Alcoa 2012 Annual Report Download - page 6

ALCOA 2012 Annual Report4
W hile driving performance in each of those four businesses, we also are rebalancing Alcoa’s portfolio through organic growth,
acquisitions and divestitures. Our goal is to make ourselves less dependent on the commodity and LME changes in the upstream business
and increase our value-add mid-stream and downstream businesses. Each sector continues to draw on a powerful array of competitive
advantages unique to Alcoa – three strategic priorities, a strong global presence in growth markets, the parental benefi ts we call the
Alcoa Advantage and a solid foundation of values that have guided Alcoa for 125 years in good times and bad. For example, during the
economic crisis of 2009 we launched the Cash Sustainability Program that guided Alcoa successfully through the downturn while also
driving systemic changes to our cost structure. As that program continued to drive the improvements to our businesses, it enabled us
to achieve all of our cash sustainability targets in 2012.
In each of our global regions, we have built
on Alcoa’s local relationships and reputation
to improve the profi tability of our existing
operations and to introduce our business
units to new opportunities.
In China, we are developing plans with
our new joint venture partner, China Power
Investment Corporation (CPI), for expansion
in the world’s fastest-growing market. We are
shifting our rolling business to focus on the
tremendous potential in China’s automotive
and packaging markets. As a result of the
solid performance of our fasteners business in
China, Commercial Aircraft of China (COMAC)
recently contracted with Alcoa to partner in the
development and production of the new C-919
aircraft. Our new wheel production facility
in China continues to expand its capacity,
supporting more than half of our sales to the
growing Chinese commercial vehicle market
within months of its opening.
In Brazil, where we have a substantial
upstream presence, our initiative to introduce
and grow our mid-stream and downstream
businesses produced $256 million in organic
growth in 2012. To establish a presence in the
Brazilian commercial transportation business,
we are opening a forged wheels facility and
are partnering with the country’s largest bus
manufacturer to build and test a prototype
for what will be the world’s fi rst all-aluminum
bus. We are expanding sales of aluminum
risers to the country’s major off-shore oil
drilling program and are increasing sales to
the Brazilian commercial aerospace industry.
In Europe, we had a tale of two worlds.
InSouthern Europe, where energy is expensive,
we worked with government offi cials in Italy
to obtain approval to curtail our smelter in
Portovesme and in Spain to gain support for
more affordable electricity rates. In Norway
and Iceland, affordable energy and technical
advancements have helped our smelter
operations to be profi t leaders among our
global primary businesses.
In the Middle East, the construction of
our Ma’aden-Alcoa joint venture facilities
is progressing well. Infact, on December
12, 2012, we produced the fi rst hot metal
only 25 months after we broke ground, an
extraordinary achievement. Onthe same day,
we broke ground for a rolling mill expansion
targeted at the automotive market. When fully
operational, the integrated aluminum facility
will be the lowest-cost and most-effi cient in
the world. The Government of Saudi Arabia
is in discussions with manufacturers planning
to establish operations in the region, who
would become customers of the aluminum
joint venture.
Regional Growth and Profi tability
Alcoa is bringing its popular aluminum wheels to the growing
commercial transportation industry in Brazil.
The signing of a joint venture with China Power Investment
Corporation is a major step for Alcoa’s future growth in China.
The Fjarðaál smelter in Iceland is one of the highly profi table
Northern European smelters in Alcoa’s Primary Metals portfolio.
In December 2012, the Ma’aden-Alcoa Joint Venture produced
the fi rst metal in Saudi Arabia, only 25 months after construction
began.
LEVERAGING THE ALCOA PLATFORM
FOR PROFITABLE GROWTH
Achieved All 2012 Cash Sustainability Targets
Positive
Free
Cash Flow
Productivity & Overhead Target: $850m
Actual: $1.3b ✓
Working Capital Target: 1.5 days
Actual: 3.5 days
✓
Capital Spend and Investments Target: $1.7b
Actual: $1.4b ✓
Maintain Debt-to-Capital Target: 30%-35%
Actual: 34.8% ✓
✓