http://www.morningstar.com/earnings/50825835-alcoa-inc-aa-q1-2013.aspx

Alcoa Inc AA
Q1 2013 Earnings Call Transcript

Transcript Call Date 04/08/2013

Operator: Good day, ladies and gentlemen, and welcome to the First Quarter 2013 Alcoa Earnings Conference Call. My name is Cilia, and I will be your operator for today. At this time, all participants are in a listen-only mode. As a reminder, this call is being recorded for replay purposes.

At this time now, I'd like to turn the call over to Kelly Pasterick, Director of Investor Relations. Please proceed.

Kelly Pasterick - Director, IR: Thank you, Cilia. Good afternoon and welcome to Alcoa's first quarter 2013 earnings conference call. I’m joined by Klaus Kleinfeld, Chairman and Chief Executive officer and William Oplinger, Executive Vice President and Chief Financial Officer. After comments by Klaus and William, we will take your questions.

Before we begin, I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the Company's actual results to differ materially from these projections listed in today's press release and presentation and in our most recent SEC filings.

In addition, we have included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release, in the appendix to today's presentation, and on our website at www.alcoa.com under the Invest section.

Any reference in our discussion today to EBITDA means adjusted EBITDA for which we have provided calculations and reconciliations in the appendix.

With that, I'd like to hand it over to Mr. Klaus Kleinfeld.

Klaus Kleinfeld - Chairman and CEO: Thank very much, Kelly. Good afternoon to everybody. Before we go through all the details, let me give you a summary on how I see this quarter. I think it's been a great start into the year; we are delivering a strong number of results here. All segments are profitable. Net income is the best net income since the third quarter of '11; EBITDA 16% up sequentially, 11% year-over-year; record profitability on the downstream, 20.9% EBIT margin to be precise. We have improved performance also on the upstream side, despite year-on-year lower metal prices. Strong liquidity, $1.6 billion cash on hand and a solid global end market growth and we're reaffirming our aluminum demand growth of 7% for 2013.

So with that, let me hand over to Bill Oplinger, our new CFO. Bill, welcome.

William F. Oplinger - EVP and CFO: Thanks Klaus. As Klaus just highlighted, we had a very strong first quarter. I'll start the financial review with a quick summary of the income statement. As you can see, revenue of $5.8 billion was down slightly on a sequential quarter basis based on two fewer production days in 1Q versus 4Q. Compared to last year, revenues are down 3% on lower LME prices, which were down 8% and the impact of primary production curtailments in Europe. However, due to strong productivity, which you will see more details on later, cost of goods sold percentage actually improved sequentially by 110 basis points, and overhead costs were also down sequentially from the highs we saw in 4Q '12.

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