Alcoa 2013 Annual Report Download - page 45

through price increases, productivity improvements or cost reduction programs. Similarly, Alcoa’s operating results are
affected by significant lag effects of declines in key costs of production that are commodity or LME-linked. For
example, declines in the LME-linked costs of alumina and power during a particular period may not be adequate to
offset sharp declines in metal price in that period. Increases in the cost of raw materials or decreases in input costs that
are disproportionate to concurrent sharper decreases in the price of aluminum could have a material adverse effect on
Alcoa’s operating results.
Alcoa is exposed to fluctuations in foreign currency exchange rates and interest rates, as well as inflation, and
other economic factors in the countries in which it operates.
Economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates,
competitive factors in the countries in which Alcoa operates, and continued volatility or deterioration in the global
economic and financial environment could affect Alcoa’s revenues, expenses and results of operations. Changes in the
valuation of the U.S. dollar against other currencies, particularly the Australian dollar, Brazilian real, Canadian dollar,
Euro and Norwegian kroner, may affect Alcoa’s profitability as some important raw materials are purchased in other
currencies, while the Company’s products are generally sold in U.S. dollars.
Alcoa may not be able to successfully realize goals established in each of its four business segments, at the levels
or by the dates targeted for such goals.
Alcoa established targets for each of its four major business segments, including the following:
• by 2016, driving the alumina business further down the industry cost curve into the 21st percentile;
• by 2016, driving the aluminum business further down the industry cost curve into the 38th percentile;
• by 2016, increasing the revenues of the Global Rolled Products segment, while improving margins that
exceed historical levels, by $1.0 billion, with 90% expected to be generated from innovation and share gains;
and
• by 2016, increasing the revenues of the Engineered Products and Solutions segment, while improving
margins that exceed historical levels, by $1.2 billion, with 75% expected to be generated from innovation and
share gains.
For more information regarding Alcoa’s targets, see “Management Review of 2013 and Outlook for the Future” in Part
II, Item 7. (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of this report.
There can be no assurance that any of these targets or other goals will be completed as anticipated. Market conditions
or other factors may prevent Alcoa from accomplishing its goals at the levels or by the dates targeted, if at all, and
failure to do so may have a material adverse effect on our business, financial condition, results of operations or the
market price of our securities.
Alcoa may not be able to realize expected benefits from its growth projects or from its streamlining portfolio
strategy.
Alcoa’s growth projects include the joint venture with Ma’aden in Saudi Arabia; the automotive expansions in
Davenport, Iowa and Alcoa, Tennessee; the aluminum lithium capacity expansion in Lafayette, Indiana, at the Alcoa
Technical Center in Pennsylvania and at the Kitts Green plant in the United Kingdom; and the China and Russia
growth projects. Although management believes that these projects will be beneficial to Alcoa, there is no assurance
that anticipated benefits will be realized. Adverse factors may prevent Alcoa from realizing the benefits of its growth
projects, including unfavorable global economic conditions, currency fluctuations, or unexpected delays in target
timelines.
Alcoa has made, and may continue to plan and execute, acquisitions and divestitures and take other actions to grow or
streamline its portfolio. Alcoa may face barriers to exit from unprofitable businesses or operations, including high exit
costs or objections from various stakeholders. In addition, Alcoa may retain unforeseen liabilities for divested entities
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