Alcoa Reports Strong 2nd Quarter 2008 Results; Higher Volume and Pricing Offset Input Cost Pressures.

Double-Digit Profit Increases Across All Segments From 1(st) Quarter 2008

Highlights:

* Net income of $546 million or $0.66 per share, an 80 percent increase sequentially;

* Revenues of $7.6 billion, an 11 percent increase excluding Packaging;

* Revenue increases across all four operating segments sequentially;

* Double-digit profit increases across all segments sequentially;

* Input costs impacting entire aluminum industry offset by higher volume and pricing;

* Record quarterly smelting production levels set at more than 1 million metric tons

* Cash from operations of $1 billion in the quarter, driven by higher profits and improved working capital;

* Debt-to-capital stands well within targeted range at 30.6 percent;

* ROC stands at 12.1 percent excluding investments in growth projects;

* Share repurchase program continued in quarter. Total repurchases at 10 percent against Board authorized level of up to a maximum of 25 percent of shares outstanding.

NEW YORK -- Alcoa (NYSE: AA) today announced that strong revenue growth in its second quarter 2008 led to an 80 percent increase in profitability compared with the first quarter of 2008. The Company reported net income of $546 million, or $0.66 per diluted share compared with $303 million or $0.37 per share in first quarter 2008. Higher input costs impacting the entire aluminum industry were offset by higher volume and stronger pricing. Net income in the second quarter of 2007 was $715 million or $0.81.

Revenues for the quarter increased to $7.6 billion from $7.4 billion in the first quarter of 2008 driven by higher volumes and prices. All of the Company's operating segments achieved higher revenues in the quarter. Revenues in the second quarter of 2007 were $6.8 billion excluding divested businesses, and including divested businesses were $8.1 billion.

All of the Company's operating segments achieved double-digit after-tax operating income (ATOI) increases over the prior quarter. The Company's downstream Engineered Products and Solutions segment again achieved an all-time quarterly ATOI record.

The strong quarterly results were achieved despite a negative after-tax impact of $39 million, or $0.05 per share, associated with the previously announced gas pipeline explosion in Western Australia and power disruptions at the Rockdale, TX smelter because of unreliable power supply.

"Each of our operating groups grew their topline this quarter, but more importantly they achieved profitable growth as they achieved strong ATOI increases," said Klaus Kleinfeld, Alcoa Chief Executive Officer. "Higher prices for our products and increased volumes more than offset the increased input costs facing the entire industry.

"All of our businesses are focused on continuing to drive profitable growth through disciplined execution and using all of the levers of Alcoa in order to maximize shareowner value," said Kleinfeld.

Cash from operations in the second quarter was $1.0 billion, an approximately $1.3 billion improvement from first quarter 2008, driven by higher profits and improved working capital management. Significant improvement was achieved in days working capital outstanding. On a year over year basis, days working capital improved 6.4 days, and on a sequential basis, 5.7 days. The Company's cash generation helped to fund its growth programs. In the quarter, capital expenditures were $796 million, 52 percent of which was devoted to growth projects. Cash from operations in the 2007 second quarter was $1.3 billion.

The Company's debt-to-capital ratio stood at 30.6 percent at the end of the quarter, well within its targeted range. The Company's 12-month trailing return on capital (ROC) stood at 12.1 percent at the end of the second quarter, excluding investments in growth. Including those investments, ROC was 9.4 percent.

The Company's share repurchase program continued in the quarter. On a year-to-date basis, the Company repurchased 18.3 million shares bringing total repurchases to 10 percent against the Board authorized level of up to a maximum of 25 percent of shares outstanding.

Segment and Other Results

Alumina 

ATOI was $190 million, an increase of $21 million, or 12 percent, from the prior quarter. Higher pricing more than offset adverse currency effects and higher material costs. As previously announced, an explosion at a natural gas supplier in Western Australia impacted profitability by $17 million.

Primary Metals

ATOI was $428 million, up $121 million, or 39 percent, compared to the prior quarter. Record quarterly smelting production levels were set at more than one million metric tons as the Iceland smelter reached full capacity during the period. Higher LME prices more than offset cost pressures for raw materials, currency, and energy. Power disruptions at the Rockdale smelter required an increase in electricity purchases at market rates and impacted income by $22 million in the period. This segment purchased approximately 52 kmt of primary metal for internal use.

Flat-Rolled Products

ATOI was $55 million, up $14 million, or 34 percent, from the prior quarter. Improved Russia results and productivity gains more than offset lower volumes caused by North American and European market weakness and higher energy and transportation costs.

Engineered Products and Solutions

ATOI was a record $157 million, up $19 million, or 14 percent, from the prior quarter. Record revenue was also achieved despite some sluggish end markets. Volumes increased in the aerospace, industrial gas turbine, commercial building and construction, and commercial transportation markets.

Alcoa will hold its quarterly conference call at 5:00 PM Eastern Time on July 8, 2008 to present the quarter's results. The meeting will be webcast via alcoa.com. Call information and related details are available at www.alcoa.com under "Invest."

About Alcoa

Alcoa is the world leader in the production and management of primary aluminum, fabricated aluminum and alumina combined, through its active and growing participation in all major aspects of the industry. Alcoa serves the aerospace, automotive, packaging, building and construction, commercial transportation and industrial markets, bringing design, engineering, production and other capabilities of Alcoa's businesses to customers. In addition to aluminum products and components including flat-rolled products, hard alloy extrusions, and forgings, Alcoa also markets Alcoa[R] wheels, fastening systems, precision and investment castings, and building systems. The Company has 97,000 employees in 34 countries and has been named one of the top most sustainable corporations in the world at the World Economic Forum in Davos, Switzerland. More information can be found at www.alcoa.com

Forward-Looking Statements 

Certain statements in this release relate to future events and expectations and as such constitute forward-looking statements involving known and unknown risks and uncertainties that may cause actual results, performance or achievements of Alcoa to be different from those expressed or implied in the forward-looking statements. Alcoa 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. Important factors that could cause actual results to differ materially from those in the forward-looking statements include: (a) material adverse changes in economic or aluminum industry conditions generally, including global supply and demand conditions and fluctuations in London Metal Exchange-based prices for primary aluminum and other products; (b) material adverse changes in the markets served by Alcoa, including the transportation, aerospace, building and construction, distribution, packaging, industrial gas turbine and other markets; (c) Alcoa's inability to mitigate impacts from energy supply interruptions or from unfavorable currency fluctuations or from increased energy, transportation and raw materials costs or other cost inflation; (d) Alcoa's inability to achieve the level of cash generation, return on capital improvement, cost savings, or earnings or revenue growth anticipated by management; (e) Alcoa's inability to complete its growth projects or achieve efficiency improvements at newly constructed or acquired facilities as planned and by targeted completion dates; (f) unfavorable changes in laws, governmental regulations or policies, foreign currency exchange rates or competitive factors in the countries in which Alcoa operates; (g) significant legal proceedings or investigations adverse to Alcoa, including environmental, product liability, safety and health and other claims; and (h) the other risk factors summarized in Alcoa's Form 10-K for the year ended December 31, 2007, Form 10-Q for the quarter ended March 31, 2008, and other reports filed with the Securities and Exchange Commission.

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