Alcoa 2010 Annual Report Download - page 64

Flat-Rolled Products
2010 2009 2008
Third-party aluminum shipments (kmt) 1,658 1,831 2,221
Third-party sales $6,277 $6,069 $8,966
Intersegment sales 180 113 218
Total sales $6,457 $6,182 $9,184
ATOI $ 220 $ (49) $ (3)
This segment’s (known as midstream operations) principal business is the production and sale of aluminum plate and
sheet. A small portion of this segment’s operations still relate to foil (most of this business was exited during 2009 and
2010 through shutdown actions and divestitures) produced from one plant in Brazil. This segment includes rigid
container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to
produce aluminum beverage cans. Seasonal increases in RCS sales are generally experienced in the second and third
quarters of the year. This segment also includes sheet and plate used in the aerospace, commercial transportation,
building and construction, and distribution markets (mainly used in the production of machinery and equipment and
consumer durables), which is sold directly to customers and through distributors. Approximately one-half of the third-
party sales in this segment consist of RCS, while the other one-half of third-party sales are derived from sheet and plate
and foil used in industrial markets. While the customer base for flat-rolled products is large, a significant amount of
sales of RCS, sheet, and plate is to a relatively small number of customers.
Third-party sales for the Flat-Rolled Products segment increased 3% in 2010 compared with 2009, principally due to
better pricing and higher volumes in most key end markets, partially offset by lower volumes in the segment’s can
sheet business, largely due to a decision in early 2010 to curtail sales to a North American customer and the absence of
sales ($125 in 2009) from two foil plants (Spain and China), which were divested in late 2009. Third-party sales for
this segment declined 32% in 2009 compared with 2008, primarily due to a drop in prices, attributable to unfavorable
changes in the variable components of certain customer contracts, and a reduction in volumes across most businesses,
both of which were mostly the result of weak end markets in Europe and North America, and unfavorable foreign
currency movements due to a weaker euro and Australian dollar.
ATOI for the Flat-Rolled Products segment improved $269 in 2010 compared with 2009, mainly the result of both
favorable pricing and increased productivity across all businesses due to cost savings initiatives, including the
operations in Russia as results turned profitable. ATOI for this segment fell $46 in 2009 compared with 2008, primarily
as a result of reduced volumes across most businesses; the previously mentioned drop in prices; and an increase in
depreciation expense as a result of the new coating line commissioned in Samara (Russia) and the new flat-rolled
product facility in Bohai (China); all of which were mostly offset by procurement and overhead cost savings and net
favorable foreign currency movements due to a stronger U.S. dollar.
In 2011, the following trends are expected to continue: strengthening demand in most regions around the globe, higher
energy costs, and productivity improvements. Also, improvements in product mix are anticipated as a result of the
optimization of this segment’s portfolio.
Engineered Products and Solutions
2010 2009 2008
Third-party aluminum shipments (kmt) 197 180 257
Third-party sales $4,584 $4,689 $6,199
ATOI $ 415 $ 315 $ 533
This segment (known as downstream operations) includes titanium, aluminum, and super alloy investment castings;
forgings and fasteners; aluminum wheels; integrated aluminum structural systems; and architectural extrusions used in
the aerospace, automotive, building and construction, commercial transportation, and power generation markets. These
products are sold directly to customers and through distributors. Additionally, hard alloy extrusions products, which are
also sold directly to customers and through distributors, serve the distribution, aerospace, automotive, and commercial
transportation markets. In 2008, the Electrical and Electronic Solutions business was classified as discontinued
operations; therefore, all periods presented exclude the results of this business (this business was sold during 2009).
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