Investor Contact: Media Contact:

Matt Garth Monica Orbe

(212) 836-2674 (212) 836-2632

[email protected] [email protected]

Alcoa Reports Second Quarter 2016 Results

Profit in Future Combined Arconic Segments Grew Year-Over-Year Profit in Future Combined Alcoa Corporation Segments Rose Sequentially

Company on Track to Separate in the Second Half of 2016

2Q 2016 Consolidated Highlights

• Net income of $135 million, or $0.09 per share;

  excluding special items, adjusted net income of $213 million, or $0.15 per share

• Revenue of $5.3 billion, down 10 percent year-over-year, reflects:

  • 4 percent revenue increase from recent acquisitions and organic growth, more than offset by a 14 percent revenue decline due primarily to lower aluminum and alumina pricing and the impact of curtailed, divested and closed operations

• Announced sales of non-essential assets expected to generate total cash proceeds of $1.2 billion during 2016; $815 million received year-to-date, strengthening the balance sheet

• $1.9 billion cash on hand

• Strong productivity gains of $375 million, year-over-year, across all segments

  Overview of Arconic and Alcoa Corporation Segments1: 2Q 2016 Arconic Segments (Value-Add)

• Revenue of $3.5 billion, up 1 percent year-over-year, reflects:

  • 5 percent revenue increase related to acquisitions, mostly offset by a 4 percent revenue decline predominately from metal price impacts

  • Record Engineered Products and Solutions revenue of $1.5 billion, up 15 percent year-over-year

• After-tax operating income of $294 million, up 3 percent year-over-year

  • Global Rolled Products: $68 million after-tax operating income;

    record quarter for automotive sheet shipments, up 17 percent year-over- year

  • Engineered Products and Solutions: Record after-tax operating income of

    $180 million, up 9 percent year-over-year

    1 The Arconic segments described in this release consist of Alcoa's existing Value-Add segments: Global Rolled Products, Engineered Products and Solutions, and Transportation and Construction Solutions. The Alcoa Corporation segments described herein consist of the existing Upstream segments: Alumina and Primary Metals. Until the separation is effected, financial information about the future Arconic and Alcoa Corporation companies herein relates solely to the Value-Add and Upstream segments, respectively, and does not include any of the corporate-related items that are currently presented in Alcoa's Reconciliation of Total Segment ATOI to Consolidated Net Income. Following the separation, the rolling mill operations in Warrick, IN and Saudi Arabia (which are currently in the Global Rolled Products segment) will belong to Alcoa Corporation.

  • Transportation and Construction Solutions: $46 million after-tax operating income, up 5 percent year-over-year

• Signed a multi-year contract with Embraer valued at approximately $470 million

• Opened state-of-the-art, 3D printing metal powder production facility to develop and produce proprietary titanium, nickel and aluminum powders

• Achieved $176 million in productivity savings ($360 million year-to-date), on target to deliver $650 million in 2016

  2Q 2016 Alcoa Corporation Segments (Upstream)

• Total revenue of $2.3 billion, up 7 percent sequentially

  • Predominately due to 22 percent higher alumina prices, 2 percent higher aluminum pricing and organic growth, slightly offset by the impact of curtailed, divested and closed operations

• Third-party revenue of $1.8 billion, up 9 percent sequentially

• After-tax operating income of $150 million, up sequentially, as improved pricing, productivity savings and the realized benefit of a more competitive portfolio lifted Alumina and Primary Metals segments profits

• Alcoa World Alumina and Chemicals secured $60 million of new third-party bauxite sales over the next two years

• Reached power agreement to improve competitiveness of Intalco smelter in Washington State and curtailed Pt. Comfort, Texas refinery

• Achieved $199 million in productivity savings ($379 million year-to-date), on target to deliver $550 million in 2016

  New York, July 11, 2016 - Lightweight metals leader Alcoa (NYSE:AA) today reported second quarter 2016 results. Profit in the future combined Arconic (Value-Add) segments grew year-over-year and the future combined Alcoa Corporation (Upstream) segments strengthened sequentially. The Company is on track to complete its separation in the second half of 2016.

  "As markets ever more rapidly evolve, we have made Alcoa increasingly agile; results continue to improve," said Klaus Kleinfeld, Alcoa Chairman and Chief Executive Officer. "In the face of a transforming aerospace market, we moved quickly to bring our costs down while capturing new opportunities. Contract wins continued as did our innovation leadership with the opening of a state-of-the-art metals powder plant geared toward rising demand for 3D-printed parts. Our automotive sheet revenue hit an all-time high. After substantially reshaping our Upstream segments they are now performing well even in a low pricing environment; we are building out our bauxite business and continue to win new supply contracts. Exceptional productivity and monetization of non-essential assets has put us in an excellent cash position. Our separation is on track for later this year."

