Alcoa (NYSE:AA) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Summary
Alcoa reported strong first-quarter performance for 2026, with a net income of $425 million, up from $213 million in the prior quarter, and earnings per share rising to $1.60.
The company maintained stable operations, capturing higher metal prices despite disruptions in the Middle East, and continued to advance strategic initiatives, including mine approvals in Western Australia and monetization of idle sites.
Looking ahead, Alcoa expects increased profitability through higher shipments and operational performance, with a focus on safety, operational excellence, and maintaining strong market conditions in the aluminum segment.
Full Transcript
OPERATOR
Good afternoon and welcome to The Alcoa Corporation first quarter 2026 earnings presentation and conference call. All participants will be in a listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press Star then one on your phone. To withdraw your question, please press Star then two. Please note this event is being recorded. I would now like to turn the conference over to Louis Langloua, Senior Vice President of Treasury and Capital Markets. Please go ahead.
Louis Langloua (Senior Vice President of Treasury and Capital Markets)
Thank you and good day everyone. I’m joined today by William Maplinger at Alcoa Corporation President and Chief Executive Officer and Molly Behrman, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Bill and Molly. As a reminder, today’s discussion will contain forward looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause a company’s actual results to differ materially from these statements are included in today’s presentation and in our SEC filings. In addition, we have included some non GAAP financial measures in this presentation for historical non GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today’s presentation. We have not presented quantitative reconciliations of certain forward looking non GAAP financial measures for reasons noted on this slide. Any reference in our discussion to term EBITDA means Adjusted EBITDA finally, as previously announced, the earnings press release and slide presentation are available on our website. Now I’d like to turn over the call to Bill.
William Maplinger (President and Chief Executive Officer)
Thank you Louis and Welcome to our first quarter 2026 earnings conference call. Today we’ll review our strong first quarter performance, discuss our markets and highlight the progress we are making on our strategic priorities. Let me start with the headline. We had a strong start to 2026 driven by execution and we are well positioned to deliver a strong second quarter and full year 2026 performance. Starting with safety, we continued making progress with improved total injury rates in the first quarter. While we’re never satisfied both our leading and lagging indicators are moving in the right direction, our focus remains clear. Fatality and critical risk management are combined with leader time in the field. Our leaders are expected to be on the production floor or mine site, interacting, coaching and reinforcing standards. Safety is not an initiative, it’s the foundation of everything we do. Operationally, we delivered. We maintained stable performance across the system and captured higher metal prices despite significant disruption in the Middle East. Our teams ensured continuity of supply for our operations. Our flexible cast house network continues to unlock value add opportunities and the depth of our commercial, procurement and logistics capabilities was evident this quarter. Strategically, we kept moving forward. In Western Australia we advanced our MINE approvals, completing responses from the public comment period and continuing to work collaboratively with stakeholders. We continue to anticipate ministerial approvals by year end 2026, consistent with the timeline we’ve previously shared. We are in advance discussions on the monetization of our former Messina east smelter site for a data center project. The potential developer has applied for public review. We are still finalizing terms and won’t comment on value today, but we will provide additional details later in the process. Additionally, we are making progress on two other sites in parallel. Our momentum continues into the second quarter. On April 7th we successfully and safely completed the restart of the San Cyprian smelter and on April 14th we issued notice to redeem the remaining $219 million outstanding of our 2028 notes, another clear example of disciplined capital allocation supported by our strong cash balance of $1.4 billion at the end of the first quarter. Looking ahead, we are focused on increasing profitability through higher shipments, continued operational performance and and realizing the benefit of strong market conditions in the aluminum segment. At the same time, we will maintain momentum on the company’s strategic initiatives aimed at creating value. Now I’ll turn it over to Molly to take us through the financial results.
