Quarterly Earnings Conference Report
Tennis30
AlcoaQuyarterlyreport.pdf
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• Revenue amounted to $2595 mln (-3% YoY) against our estimate of $2475 mln. The 4.8% discrepancy was caused by higher proceeds from the primary aluminum production segment ($1683 mln vs. our estimate of $1585 mln) based on an increase in raw material deliveries of 638 kt compared to our forecast of 595 kt (7% discrepancy).
• Adjusted EBITDA totaled $172 mln (+110% YoY) as opposed to our guidance of $114 mln. The divergence was driven by higher revenues.
• Alcoa announced that it will take over Alumina Limited for $2.2 bn through the issue of ordinary shares. Alumina Limited shareholders will receive 0.02854 Alcoa shares per 1 Alumina Limited share. The ownership structure in the new company will be as follows: 68% will be held by Alcoa shareholders and 32% by Alumina Limited shareholders.
AA LTM performance
We have raised our adjusted EBITDA forecast from $1344 mln (+83% YoY) to $1522 mln (+107% YoY) for 2024 and we set the guidance at $1542 mln (+1% YoY) for 2025 amid: • Decrease in gross expenses as a percentage of revenue from 87% to
86% by the end of 2025 due to adjustments in the operating cost model;
• Higher revenue expectations in the aluminum segment due to better capacity utilization and in the aluminum oxide/bauxite segment.
We have revised downwards our target price from $31 to $28 due to: • improvement in EBITDA forecast till 2025; • increase in outstanding shares from 179 mln to 262 mln; • lower discount factor. We maintain HOLD status. Upside: 12%.
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Alcoa: above the forecastTicker AA Status HOLD Last price
25.3
Target price
28.0
Upside 12%
Twilio Inc. Q4 2023 report Research – US shares February 27, 2024
Q4 2023 financial results
$ mln 4Q23 4Q22 %
Revenue 2595 2663 (3%)
EBITDA 172 82 110%
Net income (150) (395) -
Outlook
25.3
Contacts:
Alexander Sayganov
Head or research
a.sayganov@inv est-heroes.ru
Andrey Kurapov
Senior Analyst
a.kurapov@inves t-heroes.ru
Dmitry Novichkov
Senior Analyst
d.novichkov@inv est-heroes.ru
Telegram InvestHeroes
@InvestHeroes
Source: company data, non-GAAP
In January 2024, the average aluminum price increased by 1.1% MoM to $2,242/t. Current prices are ~2220 $/t. According to the latest data (Fitch), aluminum demand outside China was not as strong as previously expected. In addition, China continued to ramp up aluminum production at a strong pace as power supply improved and capacity was restored as a result of significant reductions in electricity costs and sufficient water in reservoirs. Over the last 11 months, China's aluminum production grew by 3.5% YoY to 38.1 mt (+6.0% to 2021).
Considering the above factors, we expect the aluminum market to be balanced in 2024, and thereafter, given the growing consumption in the green energy segment and the lack of proper growth in aluminum prices, the market will move to a deficit.
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Macro statistics on aluminium
Q4 2023 financial results: Alcoa 27.02.2024
63,8 68,7 69,2 70,4 73,6 77,3 64,6 67,8 68,4 70,4 73,6 74,7
0,8 - 0,9 - 0,9 0,0 0,0
- 2,6 2020A 2021A 2022A 2023F 2024F 2025F
Aluminium market balance, mt
Мировое потребление, млн. тонн
Мировое производство, млн. тонн
Рыночный баланс, млн. тонн
We expect aluminum stocks to stand at 5.9-6.2 in weeks of consumption in 2024. Further, they are likely to begin to deplete if aluminum production does not rise sufficiently.
10,1
9,1 8,3 8,3 8,3
5,8
8,2 6,9
6,2 6,2 5,9
3,9
2020A 2021A 2022A 2023F 2024F 2025F
Aluminium reserves forecast
Запасы, млн т. Запасы в неделях потребленияInventories, mt Inventories by weeks of consumption
World consumption, mt
World production, mt
Market balance, mt
We maintain our aluminum price forecast at $2 438/t (+6% YoY) through 2024. In a balanced environment, we expect the average margin of producers to be at the 80th percentile averaging 15%, with producers at the upper end of the cost curve operating at around zero margin.
