Slides presented during Alcoa Inc. second quarter 2009 earnings call

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Forward-Looking Statements

Today’s

discussion

may

include

“forward-looking

statements”

within

the

meaning

the

Private

Securities

Litigation

Reform

Act

1995.

Such

statements relate to future events and expectations and involve known

and unknown risks and uncertainties. Alcoa’s actual results or actions

may differ materially from those projected in the forward-looking

statements. For a summary of the specific risk factors that could cause

results to differ materially from those expressed in the forward-looking

statements, please refer to Alcoa’s Form 10-K for the year ended

December 31, 2008, Form 10-Q for the quarter ended March 31, 2009,

and other reports filed with the Securities and Exchange Commission.

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2nd Quarter 2009 Financial Overview

Loss from continuing operations of $312 million, or $0.32 per share

–

Excluding restructuring, loss of $256 million or $0.26 per share

Realized aluminum price of $1,667/MT

–

Increase of 6% sequentially

Cash from operations of $328 million

–

Increase of $599 million sequentially

Improved free cash flow

–

Increase of $652 million sequentially

Breakeven EBITDA

–

Improvement of $281 million sequentially

Debt-to-cap at 39.8%; down 80 basis points sequentially

–

Cash on hand of $851 million

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2Q 08

1Q 09

2Q 09

Production (kmt)

3,820

3,445

3,309

Party Shipments (kmt)

1,913

1,737

2,011

Party Revenue ($MM)

717

430

441

ATOI ($MM)

190

(7)

Improved

operations

globally

–

including

record

production at Pinjarra

Productivity and material cost improvements partially

offset currency impacts

Negative currency impact of $40 million

Higher fuel oil costs of $7 million

Commissioning

Juruti

bauxite

mine

underway

Alumina

2 Quarter Highlights

3 Quarter Outlook

Quarter Business Conditions

Benefit from cost savings initiatives

Lower caustic prices to be realized

Current U.S. dollar and fuel oil costs would adversely

affect results

Start-up costs of Brazil projects will negatively impact

results by $12 million

Beginning ramp up of Sao Luis refinery expansion

-$200

$200

$400

$600

$800

$1,000

-$50

$50

$100

$150

$200

$250

1Q 08

2Q 08

3Q08

4Q08

1Q09

2Q09

ATOI

Third Party Revenue

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Quarter Highlights

2Q 08

1Q 09

2Q 09

Production (kmt)

1,030

880

906

3 Party

Shipments

(kmt)

750

683

779

Party

Revenue

($MM)

2,437

844

1,146

Party

Price

($/MT)

3,058

1,567

1,667

ATOI ($MM)

428

(212)

(178)

Primary Metals

Quarter Outlook

Quarter Business Conditions

Realized pricing up 6%

Increased production 3% due to full quarter of

Norwegian smelters and record Iceland output,

partially offset by Tennessee and Massena East

curtailment

Experienced adverse currency effects of $38 million

Anglesea

power station upgrade completed at $8

million cost, on time and under budget

Benefit from cost savings initiatives, especially in

labor and key raw materials

Pricing will follow a 15-day lag on LME

Current U.S. dollar would adversely affect results

Completion of all announced production curtailments

–

current annual run rate ~ 3.5 million metric tonnes

-$2,500

-$2,000

-$1,500

-$1,000

-$500

$500

$1,000

$1,500

$2,000

$2,500

-$500

-$250

$250

$500

1Q 08

2Q 08

3Q08

4Q08

1Q09

2Q09

ATOI

Third Party Revenue

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Flat-Rolled Products

Quarter Outlook

Quarter Business Conditions

$ Millions

2Q 08

1Q 09

2Q 09

Flat-Rolled Products,

excl Russia, China & Other

Russia, China & Other

(21)

(64)

(37)

Total

(61)

(35)

