Alcoa Q1 2023 results: higher earnings, lower net loss

"In the first quarter of 2023, we saw improvement in some key financial metrics, including a USD211m sequential gain in adjusted Ebitda, and we continued to maintain a strong balance sheet,” said Roy Harvey, chief executive and president of Alcoa. “We’re also making important progress in stabilizing our operations, with teams working to improve on a minute-by-minute, day-by-day basis. We plan to build on that momentum as we tackle a host of complex issues, including developing breakthrough technologies and addressing increased expectations from stakeholders.”

“I have confidence in our team’s abilities to develop solutions, such as our recent decision to expand our EcoSource alumina brand to now include non-metallurgical grades as part of our Sustana family of low-carbon products,” he continued. “We know that all aluminium is not created equally, and being a responsible producer will be a key differentiator to help position Alcoa for the future. The world will need sustainably produced materials to help reach global decarbonization goals, and we will be the Company to provide them.”

Q1 results in detail

Revenue: The company’s total third-party revenue of USD2.7bn was consistent with the prior quarter as higher prices in both the alumina and aluminium segments were offset by decreased shipments. Sequentially, the average realized third-party price of alumina increased 8 % and the average realized third-party price of aluminium increased 7 %.

Shipments: In the Alumina segment, third-party shipments of alumina decreased 13 % sequentially primarily due to reduced refinery production, largely from the Kwinana refinery in Australia and the San Ciprián refinery in Spain due to issues related to natural gas in their respective regions.

In Aluminium, total shipments decreased 6 % sequentially due to reduced trading opportunities and lower volumes from the Canadian smelters due to timing of shipments, partially offset by higher volumes from the Alumar smelter restart in Brazil.

Production: Alumina production decreased 9 % sequentially to 2.8m tonnes as discussed above. In Aluminium, Alcoa produced 518,000 tonnes, consistent with the fourth quarter’s strong output due to the restart of the Alumar smelter, offset by fewer days in the first quarter.

Net loss attributable to Alcoa of USD231m improved sequentially (Q4 2022 net loss: USD395). Higher realized prices for aluminium and alumina were the primary drivers for the positive change, including lower energy costs in Europe and the nonrecurrence of a USD217m charge to tax expense to record a valuation allowance on Alcoa Alumínio’s (Brazil) deferred tax assets in Q4 2022. Those factors were partially offset by USD149m of restructuring related charges recorded in the first quarter 2023 (including USD101m related to the permanent closure of the Intalco smelter and USD47m for certain employee obligations related to the updated agreement for San Ciprián smelter) and USD41m for an expected utility settlement at the Ma’aden joint venture in Saudi Arabia.

Adjusted net loss was USD41m excluding the impact from net special items of USD190m. Notable special items include charges of USD117m related to the permanent closure of the Intalco smelter, USD47m for certain employee obligations related to the updated agreement for the San Ciprián smelter, USD19m related to the restart costs at the Alumar smelter, and USD13m for net losses on asset sales.

Operational actions

Portland, Australia: In March 2023, production at the Portland Aluminium smelter in Australia was reduced to approximately 75 % of the site’s total consolidated capacity of 358,000 tpy due to instability and challenges related to the production of rodded anodes. Alcoa’s share of the total capacity is 197,000 tpy.

Intalco, Washington: In March, the company announced the decision to permanently close the Intalco smelter that had been fully idle since 2020. The closure announcement begins a process to prepare the site for new economic development opportunities.

San Ciprián smelter, Spain: In February, Alcoa reached an updated agreement with the workers’ representatives to commence the restart process of the San Ciprián smelter in phases beginning in January 2024. The smelter has an annual capacity of 228,000 tpy.

Kwinana, Australia: In January 2023, in response to a state-wide shortage of natural gas from key suppliers in Western Australia, the Kwinana refinery reduced its production by decreasing process flows and taking offline one of five production units. Alcoa has decided to keep the one digester down due to the prolonged annual mine plan approvals process.

2023 Outlook

Alcoa expects 2023 total alumina and aluminium shipments to remain unchanged between 12.7m and 12.9m tonnes, and between 2.5m and 2.6m tonnes, respectively.

As a result of a prolonged annual mine plan approvals process at its Huntly mine, which supplies the Kwinana and Pinjarra refineries, Alcoa began mining lower bauxite grades in April 2023 from areas already permitted under existing approvals. The reduction in grade will extend the ore supply and provide more time to work through the approvals process.

For Q2 2023, the Aluminium Segment Adjusted Ebitda is expected to improve by USD30m on favourable raw materials, volume and lower production costs, partially offset by changes in value added premiums. In addition, Alcoa expects USD5-10m in unfavourable impacts associated with the Portland smelter partial curtailment.