# Alcoa Corp (AA) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Alcoa Corp's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1675149/000095017025024242/aa-20241231.htm
Accession: 0000950170-25-024242
Filing date: 2025-02-20
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture.
Confidence: high

Company profile: /company/AA/
All MD&A years: /company/AA/mda/
Previous year: /company/AA/mda/fy2023/ (FY 2023)
Next year: /company/AA/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

(dollars in millions, except per-share amounts, average realized prices, and average cost amounts;

metric tons in thousands (kmt); dry metric tons in millions (mdmt))

Forward-Looking Statements

This report 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 “aims,” “ambition,” “anticipates,” “believes,” “could,” “develop,” “endeavors,” “estimates,” “expects,” “forecasts,” “goal,” “intends,” “may,” “outlook,” “potential,” “plans,” “projects,” “reach,” “seeks,” “sees,” “should,” “strive,” “targets,” “will,” “working,” “would,” or other words of similar meaning. All statements by Alcoa Corporation that reflect expectations, assumptions or projections about the future, other than statements of historical fact, are forward-looking statements, including, without limitation, statements regarding forecasts concerning global demand growth for bauxite, alumina, and aluminum, and supply/demand balances; statements, projections or forecasts of future or targeted financial results, or operating performance (including our ability to execute on strategies related to environmental, social and governance matters); statements about strategies, outlook, and business and financial prospects; and statements about capital allocation and return of capital. These statements reflect beliefs and assumptions that are based on Alcoa Corporation’s perception of historical trends, current conditions, and expected future developments, as well as other factors that management believes are appropriate in the circumstances.

Forward-looking statements are not guarantees of future performance and are subject to known and unknown risks, uncertainties, and changes in circumstances that are difficult to predict. Although Alcoa Corporation believes that the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that these expectations will be attained and it is possible that actual results may differ materially from those indicated by these forward-looking statements due to a variety of risks and uncertainties. Such risks and uncertainties include, but are not limited to: (a) the impact of global economic conditions on the aluminum industry and aluminum end-use markets; (b) volatility and declines in aluminum and alumina demand and pricing, including global, regional, and product-specific prices, or significant changes in production costs which are linked to LME or other commodities; (c) the disruption of market-driven balancing of global aluminum supply and demand by non-market forces; (d) competitive and complex conditions in global markets; (e) our ability to obtain, maintain, or renew permits or approvals necessary for our mining operations; (f) rising energy costs and interruptions or uncertainty in energy supplies; (g) unfavorable changes in the cost, quality, or availability of raw materials or other key inputs, or by disruptions in the supply chain; (h) economic, political, and social conditions, including the impact of trade policies, tariffs, and adverse industry publicity; (i) legal proceedings, investigations, or changes in foreign and/or U.S. federal, state, or local laws, regulations, or policies; (j) changes in tax laws or exposure to additional tax liabilities; (k) climate change, climate change legislation or regulations, and efforts to reduce emissions and build operational resilience to extreme weather conditions; (l) disruptions in the global economy caused by ongoing regional conflicts; (m) fluctuations in foreign currency exchange rates and interest rates, inflation and other economic factors in the countries in which we operate; (n) global competition within and beyond the aluminum industry; (o) our ability to achieve our strategies or expectations relating to environmental, social, and governance considerations; (p) claims, costs, and liabilities related to health, safety and environmental laws, regulations, and other requirements in the jurisdictions in which we operate; (q) liabilities resulting from impoundment structures, which could impact the environment or cause exposure to hazardous substances or other damage; (r) dilution of the ownership position of the Company’s stockholders, price volatility, and other impacts on the price of Alcoa common stock by the secondary listing of the Alcoa common stock on the Australian Securities Exchange; (s) our ability to obtain or maintain adequate insurance coverage; (t) our ability to execute on our strategy to reduce complexity and optimize our asset portfolio and to realize the anticipated benefits from announced plans, programs, initiatives relating to our portfolio, capital investments, and developing technologies; (u) our ability to integrate and achieve intended results from joint ventures, other strategic alliances, and strategic business transactions; (v) our ability to fund capital expenditures; (w) deterioration in our credit profile or increases in interest rates; (x) impacts on our current and future operations due to our indebtedness; (y) our ability to continue to return capital to our stockholders through the payment of cash dividends and/or the repurchase of our common stock; (z) cyber attacks, security breaches, system failures, software or application vulnerabilities, or other cyber incidents; (aa) labor market conditions, union disputes and other employee relations issues; (bb) a decline in the liability discount rate or lower-than-expected investment returns on pension assets; and (cc) the other risk factors discussed in Part 1 Item 1A of this Form 10-K and other reports filed by Alcoa Corporation with the SEC, including those described in this report.

We caution readers not to place undue reliance upon any such forward-looking statements, which speak only as of the date they are made. Alcoa Corporation 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. Market projections are subject to the risks described above and other risks in the market.

49

Overview

Our Business

Alcoa Corporation (Alcoa or the Company) is a vertically integrated aluminum company comprised of bauxite mining, alumina refining, aluminum production (smelting and casting), and energy generation. Aluminum is a commodity that is traded on the London Metal Exchange (LME) and priced daily. Additionally, alumina is subject to market pricing through the Alumina Price Index (API), which is calculated by the Company based on the weighted average of a prior month’s daily spot prices published by the following three indices: CRU Metallurgical Grade Alumina Price, Platts Metals Daily Alumina PAX Price, and FastMarkets Metal Bulletin Non-Ferrous Metals Alumina Index. As a result, the price of both aluminum and alumina is subject to significant volatility and, therefore, influences the operating results of Alcoa Corporation.

Through direct and indirect ownership, Alcoa Corporation has 26 operating locations in nine countries around the world, situated primarily in Australia, Brazil, Canada, Iceland, Norway, Spain, and the United States. Governmental policies, laws and regulations, and other economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, affect the results of operations in these countries.

Business Update

During 2024, Alcoa experienced strength in alumina and aluminum pricing and made significant progress on its key operational, commercial, financial, and capital allocation objectives, delivering on strategic actions and operational improvements.

Average alumina and aluminum prices increased by 37% and 7%, respectively, with the alumina price reaching an all-time high in the fourth quarter of 2024 driven primarily by supply disruptions. The increase in alumina price outweighed the increase in aluminum price. The alumina and aluminum markets ended 2024 in a volume deficit or balanced, respectively. The cost for energy and raw materials, including carbon products, caustic soda, and other key inputs decreased.

Nine of the Company's eleven smelters increased annual production, while the Mosjøen (Norway) smelter, the Warrick (Indiana) smelter, and the Company’s smelters in Canada set annual production records. The Company’s mine operations successfully operated under new mine conditions in Western Australia, which included daily observation of its mining and rehabilitation practices by certain regulators.

Commercially, the Company expanded a number of important customer and supplier relationships and invested in growth capital expenditures to enhance value add products to meet its customer demand.

The Company delivered changes to improve the financial performance of its operating portfolio. The Alumar (Brazil) smelter steadily improved stability and increased operating capacity to approximately 84 percent at December 31, 2024.

The Company announced the curtailment of the Kwinana (Australia) refinery in January 2024 and completed the full curtailment in the second quarter of 2024.

Alcoa completed the acquisition of Alumina Limited on August 1, 2024. The acquisition enhances Alcoa’s position as a leading pure play, upstream aluminum company globally, while simplifying the Company’s corporate structure and governance, resulting in greater financial flexibility and strategic optionality.

In September 2024, Alcoa announced the sale of its 25.1% interest in the Saudi Arabia joint venture to Ma’aden. This decision aligns with the Company’s ongoing efforts to streamline its operations and is expected to provide Alcoa with enhanced financial flexibility.

In October 2024, Alcoa announced that it is progressing toward entering into a strategic partnership with IGNIS Equity Holdings, SL (IGNIS EQT), to support the continued operation of the San Ciprián complex. On January 21, 2025, the Company, the Spanish national and Xunta regional governments, and IGNIS EQT signed a memorandum of understanding that outlines a process for the parties to work cooperatively toward the common objective of improving the long-term outlook for the San Ciprián operations.

In November 2024, the Company began de-levering and repaid $385 drawn under the Alumina Limited Revolving Credit Facility, which was assumed in connection with acquisition.

50

Alumina Limited Acquisition

On August 1, 2024, Alcoa completed the acquisition of all of the ordinary shares of Alumina Limited (Alumina Shares) through a wholly-owned subsidiary, AAC Investments Australia 2 Pty Ltd. At acquisition, Alumina Limited held a 40% ownership interest in the AWAC joint venture.

Under the Scheme Implementation Deed (the Agreement) entered into in March 2024, as amended in May 2024, holders of Alumina Shares received 0.02854 Alcoa CHESS Depositary Interests (CDIs) for each Alumina Share (the Agreed Ratio), except that i) holders of Alumina Shares represented by American Depositary Shares, each of which represented 4 Alumina Shares, received 0.02854 shares of Alcoa common stock and ii) a certain shareholder received, for certain of their Alumina Shares, 0.02854 shares of Alcoa non-voting convertible preferred stock. The Alcoa CDIs are quoted on the Australian Stock Exchange.

At closing, Alumina Shares outstanding of 2,760,056,014 and 141,625,403 were exchanged for 78,772,422 and 4,041,989 shares of Alcoa common stock and Alcoa preferred stock, respectively. Based on Alcoa’s closing share price as of July 31, 2024, the Agreed Ratio implied a value of A$1.45 per Alumina Share and aggregate purchase consideration of approximately $2,700 for Alumina Limited.

For Alcoa stockholders, the transaction enhances Alcoa’s vertical integration along the value chain across bauxite mining, alumina refining, and aluminum smelting, increases Alcoa’s economic interest in its bauxite and alumina assets, simplifies governance, and reaffirms Alcoa’s commitment to Western Australia. In addition to the implied premium over prior share prices, Alumina Limited shareholders’ ownership is diversified to a large-scale, global upstream aluminum portfolio.

