(Updated - April 11, 2016 5:06 PM EDT)

Alcoa (NYSE: AA) reported Q1 EPS of $0.07, $0.05 better than the analyst estimate of $0.02. Revenue was $4.95 billion, versus the consensus at $5.14 billion.

The company said its separation is on track.

1Q 2016 Arconic Segments (Value-Add) Overview

• Revenue of $3.3 billion, down 2.2 percent year-over-year, reflects:
  • 6.7 percent revenue increase predominantly related to acquisitions, offset by 8.3 percent revenue decline from metal and foreign exchange impacts and 0.6 percent revenue decline from divested or closed operations
• After-tax operating income of $269 million, up 8 percent year-over-year, adjusted EBITDA of $537 million, up 7 percent year-over-year, and record adjusted EBITDA margin of 16.4 percent
  • Global Rolled Products (GRP): $68 million after-tax operating income, up 26 percent year-over-year and adjusted EBITDA per metric ton of $374, up 8 percent from year-ago due to strong cost control; automotive sheet shipment growth up 38 percent year-over-year
  • Engineered Products and Solutions (EPS): Record first quarter revenue of $1.4 billion, record first quarter after-tax operating income of $162 million, up 4 percent year-over-year and adjusted EBITDA margin of 21.0 percent; aerospace sales up 14 percent year-over-year
  • Transportation and Construction Solutions (TCS): $39 million after-tax operating income, up 3 percent year-over-year and record first quarter adjusted EBITDA margin of 14.9 percent
• Supply agreement for 3D-printed titanium fuselage and engine pylon parts to Airbus
• Signed multi-year contract valued at approximately $1 billion to deliver advanced industrial gas turbine (IGT) components, Alcoa’s largest IGT contract to date
• Achieved $179 million in productivity savings, on target to deliver $650 million in 2016

1Q 2016 new Alcoa Segments (Upstream) Overview

• Third-party revenue of $1.7 billion, down 32.2 percent year-over-year, reflects:
  • 4.5 percent revenue increase from organic growth more than offset by 26.1 percent revenue decline due to lower pricing and foreign exchange impacts and 10.6 percent revenue decline predominantly related to curtailed or closed operations
• Total revenue of $2.1 billion, after-tax operating income of $22 million, and adjusted EBITDA of $185 million
  • Profitable Alumina and Primary Metals segments despite 19 percent price decline in the Alumina Price Index, and flat aluminum pricing, sequentially; year-over-year declines of 40 and 26 percent, respectively
• Alcoa World Alumina and Chemicals signed new third-party bauxite contracts valued at over $350 million over the next two years
• Ma’aden-Alcoa joint venture refinery continued to ramp-up, now at 80 percent of nameplate capacity
• Pt. Comfort, Texas refinery on track to be fully curtailed by end of second quarter; closed Warrick smelter in Indiana
• Achieved $175 million in productivity, on target to deliver $550 million in 2016

Market Update

In aerospace, Alcoa is projecting 6 to 8 percent global aerospace sales growth in 2016, revised from the 8 to 9 percent estimated in fourth quarter 2015. The market is experiencing a transition period as major original equipment manufacturers shift from incumbent platforms to multiple new platforms simultaneously. Powerful trends continue to drive long-term market strength, with the order book for commercial jet airframes and jet engines representing more than nine years of production at 2015 delivery rates.

In automotive, Alcoa continues to forecast global automotive production growth of 1 to 4 percent, including 1 to 5 percent growth in North America. Strong U.S. sales, sustained vehicle demand and incentives are driving the North American automotive market. Automotive sales are also strong in Europe and China.

In the heavy duty truck and trailer end market, Alcoa projects a global production of negative 4 percent to flat. This is revised downward from estimates of negative three to up one percent in fourth quarter 2015 as strength in Europe and China is offset by weakness in North America.

Alcoa projects solid growth in all its other end markets. The Company continues to forecast 1 to 3 percent global sales growth in packaging; 4 to 6 percent building and construction sales growth both globally and in North America; and 2 to 4 percent global airfoil market growth as the market moves towards higher value-add product for new, high efficiency turbines with advanced technology.

In 2016, Alcoa projects an approximately 1.1 million metric ton global aluminum deficit as 5 percent global aluminum demand growth (revised from 6 percent) outweighs 2 percent global aluminum supply growth (revised from 3 percent). In addition, the Company projects a global alumina deficit of 1.4 million metric tons.

Arconic Overview

After the Company’s separation, the innovation and technology-driven Arconic company will include Global Rolled Products (GRP), Engineered Products and Solutions (EPS) and Transportation and Construction Solutions (TCS). In first quarter 2016, these business segments reported combined revenue of $3.3 billion, after-tax operating income (ATOI) of $269 million, adjusted EBITDA of $537 million and adjusted EBITDA margin of 16.4 percent.

