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Alcoa Corp (AA) Q1 2024 Earnings Call Transcript Highlights: Navigating Market Dynamics and ...

GuruFocus Research
·3-min read

  • Revenue: Flat sequentially at $2.6 billion.

  • Net Loss: Changed $102 million to $252 million.

  • Loss Per Share: Changed from $0.84 to $1.41.

  • Adjusted Net Loss: $145 million or $0.81 per share.

  • Adjusted EBITDA: Increased $43 million to $132 million.

  • Alumina Segment EBITDA: Increased $55 million sequentially.

  • Aluminum Segment EBITDA: Declined $30 million sequentially.

  • Free Cash Flow: Negative for the quarter at $269 million.

  • Cash Balance: Increased $500 million to $1.4 billion.

  • Interest Expense: Updated full-year outlook from $110 million to $145 million.

  • Return on Equity: Negative 14.5% year-to-date.

  • Days Working Capital: Increased 8 days to 47 days sequentially.

  • Dividend: Added $19 million to stockholder capital returns.

Release Date: April 17, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Q & A Highlights

Q: With some of the changes expected on the power side and the Chinese production cap, what's your view of the relative market strength in aluminum versus alumina? And how should we see that in the context of the AWAC acquisition? Any view on synergies from a tax perspective and overhead? A: (William F. Oplinger - President, CEO & Director, Alcoa Corporation) The Alumina Limited deal is long-term and provides benefits to shareholders and communities, independent of near-term market dynamics. Immediate synergies include a $12 million reduction in overhead, with potential future synergies in capital structure and debt in Australia. Market dynamics for both alumina and aluminum are improving, with aluminum demand growth in all major markets except European building construction, impacting metal prices and driving regional premiums higher.

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Q: On the closure costs for Kwinana and potential costs for San Ciprian, can you provide estimates and clarify the nature of these costs? A: (Molly S. Beerman - Executive VP & CFO, Alcoa Corporation) The $115 million for Kwinana represents curtailment costs, mainly severance and environmental setup for water treatment. Closure costs would be significantly higher. For San Ciprian, refinery closure costs are about $200 million, and smelter closure costs are between $25 and $50 million, excluding severance.

Q: Regarding working capital guidance for the rest of the year and the potential to exceed savings targets due to raw material cost trends, can you quantify this? A: (Molly S. Beerman - Executive VP & CFO, Alcoa Corporation) Working capital target is $1 billion by year-end, down from $1.4 billion. Savings from lower raw material costs are expected to exceed the $310 million year-over-year target, with favorable results already coming in.

Q: Given the challenges at Alumar and Warrick, are the savings targets of $75 million and $70 million still achievable by 2025? A: (Molly S. Beerman - Executive VP & CFO, Alcoa Corporation) The targets are still achievable. Warrick had a successful restart, and additional actions are identified for profitability. Alumar faces issues, but progress is being made. Kwinana's savings will ramp up in the second half of 2024, with full realization expected in 2025.

Q: How do you see further protection evolving in the U.S. market given the election year and recent headlines about Chinese material? A: (William F. Oplinger - President, CEO & Director, Alcoa Corporation) Section 232 tariffs are expected to remain in place. The recent increase in tariffs on certain Chinese aluminum products is seen as positive for North American customers, supporting local industry.

Q: With the optimistic outlook for aluminum and recent strength in prices, do you consider further restarts at Warrick or Lista, or opportunities to capitalize on higher prices? A: (William F. Oplinger - President, CEO & Director, Alcoa Corporation) Any decision on further restarts would require clarity on near-term energy prices. The focus is on ensuring current operations at Warrick run well and exploring all options, including potential restarts if economically viable.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.