Alcoa Corp (AA) Q1 2024 Earnings Summary

Executive Summary

Q1 2024 revenue was $2.60B, flat sequentially, while GAAP EPS was a loss of $1.41 and adjusted EPS was a loss of $0.81; adjusted EBITDA ex‑specials rose to $132M as lower energy and raw material costs offset weaker aluminum pricing .
Management raised full‑year interest expense guidance to ~$145M (from ~$110M), reflecting the March $750M green bond issuance at 7.125% due 2031 .
Strategic actions advanced: binding agreement to acquire Alumina Limited (overhead synergies ~$12M) and initiation of a sale process for San Ciprián; Kwinana refinery curtailment drove a $197M charge in the quarter .
Near‑term setup: alumina prices at multi‑year highs and sanctions on Russian aluminum support pricing, but Q2 outlook calls for ~$20M seasonal alumina headwinds and higher alumina costs in the Aluminum segment (+$15M), with tax expense expected at $40–$50M .

What Went Well and What Went Wrong

What Went Well

“Adjusted EBITDA excluding special items was $132 million, a sequential increase of $43 million primarily due to lower energy and raw material costs” .
Strategic progress: “Entered into binding agreement to acquire Alumina Limited in all‑stock transaction” and “Completed restart of one potline at Warrick Operations” . CEO: “We believe the acquisition will deliver immediate and significant value for both companies’ shareholders” .
Markets improving: CEO noted alumina reached a two‑year high and demand recovery in packaging alongside strong autos/electrical; U.S./U.K. sanctions on Russian aluminum seen as “the right decision” and supportive of price benchmarks .

What Went Wrong

Aluminum pricing pressure and production costs: “lower average realized third‑party prices for aluminum and higher production costs” weighed on results; segment EBITDA declined $30M sequentially in Aluminum .
Kwinana curtailment charge of $197M drove net special items; GAAP net loss widened to $252M (EPS –$1.41) .
Alumar restart challenges persisted: management highlighted equipment reliability issues and delayed profitability, likely improving into 2025 depending on metal price; “we fundamentally underestimated how hard it was going to be to get that site back up and running” .

Financial Results

Metric	Q3 2023	Q4 2023	Q1 2024
Revenue ($USD Billions)	$2.602	$2.595	$2.599
GAAP Diluted EPS ($)	$(0.94)	$(0.84)	$(1.41)
Adjusted Diluted EPS ($)	$(1.14)	$(0.56)	$(0.81)
Adjusted EBITDA ($USD Millions)	$70	$89	$132
Adjusted EBITDA Margin (%)	2.7% (70/2,602)	3.4% (89/2,595)	5.1% (132/2,599)

Segment performance and pricing

Segment KPI	Q3 2023	Q4 2023	Q1 2024
Alumina – Avg realized price ($/mt)	$354	$344	$372
Alumina – 3rd‑party shipments (kmt)	2,374	2,259	2,397
Alumina – Segment Adjusted EBITDA ($M)	$53	$84	$139
Aluminum – Avg realized price ($/mt)	$2,647	$2,828	$2,620
Aluminum – Total shipments (kmt)	630	638	634
Aluminum – Segment Adjusted EBITDA ($M)	$79	$88	$50

Key KPIs

KPI	Q3 2023	Q4 2023	Q1 2024
Cash and Cash Equivalents ($USD Billions)	$0.926	$0.944	$1.358
Net Debt ($USD Billions)	$0.926	$0.923	$1.242
Free Cash Flow ($USD Millions)	$(76)	$10	$(324)
Days Working Capital (days)	50	39	47
Quarterly Dividend (Paid) ($USD Millions)	$18	$18	$19

Notes:

Q1 2024 GAAP loss includes $197M Kwinana curtailment charge; adjusted EPS excludes net special items of $107M .
Sequential EBITDA improvement came primarily from lower energy/raw materials; aluminum pricing and production costs were headwinds .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Interest Expense	FY 2024	~$110M	~$145M	Raised
Alumina Production	FY 2024	9.8–10.0 mmt	9.8–10.0 mmt	Maintained
Alumina Shipments	FY 2024	12.7–12.9 mmt	12.7–12.9 mmt	Maintained
Aluminum Production	FY 2024	2.2–2.3 mmt	2.2–2.3 mmt	Maintained
Aluminum Shipments	FY 2024	2.5–2.6 mmt	2.5–2.6 mmt	Maintained
Alumina Segment – Seasonal Maintenance Headwind	Q2 2024	N/A	~$(20)M sequential	New
Aluminum Segment – Alumina Cost Impact	Q2 2024	+$5M (Q1 sequential)	+$15M sequential	Raised
Operational Tax Expense	Q2 2024	Negligible (Q1)	~$40–$50M	Increased
Dividend	Quarterly	$0.10/share typical	$0.10/share paid ($19M)	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2023, Q4 2023)	Current Period (Q1 2024)	Trend
San Ciprián viability/sale	Engagement with Spanish stakeholders; ongoing losses, viability concerns	Sale process initiated; bid process targeted by end of June; cash likely to run out in 2H24 absent solution	Escalating urgency; pursuing sale
IRA 45X credits	Recorded full‑year $36M benefit in Q4; cadence into 2024	Non‑recurrence increased production costs; potential $30–$40M additional benefit if direct materials included	Ongoing benefit; policy clarity pending
Alumina Limited acquisition	N/A in Q3/Q4	All‑stock deal; overhead synergies ~$12M; closing targeted Q3 2024	New strategic initiative
Green bond financing	N/A in Q3/Q4	$750M at 7.125% due 2031 under Green Finance Framework	Increased liquidity; supports decarbonization projects
Russian aluminum sanctions	EU action advocated; LME credibility concerns	U.S./U.K. sanctions enacted; management expects EU to follow	Policy tailwind for pricing
Working capital discipline	Q3 50 days; Q4 improved to 39 days	Q1 seasonally higher at 47 days; target ~$1B DWC by year‑end	Active management; seasonal headwind
Raw materials savings	Company outlined $310M 2024 savings plan	More savings “locked in” entering Q2	Improving
Kwinana refinery	Restructuring savings ~$10M (Q3)	Curtailment announced in Jan; $197M charge; completion by Q2	Execution underway
Alumar restart	~65–70% restart; stability improving	Issues persist; profitability likely in 2025, depends on metal price	Delayed improvement

