Alcan announces strong fourth quarter to cap record year - Quarterly operating cash flow reaches all-time high of $1.1 billion



    
    FINANCIAL HIGHLIGHTS
    --------------------

    - Income from continuing operations of $1.12 per common share compared
      to a loss from continuing operations of $0.91 a year earlier and
      income from continuing operations of $1.21 in the third quarter;

    - Operating earnings of $1.09 per common share compared to $0.54 a year
      earlier and $1.22 in the third quarter. Earnings include non-cash
      mark-to-market charges on derivatives of $0.17 per common share, as
      compared to charges of $0.11 a year earlier and gains of $0.03 in the
      third quarter;

    - Record cash from operating activities in continuing operations of
      $1.1 billion, up from $788 million a year earlier and $803 million in
      the third quarter;

    - 9.8 million common shares repurchased, representing 52% of the total
      approved under the program;

    - Full-year records set for cash flow from operating activities of
      $3 billion, income from continuing operations of $4.75 per share and
      operating earnings of $5.05 per share.

    MONTREAL, Jan. 31 /CNW Telbec/ - Alcan Inc. (NYSE, TSX: AL) today reported
operating earnings of $1.09 per common share in the fourth quarter of 2006
compared to $0.54 a year ago and $1.22 in the third quarter.
    "Excellent results across most businesses and record operating cash flow
in the fourth quarter capped an outstanding year," said Dick Evans, President
and CEO. "Our financial performance in 2006 has been the strongest in the
company's history, benefiting from the discipline and rigour of Alcan's
management systems and taking full advantage of strong market conditions. I am
particularly pleased that this has allowed the company to deliver solid
progress on growth, shareholder returns and debt reduction," he continued.
    "Looking to the year ahead, return on capital and cash generation remain
our top priorities. We will continue to focus on development of our growth
pipeline while maintaining a balanced approach to capital allocation. Primary
aluminum and downstream market fundamentals remain broadly supportive, and we
have good reason to be optimistic about the year ahead," he concluded.

    (*) Note: All amounts in this press release are expressed in U.S. dollars
        unless otherwise stated. This press release includes a number of
        measures for which no meaning is prescribed by generally accepted
        accounting principles (GAAP). Refer to the section "Definitions" for
        an explanation of these measures.


    -------------------------------------------------------------------------
                                                   Third                Year
                                Fourth Quarter   Quarter   Ended December 31
                              -----------------------------------------------
    ($ millions, except
     where indicated)           2006      2005      2006      2006      2005
    -------------------------------------------------------------------------
    Operating earnings -
     excluding foreign
     currency balance sheet
     translation and Other
     Specified Items             406       205       461     1,896       911

    Foreign currency balance
     sheet translation            97        (5)        -       (12)      (86)
    Other Specified Items
     (OSIs)                      (85)     (533)       (1)      (98)     (670)
                              -----------------------------------------------

    Income (Loss) from
     continuing operations       418      (333)      460     1,786       155
    Income (Loss) from
     discontinued operations       4       (28)       (4)        4       (26)
    Cumulative effect of
     accounting change             -         -         -        (4)        -
                              -----------------------------------------------
    Net income (Loss)            422      (361)      456     1,786       129
                              -----------------------------------------------
    Basic earnings (loss) per
     common share ($ per
     common share)
      Operating earnings        1.09      0.54      1.22      5.05      2.44
      Income (Loss) from
       continuing operations    1.12     (0.91)     1.21      4.75      0.40
      Net income (Loss)         1.13     (0.98)     1.20      4.75      0.33
    Average number of common
     shares outstanding
     (millions)                371.5     370.9     376.1     373.6     370.4
    -------------------------------------------------------------------------


    Operating Earnings

    Operating earnings from continuing operations exclude foreign currency
balance sheet translation effects and Other Specified Items (OSIs). Operating
earnings of $406 million in the fourth quarter of 2006 were $201 million
higher than in the comparable quarter a year ago. The improvement mainly
reflected higher aluminum prices and the results of better pricing, product
mix and volumes in the downstream businesses partly offset by increased raw
materials and energy costs, unfavourable non-cash mark-to-market adjustments
on derivatives as well as the negative impact of a stronger Canadian dollar.
Compared to the third quarter of 2006, operating earnings were down
$55 million, mainly reflecting increased operating costs including normal
seasonal maintenance, non-cash asset retirement obligation adjustments as well
as the impact of negative non-cash mark-to-market adjustments on derivatives,
partly offset by higher metal prices, higher volumes across most business
segments and favourable power generation.
    Included in operating earnings for the fourth quarter of 2006 were
non-cash mark-to-market charges on derivatives of $0.17 per common share as
compared to charges of $0.11 a year earlier and gains of $0.03 in the third
quarter of 2006.

    Income from Continuing Operations

    Income from continuing operations was $418 million or $1.12 per common
share for the fourth quarter versus a loss of $333 million or $0.91 a year
earlier and income of $460 million or $1.21 in the third quarter of 2006.
    Included in income from continuing operations for the fourth quarter of
2006 was a primarily non-cash, after-tax gain of $97 million or $0.26 per
common share for the effects of foreign currency balance sheet translation,
compared to an after-tax loss of $5 million or $0.01 in the year-ago quarter
and nil in the third quarter of 2006.
    Also included were after-tax charges of $85 million or $0.23 per common
share for OSIs. These were comprised mainly of after-tax charges of
$36 million associated with restructuring initiatives across most business
groups, asset impairment charges of $14 million principally in relation to the
Gove alumina refinery in Australia, an asset retirement obligation adjustment
in relation to closed sites of $11 million and a net loss on business
divestments of $8 million.

    Net Income

    Including OSIs, foreign currency balance sheet translation, and
discontinued operations, net income was $422 million or $1.13 per common share
for the fourth quarter.

