Alcoa Announces Fourth Quarter Loss on Charges Associated with Cutting High-Cost Smelting Capacity, Market Weakness

Alcoa (NYSE:AA) today reported a loss from continuing operations of $193
million, or $0.18 per share, in fourth quarter 2011 on restructuring
charges associated with the closure and curtailment of high-cost
production capacity, lower aluminum prices, and continued market
weakness. Excluding the net negative impact of restructuring and other
special items, the loss from continuing operations was $34 million, or
$0.03 per share.

The fourth quarter 2011 loss compares to income from continuing
operations of $172 million, or $0.15 per share, in third quarter 2011,
and income of $258 million, or $0.24 per share, reported in fourth
quarter 2010.

For the full-year 2011, Alcoa reported income from continuing operations
of $614 million, or $0.55 per share, more than double 2010 results. The
Company ended the year in a strong cash position, with $1.9 billion cash
on hand.

'Alcoa turned in solid performance in a volatile year by responding
quickly to changing market conditions and relentlessly managing cash. We
stayed focused on growth and took aggressive action to cut costs,
improve our competitiveness, and strengthen our balance sheet,? said
Alcoa Chairman and CEO Klaus Kleinfeld.

'For 2012, we expect global aluminum demand to grow 7 percent and are
forecasting a global deficit in primary aluminum supply.?

Alcoa′s growth projection is ahead of the 6.5 percent rate required to
meet the Company′s forecast of a doubling in global aluminum demand
between 2010 and 2020. Aluminum demand grew 10 percent in 2011 on top of
13 percent growth seen in 2010.

Alcoa also projects that growing demand for aluminum, combined with
market-related production cutbacks, will result in a global aluminum
industry deficit of 600,000 metric tons in 2012.

Alcoa projects global growth in the aerospace (10-11 percent),
automotive (3-8 percent), commercial transportation (2-5 percent),
packaging (2-3 percent), and building and construction (4-5 percent)
markets.

Fourth Quarter 2011

Revenue for fourth quarter 2011 was $6 billion, down 7 percent from the
$6.4 billion reported in third quarter 2011, but up 6 percent over
fourth quarter 2010 revenue of $5.7 billion.

Sequentially, fourth quarter revenues were lower, primarily due to
continued European weakness brought on by the sovereign debt crisis and
resulting global market uncertainty. Realized pricing declined for both
alumina (down 9 percent) and aluminum (down 12 percent). Results were
also affected by lower revenues in packaging (down 17 percent),
industrial products (down 15 percent), building and construction (down
15 percent), commercial transportation (down 8 percent), and automotive
(down 2 percent) compared to third quarter 2011. Aerospace revenue grew
(up 5 percent) over the sequential quarter, as did revenue in the
industrial gas turbine market.

Fourth quarter 2011 net loss was $191 million, or $0.18 per share,
compared to income of $172 million, or $0.15 per share, in third quarter
2011 and $258 million, or $0.24 per share, in fourth quarter 2010.
Adjusted EBITDA in fourth quarter 2011 was $445 million.

Included in the fourth quarter loss were $159 million of
restructuring-related charges, primarily associated with the closure or
curtailment of high-cost smelting production capacity, of which
approximately 60 percent is non-cash. Another $26 million in charges
associated with discrete income tax items and uninsured losses were
offset by the positive impact of mark-to-market changes on certain
energy contracts and the sale of land in Australia.

Despite deteriorating prices and market conditions in the fourth
quarter, Alcoa turned in outstanding performance against the Company′s
financial targets. Alcoa generated $656 million in free cash flow in the
quarter, four times better than results from the sequential quarter,
while cash from operations was $1.14 billion. Alcoa improved liquidity
in fourth quarter 2011, with cash on hand rising 46 percent to $1.9
billion compared to third quarter 2011. The Company ended the fourth
quarter with days working capital at 27, a record low and 3 days lower
than 2010.

As previously announced, Alcoa plans to close or curtail 531,000 metric
tons, or 12 percent, of its system smelting capacity to improve the
Company′s competitive position.

Curtailments at Alcoa′s smelters in Portovesme, Italy, and La Coruña and
Avil?s, Spain, represent 240,000 metric tons, or 5 percent, of Alcoa′s
global capacity. The previously announced closing of Alcoa′s smelter in
Alcoa, Tennessee, and two lines at the Company′s Rockdale, Texas,
smelter, account for another 291,000 metric tons of capacity reduction.

