Alcoa 2012 Annual Report Download - page 45

credit loans to Alcoa in accordance with the terms of the credit agreement. If one or more of the financial institutions
providing the committed credit facility were to default on its obligation to fund its commitment, the portion of the
committed facility provided by such defaulting financial institution would not be available to the Company.
Alcoa may not be able to realize expected benefits from the change to index pricing of alumina.
Alcoa has implemented a move to a pricing mechanism for alumina based on an index of alumina prices rather than a
percentage of the LME-based aluminum price. Alcoa believes that this change, expected to affect approximately 20%
of annual contracts coming up for renewal each year, will more fairly reflect the fundamentals of alumina including
raw materials and other input costs involved. There can be no assurance that such index pricing ultimately will be
accepted or that such index pricing will result in consistently greater profitability from sales of alumina.
Alcoa’s business and growth prospects may be negatively impacted by reductions in its capital expenditures.
Alcoa requires substantial capital to invest in greenfield and brownfield projects and to maintain and prolong the life
and capacity of its existing facilities. For 2013, Alcoa’s target is to generate positive cash flow from operations that
will exceed capital spending. Insufficient cash generation may negatively impact Alcoa’s ability to fund as planned its
sustaining and growth capital projects. Over the long term, Alcoa’s ability to take advantage of improved aluminum
market conditions may be constrained by earlier capital expenditure restrictions, and the long-term value of its business
could be adversely impacted. The Company’s position in relation to its competitors may also deteriorate.
Alcoa may also need to address commercial and political issues in relation to its reductions in capital expenditures in
certain of the jurisdictions in which it operates. If Alcoa’s interest in its joint ventures is diluted or it loses key
concessions, its growth could be constrained. Any of the foregoing could have a material adverse effect on the
Company’s business, results of operations, financial condition and prospects.
Alcoa’s global operations are exposed to political and economic risks, commercial instability and events beyond
its control in the countries in which it operates.
Alcoa has operations or activities in numerous countries and regions outside the U.S. that have varying degrees of
political and economic risk, including China, Europe, Guinea, Russia, and the Kingdom of Saudi Arabia. Risks include
those associated with sovereign and private debt default, political instability, civil unrest, expropriation,
nationalization, renegotiation or nullification of existing agreements, mining leases and permits, commercial instability
caused by corruption, and changes in local government laws, regulations and policies, including those related to tariffs
and trade barriers, taxation, exchange controls, employment regulations and repatriation of earnings. While the impact
of these factors is difficult to predict, any one or more of them could adversely affect Alcoa’s business, financial
condition or operating results.
Alcoa could be adversely affected by changes in the business or financial condition of a significant customer or
customers.
A significant downturn or further deterioration in the business or financial condition of a key customer or customers
supplied by Alcoa could affect Alcoa’s results of operations in a particular period. Alcoa’s customers may experience
delays in the launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their
products, or other difficulties in their businesses. If Alcoa is not successful in replacing business lost from such
customers, profitability may be adversely affected.
Cyber attacks and security breaches may threaten the integrity of Alcoa’s trade secrets, intellectual property
and other sensitive information, disrupt our business operations, and result in reputational harm and other
negative consequences.
Alcoa faces cybersecurity threats, including threats to its information technology infrastructure and attempts to
misappropriate or compromise its confidential information or that of third parties or create system disruptions. The
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