    Sales and Operating Revenues

    -------------------------------------------------------------------------
                                                   Third                Year
                                Fourth Quarter   Quarter   Ended December 31
                              -----------------------------------------------
    ($ millions, unless
     otherwise noted)           2006      2005      2006      2006      2005
    -------------------------------------------------------------------------

    Sales and operating
     revenues ($M)             6,219     5,049     5,769    23,641    20,320
    Shipment volumes (kt)
      Ingot products (*)         776       801       728     3,018     3,070
      Aluminum used in
       engineered products
       & packaging               314       295       323     1,315     1,269
                              -----------------------------------------------
    Total aluminum volume      1,090     1,096     1,051     4,333     4,339

    Aluminum pricing data
     ($ per tonne)
      Ingot product
       realizations (*)        2,712     2,092     2,598     2,618     2,036
      Average LME 3-month
       price (one-month lag)   2,631     1,942     2,528     2,547     1,868
    -------------------------------------------------------------------------
    (*) The bulk of Alcan's ingot product sales are based on the LME 3-month
        price with a one-month lag plus a local market premium and any
        applicable product premium.
    -------------------------------------------------------------------------


    Sales and operating revenues of $6,219 million were up $1,170 million
compared to the year-ago quarter mainly reflecting higher aluminum prices and
favourable pricing, product mix and volume in downstream businesses. Compared
to the third quarter of 2006, sales and operating revenues increased by
$450 million mainly as a result of higher aluminum prices, volumes across most
businesses and power generation.
    Total aluminum volume was up 39 kilotonnes (kt) sequentially as a result
of higher shipments in Europe owing partly to the recovery of production at
the ISAL smelter following a power interruption earlier in 2006.
    The average realized price on sales of ingot products during the fourth
quarter was up $620 per tonne from the year-ago quarter and up $114 per tonne
from the third quarter of 2006. The increase over the year-ago and sequential
quarter mainly reflected the impact of higher LME aluminum prices.

    Cash Flow and Debt

    -------------------------------------------------------------------------
                                                   Third                Year
                                Fourth Quarter   Quarter   Ended December 31
                              -----------------------------------------------
    ($ millions, except
     where indicated)           2006      2005      2006      2006      2005
    -------------------------------------------------------------------------

    Cash flow from
     operating activities
     in continuing operations  1,104       788       803     3,040     1,535
      Dividends                  (76)      (54)      (77)     (269)     (226)
      Capital expenditures      (610)     (639)     (576)   (2,081)   (1,742)
                              -----------------------------------------------
    Free cash flow from
     continuing operations       418        95       150       690      (433)
    -------------------------------------------------------------------------


    Cash flow from operating activities in continuing operations increased by
$316 million compared to the year-ago quarter and $301 million compared to the
third quarter. Both increases mainly reflected higher earnings and a
favourable movement in receivables and deferred items. Debt as a percentage of
invested capital as at December 31, 2006 was at 35%, up from 33% at the end of
the third quarter due to the combined effects of adopting a new accounting
standard for pension and other post-retirement benefits, and Alcan's share
repurchase program. The upward pressure caused by these two factors was
partially mitigated by strong cash flow.

    REVIEW OF BUSINESS GROUP PROFIT AND CORPORATE ITEMS
    ---------------------------------------------------

    -------------------------------------------------------------------------
                                                   Third                Year
                                Fourth Quarter   Quarter   Ended December 31
                              -----------------------------------------------
    ($ millions)                2006      2005      2006      2006      2005
    -------------------------------------------------------------------------
    Business Group Profit
     (BGP)
      Bauxite and Alumina        156       129       198       609       435
      Primary Metal              755       531       675     2,962     1,751
      Engineered Products        168        81       101       567       403
      Packaging                  109       105       161       550       595
                              -----------------------------------------------
        Subtotal               1,188       846     1,135     4,688     3,184
                              -----------------------------------------------
      Equity accounted joint
       venture eliminations      (19)      (58)      (87)     (263)     (270)
      Change in fair market
       value of derivatives      (82)      (52)       16       (45)      (41)
                              -----------------------------------------------
                               1,087       736     1,064     4,380     2,873
    Corporate Items
      Intersegment, corporate
       offices and other        (255)     (619)     (159)     (680)     (998)
      Depreciation &
       amortization             (261)     (274)     (273)   (1,043)   (1,080)
      Interest                   (76)      (83)      (63)     (284)     (350)
      Income taxes               (55)       12      (146)     (665)     (257)
      Equity income (loss)       (21)       15        41        85        88
      Minority interests          (1)        2        (4)       (7)        1
      Goodwill impairment          -      (122)        -         -      (122)
                              -----------------------------------------------
    Income (Loss) from
     continuing operations       418      (333)      460     1,786       155
    -------------------------------------------------------------------------


    Business Group Profit (BGP)