Realized productivity gains from procurement

and

headcount

reduction

–

Year-to-date,

reduced headcount by 3,000 of which 40% in

Russia

Experienced negative currency impact of $24

million

Volume increases in automotive and

packaging markets, all others weaker

Cautious demand outlook for all end markets

Benefit from cost savings initiatives

Seasonal impact from summer plant

slowdowns, especially in Europe

Quarter Highlights

-$2,500

-$2,000

-$1,500

-$1,000

-$500

$500

$1,000

$1,500

$2,000

$2,500

-$150

-$100

-$50

$50

$100

$150

1Q 08

2Q 08

3Q08

4Q08

1Q09

2Q09

ATOI

Third Party Revenue

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Engineered Products and Solutions

Productivity gains help partially offset weak

market conditions

Weaker Aerospace and Building and

Construction demand

Decline in pace of Commercial Transportation

market slow down

Quarter Business Conditions

Quarter Outlook

Benefit from cost savings initiatives

Further weakness in Aerospace due to declining

build rates

Seasonal impact from summer shutdowns,

especially in European locations

Decline in Commercial Building and

Construction demand

The IGT market will remain stable

$ Millions

2Q 08

1Q 09

2Q 09

Third Party Revenue

1,660

1,270

1,194

ATOI

172

ATOI% of Revenue

10.4

7.5

7.4

Quarter Highlights

$500

$1,000

$1,500

$2,000

$20

$40

$60

$80

$100

$120

$140

$160

$180

$200

1Q 08

2Q 08

3Q08

4Q08

1Q09

2Q09

ATOI

Third Party Revenue

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($ Millions)

2Q'08

1Q'09

2Q'09

Net Income (Loss)

$546

($497)

($454)

DD&A

317

283

317

Change in Working Capital

233

351

329

Taxes

(113)

(363)

(138)

Pension Contributions

(48)

(34)

(35)

Other Adjustments

(11)

309

Cash From Operations

$1,007

($271)

$328

Capital Expenditures

(796)

(471)

(418)

Free Cash Flow

$211

($742)

($90)

Significant Improvement in Free Cash Flow

Cash Flow

Cash and Debt (in millions)

Free Cash Flow (in millions)

8,630

10,125

10,578

10,205

10,265

815

831

762

1,131

851

10%

20%

30%

40%

50%

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

2Q'08

3Q'08

4Q'08

1Q'09

2Q'09

Gross Debt

Cash

Debt to Cap

-$1,000

-$800

-$600

-$400

-$200

$200

2Q'08

3Q'08

4Q'08

1Q'09

2Q'09

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Global Demand -7%, Unchanged From Q1’09 Outlook

2008 Global Demand Growth Rate: -3%

(2008 ex China: -8%)

2009 Global Demand Growth Rate: -7%

(2009 ex China: -10%)

Source: Alcoa analysis

Brazil

Russia

Asia w/o China

North America

Europe

China

2008 vs. 2009

Projected Growth Rates

2009 Projected Consumption

6.4

5.0

4.3

-15%

-9%

-15%

-12%

-12%

-5%

13.1

10%

-5%

-8%

0.9

Other*

4.0

-1%

-2%

* Other

consists

of:

Middle

East,

India,

Latin

America

Brazil

and

Rest

World

34.5

2008

Actual

2009

Forecast

0.8

2009 Projected Primary Aluminum Consumption by Region (in mmt)

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China

Western World

Global Supply and Demand Comparisons: 2009

2009E Aluminum Supply / Demand Balance (in kmt)

Deficit

Surplus

Source: Alcoa estimates, Brook Hunt, CRU, CNIA, IAI

Jan-May 09 Primary Production Run

Rate (Annualized)

10,900

Announced Restarts to be implemented

Jun -

Dec 2009

1,300

Supply

12,200

Demand (0% YOY change)

(13,100)

Deficit

(900)

Imports from Western World

900

Net Deficit

Jan-May 09 Primary Production

Run Rate (Annualized)

23,800

Announced net curtailments to be

implemented

Jun

Dec

2009

(300)

Supply

23,500

Demand (-10% YOY change)

(21,400)

