with earnings per common share doubling to $0.76 per share. Adjusted EBITDA increased $222 million to $677 million. The Alumina segment contributed significantly due to higher prices and volume, while the Aluminum segment saw growth from price increases and cost improvements.

• 2025 Outlook: Alumina production expected to range between 9.5 million and 9.7 million tonnes, shipments between 13.1 million and 13.3 million tonnes. Aluminum production expected to be 2.3 million to 2.5 million tonnes, shipments 2.6 million to 2.8 million tonnes. EBITDA items: Transformation costs expected at $75 million, other corporate expense ~$170 million, depreciation ~$640 million, non-operating pension and OPEB ~$25 million, interest expense $165 million. Capital expenditures estimated at $700 million, with $625 million in sustaining and $75 million in return-seeking. Utilization of Alumina Limited carryforward net operating loss saved ~$70 million on 2024 cash taxes, with ~$60 million remaining tax benefit.
• First Quarter 2025: Alumina expected favorable by approximately $30 million, while Aluminum expected unfavorable by ~$60 million due to nonrecurring factors like the IRA Section 45 true-up benefit and seasonal pricing.

• Tariffs: Potential 25% tariffs on Canadian aluminum imports to the US could disrupt trade flows, impacting the Midwest premium and US industrial competitiveness.
• Bauxite and Alumina Supply: Tight bauxite market affecting alumina production, with limited supply growth expected in 2025, pressuring the alumina market.
• San Ciprian: Uncertainty around the success of restarting operations, with potential cash depletion and financial impact if operations don't become viable.

Q: Katya Jancic from BMO Capital Markets asked about tariffs and Midwest premium.

A: William Oplinger said the Midwest premium would go substantially higher if Canadian aluminum volume is diverted to Europe.

Q: Lawson Winder from Bank of America Securities asked about bauxite availability and new refineries.

A: William Oplinger stated the bauxite market is tight, affecting alumina production, and tight bauxite supply pressures the alumina market.

Q: Daniel Major from UBS asked about San Ciprian cash balance and legacy asset monetization.

A: Molly Beerman said cash is depleting weekly, and William Oplinger discussed the history of monetizing legacy assets like Rockdale and Intalco.

Q: Carlos de Alba from Morgan Stanley asked about legacy asset monetization timetable.

A: William Oplinger said monetization takes time for maximum value, with no immediate timetable.

Q: Nick Giles from B. Riley Securities asked about productivity and competitiveness program.

A: Molly Beerman said productivity initiatives are built into the 2025 plan.

Q: Chris LaFemina from Jefferies asked about profitability program modeling and CapEx guidance.

A: Molly Beerman and William Oplinger discussed the EBITDA bridge and CapEx breakdown.

Q: Michael Dudas from Vertical Research asked about market expectations on tariffs and industry adjustment.

A: William Oplinger discussed market uncertainty and the immediate impact of tariffs on the Midwest premium.

Q: Timna Tanners from Wolfe Research asked about restart decisions and technology initiatives.

A: William Oplinger discussed the need for tariff clarity and alumina prices, and Molly Beerman provided an update on ELYSIS technology.

Q: Bennett Moore from JPMorgan asked about San Ciprian union feedback and Western Australia permitting.

A: William Oplinger discussed MOU communication with employees, and Molly Beerman provided the permitting timeline.