The transaction consisted in substance of the acquisition of Alumina Limited’s noncontrolling interest in AWAC ($1,472), the assumption of Alumina Limited’s indebtedness ($385), the recognition of deferred tax assets ($216) primarily related to Alumina Limited’s prior net operating losses and the tax allocation of the fixed asset valuation to individual assets, and the acquisition of cash ($9) and other current liabilities ($1). The transaction was accounted for as an equity transaction where net assets acquired ($1,311) and transaction costs ($32) were reflected as an increase to Additional capital. Net income attributable to noncontrolling interest was recognized through July 31, 2024. In November 2024, Alcoa repaid the full amount ($385) of Alumina Limited's indebtedness and cancelled the agreement.

Saudi Arabia Joint Venture

On September 15, 2024, Alcoa entered into a share purchase and subscription agreement with Ma’aden, pursuant to which Alcoa agreed to sell its full ownership interest of 25.1% in the Saudi Arabia joint venture, comprised of the Ma’aden Bauxite and Alumina Company and the Ma’aden Aluminium Company, to Ma’aden in exchange for issuance by Ma’aden of approximately 86 million shares and $150 in cash. The implied value of the shares was $950 as of September 12, 2024, based on the volume-weighted average share price of Ma’aden for the previous 30 calendar days. The shares of Ma’aden will be subject to transfer and sale restrictions, including a restriction requiring Alcoa to hold its Ma’aden shares for a minimum of three years, with one-third of the shares becoming transferable after each of the third, fourth, and fifth anniversaries of closing of the transaction (the holding period). During the holding period, Alcoa would be permitted to hedge and borrow against its Ma’aden shares. Under certain circumstances, such minimum holding period would be reduced. The transaction is subject to regulatory approvals, approval by Ma’aden’s shareholders, and other customary closing conditions and is expected to close in the first half of 2025. The carrying value of Alcoa’s investment was $544 as of December 31, 2024.

Australia Mine Plan Approvals

During 2024, the Company continued to advance mine approvals for the next major Australian mine regions (Myara North and Holyoake), which were referred for accredited assessment by the WA EPA under the Accredited Assessment. Alcoa began the process in 2020, is focused on receiving approval by the first quarter of 2026, and anticipates mining in new regions will commence no earlier than 2027. Until then, the Company expects bauxite quality will remain similar to recent grades.

During the third quarter of 2024, the WA EPA set an indicative timeline for the next key step in the approval process, the public comment period, for early 2025.

The Company continues work to seek annual endorsement from the Western Australian State Government for its rolling five-year mine plan. Separately, in 2023, a third party referred the Company’s current five-year mine plan to the WA EPA for assessment (Third-Party Referral). This Third-Party Referral remains under assessment, and the public comment period is expected to be in early 2025 in accordance with the WA EPA streamlined process.

The Company is committed to working collaboratively with the WA EPA and other stakeholders to achieve the indicative timelines set by the WA EPA.

Additionally, the Company is evaluating conditions recommended by the WA EPA in similar accredited assessment processes to address the majority of relevant published conditions in the Company’s Environmental Review Document, which Alcoa will submit as part of the Accredited Assessment prior to the upcoming public comment period.

51

Portfolio Actions

Portfolio Review

In October 2024, the Company completed its five-year strategic portfolio review to improve cost positioning, or curtail, close, or divest 1.5 million and 4 million metric tons of smelting and refining capacity, respectively. The Company reached approximately 93 percent of its target for smelting capacity with the decision to restart capacity at the Warrick smelter completed in the first quarter 2024, and exceeded its target for refining capacity with the decision to curtail the Kwinana refinery in January 2024. The Company continues to evaluate assets for opportunities for improvement to remain profitable throughout business cycles.

Kwinana Refinery

In June 2024, Alcoa completed the full curtailment of the Kwinana refinery, as planned, which was announced in January 2024. The Company’s decision to fully curtail the refinery was made based on a variety of factors, including the refinery’s age, scale, operating costs, and current bauxite grades, in addition to market conditions.

Prior to the curtailment, the refinery had been operating at approximately 80 percent of its annual nameplate capacity of 2.2 million metric tons since January 2023, when the Company reduced production in response to a domestic natural gas shortage in Western Australia due to production challenges experienced by key gas suppliers.

As of March 2024, the refinery had approximately 780 employees and this number was reduced to approximately 250 through the fourth quarter of 2024 to manage certain processes that are expected to continue until about the fourth quarter of 2025. At that time, the employee number will be further reduced to approximately 50.

San Ciprián Operations

On October 16, 2024, Alcoa announced that it is progressing toward entering into a strategic partnership with IGNIS EQT, the majority shareholder in the IGNIS Group of Companies, a vertically integrated energy company based in Spain, to support the continued operation of the San Ciprián complex.

The proposed agreement is conditional upon delivery of key areas of cooperation with San Ciprián’s stakeholders, including the Spanish national government, the Xunta regional government, and San Ciprián employees and workers’ representatives. Key areas include:

•
Materially higher carbon dioxide compensation support;

•
Permitting of power generation projects, especially those with existing agreements with San Ciprián;

•
Support and approval for the bauxite residue area capital project; and,

•
Flexibility within the February 2023 updated viability agreement, including access to restricted cash for operating needs and deferral or substitution of capital improvement commitments.

On January 21, 2025, the Company, the Spanish national and Xunta regional governments, and IGNIS EQT signed a memorandum of understanding that outlines a process for the parties to work cooperatively toward the common objective of improving the long-term outlook for the San Ciprián operations and focuses on the key areas of cooperation (see above).

Under the proposed agreement, Alcoa would contribute approximately $78 (€75), and IGNIS EQT would make an initial investment of approximately $26 (€25) to fund the operations. Alcoa would continue as the managing operator of the San Ciprián complex, with IGNIS EQT holding 25 percent ownership. Additionally, up to approximately $104 (€100) would be funded by Alcoa as needed for operations with a priority position in future cash returns. Further funding would require agreement by both partners and would be shared 75 percent by Alcoa and 25 percent by IGNIS EQT.

Alcoa has operated the San Ciprián complex for a number of years in a challenging economic environment, primarily due to the high cost of energy. In the first quarter of 2024, Alcoa launched a sale process while also working to identify solutions for the long-term viability of the operations.

Despite sharing information with 60 potential investors, no viable bid was made for 100 percent of the San Ciprián complex. The potential partnership with IGNIS EQT emerged as an alternative for San Ciprián in which Alcoa can leverage its expertise in managing global aluminum operations, combined with IGNIS EQT’s strong knowledge of energy markets, to create value via market access and energy management services.

The refinery and smelter incurred substantial losses in 2024 and in prior years. As of December 31, 2024, the Spanish entities that own these operations had approximately $25 of available funding with cash on hand (excluding restricted cash to be made available for capital improvements at the site and smelter restart costs). Although aluminum and alumina prices improved during 2024, the San Ciprián complex remains unviable based on current and forward market assumptions for delivered energy in Spain and sales prices. Based on economic conditions as of December 31, 2024, the San Ciprián operations are expected to incur losses in 2025 and barring finalizing a partnership agreement with IGNIS EQT, Alcoa anticipates that available funding will be exhausted near the end of the first quarter of 2025.

52

Warrick Operations

During the first quarter of 2024, the Company completed the restart of one potline (54 kmt) at the Warrick smelter in Indiana that began in October 2023, and incurred restart expenses of $3.

Other Matters

In February 2025, the U.S. government established a 25% tariff on a wide range of goods imported from Canada into the United States to take effect on March 4, 2025. Energy resources from Canada, which appears to include aluminum as it is listed as a critical mineral, will be subject to a lower 10% tariff. In addition, in February 2025, the U.S. government expanded tariffs existing under Section 232 of the Trade Expansion Act of 1962 (Section 232) by raising the aluminum tariffs from 10% to 25%, ending all country exemptions, phasing out specific product exclusions, and terminating all existing general approved exclusions. It is unclear if aluminum imported from Canada after March 12, 2025 will be subject to both the 10% tariffs on energy resources and the 25% Section 232 tariffs. Due to the uncertainty related to the application of the tariffs, Alcoa is unable to reasonably estimate the impact to the Company’s results of operations until clarification is provided by the U.S. government.

In March 2024, the Company completed an offering of $750 aggregate principal amount of 7.125 percent senior notes due in 2031. This was the Company’s first notes issuance under its Green Finance Framework, which prioritizes climate change mitigation expenditures related to circular or low carbon products, pollution prevention technologies, renewable energy, and water management. The Company is utilizing the net proceeds to finance and/or refinance, in whole or in part, new and/or existing qualifying projects on a two-year look back that meet certain eligibility criteria within its Green Finance Framework. The net proceeds also support the Company’s cash position and ongoing cash needs, including with respect to its previously announced portfolio actions. The Company does not expect to allocate part of the net proceeds to significant capital investments in breakthrough technologies as those are not expected to occur within the applicable time period.

During the first quarter of 2024, the Company initiated and fully deployed a productivity and competitiveness program across its global operations and functions. The program is part of the Company’s objective to improve overall competitiveness and profitability and includes a target to save approximately 5 percent of operating costs, exclusive of raw materials, energy and transportation costs, which are already under active management and cost control programs. Total savings are expected to approximate $100 on a run rate basis and to be achieved by the first quarter of 2025.

The Company paid a quarterly cash dividend of $0.10 per share of the Company’s common stock (including common stock underlying CDIs) and Series A convertible preferred stock during 2024, totaling $90.

See the below sections for additional details on the above-described actions.

Basis of Presentation

The Consolidated Financial Statements of Alcoa Corporation are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). In accordance with GAAP, certain situations require management to make estimates based on judgments and assumptions, which may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. They also may affect the reported amounts of revenues and expenses during the reporting periods. Management uses historical experience and all available information to make these estimates. Management regularly evaluates the judgments and assumptions used in its estimates, and results could differ from those estimates upon future events and their effects or new information.

53

Results of Operations

The discussion that follows includes a comparison of our results of operations and liquidity and capital resources for the fiscal years ended December 31, 2024 and 2023. For a comparison of changes for the fiscal years ended December 31, 2023 and 2022, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operation in Part II Item 7 of Alcoa Corporation’s Annual Report on Form 10-K for the year ended December 31, 2023 (filed February 21, 2024).

