Release Date: July 16, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Alcoa Corp (AA, Financial) delivered strong operational performance with no fatal or serious injuries reported in the second quarter.
- The company successfully closed the sale of its 25.1% stake in the Ma'aden joint ventures for $1.35 billion.
- Alcoa Corp (AA) concluded a favorable five-year tax dispute in Australia, affirming no additional tax was owed.
- The company extended its supply agreement with Prysmian and completed its first North American sale of EcoLum, a low-carbon product.
- Alcoa Corp (AA) ended the quarter with a strong cash position of $1.5 billion and positive free cash flow of $357 million.
Negative Points
- Revenue decreased by 10% sequentially to $3 billion, with significant declines in the Alumina segment.
- Net income attributable to Alcoa Corp (AA) dropped to $164 million from $548 million in the prior quarter.
- The company faced increased US Section 232 tariff costs, impacting the Aluminum segment's adjusted EBITDA.
- Alcoa Corp (AA) lowered its annual outlook for aluminum shipments due to disruptions at the San Ciprián smelter.
- The company anticipates higher tariff costs in the third quarter, with an expected $250 million impact from increased US Section 232 tariffs.
Q & A Highlights
Q: How might potential 50% tariffs on Brazil impact Alcoa?
A: Molly Beerman, CFO, explained that if alumina is excluded, Alcoa might not be impacted. However, if included, Alcoa could redirect supply from Western Australia, though this would incur additional time and shipping costs.
Q: What are the contingency plans for Western Australia if mine approvals are delayed?
A: William Oplinger, CEO, stated that they do not anticipate cost impacts in 2025 or 2026. They have contingency plans to mine different areas or go deeper in existing pits, allowing for a 15-month delay if necessary.
Q: How are tariffs affecting Alcoa's financials, and is the Midwest Premium offsetting these costs?
A: Molly Beerman noted that in Q2, tariffs cost $115 million, with only a $60 million offset from the Midwest Premium, resulting in a $55 million margin compression. Current pricing suggests a near-neutral or slightly positive impact overall.
Q: What is the status of the San Ciprián smelter restart, and its financial implications?
A: Molly Beerman indicated that the smelter is expected to be profitable after full ramp-up in 2026, despite current challenges. The refinery will face losses due to current market prices.
Q: What prevents Alcoa from restarting spare capacity at Warrick given the increased Midwest Premium?
A: William Oplinger explained that restarting the fourth line at Warrick would require a $100 million investment and about a year to complete. They need assurance that tariffs will remain to justify this investment.
Q: How is Alcoa managing the impact of tariffs on its Canadian operations?
A: William Oplinger stated that Alcoa has redirected 100,000 tons of Canadian metal to non-US customers and will continue to do so if netbacks favor other destinations. They are also passing on tariff costs through higher Midwest Premiums.
Q: What is the status of the Alumar smelter restart in Brazil?
A: William Oplinger reported that the Alumar smelter is at 92% capacity, with challenges in patch pot failures. They aim for full restart this year but acknowledge previous target misses.
Q: What are Alcoa's plans regarding the Ma'aden shares received from the joint venture sale?
A: Molly Beerman mentioned that while they have the option to monetize shares, it would be complex and classified as debt. They plan to hold shares until lock-up periods expire and do not intend to monetize them in advance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
