Alcoa · AA
Alcoa pre-funds a deal that adds alumina and aluminum capacity; alumina EBITDA was near zero last quarter
Alcoa's alumina segment was back to roughly zero adjusted EBITDA last quarter, from -$96 million the quarter before, just as the company pre-funded its AliGroup purchase, while the Western Australia mine approval slipped into 2027.
Published · Inve Research Desk
-$1M
alumina segment adjusted EBITDA last quarter
Up from -$96M the quarter before, but still roughly zero in the alumina business whose capacity the AliGroup deal would raise by 53%.
How they did last quarter
Alumina recovered from the quarter before but its adjusted EBITDA was still about zero, and group adjusted EBITDA fell from the quarter before while staying far above a year ago.
- Alumina segment adjusted EBITDA-$1M, up from -$96M the quarter beforevs July guide for the quarter: alumina performance "net favorable by approximately $10 million"Better than the quarter before; the release does not split the $95M gain between price and operations, so the performance guide cannot be scored on its own.
- Group adjusted EBITDA$789Mvs $901M the quarter before and $270M a year agoDown $112M on the quarter before, but well above a year ago.
- Free cash flow$472Mvs $422M the quarter beforeCash generation improved even as adjusted EBITDA fell.
Alumina EBITDA was back near zero last quarter
Alcoa's alumina segment, which refines bauxite into the powder smelters turn into aluminium, reported adjusted EBITDA of -$1 million in the quarter ended 30 September. EBITDA is earnings before interest, tax, depreciation and amortisation, so it is a pre-charges profit measure rather than an operating profit. The segment's adjusted EBITDA was -$96 million the quarter before and $67 million a year ago, so the latest figure is an improvement on one and a step back from the other.
The group did far better, because aluminium carried it: adjusted EBITDA was $789 million. The AliGroup deal would add a pro forma 53% to Alcoa's alumina capacity and 37% to its primary aluminum capacity, so alumina is not the only business it has committed to enlarge.
A better price and a lower cost only brought it to level
Two things moved in the right direction. The average price Alcoa realised on third-party alumina rose to $353 a tonne, and the adjusted cost of each tonne it produced and shipped fell to $354. The two measures are on different bases, so they show a cash margin near zero rather than a precise figure per tonne; neither includes depreciation. Output helped: production rose on the quarter before as the Pinjarra refinery in Western Australia recovered from the problems that led management to cut its full-year alumina volume guidance in July.
The chief executive said the Alumina Price Index rose to about $370 a tonne in the quarter, above the price Alcoa realised. The company's guide for the final quarter is that alumina performance will be flat, and the chief executive stressed that the guide leaves price out.
The deal is pre-funded ahead of need
Management said in July that the AliGroup acquisition would add to both its alumina and its primary aluminum capacity. Alcoa raised $2.6 billion of bonds during last quarter and cancelled its bridge loan, ahead of a cash payment at closing that is expected in the first half of 2027. Debt has more than doubled in three months to $4.8 billion, set against $4.4 billion of cash. The borrowing was raised ahead of need and sits beside the cash held for that payment.
Holding that cash has a cost, partly offset by what it earns. Management now expects about $185 million of interest expense for the year, an increase from its earlier projection. Calculated from the nine-month figure, that implies roughly $72 million in the final quarter. The release also expects other income to rise in the final quarter from interest earned on the cash held for the deal.
Debt and cash, last four quarter-ends
Debt rose by $2.6 billion and cash by $3.1 billion in the latest quarter: the bonds were raised ahead of the AliGroup payment, so borrowing runs ahead of need until closing.
$ million
| Debt | Cash | |
|---|---|---|
| Dec 2025 | 2,439 | 1,597 |
| Mar 2026 | 2,550 | 1,353 |
| Jun 2026 | 2,224 | 1,352 |
| Sep 2026 | 4,822 | 4,408 |
The mine-plan approval now leans on its whole cushion
The same refineries depend on a mine-plan approval in Western Australia. In April the company expected ministerial approval by the end of 2026. In its latest results it said the process will extend into 2027, and that it has built six more months of mining in current areas into its plans. Management now expects approvals within the first six months of 2027, the full length of the contingency it described in July, with no further cushion beyond it.
The chief executive said, "The mining approvals are taking longer than expected." Management says approvals by mid-2027 should not further materially affect supply, quality or cost, that contingency plans are available if needed, and that its confidence in eventually getting them is unchanged; asked what happens beyond the first six months, the CEO said the company would have to make harder decisions.
The record: notes, full financial tables
Notes
Impact 4/5 Risk Negative
Alcoa's WA mine approval slips into 2027, leaving no room beyond its six-month cushion
Alcoa said approval of its Western Australia mine plan will now extend into 2027 because appeals and final ministerial decisions remain. On 16 April the company expected ministerial approvals by the end of 2026, and on 16 July it said timing could run past that, with contingency plans for up to six months' delay. Management now expects approvals within the first six months of 2027, inside that six-month contingency; beyond it, the CEO said, the company would have to make harder decisions. Management says approvals by mid-2027 should not further materially affect supply, quality or cost, and that contingency plans are available if needed.
