FINANCIAL HIGHLIGHTS
Loss from continuing operations of $0.91 per common share after previously announced charges for restructuring, closures and impairments, compared to a loss of $0.95 a year earlier and income of $0.19 in the third quarter;
Operating earnings for the fourth quarter of $0.54 per common share compared to $0.30 a year earlier and $0.53 in the third quarter;
Record cash from operating activities in continuing operations of $792 million for the fourth quarter compared to $346 million a year earlier and $697 million in the third quarter;
Pechiney synergy program reaches completion with run rate of $400 million.

Montreal, Canada — Alcan Inc. (NYSE, TSX: AL) today reported operating earnings from continuing operations of $0.54 per common share in the fourth quarter compared to $0.30 a year ago and $0.53 in the third quarter of 2005.*

Commenting on the results for the fourth quarter, Travis Engen, President and Chief Executiver Officer, Alcan Inc. said that, "the sharp year-over-year improvement in operating earnings reflects strong market fundamentals and solid performances across all businesses." For the year as a whole, he noted that, "we made good progress offsetting significant pressures from currency movements and input costs. After adjusting prior year results for the effects of the spin-off, our operating earnings increased by about 40 per cent year over year; an excellent performance in a challenging environment."

"Over the last two years, currencies and rising input costs have pushed the industry smelter cost curve substantially higher. Alcan’s relative position on that curve, however, has strengthened even further; bringing to the forefront the Company’s unique competitive advantage of low-cost, wholly-owned power generation. With the benefit of the strongest aluminum market in nearly 20 years and with the value of the Pechiney acquisition clearly affirmed, we are well placed to take full advantage of prevailing market conditions and take significant steps toward achieving our corporate and business group targets," he concluded.

Operating Earnings
Operating earnings from continuing operations, which exclude foreign currency balance sheet translation effects and Other Specified Items (OSIs), were $205 million or $0.54 per common share in the fourth quarter, compared to $112 million or $0.30 a year-ago and $197 million or $0.53 in the third quarter of 2005. Included in operating earnings for the fourth quarter of 2005 were mark-to-market losses on derivatives of $0.11 per common share as compared to losses of $0.09 a year earlier and $0.04 in the third quarter of 2005.

Operating earnings for the fourth quarter were $93 million higher than in the comparable year-ago quarter. The improvement mainly reflected higher aluminum prices, improved volumes, better pricing and mix as well as contributions from synergies, which were partially offset by the impact of the rolled products spin-off, and higher costs for energy and raw materials. Compared to the third quarter of 2005, operating earnings were up $8 million. The improvement mainly reflected the benefit of higher aluminum prices largely offset by unfavourable mark-to-market effects on derivatives and the impact of lower volumes in the Packaging business due to normal seasonal declines and structural weakness in some end markets.

Income from Continuing Operations
The loss from continuing operations was $333 million or $0.91 per common share for the fourth quarter versus a loss of $347 million or $0.95 a year earlier and income of $72 million or $0.19 in the third quarter of 2005.

Included in the loss from continuing operations for the fourth quarter of 2005 was a primarily non-cash, after-tax loss of $5 million or $0.01 per common share for the effects of foreign currency balance sheet translation, compared to an after-tax loss of $102 million or $0.28 in the year-ago quarter and an after-tax loss of $115 million or $0.31 in the third quarter of 2005.

The loss from continuing operations for the fourth quarter of 2005 included a previously announced net after-tax charge of $533 million or $1.44 per common share for OSIs. Included in OSIs were after-tax restructuring and asset impairment charges of $115 million and $294 million, respectively, mainly for the restructuring of certain packaging businesses, notably global Beauty Packaging and Food Flexible Packaging Europe, the previously announced closures of the Steg and Lannemezan smelters in Europe and the rationalization of certain Engineered Products operations, including the previously announced closure of the Vernon, California cast plate facility.

Also included in OSIs for the quarter was a goodwill impairment charge of $122 million. As required under GAAP, the Company annually tests for goodwill impairment in the fourth quarter. Due to an increasingly competitive environment for global Beauty Packaging, the Company has concluded that part of the goodwill associated with this business should be written down.

Net Income (Loss)
The net loss for the fourth quarter, which also includes results of discontinued operations, was $361 million or $0.98 per common share compared to a net loss of $346 million or $0.94 a year earlier and net income of $81 million or $0.21 in the third quarter of 2005. During the quarter, the copper trading business and certain non-core Engineered Products operations remained classified as discontinued operations. Collectively, discontinued operations recorded after-tax loss of $28 million in the fourth quarter compared to after-tax income of $1 million in the year-ago quarter and after-tax income of $9 million in the third quarter of 2005. During the fourth quarter, the Company wrote down to fair market value certain assets in a business held for sale.

Synergies
The Company’s two-year synergy capture program following the acquisition of Pechiney reached its successful conclusion at the end of the fourth quarter. As of the end of the program, the Company achieved an annualized synergy run rate of $400 million, well in excess of its $360 million target. Realized benefits for 2005 totaled $330 million. Results for the fourth quarter included incremental pre-tax synergy benefits of about $77 million over the year-ago quarter and $21 million over the third quarter of 2005.

Sales and operating revenues were $5.0 billion in the fourth quarter, down from $6.5 billion in the year-ago quarter mainly reflecting the impact of the spin-off of the rolled products business on 6 January 2005. Compared to the third quarter of 2005, sales and operating revenues rose by $162 million, reflecting the benefits of higher aluminum prices and increased volumes in the engineered products business offset in part by seasonal slowing in the packaging business.

Total aluminum volume, at 1,096 thousand tonnes (kt), was down from a year earlier principally due to the spin-off of the rolled products business on 6 January 2005. The significant year-over-year increase in ingot product shipments principally reflects third-party sales of ingot to Novelis that were previously classified as intercompany sales.

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. In the fourth quarter, the average LME 3-month price with a one month lag was $1,942 per tonne, compared to $1,774 per tonne a year earlier and $1,811 per tonne in the third quarter of 2005.

The average realized price on sales of ingot products during the fourth quarter was $2,092 per tonne, up $71 per tonne from the year-ago quarter and $133 per tonne from the third quarter of 2005. Both the year-over-year and sequential quarter increases reflected the impact of higher LME prices. The year-over-year change also reflects lower local market premia.

Cash Flow and Debt

Cash from operating activities in continuing operations reached a record level of $792 million in the fourth quarter of 2005 up from $346 million a year earlier and $697 million in the third quarter of 2005. Year-ago cash flow included contributions from Alcan’s former rolled products business. Compared to the third quarter of 2005, the increase in cash from operating activities in continuing operations reflected the benefits of higher aluminum prices and lower levels of working capital, including successful efforts to reduce inventory levels. After dividends of $56 million and capital expenditures of $643 million, free cash flow from continuing operations was $93 million for the fourth quarter of 2005. In the year-ago quarter, after dividends of $65 million and capital expenditures of $500 million, free cash flow from continuing operations was negative $219 million. The year-over-year increase in capital spending was mainly due to the expansion of the Gove alumina refinery in Australia.

Debt as a percentage of invested capital as at 31 December 2005 was 40 percent compared to 39 percent at the end of the third quarter and 46 percent at the end of the prior-year quarter.

OUTLOOK
For 2006, world primary aluminum consumption is forecast to increase by approximately 4.9 percent (4.5 percent in 2005), while production from new capacity and restarts is expected to increase world supply by about 4.0 percent (6.9 percent in 2005). As a consequence, the Company expects a market deficit of approximately 300 thousand tonnes in 2006 versus the balanced situation in 2005.

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