Surplus

2,100

Exports to China

(900)

Net Surplus

1,200

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2009E Alumina Supply / Demand Balance (in kmt)

Source: Alcoa estimates, CRU, CNAI, IAI

Alumina Market Reaches Equilibrium in 2009

Global

Equilibrium

Jan-Mar 09 Alumina Production Run

Rate

19,000

Announced curtailments to be

implemented

Supply

19,000

Demand

(24,000)

Deficit

(5,000)

Imports from Western World

5,000

Net Deficit

Jan-Mar 09 Alumina Production Run

Rate

51,500

Announced curtailments to be

implemented

(1,400)

Supply

50,100

Demand

(45,100)

Surplus

5,000

Exports to China

(5,000)

Net Surplus

China

Western World

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Procurement Efficiencies

–

Cost savings by 2010

Overhead Rationalizations

–

Cost savings by 2010

CapEx

Reductions

–

Annual CapEx

post 2009

Working Capital Initiatives

–

Cash Impact 2009

Asset Dispositions

–

Net proceeds

Dividend Reduction

–

Annual cash savings

Equity and Equity-Linked Financings

–

Gross proceeds

Holistic Alcoa Approach: Improved Cost Structure and Balance Sheet

$2,000M

$400M

$850M

$800M

Demonstrating Solid Execution of Holistic Approach

$1,100M

$430M

$1,400M

Operational

Financial

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$1 Billion Procurement Savings Realized to Date

Procurement Efficiencies: Reduction Targets

2009E

(millions)

Reduction Targets by Spend Category

Savings

2010E

15%

21%

34%

29%

18%

Strategic Raw Materials -

Alumina and Primary Metals

Strategic

Raw

Materials

Flat-

Rolled Products

Indirect

Services

Indirect -

Maintenance Repair

& Overhaul

Non-Smelter Energy

Transportation

Business Unit Metals

$994

$1,500

$2,000

2009 YTD

2009 Savings

Target vs. 2008

2010 Savings

Target vs. 2008

2/3 of full

year

target

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Alcoa

Global

Pitch

Cost

Creating Competitive Alternatives for Coal Tar Pitch

Levers

Specifications

Supply Base

Expansion

Backward

Integration

Expanding specifications

Deploying best practices to

mitigate industry wide pitch

quality deterioration

Aggressively developing

options for North America and

Australia

Aggressively developing

global logistics infrastructure

Expanding global supply

base for imported pitch

Developing regional logistics

options to increase import

capability

Leveraging Best Practices to Achieve Procurement

Savings

Actions

-17%

-7%

2H’08

Q2’09

Forecast

Year-End

2009

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Benefits of Aluminum Can Over PET bottles & Recycling Lifecycles

Aluminum is Infinitely Recyclable

Recycled aluminum

requires

95% less energy

and

produces 95% less

greenhouse

gas

emissions.

Recyclability

100%

Recyclable,

Infinitely.

Recycling

Rate

PET

bottles

Only

3.5%

PET

gets

recycled

back into PET bottles.

Commercial

Quick

Chill

Superior

Shelf Life

Superior Space Utilization –

economies of scale in freight &

warehousing

High

Speed

Manufacturing

Aluminum

Can vs. PET bottles

Only 25% of bottles get

recycled

the bulk of

which is in carpets &

textiles

Almost 8 billion

pounds

of plastic is

put away in landfills

every year!

Down-

Cycling

Average Life of

PET bottle

in a landfill ~

several thousands

of years

Infinitely

Recyclable

~75% of all

aluminum ever

made remains in

use today

60 days

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Alcoa: One Stop Shop for Consumer Electronics

Solutions

Colors

Durability & Recycling

Heat Dissipation

Customer Needs

Differentiation

Infinitely Recyclable

Alcoa Thermal Management

Customer Needs & Alcoa Offerings & Points of Differentiation

Bold palette

Longer lasting colors

Dent & scratch resistant

Reduced landfill waste

Increased recycled

content

4X superior cooling effect

Improved system lifetime

Superior look & feel vs.

