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CALL PARTICIPANTS
President and Chief Executive Officer — William F. Oplinger
Executive Vice President and Chief Financial Officer — Molly S. Beerman
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RISKS
Molly Beerman reported $895 million in restructuring and related charges from the permanent closure of the Kwinana refinery in fiscal Q3 2025 (period ended September 30, 2025), emphasizing this as a direct financial impact for the quarter.
Beerman noted a sequential decrease in adjusted EBITDA of $43 million, primarily attributed to higher Section 232 U.S. tariff costs, adjustments to asset retirement obligations, unfavorable currency impacts, and lower alumina prices.
Oplinger disclosed a workplace fatality at the Alumar smelter and stated, “This loss is a solemn reminder of the critical importance of safety in everything we do,” explicitly framing operational safety as a risk.
TAKEAWAYS
Revenue — $3 billion, Revenue decreased 1% sequentially to $3 billion compared to fiscal Q2 2025; Alumina segment third-party revenue decreased 9% on lower bauxite volumes and prices, while Aluminum segment third-party revenue rose 4% on higher realized prices, partly offset by lower shipments and adverse currency impacts.
Net Income / EPS — Net income attributable to Alcoa (AA 4.24%) was $232 million for fiscal Q3 2025 and earnings per share reached $0.88 for fiscal Q3 2025, both up from $164 million in the prior quarter, due to a $786 million gain on the Ma’aden JV sale and a $267 million mark-to-market benefit, partly offset by $895 million in Kwinana closure charges.
Adjusted Results — Adjusted net loss totaled $6 million, or $0.02 per share; Adjusted EBITDA was $270 million, down $43 million sequentially.
Segment EBITDA Performance — Alumina segment adjusted EBITDA fell $72 million, driven by asset retirement obligation adjustments in Brazil, lower bauxite volume/prices, and lower alumina prices, only partly offset by lower maintenance costs; Aluminum segment adjusted EBITDA increased $210 million, with gains from higher metal prices and lower alumina costs, offset by full-quarter 50% U.S. tariff costs.
Tariff and Logistics Update — Oplinger stated the Midwest premium now fully covers import logistics and the 50% Section 232 tariff, allowing U.S. shipments from Canadian smelters to return to normal levels.
Cash Flow & Debt — Ended the quarter with $1.5 billion cash; cash used in operations was $85 million, including a $25 million working capital increase; adjusted net debt was $1.635 billion, above the top end of the $1 billion to $1.5 billion target.
Capital Returns & Expenditures — $26 million in dividends paid; capital expenditures increased to $151 million.
Full-Year Outlook Updates — Interest expense for 2025 reduced to $175 million (annual outlook); full-year capital expenditures for 2025 lowered to $625 million from $675 million, driven by lower Australian mine spend; payment of prior year income taxes reduced to zero for 2025; asset retirement obligation and environmental spend for 2025 expected to increase by $20 million to approximately $260 million.
Segment Guidance — Alumina segment performance projected to improve by about $80 million in 2025, due to the absence of Q3 charges and higher shipments; Aluminum segment faces a $20 million sequential headwind in 2025 from San Ciprian restart inefficiencies and lower third-party energy sales, partially offset by higher shipments.
Gallium Project — Oplinger announced U.S. and Australian government funding, with Japanese support, for a gallium plant at Wagerup refinery; plant aims for first metal by 2026, has a 100-ton capacity, with Alcoa expected to retain a small offtake share.
Massena Energy Contract & Investment — New long-term competitive energy contract for Massena operations secured, including a $60 million investment in anode bake furnace to support modernization and efficiency.
Alumina and Aluminum Market Trends — Alumina prices declined to $315 per metric ton in the past month due to oversupply, especially from expanded Indonesian and Chinese refining capacity; LME aluminum prices rose 7% sequentially to $2,775 per metric ton, supported by a weaker U.S. dollar, monetary easing expectations, and supply tightness with resilient demand.
Mine Approval Process — Australia mine approval process progressing, with Alcoa preparing responses to about 2,000 individual comments out of 60,000 submitted during the public review period, and Western Australia EPA assessment expected by end of 2026.
