Alcoa Corporation Q3 FY2025 earnings call

• Safety: Tragic workplace fatality at Alumar smelter; comprehensive investigation and global safety measures implemented.
• Operational Performance: Achieved year-to-date aluminum production records at five smelters; higher Midwest premium offset tariff impacts on U.S. imports.
• One-Time Items: Permanent closure of Kwinana refinery, sale of Ma'aden joint venture interest, and increase in asset retirement obligations.
• Investments: Long-term energy contract for Massena operations and $60 million investment in anode bake furnace; development of gallium plant co-located at Wagerup alumina refinery with U.S. and Australian government funding.
• Market Discussion: Alumina prices declined, bauxite prices firm; aluminum prices rose, Midwest premium covers import costs, and European premiums rebounded.

Revenue decreased 1% sequentially to $3 billion. In the Alumina segment, third-party revenue decreased 9% on lower volumes and price of bauxite offtake and supply agreements. Adjusted EBITDA for Alumina decreased $72 million, primarily due to adjustments to asset retirement obligations, lower volumes, and bauxite prices, partially offset by lower production costs. In the Aluminum segment, third-party revenue increased 4% on an increase in average realized third-party price, partially offset by lower shipments and unfavorable currency impacts. Adjusted EBITDA for Aluminum increased $210 million due to higher metal prices and lower alumina costs, offset by tariff costs.

• Adjusted net debt target is $1.5 billion, with $135 million remaining to reach the top end.
• CapEx for 2025 adjusted to $625 million from $675 million, primarily due to less spending on mine moves in Australia.
• Alumina segment expected to improve due to absence of third-quarter asset retirement obligations charges and higher shipments. Aluminum segment expects sequential unfavorable impact from restart inefficiencies but favorable from higher shipments and alumina costs. Fourth-quarter tariff costs expected to increase by $50 million due to higher shipments.

• Safety incidents remain a risk, as seen with the workplace fatality at Alumar smelter.
• Market price fluctuations for alumina and aluminum, such as significant decline in alumina prices and uncertainty in bauxite supply.
• Tariff impacts, including potential increases due to higher shipments and changes in LME pricing.
• Regulatory changes, such as uncertainties around CBAM in Europe and trade policy negotiations between countries.

Q: Nick Giles asked about Canada-U.S. trade negotiations and underperforming assets.

A: William Oplinger said they provide data to governments, and there are areas for improvement across assets like Brazil and Massena.

Q: John Tumazos asked about Massena energy agreement and old capacity.

A: William Oplinger explained the ten-year energy contract, competitive green energy, and opportunities at Massena East with existing electrical infrastructure.

Q: Glyn Lawcock asked about Kwinana closure costs and land sale.

A: Molly Beerman said Kwinana closure costs are high due to water management, and land is in industrial park with port and rail access for redevelopment.

Q: William Chapman Peterson asked about hyperscaler interest and demand profile.

A: William Oplinger said hyperscaler interest remains, and demand in U.S. is strong in packaging and electrical but weak in automotive, not indicating demand destruction.

Q: Nick Giles asked about EU aluminum safeguards.

A: William Oplinger mentioned CBAM expected in 2026 with potential positive impact for Alcoa despite loopholes.