Magnesium or Plastic

options

Finish versatility

Leather

Wood Flower Texture

Textures

Alcoa Offerings

Brushed and Anodized

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Alcoa Solutions for the Oshkosh M-ATV

New

Forged

Suspensions

Components

light weight and rugged for off road capability

Armor

Plate

–

Ballistic

armor

plate

including

the

new

CR56

best

class

weldable

alloy.

Fasteners

–

rugged

chassis

applications

2,244

Oshkosh

M-ATV’s

contract,

with

more orders expected

High Strength Forged Suspension Components, Fasteners and CR56 Armor:

Customer Insight:

“Our M-ATV design combines the crew protection war

fighters have come to expect in MRAP vehicles with the extreme mobility and

durability

needed

negotiate

mountainous

off-road

terrain,”

said

Robert

Bohn, Oshkosh Corporation Chairman and CEO

Maneuverability

–

rugged

terrain

Blast

Protection

–

against

Improvised

Explosive Devices (IED) and Explosively

Formed Penetrators (EFP).

Lightweight

–

afford

better

protection,

payload and performance

Repairability

–

easy

weld

surfaces

for

field repair

Durability

–

superior

corrosion

resistance

needed

Original

MRAP

–

Unsuitable

for

rugged

terrain

Oshkosh

M-ATV

–

Designed

specifically

for

rugged

terrain

Customer Needs

Alcoa Solutions

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Key end-markets stabilizing off

1Q’09 lows

Automotive better in 2H’09 versus

1H’09

Metal price above recent lows

Regional premiums are rising in

response to pockets of tightness

Signs of Stabilization Emerge From Near-term Catalysts

Supply / demand balance

Urban construction +32%

Light vehicles sales +14%

Unsustainable levels

Rapid drawdown of

inventories when economy

rebounds

Alternative fuel efficient

buses

New construction

Transmission lines for grid

Continued execution of

announced curtailments

Near-Term Catalysts

China

Curtailment

Stimulus Programs

De-Stocking

Signs of Stabilization

Catalysts for Aluminum Industry Growth

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Announced Industry Curtailments Nearly Complete

Aluminum Supply: Curtailment Announcements by Producer (annualized kmt)

Curtailment % of Production

Executed

Not executed

687

Note: As of 6/22/09

Source:

Production

–

CRU.

Curtailments

–

Alcoa

Analysis,

Reuters,

Bloomberg,

Company

Statements,

Mitsui

Bussan,

Platts.

Other ROW

UC Rusal

Other China

Alcoa

Rio Tinto Alcan

Chalco

Hydro

38,759

11,352

10,788

4,494

4,049

3,990

2,317

1,769

570

246

852

513

124

570

852

20%

364

2,128

30%

25%

2,128

Average = 17%

15%

10%

1,460

1,096

560

122

127

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Reconciliation of ATOI to Consolidated Net Income

(Loss) Attributable to Alcoa

(in millions)

1Q08

2Q08

3Q08

4Q08

2008

1Q09

2Q09

Total segment ATOI

$ 668

$ 838

$ 665

$ 28

$ 2,199

(143)

(132)

Unallocated amounts (net of tax):

Impact of LIFO

(31)

(44)

(5)

(7)

Interest income

Interest expense

(64)

(57)

(63)

(81)

(265)

(74)

(75)

Noncontrolling interests (1)

(67)

(70)

(84)

–

(221)

(10)

Corporate expense

(82)

(91)

(77)

(78)

(328)

(71)

(70)

Restructuring and other charges

(30)

(1)

(25)

(637)

(693)

(46)

(56)

Discontinued operations

(7)

(38)

(262)

(303)

(17)

(142)

Other

(104)

(34)

(115)

(238)

(491)

(166)

(31)

Consolidated net income (loss) attributable to

Alcoa

$ 303

$ 546

$ 268

$ (1,191)

$ (74)

$ (497)

$ (454)

Prior period information was reclassified to reflect the movement of the Electrical and Electronic Solutions business to discontinued operations

in the fourth quarter of 2008.

