3rd Quarter 2026 Earnings Presentation & Conference Call - ALCOA CORP

Explicit Guidance:

• Q4 2026 Performance: Expect strong operating momentum with higher production and shipments in both Alumina and Aluminum segments, driven by improved refining stability at Pinjarra and continued productivity gains in smelting.
• Q4 2026 Cost/Expense: Anticipate elevated direct input costs from market prices and planned maintenance, specifically noting ~$10 million in additional carbon cost impacts rolling through Q4 following a ~$20 million impact in Q3. Alumina guidance is "flat" regarding performance elements (excluding price impacts), with no net change in production/shipment metrics.
• FY 2026 Capital Expenditures: Only minor adjustments to prior guidance for CAPEX; no specific numerical range provided for the full year.
• FY 2027 Production/Volume: No specific numerical production guidance released for full-year 2027, but noted expectation of ~1.5 million metric tons of new smelting capacity coming online in Indonesia.
• Liquidity/Funding: $2.6 billion debt financing secured to fund the $3.1 billion cash consideration for the Alley Group acquisition; expect first cash proceeds of $50M–$65M from the Messina East asset sale within six months of closing.

Business-Segment Outlook:

• Alumina: Market fundamentals expected to tighten outside China in Q4 2026 and into 2027, driven by announced curtailments, project delays, and uncertainty regarding new supply additions in Indonesia. Replacing aluminum production recovery in the Middle East and smelter ramp-ups in Indonesia should support demand, creating a divergence from the well-supplied Chinese market.
• Aluminum: Market fundamentals remain constructive with global inventories historically low (~42 days of consumption). Supply is recovering (Middle East restarts, Indonesia ramp-up), though full pre-conflict levels in the Middle East remain uncertain. Regional premiums (Midwest, Rotterdam, Japan) remain supported by deficits, particularly in North America and Europe.
• Operations: Pinjarra Refinery expected to maintain performance recovery; Alumar and San Ciprian smelters fully restarted. Western Australia (WA) mine plan approvals expected to extend into mid-2027, with a six-month contingency plan added to current mining areas to ensure no material impact on supply, quality, or cost.
• Product Demand: Packaging and electrical markets continue to lead; transportation resilient; construction (especially Europe) remains the softest end market. Order book is "solid" with significantly less volume available for sale compared to last year; most products sold out or tightly committed.

Market and Competitive Outlook:

• Pricing Dynamics: Alumina API expected to reach approx. $370/metric ton in Q4 2027; aluminum prices supported by low inventories despite recent moderation from highs.
• Supply/Demand Balance: Expected 1.5 million metric ton capacity addition in Indonesia next year (2027) within a 75 million metric ton market; management views market as absorbable.
• China Cap: Chinese smelter output expected to remain near 45.8 million metric tons in 2026, roughly 400,000 tons above the nominal cap, but with no massive capacity jump expected.
• Competitive Positioning: Alcoa prioritizes secure supply and long-term agreements; regional presence and differentiated product portfolio viewed as key commercial advantages in tight markets.

Macro / Industry Outlook:

• Regulatory/Trade: U.S.-Canada aluminum tariff discussions remain speculative; management believes U.S. market shortness will keep Midwest premiums strong regardless of carve-outs.
• Geopolitics: Strait of Hormuz disruptions expected to persist, significantly impacting global aluminum flows and pricing (sitting near $3,000/ton) for the foreseeable future; full normalization unlikely soon.
• Cost Inflation: Carbon costs expected to remain elevated (incremental $10M in Q4); caustic soda price volatility from Q2 war-related spikes has moderated with no material sequential impact on current P&L.

Strategic Initiatives:

• Alley Group Acquisition: Shareholder approval secured; $2.6 billion debt financing completed. Target closing expected in the first half of 2027. Regulatory approvals progressing in South Africa and other jurisdictions; integration teams active.
• Asset Monetization: Definitive agreement reached for Messina East site sale (cash proceeds up to $315 million total). Structure involves ~$50M–$65M upfront and remaining payments before decade end (over a 7-year commissioning period). Target to generate $500 million to $1 billion from asset monetization by 2030. Two other asset sales expected to follow Messina East shortly, though specific details not disclosed.
• Capital Allocation Strategy: Post-closing of Alley Group, priority is rapid deleveraging to target net debt ratios around 1.5x (pro forma). Funding for deleveraging will come from free cash flow, locked box cash ($300M estimated), and future asset monetization. No share repurchases currently anticipated; focus on debt reduction.
• Western Australia Mining: Mine plan approvals extended to mid-2027; resequencing mining activities and using existing inventory as contingency. Confidence remains in ultimately securing approvals without material supply/cost impact.

Risks and Headwinds to Outlook:

• Regulatory Delays: Western Australia EPA mine plan approval process extending beyond original timeline; appeals and ministerial decisions pending.
• Supply Chain Uncertainty: Timing of full Middle East smelter recovery and specific Indonesian capacity ramp-ups remains uncertain.
• Commodity Price Volatility: Potential for price declines (though currently low inventories provide support) and fluctuation in input costs (carbon, freight).
• Transaction Execution: Regulatory hurdles for the Alley Group acquisition in multiple jurisdictions; integration risks post-closing.
• Environmental/Safety: Ongoing safety focus post-fatal incident at Alumar; environmental remediation responsibilities for sold assets remain with Alcoa.

Management Tone on the Future:

• Confidence: High confidence in delivering value for shareholders and successfully integrating the Alley Group acquisition. Management expresses "excitement" about opportunities and "confidence" in long-term value creation.
• Strategic Discipline: Emphasis on "growth only where we see a compelling path to long-term shareholder value" and "not pursuing growth for growth's sake."
• Operational Focus: Relentless focus on safety as the foundation of operational excellence; commitment to disciplined capital allocation and balancing sheet strengthening.
• Hedges/Caveats: Guidance excludes pricing volatility; specific cost impacts (carbon) noted as potential headwinds; WA approvals carry timeline risk but are mitigated by contingency plans.

Miscellaneous:

• Dividend: $80 million returned to shareholders via regular quarterly dividends in the first nine months of 2026.
• Acquisition Contingency Value: Estimated $13 million potential payment for Alley Group if strike price is hit (not yet reached as of Q3); no immediate impact on Alumina side.
• Transition Services: 18-month transition service agreement in place with South32 to cover post-close integration of systems and processes.