Alcoa 2009 Annual Report Download - page 61

ATOI for all reportable segments totaled $(234) in 2009, $2,199 in 2008, and $3,162 in 2007. See Note Q to the
Consolidated Financial Statements in Part II Item 8 for additional information. The following discussion provides
shipments, sales, and ATOI data for each reportable segment and production data for the Alumina and Primary Metals
segments for each of the three years in the period ended December 31, 2009.
Alumina
2009 2008 2007
Alumina production (kmt) 14,265 15,256 15,084
Third-party alumina shipments (kmt) 8,655 8,041 7,834
Third-party sales $ 2,161 $ 2,924 $ 2,709
Intersegment sales 1,534 2,803 2,448
Total sales $ 3,695 $ 5,727 $ 5,157
ATOI $ 112 $ 727 $ 956
This segment consists of Alcoa’s worldwide alumina system, including the mining of bauxite, which is then refined
into alumina. Alumina is mainly sold directly to internal and external smelter customers worldwide or is sold to
customers that process it into industrial chemical products. A portion of this segments’s third-party sales are completed
through the use of agents, alumina traders, and distributors. Slightly more than half of Alcoa’s alumina production is
sold under supply contracts to third parties worldwide, while the remainder is used internally.
In 2009, alumina production decreased by 991 kmt compared to 2008. The reduction was mostly the result of the
effects of curtailments initiated in late 2008 through early 2009, which included approximately 1,500 kmt-per-year at
the Point Comfort, TX refinery (only approximately half of this amount remains curtailed as of December 31, 2009)
and approximately 480 kmt-per-year at the Suralco (Suriname) refinery (represented AWAC’s previous 55%
ownership interest at the time of curtailment – total curtailed is approximately 870 kmt). Partially offsetting the
curtailments was increased production at the following refineries (all set production records in 2009): Jamalco
(Jamaica), Pinjarra and Wagerup (Australia), and São Luis (Brazil), where ramp-up of the 2,100 kmt expansion began
in late 2009. Production also increased due to additional capacity of approximately 600 kmt from the acquisition (total
acquired was approximately 990 kmt – 390 was curtailed) of BHP Billiton’s 45% interest in Suralco on July 31, 2009
(100% of the Suralco refinery’s operations were reflected in this segment beginning August 1, 2009). In 2008, alumina
production increased by 172 kmt compared to 2007 with the largest increase occurring at the Pinjarra refinery due to
the continued positive effects of the efficiency upgrade expansion completed in 2006. In late 2008, Alcoa reduced
production at its Point Comfort refinery by 550 kmt-per-year due to negative market conditions; however, production
for the year slightly exceeded the refinery’s 2007 production performance.
Third-party sales for the Alumina segment declined 26% in 2009 compared with 2008, principally due to a 35% drop
in realized prices, driven by significantly lower LME prices, and unfavorable foreign currency movements due to a
weaker Australian dollar, both of which were somewhat offset by an increase in volumes. Third-party sales for this
segment rose 8% in 2008 compared with 2007, primarily related to favorable foreign currency movements due to a
stronger Australian dollar and increases of 3% and 2% in third-party shipments and realized prices, respectively.
Intersegment sales for the Alumina segment dropped 45% in 2009 compared with 2008, mostly due to a drop in
realized prices and a reduction in demand from the Primary Metals segment. Intersegment sales for this segment
climbed 15% in 2008 compared with 2007, mainly as a result of a 6% increase in volumes and higher realized prices.
ATOI for the Alumina segment declined 85% in 2009 compared with 2008, principally due to the significant drop in
realized prices; a tax settlement related to an equity investment in Brazil ($30); and an increase in depreciation expense
as a result of growth projects placed into service mid-to-late 2009 in Brazil (Juruti bauxite mine and São Luis refinery);
all of which was partially offset by net procurement and overhead cost savings across most regions, favorable foreign
currency movements due to a stronger U.S. dollar, a $60 gain recognized on the acquisition of BHP Billiton’s interest
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