EX-99.2 3 dex992.htm SLIDES PRESENTED DURING ALCOA INC. FOURTH QUARTER 2006 EARNINGS CALL.

[Alcoa logo] Exhibit 99.2 January 9, 2007 4 th Quarter 2006 Analyst Conference

2 [Alcoa logo] Forward Looking Statements Today’s discussion may include “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Alcoa’s actual results or actions may differ materially from those projected in the forward-looking statements. For a summary of the specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to Alcoa’s Form 10-K for the year ended December 31, 2005 and Forms 10-Q for the quarters ended March 31, 2006, June 30, 2006 and September 30, 2006 filed with the Securities and Exchange Commission.

[Alcoa logo] Vice President and Chief Financial Officer Chuck McLane *

4 [Alcoa logo] 4 th Quarter 2006 Financial Overview – Income from continuing operations of $644m or $0.74 per share - $258m or $0.29 per share including the impact of restructurings – Revenues of $7.84b – Cash from operations of $1.33b – Debt-to-cap at 30.6% – Trailing four quarters ROC of 13.2%

5 [Alcoa logo] 4 th Quarter 2006 Restructuring Impact $M EPS Net Income $359 $0.41 Less: Income from Discontinued Operations 101 Income From Continuing Operations 258 0.29 Plus: Restructuring and other charges 386 Income From Continuing Operations, excluding restructuring and other charges $644 $0.74

6 [Alcoa logo] 4 th Quarter 2006 Financial Overview In Millions 3Q'06 4Q'06 Change Sales $7,631 $7,840 $209 Cost of Goods Sold $6,015 $6,132 $117 % of Sales 78.8% 78.2% (0.6) pts. SG&A $326 $367 $41 % of Sales 4.3% 4.7% 0.4 pts. Restructuring and Other Charges ($3) $554 $557 Interest Expense $101 $93 ($8) Other Income, Net ($48) ($49) ($1) Effective Tax Rate 24.7% -0.3% (25.0) pts. Minority Interests $109 $98 ($11) GAAP Net Income $537 $359 ($178) (Loss) Income from Discontinued Operations ($3) $101 $104 GAAP Income From Continuing Operations $540 $258 ($282)

7 [Alcoa logo] Income from Continuing Operations 3 rd Quarter vs. 4 th Quarter Comparison

8 [Alcoa logo] 4Q vs 4Q 4Q vs 3Q 4Q’06 6% (5%) 2,084 3 rd Party Shipments (kmt) 2% (3%) 3,790 Production (kmt) 27% (3%) 711 3 rd Party Revenue ($MM) 42% (4%) 259 ATOI ($MM) Pinjarra production ramp-up offset by Point Comfort decrease Impact of Pinjarra power outage Impact of stronger Australian Dollar Alumina 4 th Quarter Highlights ATOI Performance 1 st Quarter Outlook Pinjarra restored to 100% production in February following power outage Pt. Comfort at approximately 85% rate Higher alumina price 4 th Quarter Business Conditions $100 $120 $140 $160 $180 $200 $220 $240 $260 $280 $300 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 ATOI Total Revenue

9 [Alcoa logo] 4 th Quarter Highlights 98% 39% 480 ATOI ($MM) 27% 6% 2,766 3 rd Party Price ($/MT) 33% 15% 1,698 3 rd Party Revenue ($MM) 4Q vs 4Q 4Q vs 3Q 4Q’06 - 4% 556 3 rd Party Shipments (kmt) 1% 1% 908 Production (kmt) Primary Metals ATOI Performance 1 st Quarter Outlook 4 th Quarter Business Conditions Higher realized pricing and volumes Increased carbon costs Iceland start-up costs Lower energy costs Average Dec. cash LME = $2,813/MT Higher carbon and energy costs Higher Rockdale power costs Iceland start-up and Intalco restart cost $0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $1,500 $1,700 $1,900 $2,100 $2,300 $2,500 $2,700 $2,900 $3,100 $3,300 $3,500 ATOI Total Revenue