    Bauxite and Alumina: BGP for the fourth quarter was $156 million, an
increase of $27 million compared to the year-ago quarter. Excluding OSIs and
balance sheet translation effects, the year-over-year increase in BGP was
$40 million or 33%. This improvement mainly reflected higher LME-linked
contract prices for alumina (given the normal one-quarter lag) partially
offset by higher costs for maintenance and labour, mainly at Gove, and raw
material costs. On a sequential basis, BGP for the group was $42 million below
the previous quarter. Excluding OSIs and balance sheet translation effects,
BGP decreased by $33 million or 17%, reflecting lower LME-linked contract
prices and the non-recurrence of insurance recoveries recorded in the third
quarter, partially offset by improved alumina sales mix and increased shipment
volumes. Results for the first quarter of 2007 are expected to be higher than
the fourth quarter as a result of higher LME-linked contract prices, partly
offset by increased costs related to the recent bauxite mining strike in
Guinea.
    Primary Metal: BGP for the fourth quarter at $755 million increased by
$224 million as compared to the year-ago quarter. Excluding OSIs and balance
sheet translation effects, the year-over-year increase in BGP was $198 million
or 37%. The improvement mainly reflected higher LME prices, partially offset
by higher input costs (alumina, energy and fuel-related raw material costs),
higher operating costs (including an unfavourable impact of $30 million
related to the re-evaluation of asset retirement obligations), and the adverse
impact of the weaker U.S. dollar. On a sequential quarter basis, BGP increased
by $80 million. Excluding OSIs and balance sheet translation effects, BGP
increased by $55 million or 8%, reflecting higher LME prices, improved metal
shipments mainly in Europe, and higher power-related contributions in the
United Kingdom and Quebec. These favourable impacts were partially offset by
increased operating costs (normal seasonal maintenance, asset retirement
obligation re-evaluation and other costs). Based on forward prices/rates for
aluminum and currency, results for the first quarter of 2007 are expected to
improve over the fourth quarter.
    Engineered Products: BGP for the fourth quarter reached $168 million, more
than double the level of a year earlier and a quarterly record for the group.
Excluding OSIs and balance sheet translation effects, the year-over-year
increase in BGP was $66 million or 66%. The year-over-year improvement
reflected strong operating performances from all businesses, together with the
benefits of robust market conditions in Europe and North America. On a
sequential quarter basis, BGP was up $67 million, or 66%. Excluding OSIs and
balance sheet translation effects, the sequential quarter increase in BGP was
$57 million or 52%, mainly due to a better than anticipated seasonal pick-up
in Europe, metal inventory timing benefits, and further gains from the North
American cable business, which is enjoying strong demand and pricing for its
products. With market indications of continued seasonal strength through the
opening months of 2007, results for the first quarter are expected to be in
line with the fourth quarter.
    Packaging: BGP in the fourth quarter of $109 million was up $4 million or
4% from the prior year quarter. Excluding the impact of OSIs, foreign currency
balance sheet translation effects and lost contributions from divested
businesses, BGP improved by $9 million or 9%. Growth across most businesses
and favourable currency movements more than offset favourable one-time items
in the prior year. On a sequential quarter basis, BGP decreased by $52 million
or 32%. Excluding the impact of OSIs, foreign currency balance sheet
translation effects and lost contributions from divested businesses, BGP
decreased by $31 million or 19%, mainly due to increased operating costs,
including higher energy and selling costs. BGP in the first quarter of 2007 is
expected to rise in a manner similar to the corresponding period a year
earlier, mainly due to seasonal volume recovery and operational progress in
volumes and costs.

    Corporate Items

    The Intersegment, corporate offices and other expense category includes
corporate head office costs as well as other non-operating items and the
elimination of profits on intersegment sales of aluminum. The reduction of
$364 million from the fourth quarter of 2005 reflects the non-recurrence of
restructuring charges taken in the year ago quarter. Compared to the third
quarter, these expenses increased by $96 million reflecting higher share-based
compensation as well as restructuring and asset impairment charges.
    Depreciation and amortization expenses were $13 million lower than in the
year-ago quarter primarily reflecting the reduced asset base in the packaging
business due to the past year's business disposals and asset impairments
related to the restructuring program. Depreciation and amortization expenses
were $12 million lower than in the third quarter, mainly due to the
non-recurrence of certain unfavourable adjustments taken in the third quarter,
partially offset by additional depreciation at the Gove alumina refinery.
    Interest expense, net of capitalized interest, was $7 million lower than
in the year-ago quarter mainly reflecting a higher level of capitalized
interest and reduced debt levels. In the fourth quarter, capitalized interest
was $17 million, largely related to the Gove expansion, compared to
$11 million a year ago and $22 million in the third quarter of 2006. Compared
to the third quarter, interest expense increased by $13 million which included
the effect of a lower level of capitalized interest.
    The company's effective tax rate on income from continuing operations was
11% for the fourth quarter and 28% for the year. The low effective tax rate in
the fourth quarter was due mainly to balance sheet translation gains from the
weakening of the Canadian dollar.

    Share Repurchase Program

    In accordance with its announcement on October 3, 2006, Alcan established
a normal course issuer bid share repurchase program, under which the company
may purchase up to 18,800,000 common shares, representing approximately 5% of
the outstanding common shares at October 27, 2006, i.e. 376,407,558 common
shares. The common shares purchased under the program will be cancelled.
Purchases may be made on the Toronto Stock Exchange and the New York Stock
Exchange. Purchases will terminate at the latest on November 1, 2007.
    As at December 31, 2006, Alcan had purchased 9,831,200 common shares at an
average price of $47.42 per share for a total cost of $466 million. This
represents 52% of the total number of shares approved for repurchase.

    OUTLOOK
    -------

    For 2007, world primary aluminum consumption is forecast to increase by
approximately 6.7% (6.8% in 2006), while production from new capacity and
restarts is expected to increase world supply by about 7.8% (6.3% in 2006). As
a consequence the company expects the market to remain close to balanced in
2007 with a small surplus of approximately 200 kt, versus a deficit of 160 kt
in 2006. This would represent about 0.5% of estimated total world supply in
2007. Inventories, as expressed in weeks of shipments, are expected to remain
at historically low levels of about five and a half weeks.

    KEY EARNINGS SENSITIVITIES
    --------------------------

    The following table provides Alcan estimates of the annualized after-tax
impact of currency and LME price movements on income from continuing
operations, net of hedging and forward sales. The sensitivities have been
updated for 2007 to reflect current exposures.

                                                                In       $ /
                                             Increase in  millions    common
                                            rate / price      of $     share
    -------------------------------------------------------------------------

    Economic impact of changes in
     period-average exchange rates
      European currencies                          $0.10       (50)    (0.14)
      Canadian dollar                              $0.10      (150)    (0.42)
      Australian dollar                            $0.10       (70)    (0.19)
    -------------------------------------------------------------------------

    Balance sheet translation impact of
     changes in period-end exchange rates
      Canadian dollar                              $0.10      (230)    (0.63)
      Australian dollar                            $0.10       (25)    (0.07)
    -------------------------------------------------------------------------

    Economic impact of changes in
     period-average LME prices(*)
      Aluminum                                    $100/t       190      0.51
    -------------------------------------------------------------------------

    (*) Realized prices generally lag LME price changes by one month. Changes
        in local and regional premia may also impact aluminum price
        realizations. Sensitivities are updated as required to reflect
        changes in the company's commercial arrangements and portfolio of
        operations. Not included are sensitivities to energy and raw-material
        prices, which may have significant impacts.