Management Commentary

CEO on Alumina Limited transaction: “We believe the acquisition will deliver immediate and significant value…simplifies governance, resulting in greater operational flexibility and strategic optionality” .
CFO on interest expense: “Interest expense is changing from $110 million to $145 million in light of our debt shield” .
CFO on Q1 drivers: “Adjusted EBITDA increased $43 million…primarily due to improved energy costs. Raw material and other cost benefits were offset by volume and production costs” .
CEO on markets: “Alumina prices recently reached a 2‑year high…demand in the automotive and electrical sectors have remained strong…we are seeing signs of recovery in packaging” .
CEO on sanctions: “This was the right decision…reestablishes the credibility of the benchmark price” .

Q&A Highlights

San Ciprián cash runway and sale: Management expects cash to run out in 2H 2024 absent a sale or viability solution; bid process by end of June; no further corporate funding if non‑viable .
Kwinana curtailment vs closure costs: Curtailed cash outflows estimated ~$80M in 2024 and ~$35M in 2025; indicative closure costs would be ~$200M for refinery and $25–$50M for smelter (ex‑severance) .
Alumar restart: Restart remains delayed due to equipment reliability and experience; profitability goal of +$75M improvement by end of 2025 tied to metal price .
45X credit scope: If direct materials are included, incremental benefit could be ~$30–$40M; timing of decision unknown .
Working capital: Target to reduce DWC to ~$1B by year‑end; Q1 higher due to typical seasonal receivables build and lower payables .

Estimates Context

S&P Global Wall Street consensus for Q1 2024 EPS and revenue was unavailable due to data access limitations at the time of this analysis. As a result, we cannot assess beat/miss versus consensus for the quarter (S&P Global consensus data unavailable).

Where estimates may need to adjust:

Raised full‑year interest expense ($145M) increases below‑EBITDA headwind versus prior modeling .
Q2 segment headwinds (Alumina –$(20)M seasonal; Aluminum segment alumina costs +$15M) and expected tax expense ($40–$50M) may reduce near‑term earnings run‑rate despite improving raw material trends .

Key Takeaways for Investors

Sequential fundamentals improved: Adjusted EBITDA rose to $132M on lower energy/raw material costs, but aluminum pricing and production costs remain headwinds; EBITDA margin expanded to ~5% from ~3% in Q4 .
Balance sheet/liquidity strengthened via $750M green bond; expect higher interest expense (~$145M FY24), tempering net income leverage from operations .
Strategic optionality rising with Alumina Limited acquisition (overhead synergies, vertical integration) and potential San Ciprián divestiture; outcomes are stock catalysts through mid‑year .
Near‑term Q2 setup: seasonal alumina headwinds (~$20M), Aluminum segment alumina costs (+$15M), and $40–$50M tax expense likely constrain sequential earnings despite raw material savings momentum .
Market tailwinds building: alumina price strength and sanctions on Russian aluminum support price realization; value‑add product order book improving QoQ and YoY .
Watch execution: Kwinana curtailment savings ramp from H2’24; Warrick three‑line optimization and IRA credits; Alumar restart path to breakeven by end‑2025 contingent on mechanical fixes and metals pricing .
Working capital swing is tactical: Q1 DWC rose to 47 days; management targets ~$1B year‑end DWC, supporting cash generation trajectory if executed .

Appendix: Additional Data Points

Q1 2024 segment shipments/prices split: Alumina third‑party shipments 2,397 kmt; Aluminum total shipments 634 kmt; average realized prices $372/mt (alumina) and $2,620/mt (aluminum) .
Cash flow: Cash used for operations $(223)M; capex $(101)M; FCF $(324)M .
Non‑GAAP adjustments: Net special items $107M (incl. $197M Kwinana charge, offset by tax/NCI impacts), driving adjusted EPS loss of $0.81 .

Citations: Press release and 8‑K Q1 2024 ; earnings call transcript Q1 2024 ; prior quarters Q4/Q3 2023 8‑Ks and transcripts .