#1ALCAN Alcan Investor Workshop Toronto, October 3, 2006 Michael Hanley Executive Vice President and Chief Financial Officer COCO خود در دنیا در ОС SILE FRAGILE P FRAGILE HOMEPA of CRUS A380 ******* ******** B A380#2Forward Looking Statements ALCAN Statements made in the course of this presentation which describe the Company's or management's objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of securities laws. All statements that address the Company's expectations or projections about the future including statements about the Company's growth, cost reduction goals, operations reorganization plans, expenditures and financial results are forward- looking statements. 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 or 10-K for a summary of factors that could cause such differences. In addition, certain non-GAAP measures are used which are reconciled to the comparable GAAP measures here in or on the Company's website at www.alcan.com in the "Investors" section. ©2006 ALCAN INC. Slide 2#3Agenda Well Positioned for Profitable Growth Business Context Performance Against Targets Business Process Excellence Risk Management ■Capital Allocation Investment Thesis. 2006 ALCAN INC. ALCAN Slide 3#4Business Context Portfolio Optimization M&A Organic 2006 ALCAN INC. Buy Sell Open Close H1 + Pechiney + Ningxia Smelter - Arvida Smelter 2004 H2 -Non Core Trading (EP) -Mass Transport Systems (EP) H1 + Parkside (Pack.) Aluminium de Grece Novelis - Ferro alloys (EP) 2005 H2 + Prewired systems (EP) PET bottles (Pack.) + Slovakian extrusions (EP) -Lannemezan Smelter ALCAN 2006 H1 + Thailand (Pack.) - N.A. Bottles (Pack.) - Affimet. (Primary) + Reidsville Tobacco (Pack.) - + Australian winecaps (Pack.) - Workington. (EP) Steg Smelter Slide 4#5Business Context Margins Expanding With Favourable 2006 Trends Aluminum Currencies CAD AUD Euro-like Input Costs Resins Oil Caustic Coke Gas ©2006 ALCAN INC. 2004 vs. 2003 +21 +7 +12 +9 +18 +33 -14 +10 +12 2005 vs. 2004 % +10 +7 +3 +15 +41 +150 +21 +46 2006 Forecast vs. 2005 +35 +7 -2 +1 ALCAN +15 +19 -4 +2 -22 Slide 5#6Performance Against Targets Metric Return on capital employed (1) Operating EPS growth (3) Cash from continuing operations Debt to Capital (1) Operating see definition in Appendix (2) Annualized (3) Trailing 4 quarters adjusted for spin-off of Novelis 2006 ALCAN INC. Target Cover COC by 2008 15% / year Min. $2B from 2006 35% 1H-06 13.5% (2) 76% $1.1 B 35% ALCAN 2005 6.7% 39% $1.5B 40% Note: Targets based on 5-year plans and forward rates for currency and metal as at September 2005 Slide 6#7Performance Against Targets ROCE* (%) * See definition in Appendix Operating EPS (US$ / share) 2006 ALCAN INC. 15.0% 12.5% 10.0% 7.5% 5.0% 2.5% 0.0% 3.00 2.00 1.00 0.00 2001 2001 2002 2002 CAGR = 15% 2003 2004 CAGR 17% 2003 2004 2005 2005 Note: 2001-2004 results include Novelis 1H06 1H06 ALCAN Earn cost of capital by 2008 15% growth per year Slide 7#8Performance Against Targets Cash from 2,000 Operations 1,500 (US$M) 1,000 500 Debt to Capital 50% (%) 40% 2006 ALCAN INC. 30% 20% 10% 0% 0 2001 2001 III 2004 2002 2002 2003 2003 2004 2005 2005 Note: 2001-2004 results include Novelis 1H06 1H06 ALCAN Minimum $2b starting in 2006 35% Slide 8#9Business Process Excellence Controllable Value Drivers An update on progress from last year... 2006 ALCAN INC. BGP margin improvement ■ Procurement excellence Continuous improvement ■ SG&A optimization ■ Working capital management Capital spending management ALCAN Slide 9#10Business Process Excellence Annual EVA ($M) 160 140 120 100 80 60 40 20 0 Continuous Improvement 10 2004 ©2006 ALCAN INC. 90 2005 Implemented Projects 150 2006 A potential additional $100 M in projects underway 400 active black belts trained or in training ► 2600 green belts trained or in training 400 executives trained as yellow belts $M 1,800 1,600 1,400 1,200 1,000 800 600 400 200 2001 SG&A Expenses 2002 2003 2004 ALCAN 2005 1H06 SG & A -SG&A as a % of rev 8% 7% 6% 5% 4% 3% 2% 1% 