Cost Control, Strategic Acquisitions Highlight Alcoa Third Quarter

Business Wire, Oct 4, 2002

Business Editors

PITTSBURGH--(BUSINESS WIRE)--Oct. 4, 2002

Alcoa (NYSE:AA) today reported earnings for the 2002 third quarter of $216 million, or 26 cents per diluted share, excluding a special after-tax charge of $23 million, or three cents per share, principally related to the previously announced curtailment of production in the company's primary smelting operations (http://www.alcoa.com/july31news). Including the special charge, net income was $193 million, or 23 cents per share, compared with net income of $232 million, or 27 cents per share, in the second quarter of 2002.

"Despite lower aluminum prices and idle capacity, our alumina and primary metals businesses performed well. These upstream businesses partially offset continued weakness in the aerospace, industrial gas turbine and telecommunications markets. We are looking beyond the challenging global economy, and are focused on managing those things that are in our control," said Chairman and CEO Alain Belda.

"In the short term, our restructuring activities and deployment of the Alcoa Business System (ABS) are helping to lessen the impact of continuing weak economic conditions. In the long term, they will position us to capture opportunities and efficiencies as conditions improve."

The three-month LME price for primary aluminum fell two cents a pound, or 3.5%, from the second quarter of 2002. Compared with the third quarter of 2001, the LME three-month average price declined three cents a pound, or 5.3%.

At the end of the 2002 third quarter, Alcoa had achieved $560 million in annualized cost savings and remains confident it will achieve its $1.0 billion 2003 goal. The run rate at the end of the third quarter was $140 million, compared with $123 million in the prior quarter.

In this quarter, Alcoa continued its strategic growth initiative on several fronts: completed purchase of Ivex Packaging, a specialty packaging company; announced acquisition of Fairchild Fasteners, a high-tech aerospace supplier; and increased its stake in Elkem to 46.2%. Ivex's operations are being integrated and its contribution to Alcoa's margins will begin in the fourth quarter. The company has already achieved $8 million of the anticipated $75 million in annual cost synergies as it integrates Ivex. These savings are in addition to the $1.0 billion 2003 cost savings goal.

Alcoa has approximately 438,000 metric tons (mt) of aluminum production idled on a base capacity of 3,948,000 mtpy.

Quarterly Analyst Meeting; Facility Tour

Alcoa's quarterly analyst meeting will be at 4:00 p.m. EDST on Monday, October 21, 2002. The meeting will be webcast via www.alcoa.com

On November 7 and 8, analysts and media will tour the Alcoa Technical Center. At that time, presentations will be posted on alcoa.com.

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum and alumina, and is active in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components, Alcoa also markets consumer brands including Reynolds Wrap(R) products, Alcoa(R) wheels, and Baco(R) household wraps. Among its other businesses are vinyl siding, closures, precision castings, and electrical distribution systems for cars and trucks. The company has 129,000 employees in 38 countries.

Editor's Note: The Alcoa Business System is an integrated set of systems, tools and language organized to encourage unencumbered transfer of knowledge across businesses and borders. It focuses on serving customer demand by emphasizing the elimination of all waste and making what the customer wants, when the customer wants it.

Alcoa (NYSE:AA)

Certain statements in this release relate to future events and expectations and as such constitute forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of Alcoa to be different from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include the company's inability to achieve the level of cost savings or productivity improvements anticipated by management, including possible increases in the cost of doing business resulting from war or terrorist activities; and other risk factors summarized in Alcoa's SEC reports.