SUMMARY
Management reported stable operations with record year-to-date aluminum production at five smelters, resulting in strategic margin and volume gains. The financial results were shaped by non-recurring items including the Kwinana refinery closure, Ma’aden JV exit, and asset retirement adjustments. Shipping volumes from Canadian smelters to the U.S. normalized after the Midwest premium rose to offset higher tariff and logistics costs. Capital allocation priorities remain on debt reduction, with available cash used to fully repay the AWAC-related term loan. Investment in the new U.S.-Australia-Japan gallium project at Wagerup underscores Alcoa’s positioning in the critical minerals supply chain. Outlook adjustments for 2025 include lower projected interest expense, reduced capital expenditures, elimination of prior-year tax payments, and increased expected asset retirement and environmental spending. Management confirmed the San Ciprian smelter restart is on track for full run rate by mid-2026.
Beerman stated, “the structure for that offtake is a cost-plus margin, which is still in the process of negotiation,” clarifying expected economics for the new specialty materials initiative.
Oplinger emphasized, “No. There’s no interest in getting back in the rolling business,” providing strategic clarity on Alcoa’s portfolio direction.
Oplinger highlighted, “So we had redirected about 135,000 tons during the course of the year so far. But at this point, with the Midwest premium as high as it is, it would be back to normal shipments in the United States,” confirming normalization of cross-border supply chain flows.
Management disclosed that the new 10-year Massena energy contract, with two five-year extension options, secures globally competitive, low-carbon power pricing and supports long-term operational investment.
INDUSTRY GLOSSARY
Section 232 tariff: A U.S. trade tariff applied to aluminum imports, in this context raised from 25% to 50% in June 2025.
Midwest premium: A benchmark regional premium paid above the LME aluminum price for delivery in the U.S. Midwest, reflecting supply-demand and logistics costs.
Kwinana refinery: Alcoa’s alumina refinery in Western Australia, permanently closed in fiscal Q3 2025 (period ended September 30, 2025), leading to significant restructuring charges.
Ma’aden joint venture (JV): A 25.1% equity stake in a Saudi Arabian alumina and aluminum company previously held by Alcoa, sold in fiscal Q3 2025.
Gallium: A critical mineral used in semiconductors and electronics, now being extracted as a co-product at Wagerup refinery through the Alcoa/U.S./Australia/Japan initiative.
San Ciprian smelter: An Alcoa aluminum production facility in Spain, slated to reach steady-state production mid-2026 after ongoing restart activities.
AWAC: Alcoa World Alumina and Chemicals, a joint venture structure affecting Alcoa’s historical financing and transactions.
CBAM: Carbon Border Adjustment Mechanism, a European regulatory regime introducing carbon pricing on imported materials including aluminum, effective 2026.
Adjusted net debt: Total debt less cash and cash equivalents, adjusted for certain items as defined by company policy.
Asset retirement obligation (ARO): A financial liability recognizing the future costs associated with dismantling, remediation, or environmental restoration of company facilities.
Full Conference Call Transcript
William Oplinger: Thank you, Louis, and welcome to our third quarter 2025 earnings conference call. Let me begin with safety. In late July, we experienced a tragic loss with the passing of a colleague due to a fatal incident at the carbon plant of our Alumar smelter, our first workplace fatality since 2020. This event has deeply affected the entire Alcoa family; our thoughts remain with his loved ones, friends, and colleagues. Following the incident, safety leaders from across Alcoa, supported by independent external experts, conducted a comprehensive investigation. We held a town hall with employees to share findings, address concerns, and reinforce our safety protocols.
Already, the implementation of the associated actions is well advanced at Alumar, and a series of global measures have been introduced to prevent such incidents in the future. This loss is a solemn reminder of the critical importance of safety in everything we do. We remain steadfast in our commitment to provide a safe working environment.
In the third quarter, we delivered strong operational performance and stability, achieving year-to-date aluminum production records at five of our smelters. These additional tons are particularly valuable as they carry higher margins and contribute meaningfully to our bottom line. With increases in the Midwest premium this quarter, related revenue on our U.S.-produced tons more than offset the net unfavorable tariff impacts on imports of aluminum to the U.S. from our Canadian smelters. We had three one-time items impacting the quarter, which Molly will cover: the permanent closure of the Kwinana refinery, the closing of the sale of our 25.1% interest in the Ma’aden joint venture, and a sizable increase in asset retirement obligations, primarily related to our Brazil operations. Looking ahead to the fourth quarter, we anticipate higher shipments and a sequential release of working capital. The recent rise in the Midwest premium is now sufficient to cover the full cost of logistics for importing aluminum into the U.S., including the 50% Section 232 tariff. While we continue to evaluate the most profitable placement of our spot volumes and direct those shipments accordingly, the Midwest premium now covers costs on the shipments to our U.S. customers on contracts supplied by our Canadian smelters.