(1)

On January 1, 2009, Alcoa adopted Statement of Financial Accounting Standards No. 160, “Noncontrolling Interests in Consolidated

Financial Statements – an amendment of ARB No. 51,” the provisions of which, among others, requires that minority interests be

renamed noncontrolling interests for all periods presented.

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Reconciliation of Segment Information

(aluminum shipments in thousands of metric tons; dollars in millions)

Flat-Rolled Products

1Q08

2Q08

3Q08

4Q08

2008

1Q09

Third-party aluminum shipments:

As previously reported

610

591

580

515

2,296

455

Less: Global Hard Alloy Extrusions

As reported

589

571

562

499

2,221

442

Third-party sales:

As previously reported

$ 2,492

$ 2,525

$ 2,488

$ 2,058

$ 9,563

$ 1,622

Less: Global Hard Alloy Extrusions

156

162

145

134

597

112

As reported

$ 2,336

$ 2,363

$ 2,343

$ 1,924

$ 8,966

$ 1,510

ATOI:

As previously reported

$ 41

$ 55

$ 29

$ (98)

$ 27

$ (62)

Less: Global Hard Alloy Extrusions

(1)

As reported

$ 33

$ 48

$ 22

$ (106)

$ (3)

$ (61)

Engineered Products and Solutions

1Q08

2Q08

3Q08

4Q08

2008

1Q09

Third-party aluminum shipments:

As previously reported

182

Add: Global Hard Alloy Extrusions

As reported

257

Third-party sales:

As previously reported

$ 1,395

$ 1,498

$ 1,451

$ 1,258

$ 5,602

$ 1,158

Add: Global Hard Alloy Extrusions

156

162

145

134

597

112

As reported

$ 1,551

$ 1,660

$ 1,596

$ 1,392

$ 6,199

$ 1,270

ATOI:

As previously reported

$ 140

$ 165

$ 133

$ 65

$ 503

$ 96

Add: Global Hard Alloy Extrusions

(1)

As reported

$ 148

$ 172

$ 140

$ 73

$ 533

$ 95

In the second quarter of 2009, management approved the movement of Alcoa’s hard alloy extrusions business from the Flat-Rolled Products

segment to the Engineered Products and Solutions segment. This move was made to capture market, customer, and manufacturer synergies

through the combination of the hard alloy extrusions business with the power and propulsion forgings business. Prior period amounts were

reclassified to reflect this change.

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Reconciliation of Adjusted (Loss) Income

(in

millions,

except

per

amounts)

(Loss) Income

(Loss) Income per Share

Quarter ended

Six months ended

Quarter ended

Six months ended

March 31,

2009

June 30,

2009

June 30,

2008

June 30,

2009

March 31,

2009

June 30,

2009

June 30,

2008*

June 30,

2009

Net (loss) income

attributable to Alcoa

$ (497)

$ (454)

$ 849

$ (951)

$ (0.61)

$ (0.47)

$ 1.03

$ (1.06)

Loss from

discontinued

operations

(17)

(142)

(3)

(159)

(Loss) income from

continuing

operations

attributable to Alcoa

(480)

(312)

852

(792)

(0.59)

(0.32)

1.03

(0.89)

Restructuring and

other charges

102

Other special items**

(43)

–

(43)

(Loss) income from

continuing

operations

attributable to Alcoa

–

as adjusted

$ (477

)

$ (256

)

$ 902

$ (733

)

(0.58)

(0.26)

1.09

(0.82)

(Loss) income from continuing operations attributable to Alcoa – as adjusted is a non-GAAP financial measure. Management believes that this measure is

meaningful to investors because management reviews the operating results of Alcoa excluding the impacts of restructuring and other charges and other special

items. There can be no assurances that additional restructuring and other charges and other special items will not occur in future periods. To compensate for this

limitation, management believes that it is appropriate to consider both (Loss) income from continuing operations attributable to Alcoa determined under GAAP as

well as (Loss) income from continuing operations attributable to Alcoa – as adjusted.

