Alcoa 2007 Annual Report Download - page 5

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flexible packaging – for $2.7 billion
in cash. This transaction should
be completed early in 2008.
In total, the divestiture of these
businesses frees up resources – both
financial and human – to invest in
core aspects of Alcoa – yet another
example of our being focused on
sustainable growth, while improving
our returns. For example, with the
exclusion of packaging, soft alloy
extrusions, and auto castings, our
Company ROC improves from
12.7 percent to 13.5 percent, includ-
ing our investments in growth. And
EBITDA as a percentage of sales
improves from 15.5 percent to
16.7 percent. We did all this while
producing cash for sustainable
growth investment.
It is important to note that we also
monetized our stake in Chalco in
2007. This stake, which we took
when Chalco was going through its
IPO, served us and Chinalco,
Chalco’s parent company, well. But
as we said at the time of the sale,
the investment had grown where we
can now use the investment to fund
other growth projects both within
and outside of China.
We also said that the transaction
did not end the partnership between
Alcoa and Chinalco. As I publish
this letter, we have teamed with
Chinalco to purchase a 12 percent
stake in Rio Tinto plc. We have long
believed that Rio Tinto has a world-
class portfolio of assets and is very
well positioned to prosper in the
current mining cycle. This invest-
ment, made together with Chinalco,
allows us to mutually benefit from
developments in the sector. We
will continue to monitor the sector
developments together with
our partners at Chinalco and take
appropriate actions.
In May, following nearly two years
of discussions with Alcan manage-
ment, we made an offer to acquire
Alcan. Our offer subsequently was
topped by Rio Tinto by more than
$10 billion. We chose at that time to
withdraw our offer and instead
refocus our efforts on delivering
results, which we have done. Instead
of a major, game-changing acquisi-
tion, we are pursuing growth the
old-fashioned way… we are going
out and earning it.
Living Our Values
We continued our
strong focus on safety
across all of our
locations again in 2007.
Nearly 50 percent of Alcoa’s 316
locations worldwide had zero
recordable injuries, compared with
38 percent in 2006, and more than
80 percent had zero Lost Workdays,
up from 68 percent.
While we saw a leveling of perform-
ance in safety for Lost Workday
(LWD) and a slight rise in the Total
Recordable Rate (TRR) from
the previous year, we saw a vast
improvement in the reporting of
injury-free events – a 150 percent
increase – aimed at identifying
and correcting potential causes of
injuries before they occur. Our track
record on fatalities is sadly not as
strong, and this continues to be an
area of major focus and concern.
As you will see throughout this
report, the Alcoa Business System
(ABS), as the cornerstone of our
Customer Value, was again at center
stage in 2007:
• In Ground Transportation, we
strengthened or started relation-
ships with Shelby Automotive,
Lamborghini, General Motors, and
Nissan, and also partnered with
Zhengzhou Yutong Bus Company,
Ltd. to develop a new generation of
energy-efficient, environmentally
friendly buses in China for the
2008 Olympics.
• In Building and Construction,
Kawneer opened new offices in
Singapore and the United Kingdom
to better serve its customers in
36 countries, and advanced its
reputation for “ green” building
while servicing customers across
the globe.
• Alcoa Defense established itself
as the supplier of “stronger,
faster, lighter” products, signing
major contracts, including an
Alcoa Power and Propulsion
10-year, $360 million contract
with Lockheed Martin, to supply
advanced, patented 7085 alloy
aluminum die forgings for the F-35
Joint Strike Fighter (JSF) program.
Committed to Safety
Zero
Lost Workday
Locations
Zero
Recordable
Injury
Locations
38%
49%
06 07 06 07
68%
80%