Earlier this week, we announced that the United States and Australian governments will provide funding to develop a gallium plant, which will be co-located at our Wagerup alumina refinery in Australia. This follows the support by the Japanese government, which we announced in August. The partners will receive a gallium offtake in proportion to their interest. This project has strategic benefits for Alcoa and the governments supporting it. The support from all three governments underscores Alcoa’s role in the development of the critical mineral supply chain and enables us to provide maximum value from the bauxite resources we already extract in Australia.
The continuity and competitiveness of Alcoa’s Australian mining and refining operations not only support the aluminum industry but also support manufacturing, technology, and defense industries.
Additionally, earlier today, we announced a new long-term energy contract for our Massena operations, as well as a $60 million investment in the anode bake furnace. Securing long-term, competitively priced energy is essential to supporting investments like the rebuild and modernization of the furnace, an initiative that will enhance operational efficiency. This energy contract and major investment commitment are a big deal. Alcoa is taking steps to further strengthen the United States’ primary aluminum production capabilities. I made a commitment to the Massena employees to secure power and to invest in their operation. Now I will ask them to respond with their commitment to continuously improve the operation’s profitability.
We look forward to celebrating this step and certainly welcome President Trump, Governor Hochul, Senator Schumer, and the entire New York congressional delegation, as well as members of the New York Power Authority and Empire State Development, to visit our Massena operation to see what great U.S. manufacturing looks like and to thank them for their support.
The Australia mine approvals process is moving forward with the completion of the public comment period in August. We are preparing our responses and expect to submit to the Western Australia EPA by year-end. The Western Australia EPA has indicated that it will publish its assessment and recommendations by the end of 2026, and we anticipate ministerial approvals by year-end 2026. In summary, this quarter brought both sorrow and progress. The tragic event at the Alumar Smelter underscores the importance of our unwavering commitment to safety. Despite challenges, we achieved record aluminum production and took strategic steps to strengthen our future.
Looking ahead, we’re focused on increasing profitability through higher shipments, improved operations, and key investments such as the Massena Energy contract and anode bake furnace. Now I’ll turn it over to Molly to take us through the financial results.
Molly Beerman: Thank you, Bill. Revenue decreased 1% sequentially to $3 billion. In the Alumina segment, third-party revenue decreased 9% on lower volumes and price of bauxite offtake and supply agreements. In the Aluminum segment, third-party revenue increased 4% on an increase in average realized third-party price, partially offset by lower shipments and unfavorable currency impacts. However, this was lower than our revenue expectation for the segment, primarily due to certain aluminum shipments from Canada to U.S. customers being in transit at quarter-end. This also explains why our tariff costs sequentially were lower than expected. Third-quarter net income attributable to Alcoa was $232 million versus the prior quarter of $164 million, with earnings per common share increasing to $0.88 per share.
The results reflect a $786 million gain on the sale of our interest in the Ma’aden joint venture and a subsequent favorable mark-to-market change of $267 million on the Ma’aden shares, partially offset by restructuring and related charges of $895 million for the permanent closure of the Kwinana refinery in Australia. On an adjusted basis, net loss attributable to Alcoa was $6 million, or $0.02 per share. Adjusted EBITDA was $270 million.
Let’s look at the key drivers of EBITDA. The sequential decrease in adjusted EBITDA of $43 million is primarily due to increased U.S. Section 232 tariff costs on aluminum imported into the U.S. from our Canadian smelters, adjustments to asset retirement obligations, unfavorable currency impacts, and lower alumina prices, partially offset by higher aluminum prices. The Alumina segment adjusted EBITDA decreased $72 million, primarily due to adjustments to asset retirement obligations, primarily in Brazil. Also, lower volumes and price of bauxite offtake and supply agreements and lower alumina prices were only partially offset by lower production costs related to the timing of maintenance activities. The Aluminum segment adjusted EBITDA increased $210 million.