  Alcoa reported second quarter 2016 net income of $135 million, or $0.09 per share, including $78 million in special items primarily related to separation costs, restructuring- related charges and associated tax impacts, discussed below. Year-over-year, second quarter 2016 results compare to net income of $140 million, or $0.10 per share.

  Excluding the impact of special items, second quarter 2016 adjusted net income was

  $213 million, or $0.15 per share. All segments contributed to $375 million in productivity gains, partially offsetting the negative effects of lower year-over-year alumina and aluminum pricing and cost increases. In second quarter 2015, Alcoa reported adjusted net income, excluding special items, of $250 million, or $0.19 per share.

  The second quarter effective tax rate of 46 percent was affected by special items during the quarter, including certain non-deductible expenses related to the separation and tax costs associated with the sale of company-owned life insurance policies. Excluding the impact of all special items, the quarterly tax rate on operating results was 31 percent.

  Year-over-year, a 4 percent revenue increase from recent acquisitions and organic growth was more than offset by a 14 percent revenue decline due primarily to lower aluminum and alumina pricing and the impact of curtailed, divested and closed operations. As a result of these combined factors, Alcoa reported second quarter 2016 revenue of $5.3 billion, down 10 percent from $5.9 billion in the second quarter of 2015.

  Asset Sales

  Alcoa continues to strengthen its balance sheet and maximize cash flow through sales of non-essential assets. Announced sales are expected to generate total cash proceeds of

  $1.2 billion during 2016, of which $815 million has been received year-to-date. In the second quarter of 2016, Alcoa:

• Liquidated additional company-owned life insurance policies for gross proceeds of $223 million;

• Sold its Remmele Medical business, which was part of the RTI International Metals acquisition, to LISI MEDICAL, for $102 million; and

• Sold for $111 million equity and fixed income securities held by its captive insurance company.

  Additionally in the second quarter, Alcoa reached agreement to sell the following assets for a total of approximately $400 million:

• Real estate in Ferndale, Washington to Petrogas and property associated with a former Alcoa smelter in Frederick, Maryland to a regional commercial real estate company; and

• The Yadkin Hydroelectric Project in North Carolina to Cube Hydro Carolinas LLC, an affiliate of Cube Hydro Partners LLC, which will manage the assets.

The transactions above are expected to close in the second half of 2016.

Cash Flows

Alcoa ended second quarter 2016 with cash on hand of $1.9 billion. Cash from operations was $332 million. Free cash flow for the quarter was $55 million, which reflected an additional planned prepayment of $200 million related to a natural gas supply agreement in Australia and pension contributions of $77 million. Additionally, cash used for financing activities and cash provided from investing activities were $100 million and $311 million, respectively.

Market Update

In the global aerospace market, 2016 continues to be a transition year for original equipment manufacturers. Within jet engines, new launches are accelerating demand, outpacing near-term demand for structural airframe components, which is being partially absorbed through de-stocking.

The Company is forecasting improvement in the second half of 2016 as new platforms ramp up, and a strong 2017. Large commercial aircraft deliveries declined approximately 1 percent year-over-year in the first half of 2016, but are expected to rise 6 percent in the second half of 2016 compared to the first. As a result, Alcoa forecasts full-year 2016 deliveries to be flat to up 3 percent, followed by strong double-digit growth in 2017.

In automotive, Alcoa continues to forecast global automotive production growth of 1 to 4 percent. This includes 1 to 4 percent growth in North America, where the United States continues to record strong sales, particularly in the light truck segment. The global outlook is driven by a variety of factors, including low fuel prices, sustained demand, stable consumer confidence and recovery of global economies.

Alcoa also projects solid growth in other end markets. Low natural gas prices in North America and the adoption of new, high-efficiency industrial gas turbine models continue to drive orders for both heavy-duty gas turbines and spare parts. Alcoa projects global airfoil market growth to be 2 to 4 percent for 2016. The 2016 packaging market is projected to grow 1 to 3 percent and the global building and construction market, 4 to 6 percent.

Growth in the heavy duty truck, trailer and bus market in Europe and China is expected to be offset by continued production declines in North America, setting the global production outlook for the commercial transportation market at negative 4 to negative 1 percent for the year.

In 2016, Alcoa projects an approximately 775 thousand metric ton global aluminum deficit as 5 percent global aluminum demand growth outweighs 2.5 percent global aluminum supply growth. In addition, the Company projects a global alumina deficit of