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compared with 2002 as higher realized prices and ongoing cost savings were substantially offset by higher costs for energy, raw materials, and employee benefits, and the impact of unfavorable foreign currency exchange movements. 

In 2004, Alcoa made significant progress toward restarting smelting capacity at the Wenatchee, WA; Be ´cancour, Canada; and Massena, NY facilities. Once these restarts are complete, Alcoa will have 361,000 metric tons per year (mtpy) of idle capacity on a base capacity of 4,004,000 mtpy. Also during 2004, Alcoa broke ground on its smelter in Iceland, which will add 322,000 mtpy of capacity, and announced an expansion at the Alumar smelter in Brazil. The Iceland smelter is expected to be completed in 2007; however, the unknown impact of pending litigation could affect the completion date. In 2005, the company will invest in a new anode plant in Norway, modernize a Spanish smelter, and continue to explore smelting opportunities in China and Trinidad and energy projects in Brazil. While capacity restarts and anticipated higher metal prices will add to revenue and profit in 2005, the company anticipates that higher energy costs will persist. 

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## Flat-Rolled Products 

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This segment’s principal business is the production and sale of aluminum plate, sheet, and foil. This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to produce aluminum beverage cans. Seasonal increases in RCS sales are generally experienced in the second and third quarters of the year. This segment also includes sheet and plate used in the transportation, building and construction, and distributor markets (mainly used in the production of machinery and equipment and consumer durables), of which approximately two-thirds is sold directly to customers while the remainder is sold through distributors. Approximately two-thirds of the third-party sales in this segment are derived from sheet and plate, and foil used in industrial markets, while the remaining one-third of third-party sales consists of RCS. While the customer base for flat-rolled products is large, a significant 

amount of sales of RCS, sheet, and plate is to a relatively small number of customers. 

Third-party sales for the Flat-Rolled Products segment increased 24% in 2004 compared with 2003. The increase was due to the acquisition of the remaining 50% interest in KAAL Australia (can sheet rolling mills) in October of 2003, higher prices, the favorable impact of foreign currency exchange movements in Europe, and increased volumes for sheet and plate. Increased volumes for these products resulted from improved performance in businesses serving the commercial transportation, aerospace, automotive, and distribution markets. Third-party sales increased 4% in 2003 compared with 2002, primarily due to the KAAL Australia acquisition, favorable foreign currency exchange movements in Europe, and increased volumes for RCS and sheet and plate. These positive contributions were offset by the absence of sales from the commercial foil business, which was discontinued as a result of a prior year’s restructuring program. 

ATOI for this segment increased 11% in 2004 compared with 2003, principally due to higher volumes, higher prices, improved productivity, and favorable mix for sheet and plate; favorable foreign currency exchange movements in Europe; and the contribution of KAAL Australia. These positive contributions were somewhat offset by a hot mill interruption at the Kitts Green facility in the U.K. and temporary throughput issues at the Tennessee can sheet facility. These issues were resolved in 2004. ATOI remained flat in 2003 compared with 2002, as the contribution of KAAL Australia to ATOI and the positive results in Europe due to favorable foreign currency exchange movements were offset by higher costs for raw materials, energy, and employee benefits for RCS and the U.S. sheet and plate business. 

In January 2005, Alcoa completed the acquisition of two fabricating facilities in Samara and Belaya Kalitva in the Russian Federation. 

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## Engineered Products 

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This segment includes hard- and soft-alloy extrusions, including architectural extrusions, super-alloy castings, steel and alumi- num fasteners, aluminum forgings, and wheels. These products 

