Good afternoon and welcome to Alcoa Corporation First Quarter 2021 Earnings Presentation and Conference Call. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. Please go ahead.

Thank you, and good day, everyone. I am joined today by Roy Harvey, Alcoa Corporation’s President and Chief Executive Officer; and William Oplinger, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Roy and Bill. 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 the 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. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today’s presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced the earnings release and slide presentation are available on our website. With that here is Roy.

Thank you, Jim, and thanks to everyone for joining our call. It is a real pleasure to present Alcoa’s excellent first quarter. As you can see from our release, our results were strong in both the top and bottom line with our strongest results since the record-setting year in 2018. I’m very happy with the progress we’ve made at Alcoa on multiple fronts, particularly this quarter. As the world’s economies continue to spin up from the lows of last year’s pandemic-induced lockdowns, we are capturing the benefits of stronger markets. We are delivering to customers the sustainable materials they need to meet improved demand. Importantly, we are operating safely and reliably, demonstrating the same kind of relentless discipline that helped guide us through more turbulent times. Bill will discuss the financial results in more detail, but I’d like to take the opportunity to characterize our most important achievements. We have net income of $175 million or $0.93 per share. On a year-over-year basis, this is more than double the $80 million in the first quarter of 2020. Adjusted net income was $150 million, which more than tripled last quarter’s $49 million. Adjusted EBITDA excluding special items was $521 million, a 44% increase sequentially. And significantly, we finished the quarter with $2.5 billion of cash on hand. I’m proud of the work our team is doing to drive each of these results. As Alcoans, we never shy away from getting the hard work done, working inclusively and remaining focused on executing against our goals. Our Company is getting better and stronger. And this was certainly the case in the first quarter. Before we get into the details, though, I want to emphasize again that I’ll always place an emphasis on our values and our strategic priorities regardless of market conditions. The COVID-19 crisis has served as a strong pressure test. When the pandemic hit last year, Alcoa was well-prepared to implement rigorous processes to protect our people and support our communities, keep our operations running, and preserve and generate cash. Today, our values and our strategic priorities are working to keep us on track and to help drive positive results. Most importantly, we had no fatal or serious injuries in the quarter. The safety of our workforce, whether employees or contractors, is always our most important responsibility, and our teams continue to make progress in using proactive tools to keep all of our people safe. In the first quarter, we also continued to make progress on our strategy, accomplishing several key actions. First, we successfully closed on the $670 million sale of the Warrick rolling mill in Indiana, a non-core asset. That sale combined with the Gum Springs sale last year, put us at the top of our target of between $500 million and $1 billion for non-core asset sales, although we’ll continue to pursue other opportunities where it makes sense. Last month in our Aluminum segment, we reached an agreement to repower the Portland Aluminium smelter in Australia. Our agreements with multiple power providers and the Australian government will improve the smelter’s competitiveness and also help provide reliability to the electric grid in the state of Victoria. Also, our strong cash position coupled with a favorable debt market provided Alcoa an opportunity to prefund certain pension obligations and pay off higher interest rate debt via a $500 million debt issuance at a 4.125% interest rate. This was the lowest rate debt we’ve ever issued as an independent company. Earlier this month, we retired in full the $750 million senior notes that were due in 2024, which were issued at a 6.75% coupon. In April, we also contributed $500 million to our U.S. pension plans, improving our funded status. These actions position Alcoa for minimal cash outflows for debt repayment or pension contributions for the next several years. This provides added optionality to use future access free cash for items aligned with our capital allocation framework. And Bill will discuss more about this in a moment. We are also seeing stronger markets, markets that are evolving to reflect the key issues facing our planet. We are fortunate that aluminum is a sustainable solution to help solve many challenges due to its inherent qualities. It is lightweight, strong, durable, and infinitely recyclable. We are also extremely well-positioned to meet our customers’ demands for sustainably produced products. As a company with an integrated upstream aluminum value chain, we have a distinct advantage to differentiate with sustainably produced bauxite, alumina, and aluminum. And additionally, we already have the industry’s most comprehensive portfolio of low-carbon products through our Sustana family, which includes the industry’s first and only low-carbon smelter-grade aluminum product. Finally, an important point to consider for the future is China’s evolving role in the global aluminum industry. We have been encouraged to see the strict discipline now evidenced in their issuance and enforcement of operating permits that comply with their supply-side reforms and environmental targets. And over these last months, it is obvious that the country with the world’s largest capacity in aluminum is working to reduce its carbon footprint with increasing impacts on today’s and tomorrow’s aluminum operations. Alcoa is ready to win in this rapidly changing world with improving markets, increased environmental discipline in China, and our strong ESG focus in the upstream aluminum industry. With that, let’s get straight to the results. Bill, please go ahead.