    Cautionary Statement
    --------------------

    Statements made in this quarterly earnings press release which describe
the company's or management's objectives, projections, estimates, expectations
or predictions of the future may be "forward-looking statements" within the
meaning of securities laws which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," "would," "estimates," "plans," "anticipates" or the negative thereof
or other variations thereon. 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. Such
statements may be based on the company's own research and analysis. The
company cautions that, by their nature, forward-looking statements involve
risk and uncertainty and that the company's actual actions or results could
differ materially from those expressed or implied in such forward-looking
statements or could affect the extent to which a particular projection is
realized. Reference should be made to the company's most recent Annual Report
on Form 10-K for a list of factors that could cause such differences.
    Important factors which could cause such differences include: changes in
global supply and demand conditions for aluminum and other products; changes
in aluminum ingot prices and changes in raw material costs and availability;
changes in the relative value of various currencies; cyclical demand and
pricing within the principal markets for the company's products; changes in
government regulations, particularly those affecting environmental, health or
safety compliance; fluctuations in the supply of and prices for power in the
areas in which the company maintains production facilities; the consequences
of transferring most of the aluminum rolled products businesses operated by
the company to Novelis Inc.; potential discovery of unanticipated commitments
or other liabilities associated with the acquisition and integration or
disposition of businesses; major changes in technology that affect the
company's competitiveness; the risk of significant losses from trading
operations, including losses due to market and credit risks associated with
derivatives; changes in prevailing interest rates and equity market returns
related to pension plan investments; potential catastrophic damage, increased
insurance and security costs and general uncertainties associated with the
increased threat of terrorism or war; the effect of international trade
disputes on the company's ability to import materials, export its products and
compete internationally; economic, regulatory and political factors within the
countries in which the company operates or sells its products; relationships
with, and financial and operating conditions of, customers and suppliers; the
effect of integrating acquired businesses and the ability to attain expected
benefits; and; other factors affecting the company's operations including, but
not limited to, litigation, labour relations and negotiations and fiscal
regimes.
    The company undertakes no obligation to release publicly the results of
any future revisions it may make to forward-looking statements to reflect
events or circumstances after the date of this press release or to reflect the
occurrence of unanticipated events. Furthermore, the company undertakes no
obligation, in relation to future quarterly earnings disclosures, to release
publicly any information on an interim basis prior to the final earnings
disclosure.

    DEFINITIONS
    -----------

    "$" all amounts are in U.S. dollars.
    "Business Group Profit" (BGP) comprises earnings before interest, income
taxes, minority interests, depreciation and amortization and excludes certain
items, such as corporate costs, pension actuarial gains and losses and other
adjustments, as well as certain OSIs (definition below) including
restructuring costs (relating to major corporate-wide acquisitions or
initiatives), impairment and other special charges that are not under the
control of the business groups or are not considered in the measurement of
their profitability. These items are generally managed by the company's
corporate head office, which focuses on strategy development and oversees
governance, policy, legal, compliance, human resources and finance matters.
Financial information for individual business groups includes the results of
certain joint ventures and other investments accounted for using the equity
method on a proportionately consolidated basis, which is consistent with the
way the business groups are managed. However, the BGP of these joint ventures
and equity-accounted investments is removed from total BGP for the company and
the net after-tax results are reported as equity income. The change in the
fair market value of derivatives has been removed from individual business
group results and is shown on a separate line within total BGP. This
presentation provides a more accurate portrayal of underlying business group
results and is in line with the company's portfolio approach to risk
management.
    "Debt as a percentage of invested capital" does not have a uniform
definition. Because other issuers may calculate debt as a percentage of
invested capital differently, Alcan's calculation may not be comparable to
other companies' calculations. The figure is calculated by dividing borrowings
by total invested capital. Total invested capital is equal to the sum of
borrowings and equity, including minority interests. The company believes that
debt as a percentage of invested capital can be a useful measure of its
financial leverage as it indicates the extent to which it is financed by debt
holders. The measure is widely used by the investment community and credit
rating agencies to assess the relative amounts of capital put at risk by debt
holders and equity investors.
    "Derivatives" including forward contracts, swaps and options are financial
instruments used by the company to manage the specific risks arising from
fluctuations in exchange rates, interest rates, aluminum prices and other
commodity prices. Mark-to-market gains and losses on derivatives will be
offset over time by gains and losses on the underlying exposures.
    "Foreign currency balance sheet translation" effects largely arise from
translating monetary items (principally deferred income taxes and long-term
liabilities) denominated in Canadian and Australian dollars into U.S. dollars
for reporting purposes. Although these effects are primarily non-cash in
nature, they can have a significant impact on the company's net income.
    "Free cash flow from continuing operations" consists of cash from
operating activities in continuing operations less capital expenditures and
dividends. Management believes that free cash flow, for which there is no
comparable GAAP measure, is relevant to investors as it provides an indication
of the cash generated internally that is available for investment
opportunities and debt service.
    "GAAP" refers to Generally Accepted Accounting Principles.
    "LME" refers to the London Metal Exchange.
    "Other Specified Items" (OSIs) include, for example: restructuring and
synergy charges; asset impairment charges; gains and losses on non-routine
sales of assets, businesses or investments; unusual gains and losses from
legal claims and environmental matters; gains and losses on the redemption of
debt; income tax reassessments related to prior years and the effects of
changes in income tax rates; and other items that, in Alcan's view, do not
typify normal operating activities.
    "Operating earnings from continuing operations" is presented in addition
to income from continuing operations and reported net income. Operating
earnings from continuing operations are not calculated in accordance with U.S.
GAAP and there is no standard definition of this term. Accordingly, it is
unlikely that comparisons can be made among different companies that make
operating earnings information available. The determination of whether an item
is treated as an Other Specified Item involves the exercise of judgement by
Alcan management. The company believes that operating earnings from continuing
operations is a useful measure because it excludes items that are not typical
of ongoing operating activities, such as Other Specified Items, as well as
items that are outside management's control, such as the impact of foreign
currency balance sheet translation. Management has concluded that operating
earnings is a relevant measure for shareholders and other investors as it
removes the inherent volatility of such items, whether favourable or
unfavourable, and provides a clearer picture of underlying business
performance. Moreover, the measure is in line with the company's internal
performance measurement and management systems. Operating earnings information
has historically been presented in response to requests from investors and
financial analysts, who have indicated that they find the information highly
relevant and essential to their understanding of the company.
    All tonnages are stated in metric tonnes, equivalent to 2,204.6 pounds.
    All figures are unaudited.

