2017 Annual Report REDUCE Complexity DRIVE Returns STRENGTHEN the Balance Sheet 58515.indd 1 3/16/18 8:14 AM Adjusted EBITDA Revenue Net Income Excluding Special Items* $11.7 billion $217 million $2.35 billion 58515.indd 2 3/16/18 8:14 AM Cash on Hand Free Cash Flow* $1.36 billion $819 million Number of Employees 14,600 Who We Are Alcoa is a global industry leader in bauxite, alumina and aluminum products. Our Company is built on a foundation of strong values and operating excellence dating back nearly 130 years to the world-changing discovery that made aluminum an affordable and vital part of modern life. Since developing the aluminum industry, and throughout our history, our talented Alcoans have followed on with breakthrough innovations and best practices that have led to effi ciency, safety, sustainability, and stronger communities wherever we operate. In 2017, Alcoa relocated its global headquarters back to Pittsburgh from New York City as part of the Company’s initiative to reduce and simplify the organization’s structure. Pictured: Alcoa corporate headquarters * Please see Calculation of Financial Measures at the end of this Annual Report for a description and reconciliation of Adjusted EBITDA Excluding Special Items and Free Cash Flow 58515.indd 3 3/16/18 8:14 AM 02 Letter to Stockholders Following the separation from our parent company, we introduced three strategic priorities—reduce complexity, drive returns and strengthen the balance sheet—as the building blocks for a strong and bright Alcoa future. These strategic priorities guided our decisions during the year and, equipped with these priorities, our employees across the globe eliminated waste, streamlined processes and improved organizational structures. They implemented new ideas, carefully managed costs and assets, addressed legacy liabilities and ultimately drove signifi cant value creation for our stockholders. Alcoa Corporation’s fi rst full year as an Our initiatives to reduce complexity included independent, publicly-traded company was a consolidating our business units to focus on success by many measures. However, by the bauxite, alumina and aluminum products, and most critical one—safety—we failed. In 2017, partially restarting our Warrick smelter in Indiana three workers at Alcoa facilities, two in Brazil and to gain effi ciencies with the rolling mill and one in Spain, died from injuries sustained in our power plant at that location. And, of course, operations. That they did not return home safely Alcoa returned its global headquarters back is deeply painful to the entire Alcoa family. to Pittsburgh, Pennsylvania, demonstrating a Because nothing is more valuable than human commitment to reducing and simplifying our life, we continued to refi ne our safety systems overhead structure. and programs, and made further changes in our We drove stockholder returns by initiating and quest for continuous improvement. In 2017, we completing returning-seeking capital projects welcomed a new Vice President of Environment, across our three businesses—Bauxite, Alumina Health and Safety to the Executive Team. and Aluminum. In Bauxite, we grew exports to Additionally, our Board of Directors reinforced the third-party customers and made third-party sales Company’s commitment to safety and corporate from all our major mining operations. Alumina values by renaming the former “Public Issues continued to realize greater value from our low- Committee” the “Safety, Sustainability and Public cost plants, achieving production records at our Issues Committee,” and amending the scope three largest refi neries. Several successful creep of that committee accordingly. In 2018, we will projects in Aluminium also resulted in production remain focused on the safety of every employee, records at three of our plants, increasing that contractor, temporary worker and visitor who walks business’s capacity for additional profi tability. through our doors as our most important priority. And, we continued to problem-solve and innovate While acknowledging that we need to do better for the future at our world-class technology with safety, we also want to recognize the centers, supporting the smelting operations from successes we achieved in 2017. the Alcoa Technical Center in New Kensington 58515.indd 4 3/16/18 8:14 AM Alcoa 2017 Annual Report 03 Pennsylvania, and the refi ning operations from (earnings before interest, taxes, depreciation and our Center of Excellence in Western Australia. amortization) excluding special items basis, Alcoa realized $2.35 billion, more than doubling the To strengthen the balance sheet, we grew our 2016 result, which included the period before the cash balance in 2017 while resolving legacy separation from our former parent company. liabilities in the United States and in Italy. Our stronger fi nancial position allowed us to Higher aluminum and alumina prices also grew successfully renegotiate our revolving credit revenue 25 percent year-on-year, to $11.7 billion. agreement to gain greater fl exibility in executing Additionally, cash from operations and free cash our