10 [Alcoa logo] Favorable aerospace mix Recovery from 3 rd quarter mill outages Swansea shutdown costs Tax benefit 4Q vs 4Q 4Q vs 3Q 4Q’06 – 29% 62 ATOI ($MM) 22% 1% 2,127 Revenue ($MM) Flat Rolled Products 4 th Quarter Highlights ATOI Performance 1 st Quarter Outlook 4 th Quarter Business Conditions Swansea shutdown costs continue Aerospace demand remains strong Productivity to offset cost inflation $0 $20 $40 $60 $80 $100 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $1,500 $1,600 $1,700 $1,800 $1,900 $2,000 $2,100 $2,200 ATOI Third Party Revenue

11 [Alcoa logo] (4) (3) (5) Other 75 86 (8) 3Q06 Total Investment Castings, Forgings, Fasteners AFL, Auto Castings and Structures 47 65 (13) 4Q05 73 61 16 4Q06 Aerospace market remained strong Cleveland strike impact in forgings business Weakness in NA automotive demand AFL tax benefit Engineered Solutions ATOI ($MM) 4 th Quarter Business Conditions 1 st Quarter Outlook Decline in heavy truck due to change in engine emissions regulations North American auto production cuts continue on specific platforms Global aerospace markets remain strong despite A380 delays $0 $20 $40 $60 $80 $100 $120 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 ATOI Third Party Revenue

12 [Alcoa logo] 3 (2) (14) Alcoa Custom Extruded Solutions and Other 4Q06 3Q06 4Q05 27 16 (2) Total 24 18 12 Global Engineered Products, Building & Construction Systems and Russia Favorable mix in hard alloys Lower volume in industrial market Tax benefit Extruded and End Products ATOI ($MM) 4 th Quarter Business Conditions 1 st Quarter Outlook Seasonal decline in commercial building and construction Expected to finalized soft alloy extrusions joint venture -$5 $0 $5 $10 $15 $20 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $0 $200 $400 $600 $800 $1,000 $1,200 ATOI Third Party Revenue

13 [Alcoa logo] (1) (2) (1) Other 24 (4) 30 3Q06 Total Reynolds Food Packaging and Flexible Packaging Closure Systems and Consumer Products 20 (8) 29 4Q05 26 (9) 36 4Q06 Packaging & Consumer ATOI ($MM) 4 th Quarter Business Conditions 1 st Quarter Outlook Seasonal decrease in Consumer Productivity improvements across the businesses. – Seasonal strength in Consumer – Seasonal decline in Closures – Higher metal costs $0 $10 $20 $30 $40 $50 $60 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 $500 $600 $700 $800 $900 ATOI Third Party Revenue

14 [Alcoa logo] 4 th Quarter 2006 Cash Flow Review $ In Millions 4Q'05 4Q'06 Net Income $224 $359 DD&A 315 325 Change in Working Capital 386 402 Other Adjustments 133 300 Pension Contributions (19) (53) Cash From Operating Activities 1,039 1,333 Dividends to Shareholders (131) (131) Change in Debt (248) (676) Other Financing Activities (64) 174 Cash From Financing Activities (443) (633) Capital Expenditures (762) (1,147) Acquisitions (5) 0 Other Investing Activities 413 378 Cash From Investing Activities ($354) ($769)

15 [Alcoa logo] Strong Performance Trends Bloomberg ROC* Segment ATOI and Revenue

[Alcoa logo] Chairman and Chief Executive Officer Alain J.P. Belda *

17 [Alcoa logo] 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance

18 [Alcoa logo] Sustainability – Named to the Dow Jones Sustainability Index – Named one of the most sustainable companies in the world at the World Economic Forum – Ranked 2 nd in the Covalence Ethical Ranking – Ranked 2 nd overall by CERES on Climate Change and Governance