Thanks, Roy. First, before diving into what was a very good quarter financially and operationally, let’s cover the four important strategic actions taken in March and early April wherein we significantly improved our cash, debt maturity profile, and liquidity position. First, in early March, we issued at 4.125%, $500 million with eight-year bonds maturing in 2029. Second, at the end of March, we closed on the Warrick rolling mill sale to Kaiser Aluminum, generating cash proceeds of approximately $600 million. These two actions took our cash balance to $2.5 billion on March 31. Thirdly, on April 1st, we funded $500 million into our U.S. pension plans. And lastly, on April 7th, we called the entire $750 million of our 6.75% eight-year bonds maturing in 2024. On a pro forma basis, the net of these actions brings our cash balance to $1.3 billion, in line with our capital allocation framework target of retaining $1 billion cash on the balance sheet and eliminates all material debt maturities until 2026. These actions also significantly moved us toward meeting our adjusted proportional net debt target and created substantial pension funding flexibility. We believe that our optimal capital structure and WACC is achieved with a proportional adjusted net debt of $2 billion to $2.5 billion. At the end of the first quarter, we improved that metric over $700 million from year-end to $2.7 billion and just $200 million from the top of our target range. Further progress on achieving the net debt target can be made through reducing debt, lowering pension OPEB net liability, or increasing cash on hand. The $500 million pension funding substantially improves the U.S. pension and our overall pension position. Funded status for the U.S. pensions moved from 81% at year-end to an estimate of greater than 95% on April 1st and creates a prefunding balance of roughly $1 billion. Further, taken as a whole, our global pensions are estimated to be greater than 90% funded. The change in funded status benefits Alcoa in two ways. First, it allows us to derisk the pension investment strategy. It reduces balance sheet volatility associated with both asset returns and discount rate changes. Second, it can free up future cash flows. Should we choose to direct cash flows to other uses, or should funded status continue to improve, the prefunding balance can be used to meet our expected minimum funding requirements for the U.S. pensions. Now, let’s talk about the first quarter of 2021 in more detail. Revenues increased approximately $500 million, up 20% sequentially and 21% year-over-year on higher aluminum and alumina prices. Higher revenues translated into earnings per share of $0.93 per share on a GAAP basis or $0.79 per share after special items that include the gain on the sale of the Warrick rolling mill. Adjusted EBITDA, excluding special items, was $521 million, up 44% sequentially and up 62% compared to the first quarter of 2020. Looking at drivers of adjusted EBITDA, excluding special items, the entire benefit in aluminum and alumina prices flowed through to the bottom line. Unfavorable currency, higher energy prices, and slightly lower seasonal shipments were totally offset by the resumption of shipments at the San Ciprián smelter and favorable inventory costs. In the segments, bauxite adjusted EBITDA was lower on the intercompany pricing change we announced in January, non-recurrence of a favorable contract true-up in the fourth quarter of 2020, and earnings at non-operated mines. Alumina more than doubled, up $130 million sequentially to $227 million on higher alumina prices and lower bauxite costs. Aluminum improved 56% to $283 million in the first quarter, primarily due to higher metal prices, slightly offset by higher alumina costs. Turning to the balance sheet and cash flow. Working capital usually increases in the first quarter. And excluding the impact of the Warrick rolling mill, days working capital increased 5 days sequentially to 25 days and improved 4 days compared to the year-ago quarter. Other key metrics also improved as return on equity was 18.5%, and the $2.5 billion cash balance helped to reduce our proportional adjusted net debt to $2.7 billion, improving over $700 million from year-end 2020. Free cash flow less NCI distributions was negative $131 million, reflecting the expected use of working capital in the first quarter, approximately $344 million. Cash sources of $1.6 billion are from nearly equal contributions from adjusted EBITDA, the rolling mill sale, and the debt issue. Uses after working capital included capital expenditures of $75 million, cash income taxes of $71 million and pension/OPEB funding of $70 million, which does not include the $500 million funded April 1st. Our outlook for the year continues the trend set by our very good first quarter. Shipments are expected to remain at high levels, supported by consistent production levels at the operations. We’ve increased the estimated full year 2021 alumina shipments range by 100,000 tons. Several cost elements are expected to improve a total of $45 million on a full year basis with transformation costs that are $5 million, non-operating pension and OPEB expense that are $25 million, and interest expense that are $15 million. Cash flow impacts now note the additional U.S. pension funding of $500 million made on April 1st and assume using the U.S. prefunding balance for the remainder of the year, and also note the debt repayment of $750 million made on April 7th. All other cash flow impacts remain on track. For the coming quarter, we no longer have earnings from the Warrick rolling mill, which booked adjusted EBITDA of $14 million in the first quarter. However, we expect to see increased benefit from the current higher aluminum market prices and continued improvement in value-add aluminum shipments and pricing. As is often the case, we expect that the second quarter will be our highest level of maintenance activity for the year, approximately $25 million higher than the first quarter, and then return to a lower level in the third quarter. Also, based on current energy market conditions around the world, we expect an unfavorable impact of $20 million sequentially. Finally, we expect tax expense for the second quarter to be approximately $90 million. In summary, we are on track for an excellent year, consistent with a very good first quarter. Now, let me turn it back to Roy.

