Alcoa 2009 Annual Report Download - page 4

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CASH SUSTAINABILITY PROGRAM
Operational Achievements
• Procurement Effi ciencies
• Overhead Rationalizations
• CapEx Reductions
Annual CapEx post 2009
• Working Capital Initiatives
Financial Achievements
• Asset Dispositions
Net Proceeds
• Dividend Reduction
Annual Cash Savings
• Equity and Equity-Linked
Financings
Gross Proceeds
$1,998M
$412M
$850M
$1,100M
$430M
$1,400M
$1,302M
Klaus Kleinfeld
President and Chief Executive Offi cer
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TURNING CRISIS INTO OPPORTUNITY
In reviewing Alcoa’s performance in 2009, it’s clear that we
not only weathered the economic storm of the past year
and a half, we capitalized on the crisis to reposition Alcoa to
succeed in a changed economic landscape.
By early 2009, the price of aluminum had dropped more
than 50% since its peak in 2008; we were witnessing broad
demand destruction in our key end markets; and the credit
market had virtually dried up. This “triple threat” demanded
that we take rapid and bold action to build cash reserves to
weather the crisis.
We had the commitment and energies of the global team of
Alcoans, the leaders and workers who responded quickly to
keep Alcoa on course. They ensured the sustainable success
of our Company through their many actions that enabled us
to conserve cash, reduce our cost structure and reshape
our portfolio to focus on the most profi table businesses.
Because of that swift action, today Alcoa is stronger
operationally and fi nancially, and better prepared to lead
our industry in the future.
In 2009, the Alcoa team truly went the extra mile – applying
ingenuity and old-fashioned hard work to pull our Company
through the economic storm. They were motivated by the
confi dence that comes from working for a very special
company, and by the knowledge that they had the steadfast
support of our shareholders.
Early in 2009, when the crisis was at its worst, we
determined that managing for cash must be our top priority.
We realized that strengthening liquidity represented the
most promising way to address the economic uncertainty
and the continuing credit crunch, and to ensure we had the
means to move quickly when the economy recovered and
demand picked up. We developed a holistic solution –
the Cash Sustainability Program (CSP) – that included seven
fi nancial and operational goals that, when achieved together,
would strengthen our balance sheet, restore liquidity and
make our Company free-cash-fl ow neutral by the end of
2009. We considered those goals to be “seven promises” to
our investors. By the end of 2009, we kept every one of those
promises and in several areas we over-delivered.
By applying the fi nancial levers, we secured:
• $1.1 billion from asset dispositions. We divested low-
growth assets and businesses where we had a small
market share and we redeemed our shares in Rio Tinto
for a premium.
• $430 million from our dividend reduction.
• $1.4 billion in equity and equity-linked fi nancings.
Despite extremely tight markets, the promise of the
Cash Sustainability Program resulted in offerings that
were quickly over-subscribed during the dark days of
March 2009.
We also over-delivered on the operational levers:
• $1.998 billion in procurement savings, from raw materials
to services to maintenance and transportation. By the end
of 2009, our spend reduction teams had already met our
2010 target.
• $412 million in overhead cost reductions – surpassing our
2009 target by more than $200 million.