[[GREPCENT_TABLE]]
[["","","For the year ended December 31,"],["Statement of Operations","","2024","","","2023"],["Sales","","$","11,895","","","$","10,551"],["Cost of goods sold (exclusive of expenses below)","","","10,044","","","","9,813"],["Selling, general administrative, and other expenses","","","275","","","","226"],["Research and development expenses","","","57","","","","39"],["Provision for depreciation, depletion, and amortization","","","642","","","","632"],["Restructuring and other charges, net","","","341","","","","184"],["Interest expense","","","156","","","","107"],["Other expenses, net","","","91","","","","134"],["Total costs and expenses","","","11,606","","","","11,135"],["Income (loss) before income taxes","","","289","","","","(584",")"],["Provision for income taxes","","","265","","","","189"],["Net income (loss)","","","24","","","","(773",")"],["Less: Net loss attributable to noncontrolling interest","","","(36",")","","","(122",")"],["Net income (loss) attributable to Alcoa Corporation","","$","60","","","$","(651",")"]]
[[/GREPCENT_TABLE]]

[[GREPCENT_TABLE]]
[["Selected Financial Metrics","","2024","","","2023"],["Diluted income (loss) per share attributable to Alcoa Corporation common shareholders","","$","0.26","","","$","(3.65",")"],["Third-party shipments of alumina (kmt)","","","9,005","","","","8,698"],["Third-party shipments of aluminum (kmt)","","","2,590","","","","2,491"],["Average realized price per metric ton of alumina","","$","472","","","$","358"],["Average realized price per metric ton of aluminum","","$","2,841","","","$","2,828"],["Average Alumina Price Index (API)(1)","","$","471","","","$","343"],["Average London Metal Exchange (LME) 15-day lag(2)","","$","2,409","","","$","2,249"]]
[[/GREPCENT_TABLE]]

(1)
API (Alumina Price Index) is a pricing mechanism that is calculated by the Company based on the weighted average of a prior month’s daily spot prices published by the following three indices: CRU Metallurgical Grade Alumina Price, Platts Metals Daily Alumina PAX Price, and FastMarkets Metal Bulletin Non-Ferrous Metals Alumina Index.

(2)
LME (London Metal Exchange) is a globally recognized exchange for commodity trading, including aluminum. The LME pricing component represents the underlying base metal component, based on quoted prices for aluminum on the exchange.

Annual Comparison

Overview

Net income (loss) attributable to Alcoa Corporation increased $711 primarily as a result of:

•
Higher average realized price of alumina and aluminum

•
Lower equity losses

•
Favorable energy and raw material costs

•
Absence of Net income attributable to noncontrolling interest following Alumina Limited acquisition

•
Favorable mark-to-market results on derivative instruments

Partially offset by:

•
Higher restructuring charges

•
Unfavorable currency impacts

•
Higher taxes on higher earnings, partially offset by the absence of a net charge for valuation allowances on certain deferred tax assets in 2023

•
Decrease in value add product sales

54

Sales

Sales increased $1,344 primarily as a result of:

•
Higher average realized price of alumina and aluminum

•
Higher shipments of aluminum and alumina

•
Increased offtake from an aluminum joint venture supply agreement

Partially offset by:

•
Lower volumes and price from bauxite offtake and supply agreements

•
Decrease in value add product sales

Cost of goods sold

Cost of goods sold as a percentage of sales decreased 9% primarily as a result of:

•
Higher average realized price of alumina and aluminum

•
Lower energy costs across both segments

•
Favorable currency impacts

•
Lower production costs in the Aluminum segment

•
Favorable raw material costs

Partially offset by:

•
Higher production costs in the Alumina segment

Selling, general administrative, and other expenses

Selling, general administrative, and other expenses increased $49 primarily as a result of:

•
Higher labor and variable compensation costs and increased fees for professional services, primarily in support of portfolio transformation

Provision for depreciation, depletion, and amortization

The Provision for depreciation, depletion, and amortization increased $10 primarily as a result of:

•
Higher depreciation in Brazil and Australia for mine reclamation and bauxite residue storage asset retirement obligations

Partially offset by:

•
Lower amortization of mine development costs

•
Lower depreciation due to the absence of write offs of assets for projects no longer being pursued

Interest expense

Interest expense increased $49 primarily as a result of:

•
Interest incurred on the $750 7.125% Senior Notes issued in March 2024

•
Interest incurred on the Alumina Limited Facility that was assumed on August 1, 2024, until Alcoa repaid outstanding amounts under the Alumina Limited Facility on November 29, 2024

Other expenses, net

Other expenses, net was $91 in 2024, compared with $134 in 2023. The favorable change of $43 was primarily a result of:

•
Decrease in equity losses from the Ma’aden aluminum joint venture primarily due to higher sales volume, higher aluminum prices and the absence of a charge for a utility settlement, partially offset by higher alumina prices

•
Favorable mark-to-market results on derivative instruments primarily due to higher power prices in the current year

•
Decrease in equity losses from the Ma’aden bauxite and alumina joint venture primarily due to higher alumina prices and lower production costs

•
Lower ELYSIS capital contributions, reducing loss recognition

Partially offset by:

•
Unfavorable currency revaluation impacts primarily due to the U.S. dollar strengthening against the Brazilian real in the current year, partially offset by the absence of gains recognized in the prior year due to the U.S. dollar weakening against the Brazilian real

55

Restructuring and other charges, net

In 2024, Restructuring and other charges, net of $341 primarily related to:

•
$287 for the curtailment of the Kwinana refinery

•
$40 to record additional asset retirement obligations and environmental remediation at previously closed sites

•
$22 for take-or-pay energy contract costs at a previously closed site

•
$12 for contract termination costs at the closed Intalco smelter

Partially offset by:

•
$20 due to lower costs for environmental remediation and asset retirement obligations at the Intalco smelter and a previously closed site

In 2023, Restructuring and other charges, net of $184 primarily related to:

•
$101 for the permanent closure of the previously curtailed Intalco aluminum smelter

•
$53 related to the updated viability agreement for the San Ciprián aluminum smelter

•
$21 for the settlement of certain pension benefits

•
$15 to record net additional environmental remediation and asset retirement obligations at previously closed sites

•
$11 for employee termination and severance costs, primarily related to Kwinana refinery productivity program

Partially offset by:

•
$19 for the sale of unused carbon credits at a previously closed site

Provision for income taxes

The Provision for income taxes in 2024 was $265 on income before taxes of $289 or 91.7%. In comparison, the 2023 Provision for income taxes was $189 on a loss before taxes of $(584) or (32.4)%.

The increase in tax expense of $76 is primarily attributable to higher income in the jurisdictions where taxes are paid. Additionally, tax expense in 2023 included a charge of $152 to record a full valuation allowance against the deferred tax assets of Alcoa World Alumina Brasil Ltda. (AWAB), partially offset by the full reversal of the valuation allowance of $58 recorded against the deferred tax assets of the Company’s subsidiaries in Iceland.

In December 2023, Alcoa recorded a valuation allowance of $154 against the net deferred tax assets of AWAB, of which $106 related to the balance as of December 31, 2022. The 2023 full valuation allowance was a result of AWAB’s three-year cumulative loss position for the period ended December 31, 2023. The majority of AWAB’s net deferred tax assets relate to prior net operating losses; the loss carryforwards are not subject to an expiration period. If AWAB continues to demonstrate sustained profitability management may conclude that AWAB’s deferred tax assets may be realized, resulting in a future reversal of the valuation allowance, generating a non-cash benefit in the period recorded. AWAB’s net deferred tax assets, excluding the valuation allowance, were $116 as of December 31, 2024.

The Company’s subsidiaries in Iceland had a full valuation allowance recorded against deferred tax assets, which was established in 2015 and 2017, as the Company believed it was more likely than not that these tax benefits would not be realized. During 2023, after considering all positive and negative evidence, including the expectation that the jurisdiction will remain in a three-year cumulative income position, the Company determined that it is more likely than not that the net deferred tax assets will be realized. Based on this conclusion, the Company reversed the valuation allowance totaling $58 during 2023, generating a non-cash benefit from income taxes.

Noncontrolling interest

Net loss attributable to noncontrolling interest was $(36) in 2024 compared with $(122) in 2023. These amounts are entirely related to Alumina Limited’s 40% ownership interest in several affiliated operating entities prior to Alcoa’s acquisition of Alumina Limited on August 1, 2024.

Net loss attributable to noncontrolling interest in 2024 was driven by restructuring costs partially offset by favorable average realized price of alumina. Net loss attributable to noncontrolling interest in 2023 reflects unfavorable production and raw material costs, unfavorable average realized price of alumina and equity losses from the Ma’aden bauxite and alumina joint venture.

56

Segment Information

Alcoa Corporation is a producer of bauxite, alumina, and aluminum products. The Company has two operating and reportable segments: (i) Alumina and (ii) Aluminum. The primary measure of performance is Adjusted EBITDA (Earnings before interest, taxes, depreciation, and amortization) for each segment.

The Company calculates Segment Adjusted EBITDA as Total sales (third-party and intersegment) minus the following items: Cost of goods sold; Selling, general administrative, and other expenses; and Research and development expenses. Alcoa Corporation’s Segment Adjusted EBITDA may not be comparable to similarly titled measures of other companies. The Chief Operating Decision Maker regularly reviews Segment Adjusted EBITDA to assess performance and allocate resources.

Segment Adjusted EBITDA totaled $2,065 in 2024 and $734 in 2023. The following information provides production, shipments, sales, Segment Adjusted EBITDA, and Adjusted operating costs data for each reportable segment, as well as certain realized price and average cost data, for each of the two years in the period ended December 31, 2024.