    QUARTERLY RESULTS WEBCAST
    -------------------------

    Alcan's quarterly results conference call with investors and analysts will
take place on Wednesday, January 31, 2007 at 10:00 a.m. EDT and will be
webcast via the Internet at www.alcan.com.
    Supporting documentation (press release, financial statements and investor
presentation) is available at www.alcan.com, using the Investors link.
Miscellaneous and previous years' filings may be accessed using the following
websites: www.sec.gov (U.S.) and www.sedar.com (Canada) websites.

    ALCAN INC.
    ----------

    Alcan Inc. (NYSE, TSX: AL) is a leading global materials company,
delivering high quality products and services worldwide. With world-class
technology and operations in bauxite mining, alumina processing, primary metal
smelting, power generation, aluminum fabrication, engineered solutions as well
as flexible and specialty packaging, today's Alcan is well positioned to meet
and exceed its customers' needs. Alcan is represented by 65,000 employees in
61 countries and regions, and posted revenues of $20.3 billion in 2005. The
company has featured on the Dow Jones Sustainability World Index consecutively
since 2003. For more information, please visit: www.alcan.com.


                                 ALCAN INC.
                                 ----------

    CONSOLIDATED STATEMENT OF INCOME (unaudited)
    -------------------------------------------------------------------------
                                                    Fourth Quarter      Year
                                         ------------------------------------
    Periods ended December 31             2006      2005      2006      2005
                                         ------------------------------------
                                         ------------------------------------
    (in millions of US$,
     except per share amounts)

    Sales and operating revenues         6,219     5,049    23,641    20,320
    Costs and expenses
    Cost of sales and operating expenses,
     excluding depreciation
     and amortization noted below        4,762     3,994    17,990    16,135
    Depreciation and amortization          261       274     1,043     1,080
    Selling, administrative and
     general expenses                      418       346     1,475     1,402
    Research and development expenses       63        63       220       227
    Interest                                76        83       284       350
    Restructuring charges - net             49       543       179       685
    Goodwill impairment                      -       122         -       122
    Other expenses (income) - net           95       (14)       77        (4)
                                         ------------------------------------
                                         5,724     5,411    21,268    19,997
                                         ------------------------------------
    Income (Loss) from continuing
     operations before income taxes
    and other items                        495      (362)    2,373       323
    Income taxes                            55       (12)      665       257
                                         ------------------------------------
    Income (Loss) from continuing
     operations before other items         440      (350)    1,708        66
    Equity income (loss)                   (21)       15        85        88
    Minority interests                      (1)        2        (7)        1
                                         ------------------------------------
    Income (Loss) from continuing
     operations                            418      (333)    1,786       155
    Income (Loss) from discontinued
     operations                              4       (28)        4       (26)
                                          ------------------------------------
    Income (Loss) before cumulative
     effect of accounting change           422      (361)    1,790       129
    Cumulative effect of accounting
     change, net of income
    taxes of $2 (nil in 2005)                -         -        (4)        -
                                         ------------------------------------
    Net income (Loss)                      422      (361)    1,786       129
    Dividends on preference shares           3         2        11         7
                                         ------------------------------------
    Net income (Loss) attributable
     to common shareholders                419      (363)    1,775       122
                                         ------------------------------------
                                         ------------------------------------
    Earnings (Loss) per share
    Basic:
    Income (Loss) from continuing
     operations                           1.12     (0.91)     4.75      0.40
    Income (Loss) from discontinued
     operations                           0.01     (0.07)     0.01     (0.07)
    Cumulative effect of
     accounting change                       -         -     (0.01)        -
                                         ------------------------------------
    Net income (Loss) per common share
     - basic                              1.13     (0.98)     4.75      0.33
                                         ------------------------------------
                                         ------------------------------------
    Diluted:
    Income (Loss) from continuing
     operations                           1.12     (0.91)     4.74      0.40
    Income (Loss) from discontinued
     operations                           0.01     (0.07)     0.01     (0.07)
    Cumulative effect of accounting
     change                                  -         -     (0.01)        -
                                         ------------------------------------
    Net income (Loss) per common share
     - diluted                            1.13     (0.98)     4.74      0.33
                                         ------------------------------------
                                         ------------------------------------
    Dividends per common share            0.20         -      0.70      0.60
                                         ------------------------------------
                                         ------------------------------------


                                 ALCAN INC.
                                 ----------

    CONSOLIDATED BALANCE SHEET (unaudited)
    -------------------------------------------------------------------------

    December 31                                               2006      2005
                                                         --------------------
                                                         --------------------
    (in millions of US$)

