Alcoa's 2023 Financial Performance and Future Outlook
2024-01-19
Alcoa Corporation, a leading global aluminum producer, held its Q4 2023 Earnings Call on January 17, 2024. The conference call featured key participants such as James Dwyer, Vice President of Investor Relations and Pension Investments, William Oplinger, President and CEO, and Molly Beerman, Executive Vice President and CFO.
During the call, Alcoa discussed its earnings results for Q4 2023, which surpassed expectations. The company reported an EPS of -$0.56, exceeding expectations by $0.30, and generated revenue of $2.60 billion, surpassing expectations by $29.03 million.
Alcoa emphasized its near-term focus areas, which included acting with integrity, operating with excellence, caring for people, and leading with courage. The company also highlighted its improved safety performance in 2023, with enhancements in all key safety metrics and a goal of achieving an injury-free workplace.
In terms of operations, Alcoa operates smelters in Canada, Norway, and the United States. The company also discussed the non-GAAP financial measures included in the presentation.
One of Alcoa's significant achievements was gaining approvals for their bauxite mines in Western Australia. Additionally, the company made the decision to curtail the Kwinana refinery in Western Australia, taking into consideration factors such as the refinery's age, scale, operating costs, current bauxite grades, and market conditions.
In December, Alcoa initiated discussions with national and regional authorities, as well as the labor works council, in Spain to address ongoing financial losses at the San Ciprian refinery and smelter.
For the full year of 2023, Alcoa's revenues decreased by $1.9 billion to $10.6 billion. The net loss attributable to Alcoa in 2023 worsened to $651 million, or $3.10 per share.
During the call, Alcoa also discussed the largest uses of cash in 2023, which were capital expenditures and cash income taxes. The company saw an improvement of 11 days in its days working capital, reducing it to 39 days year-over-year, primarily due to a decrease in inventories by $243 million. This improved working capital performance provided a significant source of cash in the fourth quarter.
Looking ahead, Alcoa provided an outlook for alumina and aluminum production and shipments in 2024. The company expects alumina production to range between 9.8 million and 10.0 million tons, with shipments ranging between 12.7 million and 12.9 million tons. Aluminum production is projected to range between 2.2 million and 2.3 million tons, with shipments remaining steady between 2.5 million and 2.6 million tons.
The company also discussed the factors influencing market conditions for aluminum in 2024. These factors include a slight surplus market depending on the speed of demand recovery, hydro power shortages, and capacity curtailment in Yunnan province. Alcoa also mentioned factors contributing to the increase in regional premiums for aluminum, such as widening contango and higher transportation costs for importing metal.
Alcoa's cost savings program aims to achieve full run-rate savings by the first quarter of 2025. The company is taking near-term actions to optimize the Warrick smelter and complete the Alumar smelter restart. They also addressed the current situation at the San Ciprian complex in Spain, which is facing unfavorable economics and operating at 50% capacity.
Throughout the call, Alcoa emphasized the importance of strong local leadership in various regions, as well as their commitment to low-carbon solutions and efforts to improve earnings through various initiatives. The company also fielded questions about excess cash, dividend levels, tax expenses, and the earnings outlook for the next few years.
Overall, Alcoa Corporation's Q4 2023 Earnings Call covered a range of important business topics, including financial performance, operational updates, cost savings initiatives, market conditions, and future outlook.