Alumina

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Bauxite production (mdmt)","","","38.3","","","","41.0"],["Third-party bauxite shipments (mdmt)","","","6.4","","","","7.6"],["Alumina production (kmt)","","","10,034","","","","10,908"],["Third-party alumina shipments (kmt)","","","9,005","","","","8,698"],["Intersegment alumina shipments (kmt)","","","4,194","","","","4,125"],["Produced alumina shipments (kmt)","","","10,050","","","","11,072"],["Third-party bauxite sales","","$","381","","","$","484"],["Third-party alumina sales","","","4,281","","","","3,129"],["Total segment third-party sales","","$","4,662","","","$","3,613"],["Intersegment alumina sales","","","2,263","","","","1,648"],["Total sales","","$","6,925","","","$","5,261"],["Adjusted operating costs","","","3,110","","","","3,487"],["Other segment items","","","2,407","","","","1,501"],["Segment Adjusted EBITDA","","$","1,408","","","$","273"],["Average realized third-party price per metric ton of alumina","","$","472","","","$","358"],["Adjusted operating cost per metric ton of produced alumina shipped","","$","309","","","$","315"]]
[[/GREPCENT_TABLE]]

In the above table, total alumina shipments include metric tons that were not produced by the Alumina segment. Such alumina was purchased to satisfy certain customer commitments. The Alumina segment bears the risk of loss of the purchased alumina until control of the product has been transferred to this segment’s customers.

Adjusted operating costs include all production related costs for alumina produced and shipped: raw materials consumed; conversion costs, such as labor, materials, and utilities; and plant administrative expenses. Other segment items include costs associated with trading activity, the purchase of bauxite from offtake or other supply agreements, and commercial shipping services; other direct and non-production related charges; Selling, general administrative, and other expenses; and Research and development expenses.

57

Overview. This segment represents the Company’s global bauxite mining operations and worldwide refining system, which processes bauxite into alumina.

A portion of this segment’s bauxite production represents the offtake from an equity method investment in Guinea, as well as Alcoa’s share of bauxite production related to an equity investment in Saudi Arabia. Bauxite mined is primarily used internally within the Alumina segment; a portion of the bauxite is sold to external customers. Bauxite sales to third-parties are conducted on a contract basis.

The alumina produced by this segment is sold primarily to internal and external aluminum smelter customers; a portion of the alumina is sold to external customers who process it into industrial chemical products. Approximately two-thirds of the production of alumina is sold under supply contracts to third parties worldwide, while the remainder is used internally by the Aluminum segment. Alumina produced by this segment and used internally is transferred to the Aluminum segment at prevailing market prices. A portion of this segment’s third-party sales are completed through alumina traders.

Generally, this segment’s sales are transacted in U.S. dollars while costs and expenses are transacted in the local currency of the respective operations, which are the Australian dollar, the Brazilian real, and the euro. Most of the operations that comprise the Alumina segment are part of AWAC, which is now wholly-owned by Alcoa (see Noncontrolling Interest above).

This segment also includes Alcoa’s 25.1% ownership interest in the mining and refining joint venture company in Saudi Arabia. In the third quarter of 2024, Alcoa entered into a share purchase and subscription agreement with Ma’aden, pursuant to which Alcoa agreed to sell its full ownership interest of 25.1% in the Saudi Arabia joint venture to Ma’aden in exchange for issuance by Ma’aden of approximately 86 million shares and $150 in cash.

Business Update. The average API of $471 per metric ton trended favorably compared to 2023 reflecting a 37% year over year increase. The majority of third-party alumina sales are linked to the API and the favorable price trend has resulted in strong results for the segment.

During 2024, the Alumina segment experienced favorable raw material costs compared to 2023, partially offset by higher production costs primarily due to operating the Australian refineries with lower grade bauxite.

Alumina production decreased 8% in 2024 compared to 2023 primarily due to the full curtailment of the Kwinana refinery in the second quarter of 2024 and reduced production at the Australia refineries due to lower grade bauxite, partially offset by increased production at the Alumar refinery due to the absence of unplanned equipment maintenance and increased operating levels at the San Ciprián refinery in 2024.

Kwinana Refinery

In June 2024, Alcoa completed the full curtailment of the Kwinana refinery, as planned, which was announced in January 2024. As of March 2024, the refinery had approximately 780 employees and this number was reduced to approximately 250 through the fourth quarter of 2024 to manage certain processes that are expected to continue until about the fourth quarter of 2025. At that time, the employee number will be further reduced to approximately 50. In addition to the employees separating as a result of the curtailment, approximately 290 employees have terminated through the productivity program announced in the third quarter of 2023 or redeployed to other Alcoa operations.

In 2024, Alcoa recorded restructuring charges, net of $287 related to the curtailment of the refinery including $220 for water management costs, $41 for employee related costs, $12 for take-or-pay contracts, $9 for asset retirement obligations, and $5 for asset impairments. Related cash outlays of approximately $300 (which includes existing employee related liabilities and asset retirement obligations) are expected through 2025, with $146 spent in 2024.

Capacity. At December 31, 2024, the Alumina segment had a base refining capacity of 13,843 kmt with 3,204 kmt of curtailed capacity. In the second quarter of 2024, curtailed capacity increased 1,752 kmt due to the full curtailment of the Kwinana refinery (see above).

58

Annual Comparison

Production

Alumina production decreased 8% primarily as a result of:

•
Full curtailment of the Kwinana refinery in June 2024

•
Reduced production at the Australia refineries due to lower bauxite grade

Partially offset by:

•
Increased production at the Alumar refinery due to decreased equipment maintenance

•
Increased production at the San Ciprián refinery as the refinery was operating at 50 percent capacity in 2024 and 30 to 50 percent capacity in 2023

Third-party sales

Third-party sales increased $1,049 primarily as a result of:

•
Higher average realized price of $114/ton principally driven by a higher average API

•
Higher shipments of alumina primarily due to increased sales of externally sourced alumina to satisfy certain customer commitments and increased trading activity

•
Favorable currency impacts

Partially offset by:

•
Lower volumes and price from bauxite offtake and supply agreements primarily caused by the shift to intrasegment sales due to higher production at the San Ciprián refinery

Intersegment sales

Intersegment sales increased $615 primarily as a result of:

•
Higher average API on sales to the Aluminum segment

•
Higher alumina shipments primarily due to the Alumar smelter and Warrick smelter restarts

Segment Adjusted EBITDA

Segment Adjusted EBITDA increased $1,135 primarily as a result of:

•
Higher average realized price

•
Favorable raw material costs primarily on lower prices for caustic soda

•
Favorable currency impacts

•
Lower energy costs primarily due to favorable natural gas prices

Partially offset by:

•
Higher production costs primarily related to operating certain of the Australia refineries with lower grade bauxite

•
Write down of certain inventories to their net realizable value

Forward Look.

The Alumina segment is expected to produce between 9.5 to 9.7 million metric tons of alumina in 2025, a decrease from 2024 due to the curtailment of the Kwinana refinery. In 2025, alumina shipments are expected to be between 13.1 and 13.3 million metric tons, consistent with 2024. The difference between production and shipments reflects trading volumes and externally sourced alumina to fulfill customer contracts due to the curtailment of the Kwinana refinery.

Further, in 2025, the Alumina segment expects higher raw material and energy costs to be partially offset by increased sales from bauxite offtake and supply agreements.

59

Aluminum

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Aluminum production (kmt)","","","2,215","","","","2,114"],["Total aluminum shipments (kmt)","","","2,590","","","","2,491"],["Produced aluminum shipments (kmt)","","","2,277","","","","2,166"],["Third-party aluminum sales","","$","7,359","","","$","7,045"],["Other(1)","","","(129",")","","","(120",")"],["Total segment third-party sales","","$","7,230","","","$","6,925"],["Intersegment sales","","","16","","","","15"],["Total sales","","$","7,246","","","$","6,940"],["Adjusted operating costs","","","5,488","","","","5,281"],["Other segment items","","","1,101","","","","1,198"],["Segment Adjusted EBITDA","","$","657","","","$","461"],["Average realized third-party price per metric ton of aluminum","","$","2,841","","","$","2,828"],["Adjusted operating cost per metric ton of produced aluminum shipped","","$","2,410","","","$","2,438"]]
[[/GREPCENT_TABLE]]

(1)
Other includes third-party sales of energy, as well as realized gains and losses related to embedded derivative instruments designated as cash flow hedges of forward sales of aluminum.

In the above table, total aluminum third-party shipments include metric tons that were not produced by the Aluminum segment. Such aluminum was purchased by this segment to satisfy certain customer commitments. The Aluminum segment bears the risk of loss of the purchased aluminum until control of the product has been transferred to this segment’s customer. Additionally, Total shipments include offtake from a joint venture supply agreement.

The average realized third-party price per metric ton of aluminum includes three elements: a) the underlying base metal component, based on quoted prices from the LME; b) the regional premium, which represents the incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold in the United States); and c) the product premium, which represents the incremental price for receiving physical metal in a particular shape (e.g., billet, slab, rod, etc.) or alloy.

Adjusted operating costs include all production related costs for aluminum produced and shipped: raw materials consumed; conversion costs, such as labor, materials, and utilities; and plant administrative expenses. Other segment items include costs associated with trading activity and energy assets; other direct and non-production related charges; Selling, general administrative, and other expenses; and Research and development expenses.

Overview. This segment consists of the Company’s (i) worldwide smelting and casthouse system, which processes alumina into primary aluminum, and the (ii) portfolio of energy assets in Brazil, Canada, and the United States.

Aluminum’s combined smelting and casting operations produce primary aluminum products, virtually all of which are sold to external customers and traders. The smelting operations produce molten primary aluminum, which is then formed by the casting operations into either common alloy ingot (e.g., t-bar, sow, standard ingot) or into value add ingot products (e.g., foundry, billet, rod, and slab). A variety of external customers purchase the primary aluminum products for use in fabrication operations, which produce products primarily for the transportation, building and construction, packaging, wire, and other industrial markets. Results from the sale of aluminum powder and scrap are also included in this segment, as well as the impacts of embedded aluminum derivatives related to energy supply contracts.

The energy assets supply power to external customers in Brazil and, to a lesser extent, in the United States, as well as internal customers in the Aluminum (Canadian smelters and Warrick (Indiana) smelter) and Alumina segments (Brazilian refineries).

Generally, this segment’s aluminum sales are transacted in U.S. dollars while costs and expenses of this segment are transacted in the local currency of the respective operations, which are the U.S. dollar, the euro, the Norwegian krone, the Icelandic króna, the Canadian dollar, the Brazilian real, and the Australian dollar.