19 [Alcoa logo] Zero Incident Locations Safety

20 [Alcoa logo] 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance

21 [Alcoa logo] Innovation and Technology – Bauxite residue neutralization – SMAC (Simultaneous Multi-Alloy Casting) – Reynobond® with KEVLAR – Dura-Bright® products

22 [Alcoa logo] 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance

23 [Alcoa logo] Portfolio Management – Sale of Alcoa Home Exteriors – Creation of a soft alloy extrusions joint venture – Review of portfolio continues

24 [Alcoa logo] 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance

25 [Alcoa logo] Alcoa’s Share of Nameplate Capacity Refining Smelting Bauxite Alcoa’s Upstream Growth Projects 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008 kMT kMT R R R S R S R B Jamalco Suralco Alumar Pinjarra Jamalco EWP Iceland/Mosjoen Juruti Sao Luis 2

26 [Alcoa logo] Alcoa’s Downstream Growth Projects – 50% aerospace capacity increase across four locations – Major modernization of the Kofem facility – Continued improvement in our Russia fabricating facilities – Increased strategic presence in China

27 [Alcoa logo] Alcoa’s Presence in Asia-Pacific Region

28 [Alcoa logo] 2006 Accomplishments – Environmental, Health and Safety – Innovation and Technology – Portfolio Management – Long-Term Growth – Financial Performance

29 [Alcoa logo] 2006 Financial Performance – Record income from continuing operations of $2.5b or $2.90 per share - $2.2b or $2.47 per share including the impact of restructurings – Record revenues of $30.4b – Cash from operations of $2.6b – Debt to cap of 30.6% – Trailing twelve months ROC of 16.2% excluding impact of growth projects

30 [Alcoa logo] Income from Continuing Operations 2006 vs. 2005 Bridge

31 [Alcoa logo] Bloomberg ROC Trailing 12 Months Including Growth Capex Bloomberg ROC Trailing 12 Months Excluding Growth Capex Cash from Operations Strong Performance Trends

32 [Alcoa logo] 2007 Outlook – Market Fundamentals – Market Conditions – Portfolio Improvements – Financial Targets

33 [Alcoa logo] Source: Alcoa analysis Market Fundamentals Alumina Surplus or (Deficit) Aluminum Surplus or (Deficit)

34 [Alcoa logo] 2007 Anticipated Market Conditions – Aerospace – Another strong year – Automotive – Increased production in North America and Europe – Commercial Transportation – Decrease in North America due to 2006 pre-buy – Building & Construction – Slight slowing but still healthy growth rates – Industrial Products – Approximate 10% decline in industrial gas turbines

35 [Alcoa logo] 2007 Portfolio Improvements

36 [Alcoa logo] 2007 Financial Targets

37 [Alcoa logo] Tony Thene Director, Investor Relations Alcoa 390 Park Avenue New York, N.Y. 10022-4608 Telephone: (212) 836-2674 Facsimile: (212) 836-2813 www.alcoa.com For Additional Information, Contact:

38 [Alcoa logo] * * * * * * * *******************************************

39 [Alcoa logo] * * * * * * * ******************************************* APPENDIX

40 [Alcoa logo] $ 359 10 101 (386) (82) (98) (61) 14 (66) $ 927 4Q06 $ 537 (7) (3) 2 (64) (109) (66) 23 (19) $ 780 3Q06 $2,248 $ 744 $ 608 $1,233 $ 224 $ 289 $ 460 $ 260 Consolidated net income 104 51 50 161 (62) 20 261 (58) Other (1) 87 (5) (6) (22) 13 4 (30) (9) Discontinued operations (379) 6 (1) (197) (18) (5) (144) (30) Restructuring and other charges (317) (82) (89) (312) (88) (80) (73) (69) Corporate expense (436) (124) (105) (259) (80) (59) (60) (60) Minority interests (250) (63) (60) (220) (51) (62) (56) (51) Interest expense 58 10 11 42 14 12 9 7 Interest income (170) (49) (36) (99) (56) (22) (2) (19) Impact of LIFO (1) Unallocated amounts (net of tax): $ 3,551 $1,000 $ 844 $2,139 $ 552 $ 483 $ 555 $ 549 Total ATOI 2006 2Q06 1Q06 2005 4Q05 3Q05 2Q05 1Q05 Reconciliation of ATOI to consolidated net income: (1) Certain amounts have been reclassified to Other so that this line reflects only the impact of LIFO. Prior periods’ financial information has been reclassified to reflect the movement of the Hawesville, KY automotive casting facility and the home exteriors business to discontinued operations in 2006. Reconciliation of ATOI to Net Income