    ASSETS
    ------

    Current assets
    Cash and time deposits                                     229       181
    Trade receivables
     (net of allowances of
     $58 in 2006 and $56 in 2005)                            2,910     2,308
    Other receivables                                        1,195       946
    Deferred income taxes                                      152       150
    Inventories                                              3,186     2,734
    Current assets held for sale                                 5       119
                                                         --------------------
    Total current assets                                     7,677     6,438
                                                         --------------------

    Deferred charges and other assets                        1,087     1,052
    Investments                                              1,509     1,511
    Deferred income taxes                                      989       863
    Property, plant and equipment
      Cost (excluding Construction work in progress)        18,698    16,990
      Construction work in progress                          2,294     1,604
      Accumulated depreciation                              (8,592)   (7,561)
                                                         --------------------
                                                            12,400    11,033
                                                         --------------------
    Intangible assets (net of accumulated
     amortization of $346 in 2006
     and $233 in 2005)                                         676     1,013
    Goodwill                                                 4,599     4,713
    Long-term assets held for sale                               2        15
                                                         --------------------
    Total assets                                            28,939    26,638
                                                         --------------------
                                                         --------------------


                                 ALCAN INC.
                                 ----------

    CONSOLIDATED BALANCE SHEET (cont'd) (unaudited)
    -------------------------------------------------------------------------

    December 31                                               2006      2005
                                                         --------------------
                                                         --------------------
    (in millions of US$)

    LIABILITIES AND SHAREHOLDERS' EQUITY
    ------------------------------------

    Current liabilities
    Payables and accrued liabilities                         5,408     4,608
    Short-term borrowings                                      467       348
    Debt maturing within one year                               36       802
    Deferred income taxes                                       46        25
    Current liabilities of operations held for sale              -        62
                                                         --------------------
    Total current liabilities                                5,957     5,845
                                                         --------------------

    Debt not maturing within one year                        5,476     5,265
    Deferred credits and other liabilities                   1,790     1,608
    Post-retirement benefits                                 3,400     3,037
    Deferred income taxes                                    1,151     1,172
    Minority interests                                          71        67

    Shareholders' equity
    Redeemable non-retractable preference shares               160       160
    Common shareholders' equity
    Common shares                                            6,235     6,181
    Additional paid-in capital                                 672       683
    Retained earnings                                        4,281     3,048
    Common shares held by a subsidiary                         (31)      (31)
    Accumulated other comprehensive loss                      (223)     (397)
                                                         --------------------
                                                            10,934     9,484
                                                         --------------------
                                                            11,094     9,644
                                                         --------------------
    Total liabilities and shareholders' equity              28,939    26,638
                                                         --------------------
                                                         --------------------


                                 ALCAN INC.
                                 ----------

    CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited)
    -------------------------------------------------------------------------
                                                    Fourth Quarter      Year
                                         ------------------------------------

    Periods ended December 31             2006      2005      2006      2005
                                         ------------------------------------
                                         ------------------------------------
    (in millions of US$)

    OPERATING ACTIVITIES

    Net income (Loss)                      422      (361)    1,786       129
    Cumulative effect of
     accounting change                       -         -         4         -
    Loss (Income) from discontinued
     operations                             (4)       28        (4)       26
                                         ------------------------------------
    Income (Loss) from continuing
     operations                            418      (333)    1,786       155
    Adjustments to determine cash
     from operating activities:
      Depreciation and amortization        261       274     1,043     1,080
      Deferred income taxes                 67        (5)      367       123
      Equity income, net of dividends       50        (4)       15       (33)
      Asset impairment provisions           27       388        84       428
      Goodwill impairment                    -       122         -       122
      Stock option compensation              1         5        40        19
      Loss (Gain) on disposal of
       businesses and investments - net      2       (43)       (6)      (32)
      Change in operating working capital
        Change in receivables              162       (81)     (443)     (331)
        Change in inventories               10        82      (263)       (6)
        Change in payables and
         accrued liabilities                12       340       138       (51)
      Change in deferred charges,
       other assets, deferred credits
       and other liabilities, and
       post-retirement benefits - net      189       (56)      377        81
      Other - net                          (95)       99       (98)      (20)
                                         ------------------------------------
    Cash from operating activities in
     continuing operations               1,104       788     3,040     1,535

    Cash from (used for) operating
     activities in discontinued
     operations                              -       (27)        9        27
                                         ------------------------------------

    Cash from operating activities       1,104       761     3,049     1,562
                                         ------------------------------------

    FINANCING ACTIVITIES

    Proceeds from issuance of new debt
     - net of issuance costs                99        35       479     1,272
    Debt repayments                        (10)     (239)   (1,096)   (1,695)
    Short-term borrowings - net             90       (11)       77    (2,056)
    Common shares issued                    14        49       162        62
    Common shares purchased for
     cancellation                         (466)        -      (466)        -
    Dividends -  Alcan shareholders
     (including preference)                (76)      (54)     (267)     (224)
              -  Minority interests          -         -        (2)       (2)
    Other                                    2        (4)        2        (4)
                                         ------------------------------------
    Cash used for financing activities
     in continuing operations             (347)     (224)   (1,111)   (2,647)

    Cash used for financing activities
     in discontinued operations              -         -         -       (55)
                                         ------------------------------------

    Cash used for financing activities    (347)     (224)   (1,111)   (2,702)
                                         ------------------------------------

    INVESTMENT ACTIVITIES

    Purchase of property,
     plant and equipment                  (610)     (639)   (2,081)   (1,742)
    Business acquisitions and purchase
     of investments                       (153)      (39)     (201)     (112)
    Net proceeds from disposal
     of businesses, investments and
     other assets                           73        90       307       266
    Settlement of amounts due from
     Novelis - net                           -         -         -     2,535
    Other                                   (4)        -        66         -
                                         ------------------------------------
    Cash from (used for) investment
     activities in continuing operations  (694)     (588)   (1,909)      947

    Cash from (used for) investment
     activities in discontinued
     operations                              -        (3)        5        60
                                         ------------------------------------

    Cash from (used for) investment
     activities                           (694)     (591)   (1,904)    1,007
                                         ------------------------------------