This segment also includes Alcoa Corporation’s 25.1% ownership interest in the smelting joint venture company in Saudi Arabia. In the third quarter of 2024, Alcoa entered into a share purchase and subscription agreement with Ma’aden, pursuant to which Alcoa agreed to sell its full ownership interest of 25.1% in the Saudi Arabia joint venture to Ma’aden in exchange for issuance by Ma’aden of approximately 86 million shares and $150 in cash.

60

Business Update. Aluminum prices increased 7 percent year over year with LME prices on a 15-day lag averaging $2,409 per metric ton in 2024.

During 2024, the Aluminum segment experienced favorable raw material costs for carbon materials that was more than offset by higher average alumina input costs.

During 2024, the Company maintained the controlled pace for the restart of the Alumar smelter and continued actions to improve the smelter’s overall performance. The restart resumed in the second quarter after the smelter experienced operational instability in the first quarter of 2024. The site was operating at approximately 84 percent of the site’s total annual capacity of 268 kmt (Alcoa share) as of December 31, 2024.

In the fourth quarter of 2024, the Company completed the restart of 16 kmt of previously curtailed capacity at the Portland smelter in Australia that began in the fourth quarter of 2023. The site was operating at approximately 83 percent of the site’s total annual capacity of 197 kmt (Alcoa share) as of December 31, 2024.

In October 2024, the U.S. Treasury Department issued final regulations on the Section 45X of the Advanced Manufacturing Tax Credit, enacted as part of the Inflation Reduction Act (IRA Section 45X), which further clarified that some direct and indirect material costs can qualify for the credit. In the fourth quarter of 2024, the Company recorded the full year 2023 and 2024 benefit of $30 for the Massena West and Warrick smelters in Cost of goods sold related to this clarification.

In March 2024, Alcoa completed the restart of approximately 54 kmt of capacity at the Warrick smelter in Indiana that began in October 2023. Alcoa incurred restart expenses of $3 during the first quarter of 2024.

San Ciprián Smelter

In March 2024, Alcoa completed the restart of approximately 6 percent of total pots at the San Ciprián smelter as required by the February 2023 updated viability agreement. The Company incurred restart expenses of $5 in 2024. In connection with the December 2021 agreement and the February 2023 updated viability agreement, the Company has restricted cash of $86 remaining at December 31, 2024, of which $10 was released in February 2025 for 2024 expenditures, and the remaining $76 is available for capital improvements at the site and smelter restart costs.

Capacity. At December 31, 2024, the Aluminum segment had 374 kmt of idle smelting capacity on a base capacity of 2,645 kmt, a decrease from 2023 of 91 kmt in idle capacity primarily due to the Alumar, Warrick, San Ciprián, and Portland smelter restarts (see above).

Annual Comparison

Production

Production increased 5% primarily as a result of:

•
Warrick smelter and Alumar smelter restarts

Third-party sales

Third-party sales increased $305 primarily as a result of:

•
Higher shipments primarily due to the Alumar smelter and Warrick smelter restarts

•
Increased offtake from a joint venture supply agreement

•
Higher average realized price of $13/ton driven by a higher average LME (on a 15-day lag) partially offset by lower regional premiums and the absence of gains from the Alumar smelter restart hedge program which ended in December 2023

•
Higher pricing at the Brazil hydro-electric facilities

Partially offset by:

•
Lower trading activities

•
Decrease in value add product sales due to lower product premiums in Europe and North America

•
Unfavorable currency impacts

61

Segment Adjusted EBITDA

Segment Adjusted EBITDA increased $196 primarily as a result of:

•
Higher average realized price

•
Lower energy costs, primarily in Brazil

•
Higher pricing at the Brazil hydro-electric facilities

•
Lower production costs primarily due to efficiencies at higher production rates

Partially offset by:

•
Unfavorable raw material costs primarily on higher average alumina input costs, partially offset by lower market prices for carbon materials

•
Decrease in value add product sales

Forward Look. Alcoa expects aluminum production to range between 2.3 and 2.5 million metric tons and aluminum shipments to range between 2.6 and 2.8 million metric tons in 2025. The increase in production and shipments in 2025 is due to smelter restarts.

Additionally, the Company engages in trading activity when favorable market conditions allow. Availability of trading opportunities in 2025 may impact the Company’s shipment projection.

Further, in 2025, the Aluminum segment expects lower raw material costs will offset the absence of Ma’aden metal offtake, as expected with the announced sale of the Saudi Arabia joint venture, and certain lower product premiums. The segment also expects higher production costs with the absence of the IRA Section 45X benefit for 2023 recorded in 2024.

Reconciliations of Certain Segment Information

Reconciliation of Total Segment Third-Party Sales to Consolidated Sales

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Alumina","","$","4,662","","","$","3,613"],["Aluminum","","","7,230","","","","6,925"],["Total segment third-party sales","","$","11,892","","","$","10,538"],["Other","","","3","","","","13"],["Consolidated sales","","$","11,895","","","$","10,551"]]
[[/GREPCENT_TABLE]]

Reconciliation of Total Segment Adjusted EBITDA to Consolidated Net Income (Loss) Attributable to Alcoa Corporation

[[GREPCENT_TABLE]]
[["","","2024","","","2023"],["Total Segment Adjusted EBITDA","","$","2,065","","","$","734"],["Unallocated amounts:"],["Transformation(1)","","","(62",")","","","(80",")"],["Intersegment eliminations","","","(231",")","","","7"],["Corporate expenses(2)","","","(160",")","","","(133",")"],["Provision for depreciation, depletion, and amortization","","","(642",")","","","(632",")"],["Restructuring and other charges, net","","","(341",")","","","(184",")"],["Interest expense","","","(156",")","","","(107",")"],["Other expenses, net","","","(91",")","","","(134",")"],["Other(3)","","","(93",")","","","(55",")"],["Consolidated income (loss) before income taxes","","","289","","","","(584",")"],["Provision for income taxes","","","(265",")","","","(189",")"],["Net loss attributable to noncontrolling interest","","","36","","","","122"],["Consolidated net income (loss) attributable to Alcoa Corporation","","$","60","","","$","(651",")"]]
[[/GREPCENT_TABLE]]

(1)
Transformation includes, among other items, the Adjusted EBITDA of previously closed operations.

(2)
Corporate expenses are composed of general administrative and other expenses of operating the corporate headquarters and other global administrative facilities, as well as research and development expenses of the corporate technical center.

(3)
Other includes certain items that are not included in the Adjusted EBITDA of the reportable segments.

62

Environmental Matters

See Part II Item 8 of this Form 10-K in Note S to the Consolidated Financial Statements under caption Contingencies—Environmental Matters.

Liquidity and Capital Resources

Alcoa Corporation’s primary future cash flows are centered on operating activities, particularly working capital, as well as capital expenditures and capital returns. Alcoa’s ability to fund its cash needs depends on the Company’s ongoing ability to generate and raise cash in the future.

In 2024, the Company generated higher profitability due to higher prices for alumina and aluminum and lower raw material and energy costs, partially offset by higher restructuring charges. The strong financial results allowed the Company to maintain a strong balance sheet, including a strong cash position. Additionally, the Company successfully completed the following actions:

•
Issued $750 of 7.125% Senior Notes due 2031 under the Company's new Green Finance Framework;

•
Funded $580 in capital expenditures to sustain and grow our operations;

•
Voluntarily repaid the $385 drawn under the Alumina Limited Revolving Credit Facility and cancelled the outstanding lender tranche commitments, effectively terminating the facility; and,

•
Returned capital to stockholders of $90. In each quarter of 2024, the Board of Directors declared and paid a quarterly cash dividend of $0.10 per share of the Company’s stock (including newly issued shares for the acquisition of Alumina Limited).

Management believes that the Company’s cash on hand, projected cash flows, and liquidity options, combined with its strategic actions, will be adequate to fund its short-term (at least 12 months) and long-term operating and investing needs. Further, the Company has flexibility related to its use of cash; the Company has no significant debt maturities until 2027 and no significant cash contribution requirements related to its pension plan obligations (see Material Cash Requirements below for more information).

Although management believes that Alcoa’s projected cash flows and other liquidity options will provide adequate resources to fund operating and investing needs, the Company’s access to, and the availability of, financing on acceptable terms in the future will be affected by many factors, including: (i) Alcoa Corporation’s credit rating; (ii) the liquidity of the overall capital markets; (iii) the current state of the economy and commodity markets, and (iv) short- and long-term debt ratings. There can be no assurances that the Company will continue to have access to capital markets on terms acceptable to Alcoa Corporation.

Changes in market conditions caused by U.S., global, or macroeconomic events, such as ongoing regional conflicts, high inflation, and changing U.S. or global monetary policies could have adverse effects on Alcoa’s ability to obtain additional financing and cost of borrowing. Inability to generate sufficient earnings could impact the Company’s ability to meet the financial covenants in our outstanding debt and revolving credit facility agreements and limit our ability to access these sources of liquidity or refinance or renegotiate our outstanding debt or credit agreements on terms acceptable to the Company. Additionally, the impact on market conditions from such events could adversely affect the liquidity of Alcoa’s customers, suppliers, and joint venture partners and equity method investments, which could negatively impact the collectability of outstanding receivables and our cash flows.

At December 31, 2024, the Company’s cash and cash equivalents were $1,138, of which $948 was held outside the United States. Alcoa Corporation has a number of commitments and obligations related to the Company’s operations in various foreign jurisdictions, resulting in the need for cash outside the United States. Alcoa Corporation continuously evaluates its local and global cash needs for future business operations, which may influence future repatriation decisions. See Part II Item 8 of this Form 10-K in Note Q to the Consolidated Financial Statements for additional information related to undistributed net earnings.

Cash from Operations

Cash provided from operations was $622 in 2024 compared with $91 in 2023. Notable changes to the sources and (uses) of cash include:

•
$954 favorable change in net income, excluding the impacts from restructuring charges, primarily due to higher alumina and aluminum pricing and lower raw material and energy costs;

•
$168 less income taxes paid on prior year earnings, as well as on lower current year earnings in the jurisdictions where taxes are paid; and,

•
($525) in certain working capital accounts, primarily an increase in receivables in 2024 due to higher sales, a decrease in inventories in 2023 primarily on raw material prices, partially offset by an increase in accounts payable in 2024 due to higher alumina trading payables.

