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Alcoa(AA) - 2025 Q2 - Quarterly Report
AlcoaAlcoa(US:AA)2025-07-31 20:58

PART I – FINANCIAL INFORMATION Item 1. Financial Statements Alcoa Corporation's unaudited consolidated financial statements reflect improved net income for Q2 and H1 2025, alongside robust cash flow and total assets Consolidated Statement of Operations Highlights (Q2 & H1 2025 vs 2024) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $3,018M | $2,906M | $6,387M | $5,505M | | Net Income (Loss) | $151M | $31M | $699M | $(276)M | | Net Income (Loss) Attributable to Alcoa | $164M | $20M | $712M | $(232)M | | Diluted EPS | $0.62 | $0.11 | $2.69 | $(1.29) | Consolidated Balance Sheet Highlights (as of June 30, 2025) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $5,399M | $4,914M | | Total Assets | $14,990M | $14,064M | | Total Current Liabilities | $3,272M | $3,395M | | Total Liabilities | $8,755M | $8,907M | | Total Equity | $6,135M | $5,157M | Consolidated Cash Flow Highlights (Six months ended June 30) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Cash Provided from Operations | $563M | $64M | | Cash Used for Investing Activities | $(240)M | $(281)M | | Cash Provided from Financing Activities | $10M | $679M | | Net Change in Cash | $368M | $446M | Notes to the Consolidated Financial Statements Key accounting policies and significant events are detailed, including joint ventures, asset sales, debt restructuring, and tax credit benefits - On March 31, 2025, Alcoa formed a joint venture for its San Ciprián operations with IGNIS Equity Holdings, SL (IGNIS EQT), with Alcoa retaining a 75% ownership and continuing as the managing operator24 - On July 1, 2025, Alcoa completed the sale of its 25.1% interest in the Saudi Arabia joint venture to Ma'aden for total consideration of $1.35 billion, expecting to recognize a gain of approximately $780 million in Q3 202530 - In March 2025, a subsidiary issued $1 billion in new senior notes due 2030 and 2032, using the proceeds to tender for and extinguish a significant portion of its existing 2027 and 2028 notes, resulting in a $12 million debt settlement expense6368 - The company recorded benefits related to the Section 45X Advanced Manufacturing Tax Credit of $17 million in Q2 2025 and $31 million in H1 2025, related to its Massena West and Warrick smelters101 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic actions, operational challenges like tariffs, and financial performance, highlighting sequential Q2 net income decrease but strong H1 year-over-year improvement and liquidity Business Update Strategic progress includes the Saudi JV sale and Australian tax ruling, while managing Canadian aluminum tariffs and resuming the San Ciprián smelter restart - The U.S. government imposed tariffs on Canadian aluminum imports, which increased to 50% on June 4, 2025. Alcoa is mitigating the impact by redirecting some of its Canadian production to customers outside the U.S.133134 - The restart of the San Ciprián smelter resumed on July 14, 2025, after being paused due to a widespread power outage in Spain. The restart is expected to be completed by mid-2026135 - On July 1, 2025, Alcoa completed the sale of its 25.1% interest in the Saudi Arabia joint venture to Ma'aden for $1.35 billion in stock and cash, expecting a gain of approximately $780 million in Q3 2025138 - A favorable ruling was received from the Administrative Review Tribunal of Australia, resolving a tax dispute with the ATO. This will result in a net cash impact of approximately $147 million through June 2026 from a tax refund and payment of related accrued taxes139141 Results of Operations Q2 2025 net income decreased sequentially due to lower prices and tariffs, but H1 2025 showed significant year-over-year improvement driven by higher metal prices and lower restructuring Selected Financial Performance | Metric | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales | $3,018M | $3,369M | $6,387M | $5,505M | | Net Income (Loss) Attributable to Alcoa | $164M | $548M | $712M | $(232)M | | Diluted EPS | $0.62 | $2.07 | $2.69 | $(1.29) | - The sequential decrease in net income was primarily driven by lower average realized prices for alumina and aluminum, and tariffs on U.S. imports of aluminum from Canada150152 - The year-over-year increase in net income was primarily driven by higher aluminum and alumina prices, lower intersegment profit elimination, and significantly lower restructuring charges ($19 million in H1 2025 vs. $220 million in H1 2024)150158 Segment Information Alumina segment's Adjusted EBITDA significantly declined due to lower API, while Aluminum segment's EBITDA decreased, impacted by tariffs and LME prices Segment Adjusted EBITDA | Segment | Q2 2025 | Q1 2025 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Alumina | $139M | $664M | $803M | $325M | | Aluminum | $97M | $134M | $231M | $283M | | Total Segment Adjusted EBITDA | $236M | $798M | $1,034M | $608M | - The Alumina segment's performance was heavily impacted by a 38% sequential decrease in the average API to $377 per metric ton168179 - The Aluminum segment incurred approximately $115 million in tariff costs in Q2 2025 on imports from Canada, a sequential increase of $95 million183 Liquidity and Capital Resources The company maintains adequate liquidity with strong cash from operations, a recent debt restructuring, and an undrawn revolving credit facility - Cash provided from operations was $563 million in H1 2025, compared to $64 million in H1 2024, driven by a $774 million favorable change in net income (excluding restructuring)208217 - In March 2025, the company issued $1 billion in new senior notes and used the proceeds to repurchase $890 million of existing notes, extending its debt maturity profile215220221 - The company has a $1.25 billion revolving credit facility maturing in June 2027, which was undrawn as of June 30, 2025222223 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure remains materially unchanged since December 31, 2024, with details on derivative use for mitigation - Alcoa's exposure to market risk has not changed materially since December 31, 2024236 Item 4. Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025237 - No material changes were made to the company's internal control over financial reporting during Q2 2025238 PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various legal proceedings, with management expecting no material adverse effect on its financial position - The company is involved in various legal proceedings arising from the normal course of business239 - Management does not expect the disposition of pending matters to have a material adverse effect on the company's financial position239 Item 1A. Risk Factors No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - The company refers to its Annual Report on Form 10-K for the fiscal year ended December 31, 2024, for a full discussion of risk factors242 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No common stock repurchases occurred in Q2 2025, with $500 million remaining authorized under the July 2022 repurchase program - No shares of common stock were repurchased by the company during the second quarter of 2025244 - As of the report date, $500 million remains authorized for repurchase under the July 2022 stock repurchase program244 Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during Q2 2025245 Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including required certifications and Inline XBRL data files - Lists required certifications by the CEO and CFO (Sections 31.1, 31.2, 32.1, 32.2) and XBRL data files as exhibits248