Segment and Related Information

12 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Segment and Related Information

E. Segment and Related Information

Segment Information

Alcoa Corporation is a producer of bauxite, alumina, and aluminum products (primary and flat-rolled). The Company has three operating and reportable segments, which are organized by product on a global basis: Bauxite, Alumina, and Aluminum. Segment performance under Alcoa Corporation’s management reporting system is evaluated based on a number of factors; however, the primary measure of performance is the Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) of each segment. The Company calculates segment Adjusted EBITDA as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; and Research and development expenses. Alcoa Corporation’s Adjusted EBITDA may not be comparable to similarly titled measures of other companies. The chief operating decision maker function regularly reviews the financial information, including Sales and Adjusted EBITDA, of these three operating segments to assess performance and allocate resources.

Segment assets include, among others, customer receivables (third-party and intersegment), inventories, properties, plants, and equipment, and equity investments. The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies (see Note B). Transactions among segments are established based on negotiation among the parties. Differences between segment totals and Alcoa Corporation’s consolidated totals for line items not reconciled are in Corporate.

The following are detailed descriptions of Alcoa Corporation’s reportable segments:

Bauxite. This segment represents the Company’s global bauxite mining operations. A portion of this segment’s production represents the offtake from equity method investments in Brazil and Guinea, as well as AWAC’s share of bauxite production related to an equity investment in Saudi Arabia. The bauxite mined by this segment is sold primarily to internal customers within the Alumina segment; a portion of the bauxite is sold to external customers. Bauxite mined by this segment and used internally is transferred to the Alumina segment at negotiated terms that are intended to approximate market prices; sales to third-parties are conducted on a contract basis. Generally, this segment’s sales are transacted in U.S. dollars while costs and expenses are transacted in the local currency of the respective operations, which are the Australian dollar and the Brazilian real. Most of the operations that comprise the Bauxite segment are part of AWAC (see Principles of Consolidation in Note A).

Alumina. This segment represents the Company’s worldwide refining system, which processes bauxite into alumina. The alumina produced by this segment is sold primarily to internal and external aluminum smelter customers; a portion of the alumina is sold to external customers who process it into industrial chemical products. Approximately two-thirds of Alumina’s production is sold under supply contracts to third parties worldwide, while the remainder is used internally by the Aluminum segment. Alumina produced by this segment and used internally is transferred to the Aluminum segment at prevailing market prices. A portion of this segment’s third-party sales are completed through the use of alumina traders. Generally, this segment’s sales are transacted in U.S. dollars while costs and expenses are transacted in the local currency of the respective operations, which are the Australian dollar, the Brazilian real, the U.S. dollar, and the euro. Most of the operations that comprise the Alumina segment are part of AWAC (see Principles of Consolidation in Note A). This segment also includes AWAC’s 25.1% ownership interest in a mining and refining joint venture company in Saudi Arabia (see Note H).

Aluminum. This segment consists of the Company’s (i) worldwide smelting and casthouse system, which processes alumina into primary aluminum, (ii) portfolio of energy assets in Brazil, Canada, and the United States, and (iii) rolling mill in the United States.

Aluminum’s combined smelting and casting operations produce primary aluminum products, virtually all of which are sold to external customers and traders; a portion of this primary aluminum is consumed by the rolling mill. The smelting operations produce molten primary aluminum, which is then formed by the casting operations into either common alloy ingot (e.g., t-bar, sow, standard ingot) or into value-add ingot products (e.g., foundry, billet, rod, and slab). A variety of external customers purchase the primary aluminum products for use in fabrication operations, which produce products primarily for the transportation, building and construction, packaging, wire, and other industrial markets. Results from the sale of aluminum powder and scrap are also included in this segment, as well as the impacts of embedded aluminum derivatives (see Note P) related to energy supply contracts.

The energy assets supply power to external customers in Brazil and, to a lesser extent, in the United States, and internal customers in the Aluminum (Canadian smelters and Warrick (Indiana) smelter and rolling mill) and Alumina segments (Brazilian refineries).

The rolling mill produces aluminum sheet primarily sold directly to customers in the packaging market for the production of aluminum cans (beverage and food). Additionally, from the Separation Date through the end of 2018, Alcoa Corporation had a tolling arrangement (contractually ended on December 31, 2018) with ParentCo whereby ParentCo’s rolling mill in Tennessee produced can sheet products for certain customers of the Company’s rolling operations. Alcoa Corporation supplied all of the raw materials to the Tennessee facility and paid ParentCo for the tolling service. On November 30, 2020, Alcoa announced an agreement to sell its rolling mill to Kaiser. The sale is expected to close by the end of the first quarter of 2021, subject to customary closing conditions (see Note C).

Generally, this segment’s aluminum sales are transacted in U.S. dollars while costs and expenses of this segment are transacted in the local currency of the respective operations, which are the U.S. dollar, the euro, the Norwegian krone, the Icelandic króna, the Canadian dollar, the Brazilian real, and the Australian dollar.