63

In the third quarter of 2020, AofA paid approximately $74 (A$107) to the ATO related to the tax dispute described in Note S to the Consolidated Financial Statements in Part II Item 8 of this Form 10-K. Upon payment, AofA recorded a noncurrent prepaid tax asset, as the Company continues to believe it is more likely than not that AofA’s tax position will be sustained and therefore is not recognizing any tax expense in relation to this matter. In accordance with Australian tax laws, the initial interest assessment and additional interest are deductible against AofA’s taxable income. AofA applied this deduction beginning in the third quarter of 2020, reducing cash tax payments. Interest compounded in future years is also deductible against AofA’s income in future periods. If AofA is ultimately successful, the interest deduction would become taxable as income in the year the dispute is resolved. In addition, should the ATO decide in the interim to reduce any interest already assessed, the reduction would be taxable as income at that point in time. During 2024, AofA continued to record its tax provision and tax liability without effect of the ATO assessment, since it expects to prevail. The tax payable related to deductions of interest on the assessment will remain on AofA’s balance sheet as a noncurrent liability, increased by the tax effect of subsequent periods’ interest deductions, until dispute resolution. At December 31, 2024 and December 31, 2023, the noncurrent liability resulting from the cumulative interest deductions was approximately $206 (A$332) and $199 (A$293), respectively.

The Company utilizes a Receivables Purchase Agreement facility to sell up to $150 of certain receivables through a special purpose entity (SPE) to a financial institution on a revolving basis. Alcoa Corporation guarantees the performance obligations of the Company subsidiaries, and unsold customer receivables are pledged as collateral to the financial institution to secure the sold receivables. At December 31, 2024 and December 31, 2023, the SPE held unsold customer receivables of $247 and $104, respectively, pledged as collateral against the sold receivables.

The Company continues to service the customer receivables that were transferred to the financial institution. As Alcoa collects customer payments, the SPE transfers additional receivables to the financial institution rather than remitting cash. In 2024, the Company sold gross customer receivables of $1,186, and reinvested collections of $1,170 from previously sold receivables, resulting in net cash proceeds from the financial institution of $16. In 2023, the Company sold gross customer receivables of $591, and reinvested collections of $477 from previously sold receivables, resulting in net cash proceeds from the financial institution of $114.

Cash collections from previously sold receivables yet to be reinvested of $50 and $99 were included in Accounts payable, trade on the accompanying Consolidated Balance Sheet as of December 31, 2024 and 2023, respectively. Cash received from sold receivables under the agreement are presented within operating activities in the Statement of Consolidated Cash Flows. See Part II Item 8 of this Form 10-K in Note I to the Consolidated Financial Statements for additional information related to this facility.

Financing Activities

Cash provided from financing activities was $201 in 2024 compared with $57 in 2023.

The source of cash in 2024 was primarily $737 of net proceeds from the bond issuance (see below), partially offset by $385 for the repayment of the Alumina Limited debt (see below), and $90 of dividends paid on stock.

The source of cash in 2023 was primarily $158 of net contributions from Alumina Limited (see Noncontrolling interest above) and $55 primarily related to the net issuance of short-term borrowings (see below), partially offset by $72 of dividends paid, $52 in financial contributions primarily related to the sale of the Warrick Rolling Mill, and $34 for payments related to tax withholding on stock-based compensation awards.

Credit Facilities.

Revolving Credit Facility

The Company and Alcoa Nederland Holding B.V. (ANHBV), a wholly-owned subsidiary of Alcoa Corporation and the borrower, have a $1,250 revolving credit and letter of credit facility in place for working capital and/or other general corporate purposes (the Revolving Credit Facility). The Revolving Credit Facility, established in September 2016, most recently amended and restated in June 2022 and amended in January 2024, is scheduled to mature in June 2027. Subject to the terms and conditions under the Revolving Credit Facility, the Company or ANHBV may borrow funds or issue letters of credit. Further, the Revolving Credit Facility contains financial covenants and customary affirmative and negative covenants (applicable to Alcoa Corporation and certain subsidiaries described as restricted), that, subject to certain exceptions, include limitations on (among other things): indebtedness, liens, investments, sales of assets, restricted payments, entering into restrictive agreements, a covenant prohibiting reductions in the ownership of AWAC entities, and certain other specified restricted subsidiaries of Alcoa Corporation, below an agreed level. The Revolving Credit Facility also contains customary events of default, including failure to make payments under the Revolving Credit Facility, cross-default and cross-judgment default, and certain bankruptcy and insolvency events.

64

On January 17, 2024, Alcoa Corporation, ANHBV, and certain subsidiaries of the Company entered into Amendment No. 1 (Amendment No. 1) to the Revolving Credit Facility (Amended Revolving Credit Facility). The Amended Revolving Credit Facility provides additional flexibility to the Company and the Borrower by temporarily (i) reducing the minimum interest coverage ratio required thereunder from 4.00 to 1.00 to 3.00 to 1.00 and (ii) providing for a maximum addback for cash restructuring charges in Consolidated EBITDA (as defined in the Revolving Credit Facility) of $450, in each case for the 2024 fiscal year. As of January 1, 2025, the minimum interest coverage ratio requirement reverted to 4.00 to 1.00 and the maximum addback for cash restructuring charges in Consolidated EBITDA reverted to 15% of Consolidated EBITDA. The requirement that the Company maintain a debt to capitalization ratio not to exceed .60 to 1.00 was not changed by Amendment No. 1.

In connection with Amendment No. 1, the Company also agreed to provide collateral for its obligations under the Amended Revolving Credit Facility, which requires it to execute all security documents to re-secure collateral under the Amended Revolving Credit Facility by, subject to certain exceptions, a first priority security interest in substantially all assets of the Company, the Borrower, the material domestic wholly-owned subsidiaries of the Company, and the material foreign wholly-owned subsidiaries of the Company located in Australia, Brazil, Canada, Luxembourg, the Netherlands, Norway, and Switzerland including equity interests of certain subsidiaries that directly hold equity interests in AWAC entities.

After January 1, 2025, the Company may obtain a release of the collateral if the Company or the Borrower (as applicable) (i) has at least two of the following three designated ratings: (x) Baa3 from Moody’s Investor Service (Moody’s), (y) BBB- from Standard and Poor’s (S&P) Global Ratings and (z) BBB- from Fitch Ratings and (ii) does not have any designated rating lower than: (x) Ba1 from Moody’s, (y) BB+ from S&P Global Ratings and (z) BB+ from Fitch Ratings.

The Amended Revolving Credit Facility contains customary affirmative covenants, negative covenants, and events of default substantially comparable to the Revolving Credit Facility (other than those that are described above and other minor changes). The representations, warranties and covenants contained in the Amended Revolving Credit Facility were made only for purposes of Amendment No. 1 and as of specific dates and were solely for the benefit of the parties to the Amended Revolving Credit Facility.

As of December 31, 2024, the Company was in compliance with all financial covenants. The Company may access the entire amount of commitments under the Revolving Credit Facility. There were no borrowings outstanding at December 31, 2024 and 2023, and no amounts were borrowed during 2024 and 2023 under the Revolving Credit Facility.

Japanese Yen Revolving Credit Facility

In April 2023, the Company entered into a one-year unsecured revolving credit facility for $250 (available to be drawn in Japanese yen) (the Japanese Yen Revolving Credit Facility). Subject to the terms and conditions under the facility, the Company or ANHBV may borrow funds. The facility included covenants that are substantially the same as those included in the Revolving Credit Facility.

On January 17, 2024, Alcoa Corporation and ANHBV, entered into Amendment No. 1 to the Japanese Yen Revolving Credit Facility (Amended Japanese Yen Revolving Credit Facility) which contains changes that are substantially the same as those included in the Amended Revolving Credit Facility (as described above). Also in connection with this amendment, the Company agreed to provide collateral for its obligations with the same conditions as the Amended Revolving Credit Facility. On April 26, 2024, the Company entered into an amendment extending the maturity of the Japanese Revolving Credit Facility to April 2025.

As of December 31, 2024, the Company was in compliance with all financial covenants. The Company may access the entire amount of commitments under the facility. There were no borrowings outstanding at December 31, 2024 and 2023. During 2024, $201 (29,686 JPY) was borrowed and $196 (29,686 JPY) was repaid. During 2023, $10 (1,495 JPY) was borrowed and repaid.

Alumina Limited Revolving Credit Facility

In connection with the acquisition of Alumina Limited (see Note C), the Company assumed $385 of indebtedness as of August 1, 2024, representing the amount drawn on Alumina Limited's revolving credit facility.

At acquisition, the Alumina Limited revolving credit facility had tranches maturing in October 2025 ($100), January 2026 ($150), July 2026 ($150), and June 2027 ($100). In August 2024, Alcoa cancelled the undrawn portions of the revolving credit facility maturing in July 2026 ($15) and June 2027 ($100). In November 2024, pursuant to the terms of the Alumina Limited revolving credit facility, Alcoa voluntarily repaid all accrued and unpaid amounts outstanding under the revolving credit facility, totaling $385 and, as of the same date, cancelled the outstanding lender tranche commitments ($385). As a result of the repayment and cancellation of undrawn amounts, the Alumina Limited revolving credit facility agreement was effectively terminated. No early termination penalties or prepayment premiums were incurred by Alcoa in connection with the termination of the Alumina Limited revolving credit facility.

The Company may draw on the remaining facilities periodically to ensure working capital needs are met. See Part II Item 8 of this Form 10-K in Note M to the Consolidated Financial Statements for additional information related to these facilities.

65

Guarantees of Third Parties. As of December 31, 2024 and 2023, the Company had no outstanding potential future payments for guarantees issued on behalf of a third party.

