CANADA

Inapplicable

(State or Other Jurisdiction of

(I.R.S. Employer Identification No.)

Incorporation or Organization)

PART I - FINANCIAL INFORMATION

In this report, all dollar amounts are stated in U.S. dollars and all quantities in metric tons, or tonnes, unless indicated otherwise.  A tonne is 1,000 kilograms, or 2,204.6 pounds.  The word "Company" refers to Alcan Inc. and, where applicable, one or more consolidated subsidiaries.

Item 1. Financial Statements

ALCAN INC.

INTERIM CONSOLIDATED STATEMENT OF INCOME

(unaudited)

Three months ended March 31

(in millions of US$, except per share amounts)

2003      

2002       

Sales and operating revenues

3,213      

2,888      

Costs and expenses

Cost of sales and operating expenses

2,535      

2,287      

Depreciation and amortization

224      

199      

Selling, administrative and general expenses

163      

138      

Research and development expenses

29      

28      

Interest (note 12)

48      

50      

Restructuring, impairment and other special charges (note 6)

2      

14      

Other expenses - net

57      

7      

3,058      

2,723      

Income  from continuing operations before
    income taxes and other items

155      

165      

Income taxes (note 9)

141      

79      

Income from continuing operations before other items

14      

86      

Equity income

-      

1      

Minority interests

(1)     

-      

13      

87     

Loss from discontinued operations (note 3)

-      

(1)     

Net income (Loss)

13      

86      

Dividends on preference shares

2      

1      

Net income attributable to common shareholders

11      

85      

Net income per common share - basic and diluted (note 4)

    Income from continuing operations

0.04      

0.27      

    Loss from discontinued operations

-      

(0.01)     

    Net Income (Loss)

0.04      

0.26      

Dividends per common share

0.15      

0.15      

INTERIM CONSOLIDATED STATEMENT OF RETAINED EARNINGS

(unaudited)

Three months ended March 31 (in millions of US$)

2003             

2002             

Retained earnings - beginning of year - as reported

3,503            

4,074            

Accounting change - Impairment of goodwill

  as at January 1, 2002 (note 2)

-            

(748)           

As restated

3,503            

3,326            

Net income

13            

86            

Dividends

-  Common

(48)           

(48)           

-  Preference

(2)           

(1)           

Retained earnings - end of period

3,466            

3,363            

INTERIM CONSOLIDATED BALANCE SHEET

(unaudited for 2003)

(in millions of US$)

March 31, 2003    

December 31, 2002    

ASSETS

Current assets

Cash and time deposits

110               

109               

Trade receivables

  (net of allowances of $57 in 2003 and $58 in 2002)

1,398               

1,264               

Other receivables

466               

542               

Inventories

     Aluminum operating segments

          Aluminum

946               

905               

          Raw materials

376               

390               

          Other supplies

292               

296               

1,614               

1,591               

     Packaging operating segment

378               

368               

1,992               

1,959               

Current assets held for sale (note 3)

81               

76               

4,047               

3,950               

Deferred charges and other assets

644               

666               

Property, plant and equipment

     Cost (excluding Construction work in progress)

17,719               

17,630               

     Construction work in progress

612               

570               

     Accumulated depreciation

(8,329)              

(8,107)              

10,002               

10,093               

Intangible assets, net of accumulated amortization of $60
      in 2003 and $53 in 2002

315               

318               

Goodwill

2,304               

2,303               

Long-term assets held for sale (note 3)

205               

208               

Total assets

17,517               

17,538               

INTERIM CONSOLIDATED BALANCE SHEET (cont'd)

(unaudited for 2003)

(in millions of US$)

March 31, 2003     

December 31, 2002    

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities

Payables and accrued liabilities

2,315               

2,294               

Short-term borrowings

350               

381               

Debt maturing within one year

334               

295               

Current liabilities of operations held for sale (note 3)

47               

47               

3,046               

3,017               

Debt not maturing within one year

3,104               

3,186               

Deferred credits and other liabilities

1,454               

1,418               

Deferred income taxes

1,146               

1,120               

Long-term liabilities of operations held for sale (note 3)

21               

22               

Minority interests

135               

150               

Shareholders' equity

Redeemable non-retractable preference shares

160               

160               

Common shareholders' equity

     Common shares

4,708               

4,703               

     Retained earnings

3,466               

3,503               

     Deferred translation adjustments

277               

259               

8,451               

8,465               

8,611               

8,625               

Commitments and contingencies (note 11)

Total liabilities and shareholders' equity

17,517               

17,538               

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

Three months ended March 31  (in millions of US$)