Thanks, Bill. Next, I’d like to highlight the improvements we’re seeing across the fundamentals of our industry. Perhaps the easiest way to demonstrate the impact of these underlying changes is by examining the realized price for aluminum, which is the highest we’ve seen since 2018. As you can see, prices have continued a steady upward trend from the lows at the start of the global pandemic. The average realized price was up 36% since the low in the second quarter of 2020. Economic recovery, manufacturing restarts, and tightness in the physical availability of aluminum have all contributed to this latest price rally. We have observed strong macroeconomic trends in the first quarter, including positive GDP and industrial production growth in many of the world’s leading economies. Also, the announced and implemented monetary and fiscal stimulus programs have supported stronger demand in aluminum’s end-use markets, which is expected to continue as vaccination efforts progress, lockdowns are eased, and additional stimulus measures reach further into the economy. Now, turning to the right-hand side of the slide and on markets specifically. In aluminum, we saw an approximate 10% increase in shipments of value-add products during the first quarter. This was the third consecutive quarter of sequential improvement for our metal cast and specific shapes for alloys. Also, we are seeing significant year-over-year growth in our order book for these value-add products. We currently expect value-add products to represent more than half of our shipments in 2021 and to grow more than 20% year-over-year. In alumina, the average API price for the quarter increased sequentially. Currently, however, high freight rates have pressured the alumina price. We expect our smelter-grade alumina shipments to slightly increase in 2021. In bauxite, we saw lower sequential third-party segment revenue due to lower shipments. As I said last quarter, we expect full year 2021 third-party bauxite shipments to increase as we continue to boost production. Next, I’d like to spend a few moments on aluminum industry fundamentals, specifically with regard to China. Changing dynamics in this country have the potential to have a major impact on the global primary aluminum industry. Over the last 10 years, China increased its global production of aluminum, and this was particularly acute from 2011 to 2017 as its manufacturing sector grew at a breakneck pace, with subsidized primary aluminum capacity. Many of these unfair subsidies continue today. However, growth has been lower over the last four to five years due to a combination of slower development in manufacturing as well as China’s own supply-side reforms. This includes strictly enforcing a capacity permit program with a cap at 45 million tons of annualized capacity and other constraints that will limit capacity in certain provinces. Over the last year, China has announced other policies that could further impact the aluminum industry. It has set carbon dioxide reduction goals for the country, announcing last year targets of achieving a peak in emissions by 2030 and carbon neutrality by 2060. China has also announced its latest five-year plan to reduce by 18% its carbon intensity per unit of GDP by 2025. The plan includes carbon intensity targets for individual provinces. And we are already seeing these changes on the ground. Some provinces are preventing the launch of new energy-intensive industrial projects, including primary aluminum smelting, in order to meet their targets, and others are canceling preferential power tariffs for smelters. We have seen this occur in two provinces. Inner Mongolia curtailed smelters and delayed or canceled projects, and Gansu canceled preferential smelter power tariffs. In addition, the China Nonferrous Metals Industry Association announced in April a draft goal that called for peaking emissions in the industry by 2025, five years ahead of the national carbon peak goal, as well as a target to reduce by 40% industry carbon emissions by 2040. Furthermore, China has launched its own national emissions trading scheme this year, which will first target the power industry, including captive power. It is likely that the next round will focus on emissions-intensive industries and include primary aluminum. Adding costs and supply restrictions to carbon emissions will be a challenge for China’s domestic primary aluminum smelting industry, of which more than 80% is powered by coal. In fact, 5% of China’s total carbon emissions come from the nonferrous metals industry, the majority of which comes from primary aluminum smelting. To put that in perspective, China’s primary aluminum industry alone produces a similar amount of carbon emissions each year as the entire country of Australia. In summary, China’s recent moves toward decarbonization have the potential to address persistent overcapacity in the country. Given the pressures and constraints in China, it is likely that we will see supply growth in the country slow even further as the primary aluminum industry there approaches its 45 million-ton capacity cap. And that can drive significant positive change in the global aluminum industry’s fundamentals. China is not the only significant change occurring across our industry. Other global economies are also taking steps to transition to a carbon-constrained world. And our stakeholders are demanding rapid change when it comes to a broad range of ESG-related issues. And as I’ve noted previously, Alcoa is well positioned to meet the demands of this new, sustainably-focused world. Our Sustana line of low-carbon products is the most comprehensive in the aluminum industry and includes EcoSource, the world’s first and only low-carbon smelter-grade alumina product. We are the world’s largest third-party