GuruFocus recently published an article bringing to my attention that a number of well-known investors like Seth Klarman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), and Paul Singer (Trades, Portfolio) have recently purchased shares of aluminum company Alcoa (AA, Financial).
I found the video below to be extremely helpful in giving a great overview of the company. It's a presentation titled "Alcoa's Transformation is Paying Off," given by CEO Klaus Kleinfeld. The video was published in May 2014. Readers should keep in mind that Alcoa's stock price has dropped from ~$13 per share at the time of the presentation to today's current price of $9.41 per share largely due to the drop in aluminum prices.
The video is still timely because Alcoa plans to separate the company into a value-add and a commodity business. The presentation discusses each business in detail. My notes include the minute mark for the video below.
| Minute Mark | Topic | Comment |
| 00 | CEO starts off by reviewing safety track record. | I recommend the book, “The Power of Habit” by Charles Duhigg to understand how former CEO Paul O'Neill focused on safety improvements to increase Alcoa's profitability. |
| Â | Â | AA had 612 consecutive days without a fatality. |
| Â | Â | He acknowledges union representatives. |
| Â | Â | Â |
| 2:10 | Talks about company values | Company volunteer participation |
|  |  | AA was Fortune's #1 Most Admired Metals company. |
| Â | Â | Â |
| 4:50 | CEO quickly discusses company's 125-year history. | Â |
| Â | Â | Â |
| 5:50 | He talks about the shift to Value Add (higher margin) business | Takes a look at the trend from 2003 to 2013 |
| Â | Â | Three segments (GPP, GRP, and EPS) |
| Â | Â | GRP (aluminum rolling segment) and EPS (engineering product services) are the value added businesses. |
| Â | Â | Â |
| 6:45 | Discussion on value add businesses on a more granular level | 2013 revenue from value add businesses was $13 billion. |
| Â | Value add categories | Aerospace $4 billion |
| Â | Â | Packaging $3.1 billion |
| Â | Â | Industrial Products $1.8 billion |
| Â | Â | Building and Construction $1.5 billion |
| Â | Â | Transportation $1.3 billion |
| Â | Â | Automotive $0.8 billion |
| Â | Â | Other $0.6 billion |
| Â | Â | Â |
| Â | Â | The slide also shows trends for each category by geographic region. |
| Â | Â | Â |
| 8:10 | Discusses percentage of an airplane that uses aluminum | CEO stresses the need of aluminum in the aerospace industry. |
| Â | Â | Â |
| 9:35 | Discusses AA's strong carbon fiber presence in aerospace | Â |
| Â | Â | Â |
| 10:20 | Breaking down Aerospace revenue by component | Fasteners, advanced aerospace structures, high performance engine castings |
| Â | Â | Â |
| 11:20 | Breaking down revenue by aircraft type | CEO is stressing the prevalence of AA in aircraft design. |
| Â | Â | Â |
| 12:40 | Discusses percentage of a car that uses aluminum | CEO stresses the benefit of lightweight aluminum in cars. |
| Â | Â | Talks about the Ford F-150 |
| Â | Â | Â |
| 16:10 | Discussion on growth potential of aluminum in cars | CEO talks about AA's plans to expand capacity. |
| Â | Â | He believes that automotive revenues will grow 6x between 2013 and 2018. |
| Â | Â | Â |
| 17:55 | Discusses percentage of a commercial transportation truck that uses aluminum | Â |
| Â | Three components in commercial transportation revenue | wheels, rolled products, fastening systems |
| Â | Â | 67% of 2013 wheel sales driven by proprietary technology |
| Â | Â | Â |
| 21:50 | Discussion of packaging segment | He talks about advantages of aluminum bottles. |
| Â | Â | Â |
| 24:35 | Discussion of construction segment | Annual energy consumption in U.S. –Â 73% is inside buildings vs. 58% in Europe |
| Â | Â | CEO believes there's opportunity to make U.S. buildings more energy efficient. |
| Â | Â | Some states have enacted net zero legislation for buildings by 2020. |
| Â | Â | Â |
| 29:20 | Discussion of GPP (Global Primary Products), the commodity side of AA | Mining, refining, smelting, casting, energy |
| Â | Â | He talks about AA's cost curve and the improvements it has made. |
| Â | Â | 2016 goal is to be at 21st percentile for alumina cost. |
| Â | Â | alumina price index trends |
| Â | Â | 2016 goal is to be at 38th percentile for aluminum cost. |
| Â | Â | Â |
| 31:45 | Discussion on smelting | Gives update on Saudia Arabia joint venture |
| Â | Â | Â |
| 33:15 | Video on Saudia Arabia facility construction progress | Â |
| Â | Â | Â |
| 34:40 | Discussion on productivity improvements | More than $6 billion of productivity savings from 2009 to 2013 |
| Â | Â | Reduced Days Working Capital by 45% since Q1 2009 |
| Â | Â | Â |
| 37:00 | Chart comparing AA's stock price performance to peers and S&P 500 Materials Index | Â |
