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BUSINESS NEWS ARCONIC ANNOUNCES THREE-YEAR TARGETS AT INAUGURAL INVESTOR DAY Arconic Inc. announced its levers for value creation and three-year financial targets through 2019 at its inaugural Investor Day event in New York. Arconic is focused on driving shareholder value. The company has substantially improved its portfolio and margins since 2008, and today holds strong market positions across the sectors it serves, with 70 percent of revenues derived from number one or two market positions. Arconic is well-positioned to capture secular growth tailwinds in aerospace and automotive, and achieve margin expansion through cost reductions and share gains across all segments, driven by differentiated technology. The company’s $1.2 billion retained interest (19.9 percent) in Alcoa Corporation provides further financial flexibility and Arconic plans to monetize this stake responsibly, with timing based on market conditions. Resulting cash would be used for debt pay-down and share repurchases. The following three-year business targets were announced for the 2017 to 2019 time period: ❚ ❚ Arconic revenue: $11.8 billion-$12.4 billion in 2017, with 7-8 percent compound annual growth rate through 2019 ❚ ❚ Adjusted EBITDA margin: Approximately 15 percent targeted for 2017, growing to approximately 17 percent in 2019 ❚ ❚ Combined segment adjusted EBITDA margin (excluding corporate spend): Approximately 17 percent targeted for 2017, growing to approximately 19 percent in 2019 ❚ ❚ Return on net assets: Approximately 9 percent targeted for 2017, growing to 11-12 percent in 2019 ❚ ❚ Leverage: In 2019, target of 2.0-2.5 times net debt to adjusted EBITDA ❚ ❚ Free cash flow: More than $350 million in 2017, increasing to approximately $700 million in 2019 “We lead the company with an ‘owner mindset’, strongly focused on shareholder value,” said Arconic Chairman and CEO Klaus Kleinfeld.

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“Our value creation model has six priority areas – innovation, market share and growth, productivity and overhead cost reduction, capital efficiency, de-leveraging and returning cash to shareholders. Arconic’s recent separation from Alcoa Corporation has unleashed distinct advantages; ourmanagement team is completely focused on the major end markets we serve, our technology portfolio is wholly concentrated on value-add products and processes, we have an exacting capital expenditure approval process, an efficient operating structure, and are an attractive employer of choice for high performing talent.” Kleinfeld continued, “Arconic’s businesses have strong market positions and margin profiles and are positioned to capture near-term growth tailwinds in our major segments. We have a clear execution path to incremental value by improving our businesses, a strong balance sheet profile and financial flexibility, and are attacking all opportunities to drive shareholder value. These strengths, combined with our new three-year targets, provide a clear roadmap for shareholder value creation.” Arconic has a strong track record of delivering productivity savings and expects to achieve $650 million in 2016. The company is targeting net savings of approximately 2 percent of revenue in 2017. Arconic applies an ‘owner mindset’ to capital allocation, prioritizing growth, optimization of financial position, debt pay- down, and return of cash to shareholders. The company has an exacting approach to capital expenditure approval, with 2017 expenditures capped at $650 million. Arconic’s executive compensation structure is aligned with shareholder value creation. The company is targeting a regular dividend to shareholders of approximately 10 percent of operating cash flows, with periodic, opportunistic share repurchases based on relative return assessment.

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MARK ZWEIG , from page 1

them learned what is possible through this exercise.

Folks, it is still possible to do this today. Why are you always waiting for your clients to tell you what they want? Figure it out and PITCH them. Tell the client what your assessment of their need is, how you will address it, what it will cost or what your contract will be based on, and why they should hire your firm to do it. Throw away all of your boilerplate and other BS on how many years of experience and how many registered professionals you have. That is how successful sellers do it. And when you do there will be less competition and less fee pressure. Try it. Tell me how it works. MARK ZWEIG is Zweig Group’s founder and chairman. Contact him at mzweig@zweiggroup.com.

THE ZWEIG LETTER January 23, 2017, ISSUE 1184

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