    Effect of exchange rate changes
     on cash and time deposits               8        (1)        14      (26)
                                         ------------------------------------
    Increase (Decrease) in cash and
     time deposits                          71       (55)        48     (159)
    Cash and time deposits -
     beginning of period                   158       236        181      340
                                         ------------------------------------
    Cash and time deposits -
     end of period                         229       181        229      181
                                         ------------------------------------
                                         ------------------------------------


                                 ALCAN INC.
                                 ----------
                 (in millions of US$, except where indicated)


    1. BASIS OF PRESENTATION

    The unaudited consolidated financial information is based upon accounting
policies and methods of their application consistent with those used and
described in the Company's annual financial statements as contained in the
most recent annual report. The unaudited consolidated financial information
does not include all of the financial statement disclosures included in the
annual and quarterly financial statements prepared in accordance with
accounting principles generally accepted in the United States of America (U.S.
GAAP) and therefore should be read in conjunction with the Company's most
recent annual report as well as the annual report (Form 10-K) for the year
ended December 31, 2006 that the Company expects to file on March 1, 2007.
    In the opinion of management of the Company, the unaudited consolidated
financial information reflects all adjustments, which consist only of normal
and recurring adjustments, necessary to present fairly the financial position
and the results of operations and cash flows in accordance with U.S. GAAP.

    2. DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

    Bauxite and Alumina and Primary Metal
    -------------------------------------

    On March 31, 2006, the balance of the Company's interest in Aluminium de
Grèce S.A. (AdG) of 7.2% was sold by the Company to Mytilineos Holdings S.A.
for net proceeds of $13.

    Engineered Products
    -------------------

    In the first quarter of 2004, the Company had committed to a plan to sell
certain non-strategic assets that were not part of its core operations. The
assets were used to supply castings and components to the automotive industry.
On March 31, 2006, the Company sold these assets to AluCast GmbH for net
proceeds of approximately nil.

    3. CAPITALIZATION OF INTEREST COSTS

    Total interest costs in continuing operations in the fourth quarter and
year ended December 31, 2006 were $93 and $357, respectively (2005: $94 and
$379) of which $17 and $73 (2005: $11 and $29) were capitalized.

    4. ACCOUNTING CHANGES

    SFAS 123(R) - Share-Based Payment
    ---------------------------------

    On January 1, 2006, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 123(R), Share-Based Payment, which is a revision to SFAS
No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) requires all
share-based payments to employees to be recognized in the financial statements
based on their fair values. The fair value of options granted after January 1,
2006 is determined using the Monte Carlo simulation model, whereas the fair
value of options granted prior to that date was determined using the
Black-Scholes valuation model. The Company had previously adopted the
fair-value based method of accounting for stock options using the retroactive
restatement method described in SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure, effective January 1, 2004. This
method is accepted under SFAS No. 123(R).
    On January 1, 2006, the Company recorded an after-tax charge of $4, using
the modified prospective application method, in Cumulative effect of
accounting change, to record all outstanding liability awards, previously
measured at their intrinsic value, at their fair value.

    SFAS No. 158 - Employers' Accounting for Defined Benefit Pension and
    --------------------------------------------------------------------
    Other Postretirement Plans
    --------------------------

    Effective December 31, 2006, the Company adopted the provisions of SFAS
No. 158, Employers' Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and  
 132(R). The standard requires an employer to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its balance sheet with an
offsetting amount in accumulated other comprehensive income and to recognize
changes in that funded status in the year in which the changes occur. SFAS No.
158 also expands the required annual disclosures. This standard does not
impact the consolidated statement of income. Prior years have not been
restated and are not comparable.

    5. SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS AND RESTRUCTURING
       ACTIVITIES

    Acquisitions
    ------------

    On January 3, 2006, the Company announced that it has acquired the
packaging assets and business of Recubrimientos y Laminaciones de Papel, S.A.
de C.V. (Relapasa), of Monterrey, Mexico for $22.
    On March 10, 2006, the Company acquired the operating assets of Daifu
Industries Co. Ltd., a supplier of foil and plastic lidding for food packaging
in Thailand, for an initial investment of $8. An additional amount of $3 was
paid during the second and third quarters of 2006 (Q2: $1; Q3: $2) based on
the audited value of the acquired assets.
    During the second quarter of 2006, the Company increased its ownership in
Alcan Packaging Mohammedia to 97.4% by purchasing an additional 34.4% for $8.
Alcan Packaging Mohammedia, located in Morocco, is specialized in dairy
packaging.
    On October 13, 2006, Alcan acquired the food flexible packaging company
VTS Clima Ltd. for $8.
    On December 4, 2006, Alcan completed the acquisition of the business and
assets of Penske Composites, LLC, a leading manufacturer of reinforced
structural urethane core material products for the marine and industrial
markets for $7.
    On December 1, 2006, Alcan acquired the remaining 70% stake of Carbone
Savoie and certain related technology and equipment from GrafTech
International Ltd. for $133. Carbone Savoie is a producer of cathode blocks.

