Alcoa Reports $3 Billion in Q2 Revenue

Lightweight metals miner and manufacturer Alcoa(NYSE:AA) posted fiscal 2025 second-quarter results on Wednesday, July 16, 2025, reporting revenue of $3.02 billion, adjusted EBITDA of $313 million, and adjusted earnings of $0.39 per share. Management highlighted the $1.35 billion divestiture of its stake in the Ma'aden joint venture, which closed on July 1, 2025, a positive legal resolution in Australia, and ongoing operational adjustments to U.S. tariffs.

Multiple strategic and operational pivots reflecting increasing market volatility and significant regulatory headwinds are evident in the quarter's developments.

Alcoa Saw Significant Portfolio Optimization Through Ma’aden JV Sale and Australian Tax Win

Alcoa closed the sale of its 25.1% stake in the Ma'aden joint venture for $1.35 billion on July 1, 2025, a deal comprising $1.2 billion in Ma’aden shares and $150 million in cash, directly strengthening its balance sheet and liquidity. In April, Alcoa also resolved a five-year Australian tax dispute with a favorable tribunal decision, removing a $225 million tax reserve overhang that had been fully provisioned on its balance sheet.

"On July 1, we closed the sale of our 25.1% stake in the Ma'aden joint ventures for a total value of $1.35 billion, consisting of $1.2 billion of modern shares and $150 million of cash. In late April, we successfully concluded a five-year tax dispute in Australia with a favorable ruling for Alcoa. The Australian Review Tribunal affirmed our long-standing position, determining that no additional tax was owed."
— William Oplinger, President and CEO

The dual achievements of monetizing a non-core asset and eliminating a material legal uncertainty directly enhance Alcoa's financial optionality, reduce leverage, and improve both near- and long-term capital allocation flexibility.

Alcoa Saw Tariff-Driven Margin Compression and Dynamic Supply Chain Response

Since the U.S. Section 232 tariff on Canadian aluminum imports doubled from 25% to 50% on June 4, 2025, Alcoa incurred $115 million in tariff-related costs, offset only in part by a $60 million Midwest premium benefit on Canadian volumes, resulting in net margin compression. Management identified that only approximately 30% of Canadian output is available for flexible redirection, as about 70% is locked into annual contracts with U.S. customers, limiting the company's ability to dynamically optimize trade flows fully in response to tariff levels.

"We only saw a Midwest premium uptick of about $60 million. So we had margin compression of about $55 million and related to our Canadian tons. Now obviously, we're getting a benefit on our U.S. tons. ... but with LME at $2,600 and Midwest Premium at $0.67 a pound, we are near neutral or even slightly positive. Because the higher uptick in Midwest premium on The U.S. Tons would be more than the net negative on our Canadian tons."
— Molly Beerman, EVP and CFO

Persistent tariff costs are pressuring segment profitability and creating regionally bifurcated market conditions, forcing Alcoa into a more transactional and less contractually flexible commercial model that heightens earnings volatility and supply chain complexity for future periods.

Mine Approvals and Smelter Ramp Projects Delayed, With Mitigating Contingency Plans

Approval timelines for new Western Australia mine regions (Myra North and Holyoke) have been extended beyond the first quarter of 2026, with final ramp-up of the San Ciprian smelter is now expected by mid-2026 following a prolonged national power outage. Management has implemented contingency plans to maintain current bauxite grades and mining rates for an additional 12-15 months if approvals slip further, preventing 2025–2026 production or cost dislocation. Fully ramping San Ciprian remains key to restoring profitability for the Spanish assets, though refinery losses are expected to persist into 2026.

"Given the complexity of advancing two mine approvals at the same time, the volume of documentation submitted by Alcoa and independent experts, and the anticipated effort to review and respond to public submissions, the original timeline for mine approvals is no longer feasible. While ministerial approval was initially targeted in the first quarter of 2026, it is now expected that the process will extend beyond that time frame."
— William Oplinger, President and CEO

These project timeline extensions introduce execution risk for 2027–2028 but are partially neutralized by proactive risk management, demonstrating operational resilience. If delays extend beyond 15 months, Alcoa will assess the implications for operating rates and take further action as needed.

Looking Ahead

Full-year 2025 aluminum shipment guidance was lowered to 2.5 million–2.6 million metric tons due to San Ciprian smelter delays, while adjusted return-seeking capital expenditures for 2025 were reduced to $50 million from $75 million. Expected tariff costs for the third quarter of 2025 are guided to $250 million, assuming LME of $2,600 and a Midwest premium of $0.67 per pound. Sequential adjusted EBITDA for the third quarter of 2025 is expected to be neutral, as premium pass-throughs roughly offset tariff impacts. There is no updated guidance on Spain or San Ciprian profitability for 2026, but full ramp-up of the smelter is now expected by mid-2026 (calendar year). Management expects to maintain current bauxite supply and cost levels through at least the end of 2026 while awaiting mine approvals.

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