Alcoa 2007 Revenues Highest in Company's History

Alcoa has announced that it achieved record results in revenues, income from continuing operations and cash from operations for the full year 2007. Revenues for 2007 were $30.7 billion, compared to $30.4 billion in 2006. Annual income from continuing operations rose to $2.6 billion, or $2.95 per diluted share, for 2007, a 19 percent increase compared to $2.2 billion, or $2.47, in 2006. And, cash from operations for 2007 increased 21 percent to more than $3.1 billion from $2.6 billion in 2006.

‘For the second year in a row, Alcoa has achieved company all-time records in revenues, income from continuing operations and cash generation,’ said Alain Belda, Alcoa Chairman and CEO. ‘We battled substantially higher material input and energy costs, and currency impacts while simultaneously continuing to execute on the largest capital investment programme in our history.

‘We have invested in new plants, expanded production at others, modernized operations, renegotiated long-term power agreements, and built new energy facilities to extend our energy access at competitive rates, while also continuing to invest in growth markets such as Brazil, China and Russia,’ Belda said.

‘These actions, combined with portfolio and cash flow management, our share repurchase programme, conservative leverage, and our commitment to sustainability delivered results now, and will continue to generate quality profitable growth for decades,’ added Belda. ‘In 2007, Alcoans delivered yet again. This is what builds a stronger Company for our stakeholders.’

Annual Highlights:
* 2007 revenues at an all-time record of $30.7 billion;
* Income from continuing operations an all-time high of $2.6 billion, or $2.95 per diluted share, a 19 percent increase from 2006;
* Cash from operations an all-time Company record of $3.1 billion, 21 percent higher than 2006;
* Return on capital at 12.7 percent including investments in growth projects; excluding growth projects, ROC stands at 16.1 percent;
* Debt-to-capital ratio stands at 30.2 percent, lower than a year ago despite substantial share repurchase;
* Major progress on portfolio management with agreement to sell packaging, divestiture of automotive castings, monetisation of Chalco stake, and creation of soft alloy joint venture;
* Completed major growth projects - Fjardaal smelter in Iceland and Mosjoen anode plant in Norway - and significant progress on other projects;
* Dividend increased 13 percent in 2007. |

4th Quarter 2007 Highlights:
* Revenues of $7.4 billion in the quarter;
* Income from continuing operations of $624 million, or $0.74 per share; results include favourable restructuring adjustment and tax benefit totalling $323 million or $0.38 per share, almost all of which stems from packaging sale agreement;
* Repurchased approximately 68 million shares through end of fourth quarter, with approximately 150 million shares, or 18 percent of shares outstanding, remaining within authorisation;
* Cash from operations in the quarter was $643 million.

Fourth quarter income from continuing operations was $624 million, or $0.74. Included in the results are a favourable restructuring adjustment and a tax benefit totalling $323 million or $0.38 per share, almost all of which stems from the recent agreement to sell the packaging and consumer businesses. Income from continuing operations in the 2006 fourth quarter was $258 million, or $0.29, and $558 million, or $0.64, in the third quarter 2007.

Net income for the fourth quarter 2007 was $632 million, or $0.75, which includes the restructuring adjustment and the benefit from the agreement to sell the packaging and consumer business. Net income for the fourth quarter 2006 was $359 million, or $0.41, and $555 million, or $0.63, in the 2007 third quarter.

Revenues for the 2007 fourth quarter were $7.4 billion, compared to $7.8 billion a year ago as a result of lower LME prices and the exclusion of results from the soft alloy extrusion business which is now part of a joint venture. The soft alloy extrusion business had revenues of approximately $560 million in the fourth quarter of 2006.

Cash Generation, ROC, and Growth
Cash from operations in the fourth quarter 2007 was $643 million, bringing full-year cash from operations to more than $3.1 billion, compared to $2.6 billion in 2006 and helping to keep the Company's debt-to-capital ratio within its targeted range at 30.2 percent.
The Company's trailing 12-month return on capital (ROC) was 16.1 percent, excluding investments in growth projects. Including investments in growth projects, ROC stands at 12.7 percent, well above the cost of capital.

In 2007, the Company completed major growth projects, including its first greenfield smelter in 20 years in Iceland, a new anode plant in Mosjoen, Norway, and its third flat-rolled products facility in China (Kunshan). In addition, major progress was made on several other growth projects including the Juruti bauxite mine, the expansion of the Bohai rolling mill in China, and expansion of the Sao Luis alumina refinery.

The Company made significant progress to extend the life of existing facilities through renegotiating long-term power agreements including those in Massena, NY and Wenatchee, WA in 2007. The Company also continued investments in Brazil including the Serra do Facao hydroelectric project to further increase its self-sufficiency there.

The Company is now operating primary aluminium production at a run rate of approximately four million metric tons per year.

The Company made major progress in 2007 on its portfolio management plan. During the year, the Company reached agreement to sell its packaging and consumer businesses; divested the automotive castings business; monetised its stake in Chalco to enable redeployment of capital into other value-adding options, including projects in China; and formed a joint venture with Sapa for its soft alloy extrusion business.

In 2007, Alcoa also increased its share repurchase programme from 10 percent to 25 percent of outstanding shares and increased its dividend by 13 percent during the year. Through the end of the fourth quarter the Company has repurchased 68 million shares, or approximately eight percent of shares outstanding, as part of its share repurchase programme, leaving approximately 150 million shares, or 18 percent of shares outstanding, remaining within the authorisation.


Alumina - After-tax operating income (ATOI) was $205 million, a decrease of $10 million, or five percent, from the prior quarter. System production increased by a net of 80 kmt as Suralco, San Ciprian and Pinjarra set quarterly production records and Jamalco continued its recovery from Hurricane Dean. However, higher freight and energy costs and unfavourable currency offset production gains.

Primary Metals - ATOI was $196 million, down $87 million, or 31 percent, compared to the prior quarter. The majority of the decrease resulted from lower LME prices and unfavourable currency. These items were partially offset by the recovery at the Rockdale and Tennessee smelters and a three percent production increase. The company purchased approximately 55 kmt of primary metal for internal use.



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