0% Comprehensive, focused cost management program in place > Clearly defined strategies to reduce costs. over next 2-3 years > Progress already made toward target of 6% of revenues by end of 2007 (2005: 6.9%, 2006 ytd: 6.3%) Slide 10#11Business Process Excellence 3,000 2,500 2,000 1,500 1,000 500 Working Capital Management Mih 2001 2002 2003 Total Working Capital Disciplined management: ● ● 2004 2005 1H06 2006 ALCAN INC. Days Working Capital 60 50 40 30 20 positive trend in days working capital working capital down in 2005 despite high aluminum prices First half of 2006 reflects normal seasonal build up and high aluminum prices. 10 0 Days Capital Expenditure Management 1,800 1,500 1,200 900 600 300 0 2001 2002 Sustaining Capex 2003 2004 ALCAN Growth Capex 2005 1H06 Depreciation ➤ Sustaining capex signficantly below depreciation ➤ Sustaining capex continues to be subject to discliplined process Slide 11#12Risk Management A Complete and Integrated Process 2006 ALCAN INC. "Cash flow at risk" methodology Gross and net exposures Scenario simulations Measurement Compliance monitoring Risk Measurement and Control Group Internal audit Business Group Finance Directors Strategy execution ALCAN Acceptable cash flow volatility ■ Risk Management Committee Board of Directors Strategy definition ■ Executive Committee/Board of Directors: portfolio composition Business Groups: operations Corporate Finance: capital structure, insurance, derivatives Slide 12#13Risk Management Key Relative Cash Flow Exposures AUD Pitch 2006 ALCAN INC. CAD Euro- like Coke Oil Gas Aluminum Caustic Alumina ALCAN Aluminum represents over 50% of Alcan's total cash flow exposure Canadian dollar, Australian dollar and Euro-like currency exposures combined are also significant... However, currency correlation with LME provides some degree of "natural" cash. flow volatility reduction. Slide 13#14Risk Management Hedged and Fixed-Price Sales Sale type as % of primary production 2006-7 75% 10% C ©2006 ALCAN INC. 2008 LME 3-mnth + Premia Fixed Price Sales LME Hedged Sales 15% 85% 15% ALCAN Change in approach in late 2005 > Previous approach maintained a degree of LME hedged sales plus "natural" fixed price sales obtained through normal business. operations > Current approach maintains only "natural" fixed price sales as they are entered into during normal course of business LME hedged sales run out by 2008 Weighted average price of remaining LME hedged sales is around $1,750/t Average maturity of fixed price sales around 2-3 quarters Slide 14#15Capital Allocation Balancing Profitable Growth, Shareholder Returns and a Strong Balance Sheet Growth Initiatives Organic ©2006 ALCAN INC. M&A Operating Cash Flow less Sustaining Capital Return to Share- holder Dividends Share Buybacks B/S Streng- thening ALCAN Debt Reduction Pensions Slide 15#16Alcan Investment Thesis Well Positioned for Profitable growth ■Modern and cost efficient upstream assets ➤ Opportunities to reach and maintain 1st quartile positions. Technology and power advantages ■ Downstream businesses in profitable markets with competitive positions > Significant margin improvement potential > Leading technology and market positions in selected segments Financial strength and flexibility to pursue profitable growth without compromising financial and capital allocation discipline ■ Proven track record in managing for value © 2006 ALCAN INC. ALCAN Slide 16#172006 ALCAN INC. APPENDIX Slide 17#18Key Economic Sensitivities Aluminum Currency CAD European AUD 2006 ALCAN INC. Change in Full Year Average +US$100/mt +US$0.10 +US$0.10 +US$0.10 NI ($M) $170 $(110) $(56) $(40) ALCAN EPS ($/share) $0.45 $(0.29) $(0.15) $(0.11) Slide 18#19Return on Capital Employed Definition 2006 ALCAN INC. Income = Operating earnings + Minority interest + Interest (after-tax) Average Capital Employed Total debt and borrowings + Net deferred income taxes + Minority interests + Preference shares. + Common shareholders' equity ALCAN Slide 19#20A ALCAN