Molly Behrman (Executive Vice President and Chief Financial Officer)
Thank you bill revenue decreased 7% sequentially to $3.2 billion in the alumina segment. Third party revenue decreased 33% due to typically lower first quarter shipments, lower purchased and resold alumina to satisfy third party commitments as well as vessel constraints related to the Middle east conflict and vessel loading issues caused by Cyclone Narelle in Western Australia. Realized prices were also lower for both alumina and bauxite in the aluminum segment, third party revenue increased 3% primarily due to an increase in average realized third party price and increased shipments from the San Cyprian smelter. These impacts were partially offset by seasonally lower shipping volumes from other sites as well as the timing impacts from proactively repositioning inventory within North America. The repositioning creates a timing difference deferring revenue recognition until the second quarter while providing cast house flexibility for additional value add product production and shipments which yield higher margins. Related to my comments on typically or seasonally lower first quarter shipments in both segments, it is important to Note that our first quarter shipments are historically only 23 to 24% of the annual outlook and our fourth quarter shipments are typically 26 to 27% depending on portfolio changes. Coming off the strong fourth quarter 2025 shipment levels, the first quarter of 2026 was mostly in line with our expectations, even if consensus analysts projected higher first quarter net income attributable to Alcoa was $425 million versus the prior quarter of $213 million, with earnings per common share increasing to $1.60 per share. The sequential improvement reflects realized aluminum prices and a favorable mark to market change on the Moden shares. These impacts are partially offset by the net unfavorable sequential impact from non recurring items in 4Q25, including carbon dioxide compensation recognition in Spain and Norway, the reversal of a valuation allowance on deferred tax assets in Brazil and a goodwill impairment charge. On an adjusted basis, net income attributable to Alcoa was $373 million or $1.40 per share, excluding net special items of $52 million. Notable special items include a mark to market gain of $88 million on the modern shares due to an increase in share price during the period. Adjusted EBITDA was $595 million. Let’s look at the key drivers of EBITDA. The sequential increase in adjusted EBITDA of $68 million is primarily due to higher metal prices, mainly driven by increases in LME and the Midwest premium, partially offset by lower sequential shipping volumes in both segments. The Alumina segment adjusted EBITDA decreased $52 million from primarily due to lower alumina prices and lower bauxite offtake margins, partially offset by the non recurrence of a fourth quarter charge related to the announced agreements with the Australian Federal government to further modernize the mining approval framework. The aluminum segment adjusted EBITDA increased $174 million primarily due to higher metal prices and lower alumina costs. These impacts were partially offset by the non recurrence of carbon dioxide compensation in Spain and Norway recognized in the fourth quarter and lower shipping volumes, including the impact of inventory repositioning which deferred EBITDA recognition on 30,000 metric tons to the second quarter and higher costs associated with the San Cyprian restart. Other costs outside the segment were unfavorable $54 million sequentially but primarily due to unfavorable intersegment eliminations. Moving on to cash flow activities for the first quarter of 2026, we ended March with a strong cash balance of $1.4 billion despite consuming cash as we typically do in the first quarter. The $595 million of adjusted EBITDA generated in the first quarter was mostly offset by an increase in working capital. The seasonal working capital build resulted from lower accounts payable inventory replenishment and higher alumina inventory due to shipping delays at the end of the quarter and an increase in accounts receivable primarily on higher metal prices on a days basis. The working capital increase is consistent with prior years and is likewise expected to decrease as we move through the year. Capital expenditures were $119 million which reflect our typical trend of lower spending in the first quarter. We maintain our 2026 outlook for capital expenditures. Environmental and Asset Retirement Obligation (ARO) payments were $85 million which include progress on the Kwinana site remediation Net additions to debt reflect short term borrowings related to inventory repositioning which which will be repaid when the sale of the inventory is recognized in the second quarter. Now let’s take a look at the key financial metrics for the first quarter. Return on equity through the first quarter was 21.9% reflecting a strong start to the year. During the quarter we returned $27 million in cash to stockholders through our regular quarterly dividend. Free cash flow was negative $298 million for the quarter, primarily reflecting seasonal working capital build