Alcoa Corporation

Good afternoon and welcome to the Alcoa Corporation first quarter 2020 earnings presentation and conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. Please go ahead.

Thank you, and good day, everyone. I'm joined today by Roy Harvey, Alcoa Corporation President and Chief Executive Officer, and William Opplinger, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Roy and Bill. As a reminder, today's discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company's actual results to differ materially from these statements are included in today's presentation and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today's presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced, the earnings release and slide presentation are available on our website. With that, here's Roy.

Thank you, Jim, and thanks to everyone for joining our call. It is a real pleasure to present Alcoa's excellent first quarter. As you can see from our release, our results were strong on both the top and bottom lines, with our strongest results since the record-setting year in 2018. I am very happy with the progress we've made at Alcoa on multiple fronts, particularly this quarter. As the world's economies continue to spin up from the lows of last year's pandemic-induced lockdowns, We are capturing the benefits of stronger markets. We are delivering to customers the sustainable materials they need to meet improved demand. Importantly, we are operating safely and reliably, demonstrating the same kind of relentless discipline that helped guide us through more turbulent times. Bill will discuss the financial results in more detail, but I'd like to take the opportunity to characterize our most important achievements. We had net income of $175 million, or 93 cents per share. On a year-over-year basis, this is more than double the $80 million in the first quarter of 2020. Adjusted net income was $150 million, which more than tripled last quarter's $49 million. Adjusted EBITDA, excluding special items, was $521 million, a 44% increase sequentially. And significantly, we finished the quarter with $2.5 billion of cash on hand. I'm proud of the work our team is doing to drive each of these results. As Alcoans, we never shy away from getting the hard work done, working inclusively and remaining focused on executing against our goals. Our company is getting better and stronger, and this was certainly the case in the first quarter. Before we get into the details, though, I want to emphasize again that Alcoa always places an emphasis on our values and our strategic priorities, regardless of market conditions. The COVID-19 crisis has served as a strong pressure test. When the pandemic hit last year, Alcoa was well prepared to implement rigorous processes to protect our people and support our communities, keep our operations running, and preserve and generate cash. Today, our values and our strategic priorities are working to keep us on track and to help drive positive results. Most importantly, we have no fatal or serious injuries in the quarter. The safety of our workforce, whether employees or contractors, is always our most important responsibility, and our teams continue to make progress in using proactive tools to keep all of our people safe. In the first quarter, we also continued to make progress on our strategy, accomplishing several key actions. First, we successfully closed on the $670 million sale of the Warwick Rolling Mill in Indiana, a non-core asset. That sale, combined with the Gum Springs sale last year, put us at the top of our target of between $500 million and $1 billion for non-core asset sales, although we'll continue to pursue other opportunities where it makes sense. Last month, in our aluminum segment, we reached an agreement to repower the Portland aluminum smelter in Australia. Our agreements with multiple power providers and the Australian government will improve the smelter's competitiveness and also help provide reliability to the electric grid in the state of Victoria. Also, our strong cash position coupled with a favorable debt market provided Alcoa an opportunity to pre-fund certain pension obligations and pay off higher interest rate debt via $500 million debt issuance at a 4.18% interest rate. This was the lowest rate debt we've ever issued as an independent company. Earlier this month, we retired in full the $750 million senior notes that were due in 2024, which were issued at a 6.75% coupon. In April, we also contributed $500 million to our U.S. pension plans, improving our funded status. These actions position Alcoa for minimal cash outflows for debt repayment or pension contributions for the next several years. This provides added optionality to use future excess free cash for items aligned with our capital allocation framework, and Bill will discuss more about this in a moment. We are also seeing stronger markets. markets that are evolving to reflect the key issues facing our planet. We are fortunate that aluminum is a sustainable solution to help solve many challenges due to its inherent qualities. It is lightweight, strong, durable, and infinitely recyclable. We are also extremely well positioned to meet our customers' demands for sustainably produced products. As a company with an integrated upstream aluminum value chain, we have a distinct advantage to differentiate with sustainably produced bauxite, alumina, and aluminum. And additionally, we already have the industry's most comprehensive portfolio of low-carbon products through our Sustana family, which includes the industry's first and only low-carbon smelter-grade aluminum product. Finally, an important point to consider for the future is China's evolving role in the global aluminum industry. we have been encouraged to see the strict discipline now evident in their issuance and enforcement of operating permits that comply with their supply-side reforms and environmental targets. And over these last months, it is obvious that the country, with the world's largest capacity in aluminum, is working to reduce its carbon footprint with increasing impacts on today's and tomorrow's aluminum operations. Alcoa is ready to win in this rapidly changing world. with improving markets, increased environmental discipline in China, and our strong ESG focus in the upstream aluminum industry. With that, let's get straight to the results. Bill, please go ahead.