Alcoa 2010 Annual Report Download - page 61

interest expense; noncontrolling interests; corporate expense (general administrative and selling expenses of operating
the corporate headquarters and other global administrative facilities, along with depreciation and amortization on
corporate-owned assets); restructuring and other charges; discontinued operations; and other items, including
intersegment profit eliminations and other metal adjustments, differences between tax rates applicable to the segments
and the consolidated effective tax rate, the results of the soft alloy extrusions business in Brazil, and other nonoperating
items such as foreign currency transaction gains/losses and interest income are excluded from segment ATOI.
ATOI for all reportable segments totaled $1,424 in 2010, $(234) in 2009, and $2,199 in 2008. See Note Q to the
Consolidated Financial Statements in Part II Item 8 of this Form 10-K 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, 2010.
Alumina
2010 2009 2008
Alumina production (kmt) 15,922 14,265 15,256
Third-party alumina shipments (kmt) 9,246 8,655 8,041
Third-party sales $ 2,815 $ 2,161 $ 2,924
Intersegment sales 2,212 1,534 2,803
Total sales $ 5,027 $ 3,695 $ 5,727
ATOI $ 301 $ 112 $ 727
This segment (known as upstream operations) 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 who process it into industrial chemical products. A portion of this segment’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 2010, alumina production increased by 1,657 kmt compared to 2009. The increase was mainly driven by the Point
Comfort, TX refinery as most of the 1,500 kmt-per-year curtailment initiated between the fourth quarter of 2008 and
the first quarter of 2009 has been restored. In addition, production included the continued ramp-up of the São Luís,
Brazil refinery expansion, which began in late 2009 (the Alumina segment’s share is approximately 1,100
kmt-per-year) and the 45% interest in the Suralco (Suriname) refinery acquired in mid-2009.
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 refinery and approximately 480 kmt-per-year at the Suralco 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, 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).
Third-party sales for the Alumina segment rose 30% in 2010 compared with 2009, primarily related to a 29% increase
in realized prices, driven by significantly higher LME prices, coupled with a 7% increase in volumes. Third-party sales
for this 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.
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