“The mining approvals are taking longer than expected.”— William Oplinger, CEO
Impact 4/5 Margin Mixed
Alcoa's alumina segment reported adjusted EBITDA of -$1 million, up from -$96 million
Alumina segment adjusted EBITDA was -$1 million in the September 2026 quarter, up from -$96 million the quarter before and down from $67 million a year ago, as Pinjarra recovered and the realised price rose to $353 a tonne from $334. Adjusted cost per tonne fell to $354 from $368. On 16 July management had guided the quarter's alumina performance to be about $10 million favourable; for the next quarter it guides performance flat and says the guide leaves price out.
“if prices get better during the course of the quarter and they're better today than they were a quarter ago, it will flow through.”— William Oplinger, CEO
Impact 4/5 Balance sheet Mixed
Alcoa pre-funds AliGroup with $2.6 billion of bonds; interest now seen near $185 million
In September Alcoa issued $1.5 billion of 6.625% notes due 2034 and $1.1 billion of 6.875% notes due 2036 and cancelled its bridge loan, lifting debt to $4,822 million and cash to $4,408 million at 30 September from $2,225 million and $1,352 million at 30 June. Full-year interest expense is now guided to about $185 million, an increase from the prior projection. Management will pay the $3.1 billion cash consideration from cash at closing, expected in the first half of 2027, and will update its adjusted net debt target then; in April the target was $1 billion to $1.5 billion.
“the priority after that closure will be rapid delevering.”— William Oplinger, CEO
Impact 3/5 One-off Mixed
Alcoa signs Massena East sale worth up to $315 million, with $50-65 million due at closing
Alcoa signed definitive agreements to sell part of the former Massena East smelter site to a data-centre developer, for potential cash proceeds of up to $315 million. About $50 million to $65 million is due at closing, expected within six months subject to permits; the release adds $60 million to $250 million in later payments tied to approved expansions and installments. On 16 April the talks were advanced with no value given; on 16 July the 2030 target of $500 million to $1 billion from asset sales was reconfirmed. The cash due at closing is 10% to 13% of the target's low end, by our arithmetic.
“So there's not a single template for these transactions because each site has its own complexity.”— William Oplinger, CEO
Impact 3/5 Margin Negative
Alcoa's Q4 guide adds ~$30M raw-material and maintenance costs plus ~$30M alumina costs
Aluminum segment adjusted EBITDA fell to $862 million from $1,073 million the quarter before, as lower metal prices, lower shipments and higher carbon costs outweighed productivity gains. In July management guided a $15 million carbon-cost increase for the quarter; the CFO said it came in a little over $20 million, with about $10 million more to come. For the next quarter the segment is guided to about $30 million of unfavourable items, from raw materials and planned maintenance. The release separately lists alumina costs in the Aluminum segment as about $30 million unfavourable; on the call the CEO described the change as $30 million in Aluminum and flat in Alumina.
“It ended up being just over $20 million.”— Molly Beerman, CFO
Impact 3/5 Balance sheet Positive
Alcoa expects to release 10+ days of working capital, about $400 million on our estimate
The CFO said working capital has historically fallen from near 50 days to the 35-40 range, so it expects a release of at least 10 days in the fourth quarter, depending on year-end prices. Days working capital were 50 in the September 2026 quarter, up from 46 the quarter before and level with a year ago. At last quarter's sales of $3,704 million over 92 days, ten days is about $400 million, by our arithmetic, and it falls if prices fall. On 16 July the CFO said working capital should come down as prices move and sales change, with no figure in our summary of that call.
“I would expect we'll release about 10 days at least going into the fourth quarter.”— Molly Beerman, CFO
Financials
Income statement, last 8 quarters
| Quarter end | Sales | YoY | Other income | PBT | Net profit |
|---|---|---|---|---|---|
| Sep 2026 | 3,704 | +23.7% | – | 573 | 483 |
| Jun 2026 | 3,966 | +31.4% | −200 | 482 | 407 |
| Mar 2026 | 3,193 | −5.2% | 126 | 499 | 425 |
| Dec 2025 | 3,449 | −1.1% | −115 | 68 | 213 |
| Sep 2025 | 2,995 | +3.1% | 1,034 | 167 | 232 |
| Jun 2025 | 3,018 | +3.9% | 112 | 161 | 164 |
| Mar 2025 | 3,369 | +29.6% | 26 | 668 | 548 |
| Dec 2024 | 3,486 | +34.3% | −42 | 338 | 202 |
Balance sheet
| As of | Equity | Debt | Cash | Fixed assets | Total assets |
|---|---|---|---|---|---|
| Sep 2026 | 8,245 | 4,822 | 4,408 | 6,997 | 20,362 |
| Jun 2026 | 7,370 | 2,224 | 1,352 | 6,899 | 16,853 |
| Mar 2026 | 6,826 | 2,550 | 1,353 | 6,861 | 16,640 |
| Dec 2025 | 6,118 | 2,439 | 1,597 | 6,700 | 16,129 |
| Sep 2025 | 6,345 | 2,581 | 1,485 | 6,629 | 15,969 |
Cash flow
| Year end | Operating | Investing | Financing | Free cash flow |
|---|---|---|---|---|
| Dec 2025 | 1,185 | −502 | −261 | 567 |
| Dec 2024 | 622 | −608 | 201 | 42 |
| Dec 2023 | 91 | −585 | 57 | −440 |
| Dec 2022 | 822 | −495 | −768 | 342 |