Alcoa is on track to deliver against its financial and operational targets in 2012. The Company continued strong productivity growth across the upstream and downstream segments this quarter, driven by higher utilization rates, process innovations, lower scrap rates, and usage reductions.
Following the record low in days working capital achieved for both the first quarter and second quarter of 2012, Alcoa also achieved a record low in days working capital for the third quarter at 33 days, five days lower than the previous third quarter record set in 2011. This is the 12th successive quarter the Company has demonstrated year-over-year improvement.
In third quarter 2012, the debt-to-capital ratio stood at 36.1 percent, with net debt-to-capital at 32.4 percent, and liquidity remained strong with $1.4 billion cash on hand. Following on the improved working capital performance, the Company generated cash from operations of $263 million in the quarter. Capital spending was $302 million in the quarter, compared to $291 million in second quarter 2012. Free cash flow in the third quarter was a negative $39 million. Expenditures on the Saudi Arabia joint venture project were also on track at $16 million.
Alcoa continues to execute on previously announced curtailments in the upstream business, improving competitiveness and driving toward the Company’s stated goal of moving down the cost curve 10 percentage points in smelting and 7 percentage points in refining by 2015. In line with plans announced in January 2012, Alcoa has completed partial curtailments at La Coruña and Avilés, Spain, and the Portovesme, Italy curtailment is underway and will be complete by November 30, 2012. Additionally, Alcoa permanently closed its smelter at Alcoa, Tennessee, and two lines at Rockdale, Texas. When the Portovesme smelter is fully curtailed, Alcoa will have 14 percent of its highest-cost system smelting capacity offline.Alcoa has moderated its 2012 global aluminum demand forecast to 6 percent, down from 7 percent, as a slowdown in China slightly impacts the second half outlook. The aluminum market grew 13 percent in 2010, and 10 percent in 2011, and is well ahead of the 6.5 percent compound annual growth rate needed to meet Alcoa’s projection of a doubling of aluminum demand 2010 to 2020.