provider of alumina, and our refining system also has the globe’s lowest average carbon dioxide equivalents, something that we’re leveraging with this differentiated product. EcoSource supports decarbonizing aluminum, while expanding our Sustana line to the broader aluminum value chain. It offers no more than 0.6 metric tons of carbon dioxide equivalents per metric ton of alumina, which is half of the global alumina industry’s average carbon content. And our measurement includes direct and indirect emissions from mining and refining. We expect to make our first customer shipment of EcoSource alumina in May. Meanwhile, we’re also seeing additional demand for aluminum in our Sustana line and for metals certified by the aluminum stewardship initiative. Alcoa has operations in all three of our segments, certified ASI’s exacting standards, and we have earned both ASI’s performance and chain of custody certifications, which allow us to market ASI-certified products across our value chain. In March, we announced that metal from our joint venture, ELYSIS, and our low carbon EcoLum, which is produced with no more than 4.0 tons of carbon dioxide equivalent, is being used in the wheels of the Audi e-tron GT, the manufacturer’s first electric sports car. We supplied the low-carbon aluminum to Ronal Group, which produced the wheels with EcoLum and an allocation of metal produced from the ELYSIS zero-carbon smelting technology that we invented. That technology, which eliminates all greenhouse gases, is now being ramped up to a commercial scale by the ELYSIS joint venture. While the market for low-carbon aluminum continues to develop, we are well positioned to fill the needs of a society calling for lower greenhouse gas emissions and customers who demand products that include assurances of responsible production. Whether it’s electric vehicles, wind turbines, solar panels, or battery technology, aluminum is an essential material for global economies that are working to address climate change and control carbon emissions. Carbon pricing initiatives are either in place now or being scheduled for implementation in 64 jurisdictions, including the European Union, Canada, and China. And 31 countries and the EU have GHG reduction targets in place or net-zero pledges. And here in the U.S., the Biden administration is making climate change a top priority. Alcoa has specific GHG reduction targets that align with the Paris climate accord, and we’re well positioned for this important transition occurring in the global market. Next, I want to reinforce the tremendous progress we’ve made on our strategic priorities. At Alcoa, we have a relentless focus on continuous improvement. I am impressed by our global team of employees. When we set aggressive goals, we stretch to achieve them. Last year was the first full year working within a new operating model, which further streamlined our business. It delivered an annual run rate of $60 million in savings. Importantly, we had this in place before the pandemic, and the fact that we performed so well in a time of crisis demonstrates that we designed a system that can work well for the future. We can now count this action as fully completed and working effectively. We have also achieved our goal of generating between $500 million and $1 billion from the sale of noncore assets. With the Gum Springs sale last year and the Warrick rolling mill sale last month, we’ve completed this program, finishing towards the top end of the target. Finally, we’ve made progress in our portfolio review, which includes opportunities for significant improvement, curtailments, closures, or divestitures. Last month, we were happy to reach new power agreements for the Portland Aluminium smelter. We appreciate the collaboration with multiple power generators, the Australian federal government, and the state of Victoria, in working with us to help improve the smelter’s competitiveness. Also, we continue to work on solutions for the San Ciprián smelter in Spain. We agreed with the workers’ representatives and the government to pursue an exclusive sales process with the Spanish government-owned entity. We’ve complied with that agreement and are working in good faith with all our stakeholders to find the best solution. It’s important to note that we’re now in the second year of this five-year portfolio review program, and we will continue to work as expeditiously as possible to provide clarity for our employees, communities, and other stakeholders. Finally, as we prepare to take your questions, I want to emphasize three major points to leave you with today. First, as Bill detailed, our balance sheet is solid due to the numerous actions we’ve taken, including paying off higher interest-rate debt and reducing our pension net liability, which has improved our net debt position. With no major cash outlays due in the foreseeable future and with significant cash on hand, we have much greater flexibility within our capital allocation framework. Second, we’ve delivered on some key components of our strategic actions that have improved this Company for the long term. We’re doing exactly what we’ve said, improving Alcoa so that can be successful through all market cycles. We will continue to drive for consistent improvements. That’s the Alcoa way. Third, we are working to define what it means to be a sustainable aluminum company with best-in-class processes from mine to metal, the most comprehensive low-carbon products portfolio in the industry, and the continued pursuit of operational excellence. We will continue to act with integrity, operate with excellence, and care for people. All of this aligns too with our strategic priorities, including our work to advance sustainably. Thanks for your attention. And Bill and I are now ready to welcome your questions.