* Financial information for the six months ended June 30, 2008 was reclassified to reflect the movement of the Electrical and Electronic Solutions business to discontinued operations

in the fourth quarter of 2008.

** Other special items include the following: a gain on the Elkem/SAPA swap (-$133), a loss on the sale of Shining Prospect ($118), and a discrete income tax benefit related to a tax

law change in Canada (-$28) for both the quarter ended March 31, 2009 and six months ended June 30, 2009; and a net discrete income tax charge related to the sale of the

Packaging and Consumer businesses for the six months ended June 30, 2008.

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Reconciliation of Free Cash Flow

(in millions)

Quarter ended

June 30,

2008

September 30,

2008

December 31,

2008

March 31,

2009

June 30,

2009

Cash from operations

$ 1,007

$ (93)

608

$ (271)

328

Total capital expenditures

(796)

(877)

(1,017)

(471)

(418)

Free cash flow

211

(970)

(

409)

(742)

)

(90

Free

Cash

Flow

non-GAAP

financial

measure.

Management

believes

that

this

measure

meaningful

investors

because

management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these

expenditures are considered necessary to maintain and expand Alcoa’s asset base and are expected to generate future cash flows from

operations. It is important to note that Free Cash Flow does not

represent the residual cash flow available for discretionary expenditures

since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure.

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Other Reconciliations

(in millions)

Earnings before interest, taxes, depreciation, and amortization

(EBITDA)*

Quarter ended

March 31,

2009

June 30,

2009

Change

Net loss attributable to Alcoa

$ (497)

$ (454)

$ 43

Add:

Noncontrolling interests

(5)

(15)

Loss from discontinued operations

142

125

Benefit for income taxes

(307)

(108)

199

Other expenses (income), net

(89)

(119)

Interest expense

114

115

Restructuring and other charges

Provision for depreciation, depletion, and amortization

283

317

Sub-total

216

454

238

EBITDA

$ (281)

$ –

$ 281

* Alcoa’s definition of EBITDA is net margin excluding depreciation, depletion, and amortization. Net margin is equivalent to sales minus the following items: cost of goods sold; selling, general administrative, and

other expenses; and research and development expenses.

EBITDA is a non-GAAP financial measure and should not be considered a substitute for any income or cash flow measure prepared in accordance with U.S. GAAP.

Management believes that EBITDA is meaningful to investors because it provides additional information with respect to Alcoa’s financial performance. Because the

calculation of EBITDA may vary among companies, the EBITDA presented by Alcoa may not be comparable to similarly titled measures of other companies.

Effective Tax Rate

Quarter ended

March 31,

2009

June 30,

2009

Change

Benefit for income taxes

$ (307)

$ (108)

Loss from continuing operations before income taxes

$ (777)

$ (425)

Effective tax rate

39.5%

25.4%

(14.1)%

Less: Discrete tax items**

5.0%

–

(5.0)%

Effective tax rate, excluding discrete tax items

34.5%

25.4%

(9.1)%

* The discrete tax items in the quarter ended March 31, 2009 were income tax benefits of $28 (3.6%) related to a tax law change in Canada and $11 (1.4%) related to the Elkem/SAPA swap.

Effective tax rate, excluding discrete tax items is a non-GAAP financial measure. Management believes that the Effective tax rate, excluding discrete tax items is

meaningful to investors because it provides a view of Alcoa’s operational tax rate.

Primary Metals Adjusted ATOI

Quarter ended

March 31,

2009

June 30,

2009

Change

ATOI

$ (212)

$ (178)

$ 34

Less: Gain on Elkem/SAPA swap

112

–

(112)

ATOI – as adjusted

$ (324)

$ (178)

$ 146

ATOI – as adjusted is a non-GAAP financial measure. Management believes that ATOI – as adjusted is meaningful to investors because it provides better insight to the

operational results and performance of the segment.