This segment also includes Alcoa Corporation’s 25.1% ownership interest in both a smelting (through full year 2020) and rolling mill (through the second quarter of 2019) joint venture company in Saudi Arabia (see Note H).

The operating results, capital expenditures, and assets of Alcoa Corporation’s reportable segments were as follows:

	Bauxite		Alumina			Aluminum			Total
2020
Sales:
Third-party sales	$	272	$	2,627		$	6,365		$	9,264
Intersegment sales		941		1,268			12			2,221
Total sales	$	1,213	$	3,895		$	6,377		$	11,485
Segment Adjusted EBITDA	$	495	$	497		$	325		$	1,317
Supplemental information:
Depreciation, depletion, and amortization	$	135	$	172		$	322		$	629
Equity loss		—		(23	)		(7	)		(30	)
2019
Sales:
Third-party sales	$	297	$	3,250		$	6,803		$	10,350
Intersegment sales		979		1,561			17			2,557
Total sales	$	1,276	$	4,811		$	6,820		$	12,907
Segment Adjusted EBITDA	$	504	$	1,097		$	25		$	1,626
Supplemental information:
Depreciation, depletion, and amortization	$	120	$	214		$	346		$	680
Equity income (loss)		—		6			(49	)		(43	)
2018
Sales:
Third-party sales	$	271	$	4,215		$	8,829		$	13,315
Intersegment sales		944		2,101			18			3,063
Total sales	$	1,215	$	6,316		$	8,847		$	16,378
Segment Adjusted EBITDA	$	426	$	2,373		$	451		$	3,250
Supplemental information:
Depreciation, depletion, and amortization	$	111	$	197		$	394		$	702
Equity income (loss)		—		32			(38	)		(6	)
2020
Assets:
Capital expenditures	$	127	$	103		$	111		$	341
Equity investments		222		264			546			1,032
Total assets		1,468		4,333			6,214			12,015
2019
Assets:
Capital expenditures	$	53	$	137		$	152		$	342
Equity investments		212		293			587			1,092
Total assets		1,434		4,303			6,588			12,325

The following tables reconcile certain segment information to consolidated totals:

	2020			2019			2018
Sales:
Total segment sales	$	11,485		$	12,907		$	16,378
Elimination of intersegment sales		(2,221	)		(2,557	)		(3,063	)
Other		22			83			88
Consolidated sales	$	9,286		$	10,433		$	13,403

	2020			2019			2018
Net (loss) income attributable to Alcoa Corporation:
Total Segment Adjusted EBITDA	$	1,317		$	1,626		$	3,250
Unallocated amounts:
Transformation(1)		(45	)		(7	)		(3	)
Intersegment eliminations		(8	)		150			(8	)
Corporate expenses(2)		(102	)		(101	)		(96	)
Provision for depreciation, depletion, and amortization		(653	)		(713	)		(733	)
Restructuring and other charges, net (D)		(104	)		(1,031	)		(527	)
Interest expense (U)		(146	)		(121	)		(122	)
Other expenses, net (U)		(8	)		(162	)		(64	)
Other(3)		(78	)		(79	)		(72	)
Consolidated income (loss) before income taxes		173			(438	)		1,625
Provision for income taxes (Q)		(187	)		(415	)		(732	)
Net income attributable to noncontrolling interest		(156	)		(272	)		(643	)
Consolidated net (loss) income attributable to    Alcoa Corporation	$	(170	)	$	(1,125	)	$	250

⁽¹⁾ Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.

⁽²⁾ Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities, as well as research and development expenses of the corporate technical center.

⁽³⁾ Other includes certain items that impact Cost of goods sold and other expenses on Alcoa Corporation’s Statement of Consolidated Operations that are not included in the Adjusted EBITDA of the reportable segments.

December 31,	2020			2019
Assets:
Total segment assets	$	12,015		$	12,325
Elimination of intersegment receivables		(193	)		(170	)
Unallocated amounts:
Cash and cash equivalents		1,607			879
Corporate fixed assets, net		453			519
Corporate goodwill		141			145
Deferred income taxes		655			642
Other		182			291
Consolidated assets	$	14,860		$	14,631

Product Information

Alcoa Corporation has five product divisions as follows:

Bauxite—Bauxite is a reddish clay rock that is mined from the surface of the earth’s terrain. This ore is the basic raw material used to produce alumina and is the primary source of aluminum.

Alumina—Alumina is an oxide that is extracted from bauxite and is the basic raw material used to produce primary aluminum. This product can also be consumed for non-metallurgical purposes, such as industrial chemical products.

Primary aluminum—Primary aluminum is metal in the form of a common alloy ingot (e.g., t-bar, sow, standard ingot) or a value-add ingot (e.g., billet, rod, and slab). These products are sold primarily to customers that produce products for the transportation, building and construction, packaging, wire, and other industrial markets.