Our first question today comes from Carlos de Alba with Morgan Stanley.

Thank you very much. Congratulations, Roy and Bill. My first question is about the greater flexibility you have achieved in your balance sheet and cash balance. How should we consider the priorities for this flexibility? What would you like to do with it? Can you provide any updates on the growth projects in alumina or any other initiatives you have in mind? Additionally, could you quantify or describe the potential benefits of the renegotiated Portland smelter agreements regarding energy costs? Thank you.

Roy, do you want me to take the capital allocation question?

Yes, why don’t you take it in general, and then I can add a few comments at the end.

Certainly. Carlos, your question on capital allocation is excellent. The decisions we've made this year, along with favorable market conditions, have positioned the company well to effectively carry out our capital allocation program. We experienced a significant reduction in proportional net debt during the first quarter, primarily due to the sale of the Warrick facility, bringing our proportional net debt down to $2.7 billion. Our target range is between $2 billion and $2.5 billion. When examining the capital allocation program, there are four main areas where we can allocate excess free cash flow. The first is improving our proportional net debt, which remains a key focus for us, and we expect to reach our target range this year. Next, we have returns to shareholders and ongoing actions related to our portfolio review. Lastly, we mentioned mid-sized growth projects. Currently, the mid-sized growth projects, particularly in Australia and Brazil refining, are on hold, a decision made in 2020, and we will reassess them over time. These are our capital allocation priorities. We have made significant strides in reducing debt, and I believe we will continue to do so in the current market environment. Regarding the Portland transaction, we are very pleased to have repowered Portland. It’s a strong facility supported by a capable workforce and advanced technology. While we haven't disclosed specifics about the power contract, we acknowledge that it's a valuable asset in today’s market. At this moment, I can't provide further quantification, but we are excited that this facility now has a future for the next five years after being under portfolio review.

And Carlos, I'd like to add a few quick points because I completely agree with Bill. Regarding Portland, one of the highlights of this announcement is that during our portfolio review, we’ve emphasized there are several potential outcomes. It’s encouraging to establish this five-year deal for a facility that is currently strong and competitive, especially with the improved power pricing for Portland. This exemplifies what can be achieved when you have power providers, governments, and a workforce committed to making improvements. Concerning capital allocation, as Bill mentioned, I am very pleased with the progress we've made, especially in improving our net debt target. Even amidst the pandemic, we've managed to advance our portfolio restructuring. We’ve taken significant steps that enhance our options moving forward. As we come out of the first quarter and look towards the rest of 2021, we find ourselves well-positioned with numerous great options ahead.

If I could just tag on one more comment, Carlos. We talked about the proportional net debt. But underneath the proportional net debt, you’ve got the debt side and pension. It should be apparent to everyone through this press release that our pension situation is markedly better today than it has been since we were an independent company. Our global pension systems are greater than 90% funded. Our U.S. pension system is greater than 95% funded. And the fact that we prefunded an additional $500 million gives us $1 billion pre-funding balance that essentially eliminates the need to make contributions to the U.S. pensions through 2025. And that’s all assuming today’s interest rates in today’s asset returns, you can never count on that staying the same. But as we look forward, that frees up significant cash flow. If you simply compare the amount of cash that we’re projecting today versus what was in the most recent 10-K, if we use our prefunding balance, it reduces our cash requirements by a couple of hundred million dollars a year over the next few years. So, it gives us a lot of flexibility, it gets us very close to our net debt target, and just strengthens the Company.

All right. Very impressive results and clearly open up space for potential dividends or share buybacks. So, great. I appreciate it. Good luck.

Thanks, Carlos.

Our next question will come from Alex Hacking with Citi.

My first question is on the alumina market. You laid out I think really helpfully everything going on in China with regards to aluminum. And obviously, it looks really bullish. How do you think all that plays out in aluminum? I’m kind of curious there. And then, the second question, congrats on all the success on the balance sheet. It’s really great to see the Company in such good shape. Is there potential still for more asset sales? I know that you have that land package in Texas that I don’t think you sold, if I remember correctly. And I guess, you’ve got some power assets in Brazil and things like that, or are you effectively done with the asset sales now that you’ve hit the targets?

Sure. I'll begin with your second question. We initially set a goal of $500 million to $1 billion in asset sales and successfully generated over $800 million from Gum Springs and Warrick. This means we've met our target. However, we still have the Rockdale land in Texas, which spans approximately 30,000 acres and is listed at $250 million. We're actively exploring opportunities to sell this asset. Additionally, we have a team assessing some of our closed and curtailed assets to maximize their value, which might lead to smaller asset sales as well. Regarding the hydro assets in Brazil, we are satisfied with our current position and likely continue to own them for now. Roy, would you like to address the aluminum market question?

Thanks, Bill, and I appreciate the question, Alex. I want to highlight a few points, particularly regarding China and some broader aspects. Firstly, from a short-term perspective, we've noted some trends in our presentation. Increasing freight rates and the pricing balance between China and the global market suggest that there is not a significant opportunity for arbitrage to move tons into China. Despite aluminum prices rising, our prices have remained relatively stable, indicating a balanced supply and demand situation. The aluminum market has high transparency, making it easy to observe transactions. Looking ahead, the supply side in China has undergone significant reforms, with strict enforcement of regulations. However, clarity around future changes, especially concerning alumina, is lacking. Two key trends to note are the increased transparency regarding environmental management both globally and within China. This is particularly relevant for bauxite residue management, where we emphasize using the best methodologies across our operations—this push for transparency helps create a level playing field internationally. Another major influence on the Chinese alumina industry is the decrease in bauxite reserves, leading to higher imports. This growth in the imported bauxite industry means we participate in that market. However, it raises costs due to freight and mining expenses from different locations. Overall, China has become a formidable competitor in the alumina business, and while there are opportunities for us, it also drives us to enhance the competitiveness of our refineries as we monitor market developments moving forward.

Our next question comes from Lucas Pipes with B. Riley Securities.