ATOI and adjusted EBITDA increased 8 and 7 percent, respectively, year-over-year. The combined segments also generated $179 million in productivity as part of their business improvement programs, announced in the first quarter. All Arconic segments are on track to deliver $650 million productivity savings in 2016.

In addition, the Arconic business reached the following agreements in the first quarter:

• A multi-year contract valued at approximately $1 billion to deliver advanced industrial gas turbine components, Alcoa’s largest IGT contract to date; and
• Agreement to supply 3D-printed titanium fuselage and engine pylon parts to Airbus.

Three-year target update

GRP and TCS are on track to meet their 3-year 2016 business targets (3-year target revenue adjusted for foreign exchange and London Metal Exchange pricing impact) announced in November of 2013:

• GRP targets revenue of $6.0 billion to $6.2 billion, and adjusted EBITDA per metric ton at or above average historical highs of $344; and
• TCS, comprising Alcoa Wheel and Transportation Products, Alcoa Building and Construction Systems, and the Latin American Extrusions business, targets revenue of $2 billion to $2.2 billion, and adjusted EBITDA margin of approximately 15 percent in 2016.

EPS set new 2016 goals to reflect end market headwinds, lower performance expectations for the Firth Rixson acquisition and higher performance expectations in Alcoa Titanium and Engineered Products (ATEP), the former RTI, which is ahead of the integration plan.

As a result, EPS targets segment revenue of $6 billion to $6.2 billion, revised from $7.0 billion (3-year target revenue adjusted for foreign exchange impact), and adjusted EBITDA margin of 21 percent to 22 percent, revised from approximately 23 percent. This includes:

• Firth Rixson 2016 revenue of $1 billion to $1.1 billion, revised from $1.6 billion, and adjusted EBITDA of $150 million to $170 million, compared to $350 million projected at the time of acquisition. Adjusted EBITDA margin is expected between 14 percent and 16 percent.
• ATEP 2016 revenue of $810 million to $830 million (excluding the impact of the announced Remmele Medical sale), adjusted EBITDA of $135 million to $160 million, and adjusted EBITDA margin of 17 percent to 19 percent. Due to its effective integration, ATEP is tracking ahead of 2019 targets which include revenue of $1.2 billion, adjusted EBITDA margin of 25 percent and net synergies of $100 million.

To strengthen its cost structure, EPS is taking a number of actions, including headcount reductions, overtime reduction, productivity savings and other cost controls. The business reduced its workforce by 600 positions in the first quarter and plans a further reduction of 400 positions. Additionally, given the current market environment, it is evaluating another reduction of up to 1,000 positions.

New Alcoa Overview

After the Company’s separation, the new Alcoa will comprise the five business units that today make up Global Primary Products: Bauxite, Alumina, Aluminum, Cast Products and Energy. In first quarter 2016, these combined businesses reported revenue of $2.1 billion, ATOI of $22 million and adjusted EBITDA of $185 million. The new Alcoa segments generated $175 million in productivity in the first quarter as part of its business improvement program, and is on track to deliver $550 million in productivity savings for 2016.

In the first quarter, the new Alcoa continued to take aggressive action to improve its competitiveness, and:

• Closed 269,000 metric tons of smelting capacity at its Warrick smelter in Indiana; and
• Curtailed approximately 1.2 million metric tons refining capacity at its Point Comfort, Texas facility, with plans to curtail the plant’s remaining capacity by the end of the second quarter.

In addition, the new Alcoa continues to successfully build its third-party bauxite business. Alcoa World Alumina and Chemicals (AWAC) has secured multiple bauxite supply contracts valued at more than $350 million over the next two years. Under the contracts, the Company will supply bauxite to external customers from three of its global mines. The new contracts, which will double Alcoa’s third-party bauxite sales in 2016 from 2015, cover customers in China, Europe and Brazil. The AWAC group of companies is owned 60 percent by Alcoa and 40 percent by Alumina Limited of Australia.

In Saudi Arabia, the Ma’aden-Alcoa joint venture refinery continued to ramp up. It is now operating at 80 percent of its 1.8 million metric tons of nameplate capacity. Alcoa has a 25.1 percent investment in the joint venture, the world’s lowest-cost, fully integrated aluminum complex.

As a result of these activities, the new Alcoa remains on target to meet or exceed its 2016 goals of moving to the 38th percentile on the global aluminum cost curve and 21st percentile on the global alumina cost curve.

For earnings history and earnings-related data on Alcoa (AA) click here.