Flat-rolled aluminum—Flat-rolled aluminum is metal in the form of sheet, which is sold primarily to customers that produce beverage and food cans, including body, tab, and end stock.

Energy—Energy is the generation of electricity, which is sold in the wholesale market to traders, large industrial consumers, distribution companies, and other generation companies.

The following table represents the general commercial profile of the Company’s Bauxite, Alumina, Primary aluminum, and Flat-rolled aluminum product divisions (see text below table for Energy):

Product division	Pricing components	Shipping terms(4)	Payment terms(5)
Bauxite	Negotiated	FOB/CIF	LC Sight
Alumina:
Smelter-grade	API(1)/spot	FOB	LC Sight/CAD/Net 30 days
Non-metallurgical	Negotiated	FOB/CIF	Net 30 days
Primary aluminum:
Common alloy ingot	LME + Regional premium(2)	DAP/CIF	Net 30 to 45 days
Value-add ingot	LME + Regional premium + Product premium(2)	DAP/CIF	Net 30 to 45 days
Flat-rolled aluminum	Metal + Conversion(3)	DAP	Negotiated

⁽¹⁾ API (Alumina Price Index) is a pricing mechanism that is calculated by the Company based on the weighted average of a prior month’s daily spot prices published by the following three indices: CRU Metallurgical Grade Alumina Price; Platts Metals Daily Alumina PAX Price; and Metal Bulletin Non-Ferrous Metals Alumina Index.

⁽²⁾ LME (London Metal Exchange) is a globally recognized exchange for commodity trading, including aluminum. The LME pricing component represents the underlying base metal component, based on quoted prices for aluminum on the exchange. The regional premium represents the incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold in the United States). The product premium represents the incremental price for receiving physical metal in a particular shape (e.g., billet, rod, slab, etc.) or alloy.

⁽³⁾ Metal represents the underlying base metal component plus a regional premium (see footnote 2). Conversion represents the incremental price over the metal price component that is associated with converting primary or scrap aluminum into sheet.

⁽⁴⁾ CIF (cost, insurance, and freight) means that the Company pays for these items until the product reaches the buyer’s designated destination point related to transportation by vessel. DAP (delivered at place) means the same as CIF related to all methods of transportation. FOB (free on board) means that the Company pays for costs, insurance, and freight until the product reaches the seller’s designated shipping point.

⁽⁵⁾ The net number of days means that the customer is required to remit payment to the Company for the invoice amount within the designated number of days. LC Sight is a letter of credit that is payable immediately (usually within five to ten business days) after a seller meets the requirements of the letter of credit (i.e. shipping documents that evidence the seller performed its obligations as agreed to with a buyer). CAD (cash against documents) is a payment arrangement in which a seller instructs a bank to provide shipping and title documents to the buyer at the time the buyer pays in full the accompanying bill of exchange.

For the Company’s Energy product division, sales of electricity are based on current market prices. Electricity is provided to customers on demand through a national or regional power grid; the customer simultaneously receives and consumes the electricity. Payment terms are generally within 10 days related to the previous 30 days of electricity consumption.

The following table details Alcoa Corporation’s Third-party sales by product division:

	2020			2019			2018
Sales:
Primary aluminum	$	5,190		$	5,426		$	6,787
Alumina		2,624			3,246			4,209
Flat-rolled aluminum		1,115			1,220			1,884
Bauxite		238			276			254
Energy		141			290			335
Other		(22	)		(25	)		(66	)
	$	9,286		$	10,433		$	13,403

Other includes realized gains and losses related to embedded derivative instruments designated as cash flow hedges of forward sales of aluminum (see Note P).

Geographic Area Information

Geographic information for Third-party sales was as follows (based upon the country where the point of sale originated):

	2020		2019		2018
Sales:
United States(1)	$	4,246	$	4,606	$	5,887
Spain(2)		2,766		3,077		3,806
Australia		1,884		2,249		2,930
Brazil		346		428		498
Canada		31		5		216
Other		13		68		66
	$	9,286	$	10,433	$	13,403

⁽¹⁾ Sales of a portion of the alumina from refineries in Australia and Brazil and most of the aluminum from smelters in Canada occurred in the United States.

⁽²⁾ Sales of the aluminum produced from smelters in Iceland and Norway, as well as the off-take related to an interest in the Saudi Arabia joint venture (see Note H), occurred in Spain.

Geographic information for long-lived assets was as follows (based upon the physical location of the assets):

December 31,	2020		2019
Long-lived assets:
Australia	$	2,282	$	2,044
Brazil		1,215		1,596
Iceland		1,102		1,160
United States		1,009		1,491
Canada		1,002		1,047
Norway		357		365
Spain		218		209
Other		5		4
	$	7,190	$	7,916