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Macro statistics on aluminium
3 266
2 881
2 353 2 324 2 439 2 281 2 204 2 225 2 335 2 418 2 473 2 500
1Q 22
A
2Q 22
A
3Q 22
A
4Q 22
A
1Q 23
A
2Q 23
A
3Q 23
A
4Q 23
A 1Q
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2Q 24
F
3Q 24
F
4Q 24
F
Aluminium price forecast, $/t
Q4 2023 financial results: Alcoa 27.02.2024
In 4Q2023, the company produced 10.4 mt of bauxite (-2% YoY) versus our forecast of 10.1 mt, which was in line with our expectations. Third- party sales volumes increased by 82% YoY to 2 mt vs. our estimate of 1.8 mt (11% discrepancy), while the average selling price reached $62 per tone (expectations were $60 per tone, 3% difference). We have revised upward our forecast for bauxite sales to third parties in 2024 from 6.3 mt(- 17% YoY) to 7.2 mt (-5% YoY), and in 2025 we set the target at 7.2 mt (+0% YoY) due to higher demand from other producers.
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Operating results: bauxite
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Bauxite sales to third parties, mt
До пересмотра После пересмотраBefore revision After revision
With higher sales but unchanged bauxite price expectations, we have revised upwards our revenue guidance for the division from $377 mln (- 22% YoY) to $430 mln (-11% YoY), and set our 2025 guidance at $435 mln (+1% YoY).
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Revenue from bauxite sales to third parties, mt
До пересмотра После пересмотраBefore revision After revision
Q4 2023 financial results: Alcoa 27.02.2024
In 4Q2023, the company produced 2. 8 mt of aluminum oxide (-8% YoY) vs. our forecast of 2.9 mt, which was in line with our expectations. Third- party sales increased by 1% YoY to 2.2 mt compared to our forecast of 2.2 mt (in line with expectations), while the average selling price amounted to $349 per tone (expectations were $348 per tone, divergence - 0.3%). We maintain our forecasts for aluminum oxide sales to third parties in 2024 at 7.8 mt (-10% YoY) and in 2025 we set our forecast at 7.6 mt (-3% YoY) due to the complete shutdown of the Kwinana plant in Australia. We keep our revenue expectations for 2024 at $2937 million (-6% YoY) and $3082 million (+5% YoY) for 2025.
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Operating results: aluminium oxide
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Aluminium oxide sales, kt
Межсегментные продажи, тыс. тонн
Отгрузка 3-м лицам, тыс. тонн
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Nominal aluminium oxide production capacity, kt
Sa ̃o Lui ́s (Alcoa interest)
Poc ̧os de Caldas (Alcoa Interest)
Wagerup (Alcoa interest)
Pinjarra (Alcoa Interest)
Kwinana (Alcoa Interest)
Q4 2023 financial results: Alcoa 27.02.2024
Intersegment sales, kt
Shipment to third parties, kt
In Q4 2023, the company produced 541kt of aluminum (+5% YoY) against our forecast of 489kt, which was above our expectations due to higher capacity utilization of 82% versus 78% forecast, on the back of continued strong demand. Third-party sales declined by 0.5% YoY to 638 000 tones compared to our forecast of 595 000 tones (7% divergence), and we estimate the average selling price at $2679 per tone (expectations: $2667 per tone, 0.4% divergence). We have revised upward expectations for aluminum sales to third parties in 2024 from 2.07 mt (-2% YoY) to 2.11 mt(+0% YoY), and in 2025 we set the forecast at 2.11 mt(+0% YoY) as we improve our estimate of capacity utilization from 77% to 80% over the horizon to 2025, while maintaining sales conversion. We increase our revenue expectations for the segment in 2024 from $7 194 mln (+4% YoY) to $7 437 mln (+7% YoY), and set the forecast at $7 451 mln (+5% YoY) in 2025.
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Operating results: aluminium
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Revenue from aluminium sales to third parties, mt
До пересмотра После пересмотраBefore revision After revision
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Primary aluminium production and capacity utilization rate
Производство алюминия, млн тонн (левая шкала)
Уровень загрузки мощностей, % (правая шкала) Aluminum production, mt (left scale)
Capacity utilization rate,% (right scale)
Q4 2023 financial results: Alcoa 27.02.2024
It became known that Alcoa will take over Alumina Limited for $2.2bn through the issue of ordinary shares. Shareholders of Alumina Limited will receive 0.02854 shares of Alcoa for 1 share of Alumina Limited. The ownership structure in the new company will be as follows: 68.75% will be held by Alcoa shareholders and 31.25% by Alumina Limited shareholders.