Hey. Good afternoon, everyone. And I would like to add my congratulations. One number that stood out to me in particular is the ROE of 18.5%. So, congratulations on that. And some of the questions we’ve already had kind of touched on levers, ways to continue to improve that metric. And I wanted to ask maybe a little bit more open-ended. But, you’ve done a great job of optimized assets. You sold assets. From here on out, how do you continue to drive that figure higher? Thank you very much.

Lucas, thanks for the question. I appreciate that you noticed the 18.5%. One of the things about our Company, as all of you know, we have a joint venture partnership in the bauxite and the alumina business. We also have a somewhat complex tax situation where we pay taxes in Australia, but in many places around the world, with net operating losses that we have, we don’t have to reserve for future taxes on profitability. That ends up resulting in a quarter like this, where you see strength in the earnings in the aluminum business really all falling to the bottom line, and that’s what you see in that ROE calculation. Before I get to what’s next, and I’ll actually let Roy address what’s next, it shouldn’t get lost in the first quarter results, the strength of the operations that we’ve had all through 2020, through the pandemic and into the first quarter of 2021. When you look at the bridge that I showed in the presentation, we’re making the volumes that we need to make, and we’re making cost improvements on top of that. And so, in a market that’s got good, strong tailwinds to be able to make the tons as stably as predictably and as safely as we have been doing and also deliver on cost savings, just a tremendous amount of credit goes to our operations team in our operations around the world. So, Roy, do you want to address some of the things that we would be looking at next?

You made an excellent point about the strong foundation that the stability of our operations provides as we plan for future growth and focus on return on investments. We take a long-term approach to our investments and aim to communicate this clearly both internally and to our investors. It's crucial for us to think beyond short-term market changes and focus on the long-term, especially with the significant shifts we see, including developments in China and the push for responsible production as part of the low-carbon revolution and the aluminum stewardship initiative. This context offers numerous opportunities. When analyzing our portfolio for ways to enhance returns across our product lines, we see promising prospects in our ELYSIS partnership, which is still in the research and development stage. In aluminum, we have competitive plants with solid support for both pricing and production initiatives. There are also opportunities for modest projects that can increase production, built on our operational stability and the strong capabilities of our aluminum group. In alumina, as mentioned earlier, we have medium-sized projects ready to pursue, but we need confidence in market support and to minimize capital costs due to the competitive landscape. We're focused on leveraging our technological expertise and optimizing our bauxite resources, which presents good opportunities for driving earnings. Although bauxite pricing has been softer recently, our substantial reserves give us the chance to expand our mining efforts if we have the right customers and price stability. Overall, there are numerous avenues to enhance our company. Our improved net debt position and operational stability reflect these efforts, thanks to our dedicated team. Additionally, we are committed to being disciplined in our capital deployment to deliver value to our shareholders, in alignment with the various capital allocation strategies we've discussed.

I really appreciate the very detailed answer. I have a quick follow-up on the value-add product and the opportunity there. It seems like pretty impressive growth. Can you share with us, do you spend capital in that segment, or is that really just the very strong manufacturing recovery that we’re seeing with you adding more value-add products? And from here on out, what do you think is the growth potential for that product? Thank you.

Yes. Value-added wise, I think, the improvement that you’re seeing now really is the benefits of the return in our markets. And so, when you look across, and particularly in Europe, North America, you are seeing a lot of demand returning. And then, as vaccinations continue to be rolled out as you see manufacturers get back and you’ve seen that downstream demand come into place, I think we’re seeing just a lot of strength. And so, from that perspective, it’s really a matter of getting back to where we should be and really making good use of the facilities that are already in place. When we look to the future, I mean, that’s, of course, going to depend a bit on how the recovery progresses. And I think, we always need to be cognizant that there can be surprises in both directions, both positive and negative. But, we can also consider how we try and creep forward value-added. There’s always targeted investments that we can make. They tend to be very modest compared with the investments that we would put in, for example, in creeping a smelter or in driving new production in a refinery. However, we would need to make sure that we’ve got both the molten metal available in order to produce them or a scrap input, if we were to choose to try and use some scrap or find a good business case to make sure that it would be sensible in order to drive more value added. So, it’s certainly additional possibilities that sit inside of that and it’s something that we continuously review. It’s one of the benefits of our portfolio across the world is that we are in some very vibrant value-added product markets. Now, those have been a lot of changes over these last couple of years with some additional inputs, et cetera. And also with some of the programs, 232 tariffs, et cetera, that you’ve seen that have altered some of those product flows. But we always try and look through that and again, look for the long-term so that we can actually see a good positive outcome for any investment that we’d actually put into place.

Our next question will come from David Gagliano with BMO Capital Markets.

Hi, thank you for taking my questions. Many of my queries have already been addressed, but I would like to ask for more details on the capital return or capital allocation policy. There has been significant progress and positive insights regarding future potential and the prefunding of the pension. My main question is whether equity shareholders can expect dividends in 2021 at this time.

