Alcoa Corp Q1 FY2025 earnings call

Alcoa had strong first - quarter financial and production results. Maintained safety with no fatal or serious injuries and improving safety performance. Solid production with the majority of operations improving sequentially. Completed a $1 billion debt offering in Australia. Formed a joint venture with Ignis EQT for San Ciprian operations and is resuming production. Molly Beerman walked through the financial results including revenue, net income, and adjusted EBITDA and its drivers. William Oplinger spoke on the U.S. tariffs impact on Alcoa, market conditions in alumina and aluminum, and the status of the San Ciprian restart.

Revenue was down 3% sequentially to $3.4 billion. In the Alumina segment, third-party revenue decreased 8% due to lower average realized third-party price and lower shipments. In the Aluminum segment, third-party revenue was flat due to an increase in the average realized third-party price offset by lower shipments. First-quarter net income attributable to Alcoa was $548 million, with earnings per common share more than doubling to $2.07 per share. On an adjusted basis, net income attributable to Alcoa was $568 million or $2.15 per share. Adjusted EBITDA increased $178 million to $855 million. The Aluminum segment adjusted EBITDA decreased $52 million primarily due to lower alumina prices, lower volume, and unfavorable currency impacts. The aluminum segment adjusted EBITDA decreased $60 million with higher metal prices and favorable currency more than offset by higher alumina costs and other costs.

Updated depreciation expense from $640 million to $620 million due primarily to favorable currency impact. For the second quarter of 2025, the Alumina segment is expected to maintain strong performance. The Aluminum segment is expected to be unfavorable by approximately $105 million due to U.S. Section 232 tariff costs on imports of Canadian aluminum and operating costs associated with the restart of the San Ciprian smelter. Aluminum cost in the aluminum segment is expected to be favorable by $165 million. Second - quarter operational tax is expected to be a benefit of $50 million to $60 million. A quarterly tariff cost of approximately $105 million is considered a baseline based on an LME of $2,400 and a Midwest premium of $0.39 per pound.

U.S. Section 232 tariff increased to 25% and the exemption for Canadian metal imported into the U.S. was removed, which is a material impact as approximately 70% of Alcoa's Canadian - produced aluminum is destined for U.S. customers, estimated to cost $400 to $425 million annually. Market volatility affecting intersegment eliminations sensitivity. Bauxite prices remaining high and over 80% of Chinese refineries being unprofitable due to bauxite prices and Chinese government scrutiny on new alumina projects.

Q: Timna Tanners with Wolfe Research asked about the distinction in tariff math.

A: Molly Beerman explained that the net $100 million for the year considers revenue and tariff cost with a Midwest premium, while the $105 million quarterly figure is calculated based on specific LME and Midwest premium assumptions, and the Midwest premium hasn't responded as expected.

Q: William Peterson with JPMorgan asked about engagement with governments and alumina pricing.

A: William Oplinger talked about engaging through the U.S. Aluminum Association with various U.S. and Canadian government entities, and mentioned that over 80% of Chinese refineries are unprofitable due to bauxite prices and government scrutiny.

Q: Chris LaFemina with Jefferies asked about San Ciprian hedging and EBITDA impact.

A: Molly Beerman and William Oplinger discussed that hedges are in place, the 2025 EBITDA loss for the smelter, and that 2026 numbers haven't been released yet.

Q: Nick Giles with B. Riley Securities asked about Chinese alumina refineries and input prices impact.

A: William Oplinger said Chinese refineries react to loss - making by having maintenance outages, and Molly Beerman mentioned raw material cost offsets through productivity initiatives.

Q: Carlos De Alba with Morgan Stanley asked about working capital.

A: Molly Beerman said working capital will come down significantly, and the tax benefit in the second quarter is due to a catch - up entry related to lower alumina prices.

Q: Daniel Major with UBS asked about Midwest premium and San Ciprian cash.

A: William Oplinger and Molly Beerman discussed Midwest premium expectations and San Ciprian cash release progress.

Q: Katja Jancic with BMO Capital Markets asked about Midwest premium and Western Australia permitting.

A: William Oplinger and Molly Beerman talked about Midwest premium comparison and Western Australia permitting is progressing as expected.