capital expenditures and environmental and Asset Retirement Obligation (ARO) payments offsetting the quarter’s strong EBITDA. We finished the quarter with a cash balance of $1.4 billion and adjusted net debt of $1.8 billion as announced on April 14th. The company issued notice to redeem on May 15th the remaining $219 million outstanding on our 2028 notes. The notes will be redeemed at par value. This announcement is aligned with our goal to delever and further strengthen our balance sheet. We will continue with disciplined execution of our capital allocation framework where excess cash will be evaluated in competition between value creating growth opportunities and additional returns to stockholders. Now let’s turn to the outlook. We have 2 updates to our 2026 full year outlook. Interest expense will decrease slightly to $135 million with the redemption of our 2028 notes in May. Additionally, our estimate for environmental and Asset Retirement Obligation (ARO) payments has increased to approximately $360 million, up from $325 million to reflect the cash requirements from the announced Agreements to Modernize Mining Approvals framework in Australia for the second quarter of 2026. At the segment level, alumina segment performance is expected to be unfavorable by approximately $15 million due to low price and volumes from bauxite offtake agreements and higher energy prices, primarily diesel associated with the Middle east conflict. Aluminum segment performance is expected to be favorable by $55 million due to inventory repositioning actions taken in the first quarter, higher shipments and product premiums and lower production costs due to the completion of the San Cyprian smelter restart, partially offset by seasonally lower third party energy sales. Based on recent pricing, we expect second quarter benefits from high LME and Midwest premium pricing as well as higher shipments but but this results in higher section 232 tariff costs on our Canadian metal imported to the US we expect tariff costs to increase by approximately $35 million. Alumina costs in the aluminum segment are expected to be favorable by $20 million. Regarding intersegment profit elimination, any further decrease in API prices is estimated to result in no intersegment profit elimination if API increases. Our prior guidance applies below EBITDA within other expenses. The first quarter of 2026 included favorable currency impacts of approximately $30 million which may not recur. Based on last week’s pricing, we expect the second quarter of 2026 operational tax expense to approximate 110 to $120 million. Now I’ll turn it back to Bill Thanks Molly.
William Maplinger (President and Chief Executive Officer)
Let’s begin with the alumina segment dynamics. The current environment remains challenging with the Middle east conflict exacerbating margin pressure across global refineries. FOB Western Australia, alumina prices stayed relatively weak through the quarter. At the same time, disruptions tied to the Middle east conflict, including the closure of the Strait of Hormuz, have pushed energy and freight costs higher, while related demand losses are weighing on refinery margins outside of China. Our alumina cost position provides resilience in a low price environment and we have insulated ourselves from spot energy volatility through long term contracts and financial hedges. In China, pressure on margins has been more muted. Higher domestic Alumina prices, lower bauxite costs and stable coal pricing, largely unaffected by the conflict, have supported refinery margins. That said, we do expect costs to rise as the caustic market tightens and higher freight costs begin to flow through seaborne bauxite supply. To date in 2026, roughly 4 million metric tons of annual refining capacity has been curtailed in China, with cargoes originally intended for Middle east smelters rerouting into China. We expect pressure on China prices in the near term. Forthcoming supply from new refinery projects in coastal China and Indonesia, along with the weaker demand from the Middle East Smelters will continue to weigh on the global aluminum market through the first half of the year. Finally, on bauxite prices remained weak through the first quarter on ample guinea supply. Elevated freight rates related to the Middle east conflict have lent some support to Cost, Insurance, and Freight (CIF) China pricing despite soft FOB levels. And the market is now closely watching Guinea’s export policy for the next directional signal. Now let’s look at the conflict in the Middle east and why it matters to the alumina segment. The Middle east is the largest alumina importing region in the world, with supply routes for raw materials heavily dependent on the Strait of Hormuz. Each year, roughly 8.8 million tons of alumina and 6 million tons of bauxite transit through the strait. That changed on February 27th as a result of the conflict. More than 2.5 million tons of annual smelting capacity, nearly 2 million tons of refining capacity are offline year to date. That’s a meaningful disruption to the global system. Aluminum refineries in the region are integrated with …
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