Alcoa 1Q15 Earnings Call Notes

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7% Revenue growth driven by auto and aero

“Revenue has been growing year-over-year by 7%. And if you look under the hood, you actually see that this has been driven primarily by the organic growth coming from auto & aero.”

Strong aircraft growth supporting growth

“We continue to project for this year growth between 9% to 10%. And the reason for that is because we see large commercial aircraft segment growing at 9.6%. The order book for that large segment stands now at 9 years of production.”

Auto growth this year between 1-4%

“Automotive North America, we continue to believe we will see a growth for this year between 1% and 4%. Sales are strong, 5.6%, up year to date. I actually looked at the SAAR rate, the seasonally adjusted annual rate, and in January we project 16.4 million for the year, and the projection now is at 17.1 million. Very strongly driven by light trucks.”

Production flat, inventories down

“Production is flat, and this is mainly a factor of the new models ramping up. So, we see that basically following the sales situation. Inventories are down, which those two things you see go together at 58 days. In March the industry average was rather between 60 and 65 days.”

Packaging shrinking

Packaging North America, unchanged. We see it continue to shrink a little bit, minus 1% to minus 2%. That’s mainly the demand decline of the carbonated soft drink side, and partially offset by moderate growth in the beer segment.”

Recall that there are two engines here

“we are building really two value engines. So one is lightweight multi-material innovation powerhouse. And the other one is we are creating the globally competitive commodity business”

Shifting to higher value add

“We are increasing the share in exciting growth markets. I will come to that. We have a full pipeline of innovative products. We are really using all growth levers. We are shifting to higher value add and we are expanding in multi-materials and we are increasing our expertise in multiple technology areas.”

Increasing competitiveness on commodity side

“And on the globally competitive commodity side, we are really increasing our competitiveness. And we do this to mitigate the downside, which I’ve said multiple times, we cannot influence the commodity prices, but what we can influence is where we are on the competitiveness side.”

The LME price is driven by sentiment

“The LME price is driven, as we’ve been saying for now years, by sentiment. I mean, it moved up and down depending on what Mario Draghi or Janet Yellen were on a day, right, whereas the regional premium is really driven by the market fundamentals.”

The Chinese economic team is very, very good

“I have great admiration for what the Chinese government has done over the last four years. And the smartness of the economic team is unbelievably good. I had a chance to be exposed to them many, many times.”