    Sales
    -----

    On February 7, 2006, the Company completed the sale of its Froges, France,
rolling mill to Industrie Laminazione Alluminio S.p.A based in Sardinia,
Italy, for net proceeds of ($5), resulting in a gain on disposal of $2.
    In March 2006, the Company completed the sale of selected assets of its
North American Food Packaging Plastic Bottle business to Ball Corporation for
net proceeds of $182, resulting in a loss on disposal of $4.
    On March 2, 2006, the Company completed the sale of its high-purity
activity at the Mercus processing mill in France to Praxair Inc. for net
proceeds of $2, resulting in a gain on disposal of $2.
    On March 2, 2006, the Company completed the sale of its food packaging
plant in Zaragoza, Spain, to Kostova System S.L. for net proceeds of $7,
resulting in a gain on disposal of $1. During the fourth quarter of 2005, the
Company had recorded an impairment charge of $4 as a result of the expected
divestiture.
    In June 2006, the Company completed the sale of its Chambéry, France,
operation to Compagnia Generale Alluminio S.p.A. for net proceeds of $8,
resulting in no gain or loss on disposal. During the first quarter of 2006,
the Company had recorded an impairment charge of $2 based on the expected
divestiture.
    On June 9, 2006, the Company completed the sale of its Lir France beauty
packaging facility in France for net proceeds of ($3), resulting in no gain or
loss on disposal. A provision of $9 was recorded in the fourth quarter of 2005
based on the expected loss on disposal.
    On July 10, 2006, the Company completed the sale of its 51% ownership in
the joint venture Baotou Pechiney and Baolu High Purity Aluminium Company
Limited, located in China, for net proceeds of $3, resulting in a gain on
disposal of $4.
    On July 28, 2006, the Company completed the sale of its Cebal Aerosol
business to its current management team and to Natexis Investissement Partners
for net proceeds of $16, resulting in a loss on disposal of $3. An impairment
charge of $20 was recorded in the fourth quarter of 2005 as a result of the
expected divestiture.
    On November 21, 2006, the Company completed the sale of its Wheaton
Science Products business in New Jersey, U.S.A. to River Associates
Investments, LLC, for net proceeds of $35, resulting in a gain on disposal of
$4.

    Restructuring Activities
    ------------------------

    On May 9, 2006, the Company announced the reorganization of its global
specialty aluminas business, entailing the gradual, yet permanent shut-down of
the Company's Specialty-Calcined Alumina plant ("UPCA") in Jonquière, Quebec,
by year end. In relation to this activity, the Company recorded restructuring
charges of $12 comprising $1 of severance costs and $11 of asset impairment
charges during the second quarter of 2006.
    On June 30, 2006, the Company announced that it had signed a new
collective labour agreement with its Quebec employees represented by the
Canadian Auto Workers (C.A.W.) union. The agreement applies to C.A.W.
employees at the Arvida, Beauharnois, Laterrière, Shawinigan and Vaudreuil
Works sites, as well as those at Power Operations, Port Facilities, Alma
Railway Operations and the Arvida Research and Development Centre. As part of
this agreement, the Company has offered early retirement incentives to
employees and has recorded severance charges of $3 during the third quarter of
2006 for employees who have accepted.
    On July 12, 2006, the Company announced that it has begun consultations
with unions and employee representatives for a proposed sale of selected
assets at the Company's Affimet aluminum recycling plant in Compiègne, France.
In relation to this activity, the Company recorded restructuring charges of
$44 comprising $14 of severance costs, $7 of other costs and $23 of asset
impairment charges during the second quarter of 2006.
    Also on July 12, 2006, the Company announced that it has begun
consultations with unions and employee representatives for a proposed closure
of two U.K. sites. The proposed reorganization would result in the closure of
the Workington, U.K. hard alloy extrusion plant and the closure of the
Midsomer Norton, U.K. food flexibles packaging plant.
    In relation to the Workington closure, the Company recorded restructuring
charges of $9 comprised entirely of severance costs during the second quarter
of 2006. Production from Workington would be consolidated at Alcan's
facilities in Issoire and Montreuil-Juigné, France. Workington is expected to
cease production by the end of the second quarter of 2007. During the fourth
quarter of 2006, the Company recorded an additional $4 of severance costs in
relation to this activity.
    In relation to the Midsomer Norton closure, the Company recorded
restructuring charges of $17 comprising $16 of severance costs, and $1 of
asset impairment charges during the second quarter of 2006. The plant has been
adversely affected by a declining demand in the U.K. market and high raw
material costs. The site is expected to close during the first quarter of
2007. During the fourth quarter of 2006, the Company recorded an additional $6
of restructuring charges in relation to this activity comprising $4 of
severance costs and $2 of other costs.
    During the third quarter of 2006, the Company incurred charges of $6
relating to early retirement incentives accepted by employees at a research
facility in France. These charges are included in severance costs.
    During the third quarter of 2006, the Company incurred severance charges
of $2 due to the restructuring of a trading operation in Switzerland.
    On November 14, 2006, Alcan announced that it will close its Plastic &
Laminate Tubes plant in Lincoln Park, New Jersey, U.S.A., as part of the
continued optimization of its Tubes manufacturing network in the Americas to
better serve its customers. During the fourth quarter of 2006, the Company
recorded restructuring charges of $5 comprising severance costs of $1, asset
impairment charges of $2 and other costs of $2 in relation to this activity.

    6. CONTINGENCIES

    On January 19, 2006, the Company sold claims related to the Enron
bankruptcy to a financial institution for combined proceeds of $62, recorded
in Other expenses (income) - net, resulting in an after-tax gain of $41.

    7. SHARE REPURCHASE PROGRAM

    In accordance with its announcement on October 3, 2006, Alcan established
a normal course issuer bid share repurchase program. The Company may purchase
up to 18,800,000 common shares, representing approximately 5% of the
outstanding common shares at October 27, 2006, i.e. 376,407,558 common shares.
The common shares purchased under the program will be cancelled.
    Purchases may be made on the Toronto Stock Exchange and the New York Stock
Exchange. The program commenced on November 2, 2006 and will terminate at the
latest on November 1, 2007. As at December 31, 2006, Alcan had repurchased a
total of 9,831,200 common shares for a total cost of $466. A charge of $302
was recorded in retained earnings for the excess of the purchase price over
the stated value of the common shares.

    Montreal, Canada
    31 January 2007
    




For further information:

For further information: MEDIA CONTACT: Anik Michaud, (514) 848-8151;
Conference call numbers: North America: (877) 652-1294; Local & overseas:
(706) 643-7783; INVESTOR CONTACT: Corey Copeland, (514) 848-8368; Conference
call numbers: North America: (877) 421-3963; Local & overseas: (706) 643-9535

Organization Profile

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