Bank Guarantees and Letters of Credit. Alcoa Corporation and its subsidiaries have outstanding bank guarantees and letters of credit related to, among others, energy contracts, environmental obligations, legal and tax matters, leasing obligations, workers compensation, and customs duties. The total amount committed under these instruments, which automatically renew or expire at various dates between 2025 and 2026, was $316 (includes $87 issued under a standby letter of credit agreement —see below) at December 31, 2024. Additionally, ParentCo has outstanding bank guarantees and letters of credit related to the Company of $12 at December 31, 2024. In the event ParentCo would be required to perform under any of these instruments, ParentCo would be indemnified by Alcoa Corporation in accordance with the Separation and Distribution Agreement. Likewise, the Company has outstanding bank guarantees and letters of credit related to ParentCo of $6 at December 31, 2024. In the event Alcoa Corporation would be required to perform under any of these instruments, the Company would be indemnified by ParentCo in accordance with the Separation and Distribution Agreement.

In December 2023, AofA committed to provide a bank guarantee in connection with the approval of the Company’s five-year mine plans that were referred to the Western Australia Environmental Protection Agency (WA EPA), which demonstrates Alcoa’s confidence that its operations will not impair drinking water supplies. On September 30, 2024 and October 1, 2024, AofA delivered bank guarantees totaling $62 (A$100). After March 27, 2025, Alcoa may, with the Western Australian government’s consent, replace the bank guarantee with a parent company guarantee or a surety bond. The requirement to provide financial assurance will expire upon the completion of the WA EPA’s assessment of the Company’s five-year mine plans.

In August 2017, Alcoa Corporation entered into a standby letter of credit agreement with three financial institutions, which was most recently amended in May 2024 and expires on May 1, 2026. The agreement provides for a $200 facility used by the Company for matters in the ordinary course of business. Alcoa Corporation’s obligations under this facility are secured in the same manner as obligations under the Company’s revolving credit facility. Additionally, this facility contains similar representations and warranties and affirmative, negative, and financial covenants as the Company’s Revolving Credit Facility. See Part II Item 8 of this Form 10-K in Note M to the Consolidated Financial Statements for additional information related to the Company’s debt. As of December 31, 2024, letters of credit aggregating $87 were issued under this facility.

Surety Bonds. Alcoa Corporation has outstanding surety bonds primarily related to tax matters, contract performance, workers compensation, environmental-related matters, and customs duties. The total amount committed under these bonds, which automatically renew or expire at various dates between 2025 and 2029, was $245 at December 31, 2024. Additionally, ParentCo has outstanding surety bonds related to the Company of $7 at December 31, 2024. In the event ParentCo would be required to perform under any of these instruments, ParentCo would be indemnified by Alcoa Corporation in accordance with the Separation and Distribution Agreement. Likewise, the Company has outstanding surety bonds related to ParentCo of $7 at December 31, 2024. In the event Alcoa Corporation would be required to perform under any of these instruments, the Company would be indemnified by ParentCo in accordance with the Separation and Distribution Agreement.

Debt. As of December 31, 2024, Alcoa Corporation had four outstanding series of Notes maturing at varying times. A summary of the Notes and other long-term debt is shown below. See Part II Item 8 of this Form 10-K in Note M to the Consolidated Financial Statements for additional information related to the Company’s debt.

[[GREPCENT_TABLE]]
[["December 31,","","2024","","","2023"],["5.500% Notes, due 2027","","$","750","","","$","750"],["6.125% Notes, due 2028","","","500","","","","500"],["4.125% Notes, due 2029","","","500","","","","500"],["7.125% Notes, due 2031","","","750","","","","\u2014"],["Other","","","76","","","","82"],["Unamortized discounts and deferred financing costs","","","(31",")","","","(21",")"],["Total","","","2,545","","","","1,811"],["Less: amount due within one year","","","75","","","","79"],["Long-term debt, less amount due within one year","","$","2,470","","","$","1,732"]]
[[/GREPCENT_TABLE]]

The Company entered into inventory repurchase agreements whereby the Company sold aluminum to a third party and agreed to subsequently repurchase substantially similar inventory. The Company did not record sales upon each shipment of inventory and the net cash received of $50 and $56 related to these agreements was recorded in Short-term borrowings within Other current liabilities on the Consolidated Balance Sheet as of December 31, 2024 and December 31, 2023, respectively.

66

In 2024, the Company recorded borrowings of $88 and repurchased $94 of inventory related to these agreements. In 2023, the Company recorded borrowings of $117 and repurchased $61 of inventory related to these agreements. The cash received and subsequently paid under the inventory repurchase agreements is included in Cash provided from financing activities on the Statement of Consolidated Cash Flows.

Ratings. Alcoa Corporation’s cost of borrowing and ability to access the capital markets are affected not only by market conditions but also by the short- and long-term debt ratings assigned to Alcoa Corporation’s debt by the major credit rating agencies.

On March 6, 2024, Moody’s Investor Service downgraded the rating of ANHBV’s long-term debt from Baa3 to Ba1 and revised the outlook from negative to stable.

On March 4, 2024, Fitch Ratings downgraded the rating for Alcoa Corporation and ANHBV’s long-term debt from BBB- to BB+ and revised the outlook from negative to stable.

On March 4, 2024, Standard and Poor’s Global Ratings downgraded the rating of Alcoa Corporation’s long-term debt from BB+ to BB and revised the outlook from positive to stable.

Ratings are not a recommendation to buy or hold any of Alcoa’s securities and they may be revised or revoked at any time at the sole discretion of the rating organization.

Dividend. In 2024, the Board of Directors declared and paid quarterly cash dividends of $0.10 per share of the Company’s common stock (including common stock underlying CDIs) and Series A convertible preferred stock, totaling $89 and $1, respectively, for the year.

The details of any future cash dividend declaration, including the amount of such dividend and the timing and establishment of the record and payment dates, will be determined by the Board of Directors. The decision of whether to pay future cash dividends and the amount of any such dividends will be based on the Company's financial position, results of operations, cash flows, capital requirements, business conditions, the requirements of applicable law, and any other factors the Board of Directors may deem relevant.

On February 20, 2025, the Board of Directors declared a quarterly cash dividend of $0.10 per share of the Company’s common stock (including common stock underlying CDIs) and Series A convertible preferred stock, to be paid on March 20, 2025 to stockholders of record as of the close of business on March 4, 2025.

Common Stock Repurchase Program. In October 2021, Alcoa Corporation’s Board of Directors approved a common stock repurchase program for the Company to purchase shares of its outstanding common stock up to an aggregate transactional value of $500, depending on cash availability, market conditions, and other factors.

On July 20, 2022, Alcoa Corporation announced that its Board of Directors approved an additional common stock repurchase program under which the Company may purchase shares of its outstanding common stock up to an aggregate transactional value of $500, depending on the Company’s continuing analysis of market, financial, and other factors (the July 2022 authorization). Prior to this authorization, $150 remained available for common stock repurchases at the end of the second quarter of 2022 from the prior authorization in October 2021 of $500 which was fully exhausted in 2022 with the Company’s repurchase activity (see below).

No shares were repurchased in 2024 or 2023.

In 2022, the Company repurchased 8,565,200 shares of its common stock for $500; the shares were immediately retired.

As of the date of this report, the Company is currently authorized to repurchase up to a total of $500, in the aggregate, of its outstanding shares of common stock under the July 2022 authorization. Repurchases under this program may be made using a variety of methods, which may include open market purchases, privately negotiated transactions, or pursuant to a Rule 10b5-1 plan. This program may be suspended or discontinued at any time and does not have a predetermined expiration date. Alcoa Corporation intends to retire repurchased shares of common stock.

67

Investing Activities

Cash used for investing activities was $608 in 2024 compared with $585 in 2023.

In 2024, the use of cash was primarily attributable to $580 related to capital expenditures and $37 of cash contributions to the ELYSISTM partnership.

In 2023, the use of cash was primarily attributable to $531 related to capital expenditures and $70 of cash contributions to the ELYSIS partnership.

In 2025, Alcoa expects capital expenditures of approximately $700 related to sustaining capital projects and return-seeking capital projects. The timing and amount of capital expenditures may fluctuate as a result of the Company’s normal operations.

Material Cash Requirements

As discussed above, the Company relies primarily on operating cash flows to fund its cash commitments and management believes its cash on hand, projected cash flows, and liquidity options combined with its strategic actions, will be adequate to fund its short-term (at least 12 months) and long-term operating and investing needs.

The Company has committed cash outflows related to pension and postretirement benefit obligations, asset retirement obligations, environmental remediation, and operating lease agreements. See Part II Item 8 of this Form 10-K in Notes O, R, S, and T, respectively, to the Consolidated Financial Statements for additional information. As of December 31, 2024, a summary of Alcoa Corporation’s outstanding material cash requirements are as follows:

[[GREPCENT_TABLE]]
[["","","Total","","","2025","","","2026-2027","","","2028-2029","","","Thereafter"],["Operating activities:"],["Energy-related purchase obligations","","$","12,438","","","$","1,335","","","$","2,410","","","$","2,030","","","$","6,663"],["Raw material purchase obligations","","","4,440","","","","2,055","","","","767","","","","514","","","","1,104"],["Other purchase obligations","","","1,603","","","","1,091","","","","192","","","","114","","","","206"],["Interest related to debt","","","675","","","","150","","","","292","","","","153","","","","80"],["Financing activities:"],["Long-term debt and Short-term borrowings","","","2,626","","","","125","","","","751","","","","1,000","","","","750"],["Totals","","$","21,782","","","$","4,756","","","$","4,412","","","$","3,811","","","$","8,803"]]
[[/GREPCENT_TABLE]]

Purchase obligations—Energy-related purchase obligations consist primarily of electricity and natural gas contracts with expiration dates ranging from less than 1 year to 23 years. Raw material obligations consist mostly of bauxite (relates to Alcoa's bauxite mine interests in Guinea and Brazil), caustic soda, lime, alumina, aluminum fluoride, calcined petroleum coke, anodes, and cathode blocks with expiration dates ranging from less than 1 year to 10 years. Other purchase obligations consist principally of freight for bauxite and alumina with expiration dates ranging from less than 1 to 12 years. Many of these purchase obligations contain variable pricing components, and, as a result, actual cash payments may differ from the estimates provided in the preceding table. In accordance with the terms of several of these supply contracts, obligations may be reduced as a result of an interruption to operations, such as a plant curtailment or a force majeure event.