In addition to the closures and curtailments, Alcoa will aggressively
accelerate actions to reduce the cost of raw materials used by its
Primary Products business and will adjust capacity across the Company′s
global refining system to reflect internal demand as well as prevailing
market conditions.

2011 Full-Year

For the year 2011, revenue was $25 billion, compared to $21 billion in
2010. Income from continuing operations was $614 million, or $0.55 per
share, in 2011 compared with $262 million, or $0.25 per share, in 2010.
In 2011, income from continuing operations includes special items
resulting in a net negative impact of $198 million, or $0.17 per share,
compared with special items resulting in a net negative impact of $297
million, or $0.29 per share, in 2010. Excluding the impact of special
items, income from continuing operations was $812 million, or $0.72 per
share, for 2011.

Full-year 2011 net income was $611 million, or $0.55 per share, compared
to $254 million, or $0.24 per share, in 2010.

Alcoa turned in strong performance against all of its financial targets
in 2011. Capital spending for 2011 was $1.3 billion, 86 percent of the
target. For the year, Alcoa invested $249 million in the Company′s joint
venture in Saudi Arabia, 62 percent of the target. The Saudi project
continues on-time and on-budget, with first production in the smelter
and rolling mill scheduled for 2013.

Alcoa finished 2011 with a debt-to-capital ratio of 35 percent,
consistent with the targeted range of 30 to 35 percent. Debt-to-capital
was negatively impacted by the annual measurement of the Company′s
pension plan liability, due to a significantly lower discount rate.

Alcoa also generated $906 million in free cash flow for the year, $2.2
billion in cash from operations, and ended the year with $1.9 billion
cash on hand.

Segment Information

Alumina

After-tax operating income (ATOI) in the fourth quarter was $125
million, up 92 percent compared to $65 million in fourth quarter 2010,
but a decrease of $29 million, or 19 percent, compared to third quarter
2011. Adjusted EBITDA fell $82 million to $229 million, a sequential
decrease of 26 percent. Fourth quarter results were negatively impacted
by lower pricing. Increased raw materials costs were offset by improved
productivity, lower energy costs, and positive currency impact. The sale
of land in Australia contributed $30 million to segment ATOI. Alumina
production in the fourth quarter was a record 4.18 million metric tons.

Primary Metals

ATOI in the fourth quarter was a negative $32 million, a decrease of
$210 million over fourth quarter 2010 and a decrease of $142 million
from third quarter 2011. Adjusted EBITDA fell $201 million to $71
million. Third-party realized metal prices decreased 12 percent
sequentially on declining London Metal Exchange (LME) cash prices. Lower
LME and cost increases offset positive currency impacts and productivity
gains compared to third quarter 2011.

Flat-Rolled Products

Third-party revenue in the fourth quarter was $1.7 billion, up 4 percent
from the year ago quarter and down 14 percent sequentially. ATOI for the
fourth quarter was $26 million, down 51 percent, or $27 million, from
fourth quarter 2010 and down 57 percent, or $34 million, from third
quarter 2011. Sequentially, the declining performance was driven by
seasonal volume declines in North America and Russia and continued
weakness in the European market. Performance was also unfavorably
impacted by credit losses for several customers.

Engineered Products and Solutions

Revenue in the fourth quarter was $1.4 billion, up 12 percent over the
year ago quarter and essentially flat sequentially. ATOI in the fourth
quarter was $122 million, up 8 percent, or $9 million, from fourth
quarter 2010 and down 12 percent, or $16 million, from third quarter
2011. Sequentially, decreased ATOI was mainly driven by cost increases
and unfavorable product mix, partially offset by productivity
improvements.

Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time
on January 9, 2012 to present the quarter and full-year results. The
meeting will be webcast via alcoa.com. Call information and related
details are available at www.alcoa.com
under 'Invest.?

About Alcoa

Alcoa is the world′s leading producer of primary and fabricated
aluminum, as well as the world′s largest miner of bauxite and refiner of
alumina. In addition to inventing the modern-day aluminum industry,
Alcoa innovation has been behind major milestones in the aerospace,
automotive, packaging, building and construction, commercial
transportation, consumer electronics, and industrial markets over the
past 120 years. Among the solutions Alcoa markets are flat-rolled
products, hard alloy extrusions, and forgings, as well as Alcoa ? wheels,
fastening systems, precision and investment castings, and building
systems in addition to its expertise in other light metals such as
titanium and nickel-based super alloys. Sustainability is an integral
part of Alcoa′s operating practices and the product design and
engineering it provides to customers. Alcoa has been a member of the Dow
Jones Sustainability Index for 10 consecutive years and approximately 75
percent of all of the aluminum ever produced since 1888 is still in
active use today. Alcoa employs approximately 61,000 people in 31
countries across the world. More information can be found at www.alcoa.com.