capital allocation strategy. Rating agencies fl ow were strong in 2017 at $1.2 billion and $819 Standard & Poor’s and Moody’s each upgraded million, respectively. While we used some cash to Alcoa’s credit rating in recognition of the eliminate liabilities, including debt, we still grew Company’s improving fi nancial profi le. our cash balance by more than $500 million over the course of the year and closed 2017 with $1.36 To strengthen the Company for the future, we billion on hand. made the diffi cult decision to change retirement benefi ts in North America, which represent And Alcoa’s Total Stockholder Return was Alcoa’s largest liability. Beginning in 2021, salaried 92 percent in 2017, more than four times higher employees in the United States and Canada will than both the Standard & Poor’s 500® Index and stop accruing retirement benefi ts for future service the Standard & Poor’s 500® Metals & Mining under our defi ned benefi t pension plans and will GICS Level 3 Index. instead move to defi ned contribution retirement Now well into 2018, and with strong alignment savings plans. However, in accordance with between our management team and our Board our values, we will honor all vested and current of Directors, we will continue to use our strategic obligations under those plans and will continue to priorities to build upon the success of our fi rst provide competitive benefi ts for all employees. full year as Alcoa Corporation—fi nding new ways Our disciplined focus on our strategic priorities, to reduce complexity, generate strong returns, solid execution by our three businesses and a increase cash and reduce liabilities. By continuously favorable market environment, produced strong fi rst striving toward these goals, we will build a resurgent full-year fi nancial results for Alcoa and positioned us Alcoa that remains resilient through market cycles well for whatever the future may bring. and rewards our stockholders. Aluminum and alumina realized prices, which rose We appreciate the confi dence that you, our 19 percent and 34 percent, respectively, helped to stockholders, have placed in Alcoa over the past signifi cantly grow Alcoa’s 2017 profi ts compared year, and we look forward to continued success to 2016. China’s policy to close illegal capacity in 2018. and curb production for environmental reasons contributed to this market dynamic. In 2017, Alcoa earned net income of $217 million and, excluding special items, adjusted net Michael G. Morris Roy C. Harvey income of $563 million. On an adjusted EBITDA CHAIRMAN OF THE BOARD PRESIDENT AND CHIEF EXECUTIVE OFFICER 58515.indd 5 3/16/18 8:14 AM 58515.indd 6 3/16/18 8:14 AM Alcoa 2017 Annual Report 05 Alcoa’s Strategic Priorities Reduce Complexity Drive Returns Strengthen the Balance Sheet We have defi ned three strategic priorities as the building blocks for a resurgent Alcoa Corporation—one that is resilient through market cycles, provides our stockholders with a fi nancial return, and allows all stakeholders to succeed. In 2017, our employees across the globe embraced these objectives. As a result, they eliminated waste and simplifi ed our Company, drove returns from our assets, increased cash, and reduced liabilities. We still have more to achieve. And by continuously working toward our strategic priorities, which are underpinned by our Values, we will have a strong foundation from which to create the Alcoa of the future. OUR VALUES Act with Integrity Operate with Excellence Care for People Alcoa World Alumina Brasil employees from our Juruti mine prepare to load a ship with bauxite. 58515.indd 7 3/16/18 8:14 AM 06 Bauxite Our Bauxite segment remains a source of excitement. our Huntly and Willowdale mines also achieved With quality bauxite reserves across Australia, Brazil, annual production records. Additionally, the WA State Guinea and Saudi Arabia, this segment grew revenue Government granted Alcoa of Australia approval to 13.3 percent, adjusted EBITDA 13.9 percent, and export bauxite through the Port of Bunbury for an initial adjusted EBITDA margin 10 basis points in 2017. two-year period. Combined with existing infrastructure Already a world-leading bauxite producer, we have capabilities and prior approval to export bauxite additional opportunities to meet increasing demand. through the Kwinana Bulk Terminal, the additional In Brazil, our Juruti location mined a record 5.6 million approval supports our plan to export up to 2.5 million dry metric tons of bauxite in 2017, with plans to grow dry metric tons annually of WA bauxite to third-party in 2018 at a low capital cost. In Western Australia (WA), customers, while still supplying our refi neries. PRODUCTION TOTAL SHIPMENTS 3RD-PARTY SHIPMENTS 45.8 million 47.7 million 6.6 million dry metric tons dry metric tons dry metric tons TOTAL REVENUE ADJUSTED EBITDA ADJUSTED EBITDA MARGIN $1.2 billion $427 million 35.3% In an important step toward establishing a sustainable share of the commercial bauxite market, Alcoa of Australia received approval from the Western Australia State Government to export bauxite through the Port of Bunbury.