Alcoa 2004 Annual Report Download - page 4

In addition, we combined
functional groups such as ABS (Alcoa
Business System), Customer and
Marketing Services, EHS, People, and
Quality to accelerate the culture changes
in order to achieve our Vision and
emphasize the ABS philosophy that
“people are the linchpin of ABS.”
As you will see in the pages of
this report, we are expanding across
our markets, using the tenets of ABS, to
help our customers grow their businesses.
We expect the combination of our
global business structure, our functional
resources, and our R&D expertise to
continue to spur profitable organic
growth and share gains across the world.
Upstream – Restarts and
Growth Projects
To take advantage of the strong alu-
minum market, we are restarting several
smelters. When complete, these restarts
will add 220,000 metric tons per year
(mtpy) of production in 2005, leaving
us with idle capacity of 361,000 mtpy.
Restart progress has been made at:
1) the Aluminerie de Bécancour, Inc.
(ABI) facility in Quebec, following the
end of a strike there. This strike resulted
in a significant cost to the Company,
but was necessaryto enable the long-
term flexibility we need to operate
efficiently; 2) the Wenatchee smelter in
Washington, USA, after the successful
resolution of an issue regarding health-
care cost-sharing. The plant had been
idle since 2001, and the resolution
of this issue helped save 400 jobs; and
3) the Massena East and West smelters
in New York, USA, where we are
now running at full capacity.
In addition to restarts, we began
steps to expand our upstream operations
that will benefit the Company for years,
if not decades, to come. For example,
we broke ground in Iceland on Alcoa
Fjar aál,the Company’s first greenfield
smelter in more than 20 years. This
hydropowered smelter, which is sched-
uled to come on line in 2007, will
be among the most environmentally
friendly in the world.
In Norway,we have agreed to build
anew anode plant in Mosjøen, together
with Elkem ASA, that will supply the
Alcoa Fjar aál smelter in Iceland and
the Mosjøen smelter in Norway, which is
50% held by Alcoa and Elkem.
2
Alcoa Aluminio in Brazil also
broke ground on an expansion that will
increase its share of the Alumar smelting
operations in São Luis by 30%, or
63,000 mtpy, bringing Alcoa Aluminio’s
share of smelting capacity there to
262,000 mtpy, and Alcoa’s share of
overall output will grow from 54% to
60%. The expansion was facilitated
by completion of a new, 20-year
hydropower agreement.
We signed a memorandum of
understanding (MOU) under which
Alcoa and the Government of the
Republic of Trinidad and Tobago will
build a state-of-the-art, environmentally
friendly aluminum smelter and related
facilities in Trinidad. The smelter will
utilize power produced by Trinidad and
Tobago’s vast natural gas fields, which
will then be converted into low-cost
electricity for the smelter. We are now
working with the government to finalize
the project plan.
In Ghana, we have signed an
MOU with the Government of the
Republic of Ghana to develop an inte-
grated aluminum industrythat would
include bauxite mining, alumina refin-
ing, aluminum production, and rail
transportation infrastructure upgrades.
We have begun expedited feasibility
studies that are expected to be complet-
ed in 2006, at which time both parties
will negotiate definitive agreements
as well as total investment costs. The
MOU calls for the initial restart of
120,000 mtpy at the jointly owned
200,000 mtpy Valco smelter in Tema,
Ghana, which is currently idled.
Our alumina refining system is
also expanding significantly with an
eye towardsustained, long-termgrowth.
In all, we are working on expansions
that total more than 4 million mtpy. In
Jamaica, for example, following on the
heels of a 250,000 mtpy expansion of
the Jamalco alumina refinery in
Clarendon, we announced plans to fur-
ther expand by at least an additional 1.5
million mtpy. This new expansion would
more than double the refinery’s total
capacity to at least 2.8 million mtpy. In
addition, Alcoa World Alumina and
Chemicals (AWAC) ownership in the
refinery will move from 50% to 70%.
AWAC is also a lead partner in a
project exploring the feasibility for devel-
oping jointly with the Government of the
Republic of Guinea a 1.5 million mtpy
alumina refinery there. A detailed feasi-
bility study for the refinery is expected
to be completed by mid-2005, with final
costs, investment decisions, and con-
struction to begin shortly thereafter.
A600,000 mtpy efficiency upgrade
of the Pinjarra, Australia, alumina
refinery continues to be on-track for
completion by the end of 2005. And
Suralco, owned by AWAC, completed
a250,000 mtpy expansion to its
Paranam alumina refinery in Suriname
well ahead of schedule. This brings that
facility’s total capacity to approximately
2.2 million mtpy.
Portfolio Realignment and
Expanding our Footprint
Wecontinued to review and rebalance
our portfolio to better focus on our core
businesses, while also making progress
on acquisitions that will enhance our
competitive position.
In 2005 and for a few years there-
after, one of our chief challenges will
be the successful and ongoing integration
and investment in two fabricating facili-
ties that we purchased this year in
Samara and Belaya Kalitva in the
Russian Federation. The addition of the
two Russian fabricating facilities – which
feature cast house, flat-rolled products,
extrusions, tubes, and forgings capabili-
ties – will allow the Company to serve
both the growing Russian market and
global customers in Europe, Asia, and
the Americas, giving us substantial com-
petitive and comparative advantages.
Wereached an agreement with
Fujikura Ltd. that paves the way for
Alcoa to obtain full ownership of
the Alcoa Fujikura (AFL) Automotive
business. In return, Fujikura will
obtain complete ownership of the AFL
Telecommunications business. AFL
Automotive is a large part of Alcoa’s
approximately $3 billion automotive
franchise, and this transaction increases
our position in this market.
Bloomberg Methodology calculates
ROC based on the trailing 4 quarters
02 03 04
0
5
10
15
20
Return on Capital
percent
Top Quintile
S&P Industrials
Top Quintile
S&P Industrials
Alcoa ROCAlcoa ROC