Forward-Looking Statements

This release contains statements that relate to future events and
expectations and as such constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements include those containing such words as
'estimates,? 'expects,? 'forecasts,? 'outlook,? 'plans,? 'predicts,?
'projects,? 'should,? 'targets,? 'will? or other words of similar
meaning. All statements that reflect Alcoa′s expectations, assumptions
or projections about the future other than statements of historical fact
are forward-looking statements, including, without limitation, forecasts
concerning global demand for aluminum, end market conditions, or other
trend projections, targeted financial results or operating performance,
and statements about Alcoa′s strategies, objectives, goals, targets,
outlook, and business and financial prospects. Forward-looking
statements are subject to a number of known and unknown risks,
uncertainties, and other factors and are not guarantees of future
performance. Important factors that could cause actual results to differ
materially from those expressed or implied in the forward-looking
statements include: (a) ?material adverse changes in aluminum industry
conditions, including global supply and demand conditions and
fluctuations in London Metal Exchange-based prices for primary aluminum,
alumina, and other products, and fluctuations in indexed-based and spot
prices for alumina; (b) ?deterioration in global economic and financial
market conditions generally; (c) ?unfavorable changes in the markets
served by Alcoa, including automotive and commercial transportation,
aerospace, building and construction, distribution, packaging, and
industrial gas turbine; (d) ?the impact of changes in foreign currency
exchange rates on costs and results, particularly the Australian dollar,
Brazilian real, Canadian dollar, and Euro; (e) ?increases in energy
costs, including electricity, natural gas, and fuel oil, or the
unavailability or interruption of energy supplies; (f) ?increases in the
costs of other raw materials, including aluminum fluoride, caustic soda
or carbon products; (g) ?Alcoa′s inability to achieve the level of
revenue growth, cash generation, cost savings, improvement in
profitability and margins, fiscal discipline, or strengthening of
competitiveness and operations (including moving its refining and
smelting businesses down on the industry cost curve and increasing
revenues in its Flat-Rolled Products and Engineered Products and
Solutions segments), anticipated from its restructuring programs,
productivity improvement, cash sustainability, and other initiatives;
(h) ?Alcoa′s inability to realize expected benefits from newly
constructed, expanded or acquired facilities or from international joint
ventures as planned and by targeted completion dates, including the
joint venture in Saudi Arabia or the upstream operations in Brazil;
(i) ?political, economic, and regulatory risks in the countries in which
Alcoa operates or sells products, including unfavorable changes in laws
and governmental policies, civil unrest, and other events beyond Alcoa′s
control; (j) ?the outcome of contingencies, including legal proceedings,
government investigations, and environmental remediation; (k) ?the
business or financial condition of key customers, suppliers, and
business partners; (l) ?changes in tax rates or benefits; and (m) ?the
other risk factors summarized in Alcoa′s Form 10-K for the year ended
December ?31, 2010, Forms 10-Q for the quarters ended March ?31, 2011,
June ?30, 2011, and September 30, 2011, and other reports filed with the
Securities and Exchange Commission. Alcoa disclaims any obligation to
update publicly any forward-looking statements, whether in response to
new information, future events or otherwise, except as required by
applicable law.

The difference between certain segment totals and consolidated amounts
is in Corporate.

Alcoa′s definition of Adjusted EBITDA (Earnings before interest, taxes,
depreciation, and amortization) is net margin plus an add-back for
depreciation, depletion, and amortization. Net margin is equivalent to
Sales minus the following items: Cost of goods sold; Selling, general
administrative, and other expenses; Research and development expenses;
and Provision for depreciation, depletion, and amortization. Adjusted
EBITDA is a non-GAAP financial measure. Management believes that this
measure is meaningful to investors because Adjusted EBITDA provides
additional information with respect to Alcoa′s operating performance and
the Company′s ability to meet its financial obligations. The Adjusted
EBITDA presented may not be comparable to similarly titled measures of
other companies.