- Financial Performance: Q3 revenue was $3B (-1% QoQ), net income $232M, and adjusted EBITDA of $270M, with a $786M gain from the Ma'aden joint venture sale.
- Gallium Supply Chain Initiative: A $100-ton gallium project at Wagerup, funded by Japan, U.S., and Australia, aims for first metal by 2026, with cost-plus offtake agreements.
- Kwinana Closure Cost: Permanent closure of the Kwinana smelter incurred a $1.6B charge due to water management and remediation, with land redeveloped for resale.
- CBAM Regulatory Impact: Anticipated $40-$50/ton European premium from the Carbon Border Adjustment Mechanism (CBAM) in 2026, boosting aluminum prices.
- Debt Reduction Target: $135M remaining to meet adjusted net debt goal, with $60M allocated to Massena anode furnace upgrades and $100M for Warrick smelter restart.
Operational Highlights
The company achieved record aluminum production at five smelters and increased Midwest premium revenue. CEO William Oplinger emphasized the company's commitment to safety, stability, and operational excellence. Alcoa closed the sale of its 25.1% interest in the Ma'aden joint venture, resulting in a $786 million gain. The company is progressing with its Australia mine approvals process, with the Western Australia EPA expected to publish its assessment and recommendations by the end of 2026.
Market Trends and Outlook
Alumina prices have declined due to ample spot availability and refinery expansions, while bauxite prices remain firm. Aluminum LME prices rose 7% sequentially, driven by a weaker US dollar and supply tightness. Alcoa expects higher shipments and a sequential release of working capital in the fourth quarter. The company is optimistic about the demand profile, with strength in packaging and electrical, but weakness in construction and transportation.
Valuation and Capital Allocation
Alcoa's P/E Ratio is 8.05, indicating a relatively attractive valuation. The company's Net Debt / EBITDA ratio is 0.51, suggesting a healthy debt position. Alcoa prioritizes debt repayment, with $135 million to go to reach its adjusted net debt target. The company will evaluate additional returns to stockholders and growth options. Alcoa is open to M&A opportunities across the product line, focusing on creating significant synergies.
Regulatory Updates and Future Plans
Alcoa expects the Carbon Border Adjustment Mechanism (CBAM) to come into effect in 2026, potentially raising the European premium by $40-$50 a ton, which would have a positive impact on the company. The company will host its Investor Day on October 30, discussing its strategic vision, market position, operational excellence, and financial outlook. Alcoa is exploring opportunities for its idled assets, particularly at Massena East, where electrical infrastructure is already in place.