Interest related to total debt—Interest is based on interest rates in effect as of December 31, 2024 and is calculated on debt with maturities that extend to 2031.

Long-term debt and Short-term borrowings—Total debt amounts in the preceding table represent the principal amounts of all outstanding long-term debt and Short-term borrowings, which have maturities that extend to 2031.

68

Critical Accounting Policies and Estimates

The preparation of the Company’s Consolidated Financial Statements in accordance with GAAP requires management to make certain estimates based on judgments and assumptions regarding uncertainties that affect the amounts reported in the Consolidated Financial Statements and disclosed in the Notes to the Consolidated Financial Statements. Areas that require such estimates include the review of properties, plants, and equipment and goodwill for impairment, and accounting for each of the following: asset retirement and environmental obligations; litigation matters; pension plans and other postretirement benefits obligations; derivatives and hedging activities; and income taxes.

Management uses historical experience and all available information to make these estimates; actual results may differ from those used to prepare the Company’s Consolidated Financial Statements at any given time. Despite these inherent limitations, management believes that the amounts recorded in the financial statements related to these items are based on its best estimates and judgments using all relevant information available at the time.

A summary of the Company’s significant accounting policies is included in Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements.

Properties, Plants, and Equipment. Properties, plants, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets (asset group) may not be recoverable, including in the period when assets have met the criteria to be classified as held for sale. The model used to determine recoverability of an asset or asset group would leverage the model that management uses for planning and strategic review of the entire business, including related inputs and assumptions. Management’s impairment assessment process is described in Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements. See Part II Item 8 of this Form 10-K in Note K to the Consolidated Financial Statements for more information regarding properties, plants, and equipment.

Goodwill. Goodwill is reviewed for impairment annually (in the fourth quarter) or more frequently if indicators of impairment exist or if a decision is made to sell or exit a business. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include, among others, deterioration in general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows over multiple periods. The fair value that could be realized in an actual transaction may differ from that used to evaluate goodwill for impairment.

Under the qualitative impairment test, management considers a number of factors in its assessment, such as: general economic conditions, equity and credit markets, industry and market conditions, and earnings and cash flow trends.

Under the quantitative impairment test, management uses a discounted cash flow (DCF) model to estimate the current fair value of its reporting units. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and market share, sales volumes and prices, production costs, production capability, tax rates, capital spending, discount rate, and working capital changes. The model used for the goodwill impairment test leverages the model, including related inputs and assumptions, that management uses for planning and strategic review of the entire business.

Management will test goodwill on a qualitative or quantitative basis. See Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements for more information regarding management’s impairment assessment process.

Management performed a quantitative assessment for the Alumina reporting unit in the fourth quarter of 2024. As a result of the assessment, the estimated fair value of the Alumina reporting unit was substantially in excess of its carrying value, resulting in no impairment.

The impact on the estimated fair value of an increase in the discount rate of 1% would not result in a change in the conclusions reached for the impairment assessment performed in 2024, the estimated fair value would remain in excess of carrying value.

Further, in all years presented, there have been no triggering events that necessitated an impairment test for the Alumina reporting unit, except for the 2023 segment change which resulted in no impairment. See Part II Item 8 of this Form 10-K in Note L to the Consolidated Financial Statements for more information regarding goodwill.

69

Asset Retirement and Environmental Obligations. Estimates are used to record environmental remediation and asset retirement obligation (ARO) reserves based on the best available information at the time of recognition. Several assumptions are used to estimate the costs required to demolish, environmentally remediate, reclaim, or restore the site, including:

•
Engineering designs for construction or closure;

•
Materials and services costs;

•
Volume of regulated materials to be removed (asbestos, PCB fluids, spent potlining);

•
Disposition of demolition materials;

•
Extent of contamination based on available data;

•
Scope of remediation to mitigate human health or environmental risks and/or to meet regulatory requirements;

•
Timing to complete construction or closure; and,

•
Commercial availability and pricing for off-site treatment or disposal applications.

As the site is demolished, remediated, reclaimed, or restored, the assumptions and estimates used to record the reserve may change to account for:

•
Actual site conditions that require more or less remediation or reclamation;

•
Legislation that becomes more or less stringent;

•
Regulative authorities requiring updates to final design prior to completion;

•
Alternative disposal methods for demolition waste;

•
Technological changes which allow remediation to be more efficient;

•
Market factors; and,

•
Variances in work that is atypical from prior work experience.

Changes to the estimates may result in material changes to the reserve that may require an increase to or a reversal of a previously recorded reserve. See Part II Item 8 of this Form 10-K in Note R and Note S to the Consolidated Financial Statements for more information regarding current reserves.

Litigation Matters. For asserted claims and assessments, liabilities are recorded when an unfavorable outcome of a matter is deemed to be probable and the loss is reasonably estimable. Management determines the likelihood of an unfavorable outcome based on many factors such as, among others, the nature of the matter, available defenses and case strategy, progress of the matter, views and opinions of legal counsel and other advisors, applicability and success of appeals processes, and the outcome of similar historical matters. Once an unfavorable outcome is deemed probable, management weighs the probability of estimated losses, and the most reasonable loss estimate is recorded. If an unfavorable outcome of a matter is deemed to be reasonably possible, then the matter is disclosed, and no liability is recorded. With respect to unasserted claims or assessments, management must first determine that the probability that an assertion will be made is likely, then, a determination as to the likelihood of an unfavorable outcome and the ability to reasonably estimate the potential loss is made. Legal matters are reviewed on a continuous basis to determine if there has been a change in management’s judgment regarding the likelihood of an unfavorable outcome or the estimate of a potential loss. See Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements for more information regarding management’s litigation matters policy.

Pension and Other Postretirement Benefits. Liabilities and expenses for pension and other postretirement benefits are determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount the future estimated liability, the expected long-term rate of return on plan assets, and several assumptions relating to the employee workforce (salary increases, health care cost trend rates, retirement age, and mortality).

The yield curve model used to develop the discount rate is based on high-quality corporate bonds, parallels the plans’ projected cash flows and has a weighted average duration of 10 years. If a deep market of high-quality corporate bonds does not exist in a country, then the yield on government bonds plus a corporate bond yield spread is used. The impact of a change in the weighted average discount rate of ¼ of 1% would be approximately $60 on combined pension and other postretirement liabilities and immaterial to pretax earnings in the following year.

The expected long-term rate of return on plan assets is generally applied to a five-year market-related value of plan assets (a four-year average or the fair value at the plan measurement date is used for certain non-U.S. plans). The process used by management to develop this assumption is one that relies on forward-looking investment returns by asset class. Management incorporates expected future investment returns on current and planned asset allocations using information from various external investment managers and consultants, as well as management’s own judgment. A change in the assumption for the weighted average expected long-term rate of return on plan assets of ¼ of 1% would impact pretax earnings by approximately $5 for 2025.

70

Mortality rate assumptions are based on mortality tables and future improvement scales published by third parties, such as the Society of Actuaries, and consider other available information including historical data as well as studies and publications from reputable sources.

See Part II Item 8 of this Form 10-K in Note O to the Consolidated Financial Statements for more information regarding pension and other postretirement benefits including accounting impacts of current year actions.

Derivatives and Hedging. To calculate the fair value of certain derivatives, management uses DCF and other simulation models that consider the following inputs and assumptions: quoted market prices (e.g., aluminum prices on the 10-year London Metal Exchange (LME) forward curve and energy prices), information concerning time premiums and volatilities for certain option type embedded derivatives and regional premiums for aluminum contracts, aluminum and energy prices beyond those quoted in the market, and the estimated credit spread between Alcoa and the counterparty. The quoted market prices used in the valuation models are dependent on market fundamentals, the relationship between supply and demand at any point in time, seasonal conditions, inventories, and interest rates. For periods beyond the term of quoted market prices, management estimates the price of aluminum by extrapolating the 10-year LME forward curve and estimates the Midwest premium based on recent transactions.

Changes in estimates can have a material impact on the derivative valuations. See Part II Item 8 of this Form 10-K in Note P to the Consolidated Financial Statements for more information regarding derivatives and hedging and related activity during the period.

Income Taxes. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not (greater than 50%) that a tax benefit will not be realized. In evaluating the need for a valuation allowance, management applies judgment in assessing all available positive and negative evidence and considers all potential sources of taxable income, including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable income, and income from tax planning strategies. Positive evidence includes factors such as a history of profitable operations, projections of future profitability within the carryforward period, including from tax planning strategies, and Alcoa Corporation’s experience with similar operations. Existing favorable contracts and the ability to sell products into established markets are additional positive evidence. Negative evidence includes items such as cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a deferred tax asset based on existing projections of income. In certain jurisdictions, deferred tax assets related to cumulative losses may exist without a valuation allowance where in management’s judgment the weight of the positive evidence more than offsets the negative evidence of the cumulative losses. Upon changes in facts and circumstances, management may conclude that deferred tax assets for which no valuation allowance is currently recorded may not be realized, resulting in a future charge to establish a valuation allowance. Financial information utilized in this analysis leverages the same financial information, including related inputs and assumptions, that management uses for planning and strategic review of the entire business.

Tax benefits related to uncertain tax positions taken or expected to be taken on a tax return are recorded when such benefits meet a more likely than not threshold. Otherwise, these tax benefits are recorded when a tax position has been effectively settled, which means that the statute of limitations has expired, or the appropriate taxing authority has completed their examination even though the statute of limitations remains open.

Changes in estimates can have a material impact on the deferred taxes and uncertain tax positions. See Part II Item 8 of this Form 10-K in Note Q to the Consolidated Financial Statements for more information regarding income taxes and deferred tax assets and related activity during the period.

Related Party Transactions

Alcoa Corporation buys products from and sells products to various related companies, consisting of entities in which Alcoa Corporation retains a 50% or less equity interest, at negotiated prices between the two parties. These transactions were not material to the financial position or results of operations of Alcoa Corporation for all periods presented.

Recently Adopted Accounting Guidance

See Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements under caption Recently Adopted Accounting Guidance.

Recently Issued Accounting Guidance

See Part II Item 8 of this Form 10-K in Note B to the Consolidated Financial Statements under caption Recently Issued Accounting Guidance.