Alcoa 2013 Annual Report Download - page 76

On January 1, 2013, management revised the inventory-costing method used by certain locations within the Global
Rolled Products and Engineered Products and Solutions segments, which affects the determination of the respective
segment’s profitability measure, ATOI. Management made the change in order to improve internal consistency and
enhance industry comparability. This revision does not impact the consolidated results of Alcoa. Segment information
for all prior periods presented was revised to reflect this change.
ATOI for all reportable segments totaled $1,217 in 2013, $1,357 in 2012, and $1,885 in 2011. 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, 2013.
Alumina
2013 2012 2011
Alumina production (kmt) 16,618 16,342 16,486
Third-party alumina shipments (kmt) 9,966 9,295 9,218
Alcoa’s average realized price per metric ton of alumina $ 328 $ 327 $ 370
Alcoa’s average cost per metric ton of alumina* $ 295 $ 310 $ 312
Third-party sales $ 3,326 $ 3,092 $ 3,462
Intersegment sales 2,235 2,310 2,727
Total sales $ 5,561 $ 5,402 $ 6,189
ATOI $ 259 $ 90 $ 607
* Includes all production-related costs, including raw materials consumed; conversion costs, such as labor, materials,
and utilities; depreciation, depletion, and amortization; and plant administrative expenses.
This segment represents a portion of Alcoa’s upstream operations and consists of the Company’s worldwide refinery
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 by the Primary Metals segment.
In 2013, alumina production increased by 276 kmt compared to 2012. The improvement was mostly the result of
higher production in the Atlantic refinery system, primarily at the Point Comfort, TX refinery.
In 2012, alumina production decreased by 144 kmt compared to 2011. The decline was mainly driven by lower
production in the Atlantic refinery system as a result of management’s plan to reduce annual production capacity by
approximately 390 kmt. This decision was made to align production with smelter curtailments initiated at the
beginning of 2012 and to reflect prevailing market conditions. The decrease at these refineries was partially offset by
higher production at the Pinjarra and Kwinana refineries in Australia, due to system process improvements.
Third-party sales for the Alumina segment improved 8% in 2013 compared with 2012, largely attributable to an
increase of 7% in volume and positive impacts from moving customer contracts to alumina index pricing and spot
pricing, somewhat offset by a decrease in contractual LME-based pricing (fewer sales subject to LME pricing and
lower average LME prices for those sales subject to LME pricing).
Third-party sales for this segment dropped 11% in 2012 compared with 2011, primarily related to a 12% decline in
realized prices, driven by a decrease in contractual LME-based pricing, slightly offset by realized benefits from moving
customer contracts to alumina index pricing and from improved spot pricing.
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