EX-99.2 3 michael.htm Prepared by E-Services - www.edgar2.com

 

 

Exhibit 99.2  Slides of Presentation by Michael Hanley, Executive Vice President, Interim Chief Financial Officer, Alcan Inc.

 

 

 



 

Forward Looking Statements

 
 

Statements made in the course of this presentation which describe the Company's intentions, expectations or predictions may be "forward-looking statements" within the meaning of securities laws. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty, and actual actions or results could differ materially. Reference should be made to the  most recent Form 10-Q and Form 10-K for a summary of major risk factors. In addition, certain non-GAAP measures are used which are reconciled to the comparable GAAP measures herein or on the Company's website at www.alcan.com in the "Investors" section.

 

© 2005 ALCAN INC.

Slide 2

 


 

Agenda

 

 

  Value based management

  Performance against targets

  Key challenges

  Portfolio management

  Priorities

  Key performance indicators

  Investment thesis

 

© 2005 ALCAN INC.

Slide  3

 


Value Based Management

 
 

Governing objective: maximizing shareholder value over the long term

 

  EVA introduced in 1997

  In 2001, implemented a value-based management framework:

  Goal of doubling warranted equity value every 5 years

  5-year planning process established

  In 2003, set out three financial targets to support objective:

  Operating EPS growth of 15% per year;

  Minimum free cash flow of $400 million per year; and

  Positive EVA in 2006

 

© 2005 ALCAN INC.

Slide  4

 


 

Performance Against Targets

 
 

Partial success

 

Metric

Target Achievement
Operating EPS growth 15% / year CAGR 18% (2001-2004)
Free cash flow Minimum $400M / year in 2002 and 2003

in 2004

EVA Positive by 2006   Delayed
     
© 2005 ALCAN INC.  

Slide  5

 


Key Challenges – Currencies
Assets by Geography

 

© 2005 ALCAN INC.

Slide  6

 


 

Key Challenges -  Currencies

 
 

Sharp weakening of the U.S. dollar since 1H 2003

 

Currency

Current
Annual
Requirements

 

Change
2003 vs 2005

Annualized
 Impact on Operating
 Earnings (US$M)

      $ %  
           
           
CAD 2 B      US$ +0.20 +30 (220)          
AUD 0.5 B      US$ +0.15 +25 (60)          
Euro-like 0.5 B      US$ +0.10 +10 (60)          
Total         (340)          

   

© 2005 ALCAN INC.

Slide  7

 


 

Key Challenges –  Raw Material Costs

 
 

Major external cost pressures

 

  Current
Annual
Requirements
  Change
2003 vs 2005
Annualized Cost
Impact
(US$M)
      $ %  
           
Caustic 600 kt      $/t +150 +100 (90)
Coke 1,500 kt      $/t +30 +25 (50)
Resins / films 1,100 kt     $/t +265 +30 (290)
Oil 6 mbbls      $/bbl +15 +60 (90)
Gas 16 Pj     $/Gj +4 +100 (60)
Maritime freight   $/t +13 +75 (120)
Total         (700)

 

 
© 2005 ALCAN INC.

Slide  8

 


 

Key Challenges – Operating Earnings 
Impact

 
 

About 80% of aluminum price benefit offset by higher input costs and currencies

 

 

(US$M)

Annualized Impact on
Operating Earnings
   
Aluminum * 800  
   
Raw Materials (330)
Currencies (340)
Total (670)

* Based on published sensitivity

 

© 2005 ALCAN INC.

Slide  9

 


 

Portfolio Management

 
 

Key component of VBM, but not without short-term impacts

 

■  Pechiney acquisition – December 2003

BGP margin of 5% and ROCE of 2% (2003)

  Novelis Spin-off – January 2005

  Accounted for 17% of ROCE but only 14% of assets (2004)

  Gove  – Ongoing

■  US$1.3 billion project – US$900 in 2004/2005

  Non-operating items

 

© 2005 ALCAN INC.

Slide  10

 


 

Priorities –  Pechiney Synergy Capture

 
 

  Excellent track record

  Original target of $360M by end of
    second year following acquisition.

  Bulk of benefits to be captured in
    year 2.

  Target was maintained despite
    Novelis spin-off, an increase of
    about $30M.

  Executing to plan --on track to reach
    target.

 

 
© 2005 ALCAN INC.

Slide  11


 

Priorities
Controllable Value Drivers

 
 

Focused on high impact opportunities

 

  BGP margin improvement

  Drive for procurement excellence

  SG&A optimization

  Management of capital spending

  Best in class working capital turns

  Continued portfolio optimization

 

© 2005 ALCAN INC.

Slide  12

 


 

Key Performance Indicators
Updated Financial Targets

 
 

Earning and exceeding our cost of capital is priority # 1

 

Metric Target
Return on capital employed Cover COC by 2008
Operating EPS growth 15% / year
Cash from operations Min. $2bn from 2006
Debt to Capital 35%

 

Note:  based on 5-year plans and forward rates for currency and metal

 
© 2005 ALCAN INC.

Slide  13

 


 

Key Performance Indicators
ROCE and Operating EPS

 
 

© 2005 ALCAN INC.

Slide  14


 

Key Performance Indicators
Cash from Operations and Debt to Cap

 
 

© 2005 ALCAN INC.

Slide  15

 


 

Investment Thesis

 
 

  Track record in managing for value

  Modern and cost efficient upstream assets

  Opportunities to reach and maintain 1st quartile positions

  Technology and power advantage

  Downstream businesses in profitable markets with competitive
    positions

  Significant margin improvement potential

  Financial and capital allocation discipline

  Commitment to profitable growth

 

© 2005 ALCAN INC.

Slide  16

 


 

 

 

APPENDIX

 

 

 

 

 

© 2005 ALCAN INC.

Slide  17

 


 

 

Key Economic Sensitivities

 

 

  Change in Full
Year Average
NI ($M) EPS ($/share)
Aluminum +US$100/mt $170 $0.46
Currency      
     CAD +US$0.10 $(110) $(0.30)
     European +US$0.10 $(56) $(0.15)
     AUD +US$0.10 $(40) $(0.11)

 

 

 

© 2005 ALCAN INC.

Slide  18

 


Return on Capital Employed Definition

 
 

Income =

Net income (loss) from continuing operations
+ Other specified items loss (gain) after tax
+ Balance sheet translation losses (gains)
+ Minority interest
+ Interest (after-tax)


Average * Capital Employed =

Total debt
+ Deferred taxes
+ Minority interests
+ Preference shares
+ Common equity

 

* Average of beginning and end of period.

 

© 2005 ALCAN INC.

Slide  19


Other Specified Items (OSIs)

 
 
  By their nature, non-operating
    items are difficult to forecast.

  Increase in number of OSIs
    driven mainly by major
    transactions – Pechiney and
    Novelis related charges
    represented about 85% of OSI
    charges over the last 10
    quarters.

  Further rationalization and
    consolidation of downstream
    operations will result in OSIs.

 

© 2005 ALCAN INC.

Slide  20

 


 

 

© 2005 ALCAN INC.

Slide  21