Alumina Limited owns a 40% interest in the AWAC joint venture with Alcoa, a leading producer of bauxite and aluminum oxide (Alcoa owns the remaining interest). Alcoa has previously already consolidated all of AWAC's production results (100 per cent), as the effective ownership is 60 per cent. In other words, nothing will change in terms of production and sales reporting.
We believe that the transaction is of a dubious nature as it will result in dilution of Alcoa shareholders in favor of Alumina Limited. Previously, Alumina Limited shareholders held a 40% stake in the aluminum oxide and bauxite businesses (the resource and cheaper base for aluminum), but now they own 31.25% in both the aluminum oxide and premium aluminum businesses. In turn, Alcoa shareholders previously had a 100% stake in the premium aluminum and 60% in the oxide business, while the stake in aluminum production is now 68.75%.
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Acquisition of Alumina Limited
Before After
Q4 2023 financial results: Alcoa 27.02.2024
We have revised downwards our target price from $31 to $28 due to: • Improvement in EBITDA forecast on the horizon up to 2025;
• Increase in outstanding shares from 179 million to 262 million; • Lower discount factor. We maintain HOLD status. Upside: 12%.
Alcoa is another player in the commodities sector that could be a winner as a result of a robust energy transition and depletion of existing global reserves.
Status - HOLD. The target price is $28. Upside: 12%. We value the company based on 2025 results due to the expected price stabilization in the global aluminum market. The target price of $28 was derived by discounting the fair value to 2025 at a 13% p.a. rate.
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Valuation
Multiple method 2025
EBITDA $ mln 1 542 Forward multiple x 5,4
Valuation Target EV $ mln 8 293 Net debt $ mln 867 Target cap $ mln 7 426 Outstanding shares mln pcs. 262
Target price $/share 28
Upside % 12%
Q4 2023 financial results: Alcoa 27.02.2024
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Financial results forecast
Standard: IFRS
AA Q1 24 Q2 24 Q3 24 Q4 24 2024 2025 Revenue ($ mln) 2586 2763 2695 2760 10 805 10 968 EBITDA (($ mln) 305 463 353 401 1522 1542 Net income ($ mln) 38 152 70 107 367 381 EPS ($) 0,21 0,85 0,39 0,60 2,06 2,14
Q4 2023 financial results: Alcoa 27.02.2024
Контакты:
114115, Москва, Дербеневская наб., д. 7, стр. 12
DISCLAIMER
This material (hereinafter ‘’the research report’’) does not constitute a personal investment recommendation, is provided for informational purposes only and contains data on the value of assets, assumptions about the future financial condition of issuers and the fair price of assets for a period of 12 months from the date of the release of this research report and / or situation in financial markets and related events. The financial instruments mentioned in the research report may not be suitable for the person concerned. The research report is based on the information available to the Company as of the release date of the research report. The research report is not an offer to buy or sell assets and cannot be considered as a recommendation for such actions. The company does not represent that all information provided herein is the only correct one. The company is not responsible for the use of information contained in the research report, as well as for possible losses from any transactions with assets, which are made on the basis of the data contained in the research report. The company does not undertake to correct the report in connection with the loss of the relevance of the information contained in it, as well as in the event of a discrepancy between the data provided in the research report and reality.
The research report is for informational purposes only; the information presented in it is not a guarantee or promise of profitability of investment in the future. Investing in financial instruments is associated with a high degree of risk and does not imply any guarantees either for the return of the principal invested amount or for the receipt of any income. Statements by any persons about a possible future increase in the value of the invested funds can be considered only as assumptions. Investments in assets are associated with the following risks: risks associated with doing business in a particular jurisdiction, risks associated with economic conditions, competitive environment, rapid technological and market changes, as well as with other factors that may lead to material deviations from projected indicators. These factors may cause actual results to differ materially from the assumptions or forward-looking statements of the Company, which are contained in the research report.
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Q4 2023 financial results: Alcoa 27.02.2024
Contacts: 114115,Moscow, 7 Derbenyovskaya Embankment, building 12