Higher metal prices and lower alumina costs were partially offset by tariff costs, which reflect a full quarter at the 50% tariff rate after its increase from 25% on June 4. In addition, production costs improved due to the timing of maintenance activities. Outside the segments, other corporate costs increased, while intersegment eliminations changed unfavorably, primarily due to the absence of a benefit in the prior quarter resulting from a lower average alumina price requiring less inventory profit elimination.
Moving on to cash flow activities for the third quarter. We ended the third quarter with cash of $1.5 billion. Cash used for operations was $85 million, including a slight working capital use of $25 million. We also received a tax refund of $69 million from the Australian Tax Office for the deposit held during the five-year transfer price dispute that was resolved in our favor in April. Cash from investing included $150 million from the sale of the Ma’aden joint venture, shown here net of transaction costs. Cash used for financing activities included a $74 million full repayment on a term loan, which was the last borrowing associated with the AWAC joint venture structure.
Let’s look at other key financial metrics. The year-to-date return on equity was 14.5%. Days working capital increased sequentially by three days due to an increase in accounts receivable days, primarily due to higher aluminum pricing. Our third-quarter dividend added $26 million to stockholder capital returns. We closed the quarter with $1.635 billion in adjusted net debt, making progress toward the top end of our target of $1 billion to $1.5 billion. Cash flow for the quarter includes an increase in capital expenditures to $151 million.
Turning to the outlook. We have a few adjustments to our full-year outlook. First, we are decreasing our annual outlook for interest expense to $175 million. Second, we have adjusted our total CapEx for 2025 to $625 million, down from $675 million, primarily due to less spending on mine moves in Australia. Third, we have adjusted our payment of prior year income taxes for 2025 to zero, previously $50 million, to reflect the tax refund from the ATO matter mentioned earlier. And last, the outlook for total ARO and environmental spend in 2025 is expected to increase by $20 million to approximately $260 million, consistent with the guidance update we provided in the Kwinana closure press release.
For 2025, in the Alumina segment, we expect performance to improve by approximately $80 million due to the absence of charges recorded in the third quarter to increase asset retirement obligations, as well as higher shipments and lower maintenance costs. In the Aluminum segment, we expect a sequential unfavorable impact of approximately $20 million due to restart inefficiencies at the San Ciprian smelter and lower third-party energy sales, partially offset by higher shipments. While current Midwest premium pricing and higher shipments of our Canadian metal into the U.S. are expected to have a favorable impact on the fourth quarter, we expect tariff costs to increase by approximately $50 million due to increased shipments.
Further tariff impacts from changes in LME pricing during the quarter can be calculated from our tariff sensitivity. Alumina costs in the Aluminum segment are expected to be favorable by $45 million. Below EBITDA, other expenses in the third quarter included favorable foreign currency gains of approximately $10 million, which may not recur. Based on last week’s pricing, we expect fourth-quarter operational tax expense of $40 million to $50 million. Now I’ll turn it back to Bill.
William Oplinger: Thanks, Molly. Let’s discuss our markets, starting with alumina. Alumina prices have declined significantly over the past month, with recent prices around $315 per metric ton as the market remains under pressure due to ample spot availability and refinery expansions in Indonesia and China. Outside China, the timing mismatch between new refining capacity coming online in Indonesia in 2025 and additional smelting capacity expected only in late 2025 or into 2026 is creating a short-term imbalance. In China, most previously curtailed capacity has been restarted since May, adding further supply pressure. Many Chinese refineries operate at the top of the cost curve. Continued downward pressure on domestic prices may prompt further supply-side response, resulting in curtailments.
Looking ahead, alumina demand will be supported by new smelting capacity in Indonesia and anticipated to come online in 2026. However, uncertainty around the Mozal smelter could weigh on demand and pricing. Meanwhile, bauxite prices remained firm, supported by seasonal supply disruptions in Guinea and the market working through stockpiles accumulated earlier in 2025. Alcoa continues to deliver on strong fundamentals, consistent quality in our smelter-grade alumina products, and preferred supplier status due to our reliability. We remain on track for a record year in third-party bauxite sales volumes.
Note: This is an earnings call transcript. Content may contain errors.
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