41 [Alcoa logo] Return on Capital (ROC) is presented based on Bloomberg Methodology which calculates ROC based on trailing four quarters. Reconciliation of Return on Capital 4Q'06 3Q'06 2Q'06 1Q'06 4Q'05 Bloomberg 4Q'06 Bloomberg 3Q'06 Bloomberg 2Q'06 Bloomberg 1Q'06 Bloomberg In Millions Method Annlzd Method Annlzd Method Annlzd Method Annlzd Method Net Income $2,248 $1,436 $2,113 $2,148 $1,865 $2,976 1,581 $2,432 $1,233 Minority Interest $436 $392 $418 $436 $368 $496 304 $420 $259 Interest Expense (After-tax) $291 $373 $272 $304 $268 $282 $274 $264 $261 Numerator (Sum Total) $2,975 $2,201 $2,803 $2,888 $2,501 $3,754 $2,159 $3,116 $1,753 Average Balances Short-term borrowings $386 $454 $349 $395 $306 $361 $342 $331 $279 Short-term debt $451 $847 $449 $452 $55 $60 $53 $59 $58 Commercial paper $1,192 $1,833 $1,678 $2,046 $1,501 $1,785 $1,652 $1,292 $771 Long-term debt $4,861 $4,446 $4,915 $4,801 $5,333 $5,189 $5,243 $5,250 $5,309 Preferred Stock $55 $55 $55 $55 $55 $55 $55 $55 $55 Minority interests $1,583 $1,665 $1,416 $1,502 $1,340 $1,432 $1,280 $1,378 $1,391 Common equity $13,947 $14,613 $14,120 $14,508 $13,834 $14,120 $13,611 $13,596 $13,282 Denominator (Sum Total) $22,475 $23,913 $22,982 $23,759 $22,424 $23,002 $22,237 $21,961 $21,144 Return on Capital 13.2% 9.2% 12.2% 12.2% 11.2% 16.3% 9.7% 14.2% 8.3%

42 [Alcoa logo] Return on capital, excluding growth investments is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides greater insight with respect to the underlying operating performance of the company’s productive assets. The company has significant growth investments underway in its upstream and downstream businesses, as previously noted, with expected completion dates over the next several years. As these investments generally require a period of time before they are productive, management believes that a return on capital measure excluding these growth investments is more representative of current operating performance. Reconciliation of Adjusted Return on Capital 4Q'06 3Q'06 2Q'06 1Q'06 4Q'05 Bloomberg 4Q'06 Bloomberg 3Q'06 Bloomberg 2Q'06 Bloomberg 1Q'06 Bloomberg In Millions Method Annlzd Method Annlzd Method Annlzd Method Annlzd Method Numerator (Sum Total) $2,975 $2,201 $2,803 $2,888 $2,501 $3,754 $2,159 $3,116 $1,753 Russia & Bohai Net Loss ($74) ($44) ($85) ($52) ($78) ($88) ($86) ($110) ($71) Adjusted Net Income $3,049 $2,245 $2,888 $2,940 $2,579 $3,842 $2,245 $3,226 $1,824 Average Balances Denominator (Sum Total) $22,475 $23,913 $22,982 $23,759 $22,424 $23,002 $22,237 $21,961 $21,144 Capital Projects in Progress, Russia & Bohai Capital Base $3,655 $4,203 $2,540 $3,801 $2,330 $3,220 $2,139 $2,892 $1,913 Adjusted Capital Base $18,820 $19,710 $20,442 $19,958 $20,094 $19,782 $20,098 $19,069 $19,231 Return on Capital Excluding Growth Investments 16.2% 11.4% 14.1% 14.7% 12.8% 19.4% 11.2% 16.9% 9.5%