Dave, I don’t think we’re going to comment on whether they should expect dividends. What I would say is, given the current market situation, I think we can get our targeted net debt situation within our target range of the 2 to 2.5. And after that, the goal will be to maintain it at that level and then allocate capital between the three other prongs of the capital allocation model.

All right. I thought I’d give it a try. All right. And then, just on the additional business considerations. Obviously, you called out a lot of what looks like really kind of one-timers in the second quarter for higher seasonal maintenance and energy-related costs. As we think about the third quarter, are there any offsets to simply assuming that those just go away in the third quarter, all the ones that are called out as one-timers, is there anything that we should be thinking about that say that some of that’s going to bleed into the third quarter?

Yes. We will provide guidance for the third quarter at the start of that period. However, I believe the point you raised is very valid. We have made it clear that the $20 million in seasonal maintenance for the alumina segment represents the peak maintenance period in the second quarter, and we expect a decline in the third quarter. Similarly, the $5 million in the aluminum smelting segment typically sees maintenance in the second quarter, but we expect that will diminish in the third quarter. Additionally, with the sale of the Warrick rolling mill, we will lose those earnings as that asset has been sold. To summarize the second quarter, while there are some one-time items to consider, we are also benefiting from strong market conditions, with high metal prices and regional premiums globally, as well as robust demand and pricing in our value-add products business. Therefore, we anticipate that the second quarter should yield strong results, although we need to keep in mind the mentioned factors.

Our next question will come from John Tumazos with Very Independent Research.

Thank you. Congratulations on the good times in the earnings. It’s been a little while since the new smelter in Iceland and the participation in Saudi Arabia, and the refinery and bauxite in Saudi Arabia and Juruti, bauxite in Brazil. Is there an appetite for a project, if it were a smelter, would you be building a wind farm, or would you be comparing solar and tax productivities and the Sinai desert versus Arabia, the Sahara, the Kalahari, the Sonora, West Texas and other desserts? Would you do a renewable smelter integrated in designer wind?

Yes, John. I appreciate your forward-looking question. As always, we are monitoring market changes to envision what the future holds. Currently, we don't have any major growth projects planned, but we will announce any significant developments when they arise. Regarding the future of smelting, it will almost certainly involve a dedicated renewable power source. At Alcoa, we don't see a nonrenewable smelter becoming an option, whether for us or the industry at large. Additionally, the revolutionary technology being developed in ELYSIS is an exciting opportunity that we will evaluate before deciding on any new facilities. The advantage of ELYSIS lies in its operational cost improvements, as it eliminates the need for an anode facility, allowing for increased productivity in the same space. We are also focused on ensuring that it remains competitive in terms of capital costs. Given current market trends, connecting to a renewable power source is essential to leverage the low-carbon market, and incorporating ELYSIS technology would result in the cleanest and greenest aluminum available. We are analyzing these developments for the future, and it promises to be an exciting time, but we have nothing specific to announce at this moment.

So, John, if I could just add two cents to that. One thing to keep in mind is that motion is going to be powered by wind in part in the future. So, we’ve signed a series of wind contracts. So, as you and I look back at the history of this industry over the last 10 or 20 years, who would have thought that a smelter would be wind powered, but we will have a smelter that is, in large part, wind powered going into the future.

Our next question comes from Timna Tanners with Bank of America.

I wanted to ask two questions. One is just if you were in our shoes, how do you think about modeling green aluminum? Is it just a talking point or a niche business? Is there a way to quantify that opportunity in your mind that you could guide us to? And then, my second question is just, do you think we’re approaching any incentive pricing for restarts or new capacity when you add together the aluminum price and regional premiums, or do you think that global costs have risen enough to where that’s not in reach yet? Thanks.

Let me start by addressing the green aluminum market, which is currently experiencing growth. It's difficult to predict its future landscape, making it challenging to establish a clear model. One key point we want to emphasize is the need to differentiate levels of green aluminum rather than focusing on a single standard. It's essential for the market to understand the entire value chain leading to aluminum, including the production methods for bauxite and alumina, as well as the direct emissions involved in aluminum production. This consideration is critical for customers evaluating the carbon footprint of their portfolios. For us at Alco, this topic is particularly significant. Regarding modeling, we are already starting to see premiums emerge in this new market, but they may not accurately reflect future potential. The more we differentiate these products, the greater the opportunity within the green aluminum sector. Additionally, this differentiation should align with global expectations around carbon costs and potential carbon taxes. Modeling this landscape is certainly complex. However, it’s important to recognize that not all aluminum companies are identical, and the quality of green aluminum can vary significantly. Bill, do you have any further insights on how to approach modeling this?

No, it's currently a small market, and it's just beginning to grow. I was talking to some of our marketing team today, and they're noticing increasing interest from certain customers, and it's starting to build. Some specific customers are beginning to recognize the potential of green aluminum, but it remains a small market for now. Timna, you asked about something, go ahead.

