Alcoa: Slightly Soft 2Q26; S32 Assets Provide Scale While Cyclone Effects Weigh on Alumina, Remain Overweight

Research evidence excerpt

Alcoa: Slightly Soft 2Q26; S32 Assets Provide Scale While Cyclone Effects Weigh on Alumina, Remain Overweight

Arjun Chandar AC North America Credit Research

(1-212) 834-4047 20 July 2026 J P M O R G A N

arjun.c.chandar@jpmorgan.com

value right (CVR) payment based on commodity prices. In its Q2 earnings presentation,

the company noted it is targeting a post close leverage of ~2.0x and plans to fund the

acquisition with ~$3.1bn in cash and ~17m shares of newly issued Alcoa common stock.

Moody’s and S&P both reaffirmed ratings at AA and maintained a stable outlook on the back

of the acquisition. The deal contains a locked-box mechanism, providing potential upside to

AA based on the cash flow of acquired assets effective from April 1, 2026 (locked-box

positive as of June 30, 2026). The cash flow from acquired assets offsets AA’s cash

consideration at closing. The deal is expected to close, subject to S32 shareholder approval,

in the first half of 2027. Below we provide an estimated framework for AA’s pro forma capital

structure, including our assumption around the debt/cash mix to refinance the $3.1bn bridge

currently in place. We note that the PF balance sheet below is likely the most conservative

way to look at the acquisition without giving consideration to the NPV of estimated future

synergies and without accounting for potential positive cash flow consideration from the

acquired assets via the locked-box mechanism.

Table 2: AA PF Capital Structure (Ex-Synergies)

FYE December 31 (PF S32 Acquisition) Leverage

30-Jun-26 Adj PF Gross Net

Cash 1,352.0 (1,100.0) 252.0

Available RCF (Estimated) 1,450.0 1,450.0

Total Liquidity (Estimated) 2,802.0 1,702.0

$1.25bn RCF due 2027 0.0 0.0

$200m JPY RCF 0.0 0.0

Assumed Lease Liabilities/Other (CVR) 0.0 1,400.0 1,400.0