43 [Alcoa logo] Reconciliation of Income and EPS excluding Restructuring Charges Income from continuing operations – excluding restructuring and other charges is a non-GAAP financial measure. The following matters should be considered when evaluating this non-GAAP financial measure: Alcoa reviews the operating results of its businesses excluding the impacts of restructurings and discontinued operations. Excluding the impacts of these items can provide an additional basis of comparison. Management believes that these items are unusual in nature, and would not be indicative of ongoing operating results. As a result, management believes these items should be considered in order to compare past, current, and future periods. The economic impacts of the restructuring charges are described in a footnote to Alcoa’s financial statements. Generally speaking, charges associated with restructurings include cash and non-cash charges and are the result of employee layoff, plant consolidation of assets, or plant closure costs. These actions are taken in order to achieve a lower cost base for future operating results. Restructuring charges and discontinued operations are typically material and are considered to be outside the normal operations of a business. Corporate management is responsible for making decisions about restructurings and discontinued operations. There can be no assurance that additional restructurings and discontinued operations will not occur in future periods. To compensate for this limitation, management believes that it is appropriate to consider both income from continuing operations determined under GAAP as well as income from continuing operations excluding restructuring and other charges. 1.66 2.90 0.62 0.26 0.74 $ 1,454 $ 2,540 $ 538 $ 231 $ 644 Income from continuing operations – excluding restructuring and other charges 197 379 (2) 18 386 Restructuring and other charges 1.43 2.47 0.62 0.24 0.29 1,257 2,161 540 213 258 Income from continuing operations – including restructuring and other charges (22) 87 (3) 13 101 Income (loss) from discontinued operations 2 - - 2 - Cumulative effect of accounting change $ 1.40 $ 2.57 $ 0.61 $ 0.26 $ 0.41 $ 1,233 $ 2,248 $ 537 $ 224 $ 359 Net income 2005 2006 3Q06 4Q05 4Q06 2005 2006 3Q06 4Q05 4Q06 Year ended Quarter ended Year ended Quarter ended Diluted EPS Net Income

44 [Alcoa logo] The effective tax rate, excluding restructuring charges is a non-GAAP financial measure. Management believes that this measure is meaningful to investors because it provides greater insight to the company’s tax position. There can be no assurance that additional restructuring charges will not occur in the future. As a result, management believes that it is appropriate to consider the effective tax rate under GAAP as well as after adjustment for restructuring charges. 18.4% 30.3% (0.3)% Effective Tax Rate 167 168 (1) (Benefit) provision for taxes on income $ 909 $ 554 $ 355 Income from continuing operations before taxes on income ($ millions) As Adjusted Restructuring and other charges As Reported Quarter ended December 31, 2006 Reconciliation of Effective Tax Rate excluding Restructuring Charges

45 [Alcoa logo] Days of Working Capital Definition Days Working Capital (in Millions) 4Q '05 3Q '06 4Q '06 Receivables from customers, less allowances 2,616 $ 3,152 $ 3,127 $ Add: Inventories 3,191 $ 3,848 $ 3,805 $ Less: Account Payable, trade 2,420 $ 2,518 $ 2,680 $ Working Capital 3,387 $ 4,482 $ 4,252 $ Sales 6,536 $ 7,631 $ 7,840 $ Days of Working Capital* 47.7 54.0 49.9 *Days Working Capital = Working Capital divided by (Sales/number of days in the quarter) Quarter ended