Alcoa (AA) Updates on Progress Toward Three-Year Targets, Company Separation

Alcoa (NYSE: AA) reported progress on the Company’s performance against three-year financial targets and its continuing transformation as it prepares to separate into two industry-leading, publicly-traded companies. Alcoa also outlined a clear roadmap to complete its separation in the second half of 2016. The Company delivered the update at its 2015 Investor Day event in Grand Rapids, Michigan.

“Alcoa’s transformation continues to create exciting profitable growth in our Value-Add business and lower the cost position of our Upstream business to ensure success throughout the cycle,” said Klaus Kleinfeld, Chairman and Chief Executive Officer. “Culminating our successful multi-year transformation, we have now set a clear path to separating the portfolios into two strong, industry-leading public companies. We are gratified at the positive feedback we have received from analysts, long-term investors and many new investors who recognize the enhanced value that the separation will create; we look forward to launching two strong companies in the second half of next year.”

Progress Towards Three-Year Targets

As the Company prepares for the separation, both the Value-Add businesses and the Upstream businesses reported progress against 2016 targets set at the end of 2013.

The Value-Add businesses:

• Global Rolled Products forecast approximately $1 billion of revenue growth for the three-year period, with 2016 adjusted EBITDA per metric ton at or above average historical highs of $344;
• Engineered Products and Solutions (EPS) forecast approximately $3.1 billion of revenue growth between 2013 and 2016, with adjusted EBITDA margin of approximately 23 percent next year; and
• Transportation and Construction Solutions, the new segment formed in third quarter 2015 comprising two businesses formerly part of EPS—Alcoa Wheel and Transportation Products and Alcoa Building and Construction Solutions—and the Latin American Extrusions business, forecast approximately $500 million revenue growth over the three-year period, with adjusted EBITDA margin of at least 15 percent in 2016.

The Upstream businesses:

• Moved down two points on the global alumina cost curve to the 23rd percentile in 2015 with goal to improve position to the 21st percentile in 2016;
• On track to achieve its 38th percentile target on the global aluminum cost curve in 2016, from the 43rd percentile this year; and
• Increased margins by $1.5 billion from 2010 through 2015 through shaped products from casthouses by boosting production to 70 percent of sales estimated in 2015, on target to reach 74 percent in 2016; and grew exports of third-party bauxite sales, on target to double shipments in 2016.

In addition, Alcoa projected a 2016 global aluminum deficit of 360,000 metric tons, down from a 551,000 metric ton surplus in 2015 estimated in third quarter 2015, driven by strong aluminum demand, smaller production increases and smelter curtailments. The Company also projected a 1 million metric ton alumina deficit in 2016 from a 2.2 million metric ton surplus in 2015 estimated in third quarter 2015, due to record global alumina demand and refinery curtailments.

Separation Update

Alcoa also provided an update on its separation plans. The Company has established a well-defined governance structure led by a steering committee, a separation program office and functional teams to separate Alcoa into two standalone companies. The separation program office is ensuring that all deliverables and deadlines will be met to make the separation effective in the second half of 2016. Alcoa is targeting a Form 10 filing with the U.S. Securities and Exchange Commission by mid-2016.

A replay of the Alcoa 2015 Investor Day webcast and archived slides are available on www.alcoa.com/investorday.

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