I was going to discuss the incentive capacity and the potential for new or restarted capacity coming online. Currently, the market is showing signs of strength. We're observing some inflation in raw materials, although it hasn't reached significant levels yet, and that can vary from quarter to quarter. Analyzing our portfolio, which is within our control, each smelter presents its own advantages, challenges, and circumstances. This includes factors such as the technology used in the smelter, the availability of power—whether renewable or not—and how long we can sustain operations since restarting a plant from a curtailed state can be costly and time-consuming. When Alcoa assesses this, it goes beyond just current pricing; it involves understanding the foundations that support continued pricing and, importantly, ensuring competitiveness and profitability throughout the economic cycle. While I won't speculate on where we are in the cycle, we remain committed to continuously evaluating our plants to ensure they remain competitive in generating strong profits in today's market, as well as considering which plans we could reactivate when needed.

Our next question comes from Emily Chieng with Goldman Sachs.

I wanted to touch a little bit on sort of the progress with the portfolio restructuring review here. We’ve certainly seen some updates on San Ciprián and Portland, but there’s clearly still capacity under review. It sounds like from your last comments that the high metal price environment doesn’t necessarily change any of this thinking and everything still under consideration heal. But, when should we think about maybe sharing the next update in the sort of 3.5-year program to go?

I believe you covered many of the key points, Emily. This program takes time, and Portland is a good example since we've been working on it for over two years. When considering structural changes, as you know, we don’t discuss plans that haven’t been announced, especially in relation to the portfolio review. It sometimes takes time for those changes and improvements in competitive cost structures to take effect, and we don't typically communicate this to the market. Now that Portland is behind us, we are currently negotiating with the state-owned entity regarding a potential divestiture of the San Ciprián plant. Beyond that, there is no specific timeline for making different decisions about the other plants in the portfolio. We still expect to have some tons remaining in that program, and we will announce developments when the time is right and when we are ready to take action on each facility.

Great. That’s helpful. And if I can squeeze one last question in. Just around the carbon pricing, I know you guys put a great slide out on that, but any early impacts or signs of that starting to flow through in your operations and how you might be thinking about sort of the aluminum outlook going forward?

Yes. So right now, I think, on the product side, low-carbon products, you are starting to see some sales and you saw our first EcoSource sale, which is the alumina product and then also some sales and EcoLum, et cetera. And so, that has a positive impact on the product side. On carbon taxes and carbon prices and how they’re impacting, I think there is indirect impact that happens inside of the aluminum pricing environment itself and perhaps even into the regional premiums depending on what the different efforts might be there. So, to me, because there’s so much talk about carbon pricing and where this will take us in the knock-on impact on the industry, I think you can see those indirect impacts already inside of some of the pricing environment that we’re experiencing today. I’m not sure that’s a bit of a squishy answer, but I think that’s the best I can do.

Our next question comes from Michael Dudas with Vertical Research.

So Roy, just maybe a follow-up on Timna’s thought on restarting capacity. There’s been expectations from investors that have seen for years, aluminum supply would be a lot easier to bring onto the marketplace relative to say other nonferrous metals and such. But given what you talked about in China and the fact that this renewable power is probably going to be somewhat tight capacity given what the use of that is going to be around the world because everybody wants to decarbonize. Do you think that that growth curve has really flattened out quite a bit? Is it going to take a longer period of time for supply to catch up to whatever the demand growth is in this industry? Is that what we’re starting to see emerge given the confluence of environmental, decarbonization and some of the issues that you mentioned in China?

Yes, Michael, let me try to address that and please give me feedback if I’m missing the point. Generally, bringing facilities out of curtailment is a challenging endeavor. It can be expensive and involves significant negotiations to reopen power contracts or find solutions beyond just the fluctuating pricing environment. While we tend to assume a positive future, it’s important to consider that reality. From Alcoa's perspective, we must ensure that there’s a valid reason for curtailing a facility, and similarly, there should be a reason for bringing it back online. This process takes time and carries risks, as you need substantial experience to restart these facilities. As such, making the decision to reactivate a facility is quite difficult for us. However, we do look for opportunities in curtailed facilities to see if we can address any underlying issues, such as renegotiating power contracts or mitigating impacts. This can take time, and we are cautious not just to focus on current prices but to look ahead at least 12 to 18 months or more due to the time needed to recover that investment. Thanks, Michael.

This concludes our question-and-answer session. And I’d like to turn the call back over to Roy Harvey for any closing remarks.

Yes. Thank you. And I’d like to thank everyone once again for joining us today and for all of the really good questions. I’m proud of the work that all of my fellow Alcoans are accomplishing, and I really am happy with how it has made our Company stronger. Today, we have an improved balance sheet, and we are even better positioned for the future. Our strategies are working in making Alcoa resilient through all market cycles. We will continue to focus on our values and on our priorities. And we are well positioned for a more sustainable world with materials and solutions that Alcoa can provide. I am truly excited for the possibilities. Please be safe. And I look forward to talking to you in April for our second quarter results. Good night. And thank you, operator, for all the support.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.