2003      

2002      

OPERATING ACTIVITIES

Income from continuing operations

13      

87      

Adjustments to determine cash from operating activities:

     Depreciation and amortization

224      

199      

     Deferred income taxes

25      

4      

Change in operating working capital:

     - Change in receivables

(41)     

13      

     - Change in inventories

(20)     

33      

     - Change in payables

11      

(89)     

     - Total change in operating working capital

(50)     

(43)     

 Change in deferred charges, other assets, deferred credits and
          other liabilities - net

73      

25      

  Other - net

5      

(6)     

Cash from operating activities in continuing operations

290      

266      

Cash from (used for) operating activities in discontinued
operations (note 3)

4      

(8)      

Cash from operating activities

294      

258      

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS (cont'd)

(unaudited)

Three months ended March 31 (in millions of US$)

2003     

2002     

FINANCING ACTIVITIES

New debt

4      

131      

Debt repayments

(85)     

(171)     

(81)     

(40)     

Short-term borrowings - net

(24)     

(126)     

Common shares issued

5      

6      

Dividends

     Alcan shareholders (including preference)

(50)     

(49)     

     Minority interests

(9)     

(1)     

Cash used for financing activities in continuing operations

(159)     

(210)     

Cash used for financing activities
    in discontinued operations (note 3)

(3)      

(1)      

Cash used for financing activities

(162)      

(211)     

INVESTMENT ACTIVITIES

Property, plant and equipment

(131)     

(105)     

Business acquisitions

(5)     

-      

(136)     

(105)     

Net proceeds from disposal of businesses, investments and other
       assets

6      

36      

Cash used for investment activities in continuing operations

(130)     

(69)     

Cash used for investment activities
     in discontinued operations (note 3)

(2)      

(2)      

Cash used for investment activities

(132)      

(71)      

Effect of exchange rate changes on cash and time deposits

1      

1      

1      

(23)     

Cash and time deposits - beginning of period

110      

119      

Cash and time deposits - end of period in continuing operations

110      

96      

Cash and time deposits - end of period in discontinued operations

1      

-      

Cash and time deposits - end of period

111      

96      

ALCAN INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2003
(Unaudited)

(in millions of US$, except per share amounts)

1.  ACCOUNTING POLICIES

The unaudited interim consolidated financial statements are based upon accounting policies and methods of their application consistent with those used and described in the Company's annual financial statements, except for the recently adopted accounting policies described below.  The interim financial statements do not include all of the financial statement disclosures included in the annual financial statements prepared in accordance with Canadian generally accepted accounting principles (GAAP) and therefore should be read in conjunction with the most recent annual financial statements.

Recently Adopted Accounting Policies

Impairment of Long-lived Assets

On January 1, 2003, the Company prospectively adopted the Canadian Institute of Chartered Accountants (CICA) section 3063, Impairment of Long-lived Assets.  Under this standard, an impairment loss is recognized when the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.  No significant impairment losses for long-lived assets were recorded in the first quarter of 2003.

Disposal of Long-lived Assets and Discontinued Operations

On January 1, 2003, the Company elected to early adopt the CICA section 3475, Disposal of Long-lived Assets and Discontinued Operations.  Under this standard, a long-lived asset to be disposed of by sale is measured at the lower of its carrying amount or fair value less cost to sell, and is not amortized while classified as held for sale.  Assets and liabilities classified as held for sale are reported as assets held for sale and liabilities of operations held for sale on the balance sheet.  A long-lived asset to be disposed of other than by sale, such as by abandonment, before the end of its previously estimated useful life, is classified as held for use until it is disposed of and depreciation estimates revised to reflect the use of the asset over its shortened useful life.  Also, the standard requires that the results of operations of a component of an enterprise, that has been disposed of either by sale or abandonment or is classified as held for sale, be reported as discontinued operations if the operations and cash flows of the component have been, or will be, eliminated from the ongoing operations as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction.  A component of an enterprise comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the enterprise. Disposal activities relating to long-lived assets initiated by the Company in the second quarter of 2003 are described in note 3 - Discontinued Operations and Assets Held for Sale.

3.  DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

In the second quarter of 2003, the Company committed to a plan to sell certain non-strategic Packaging operations.  These businesses are classified as held for sale and are included in discontinued operations.  An impairment charge of $113, after tax, was recorded in discontinued operations to reduce the carrying values of these businesses to estimated fair values less costs to sell.  Accepted valuation techniques were used to estimate fair values.  Certain financial information has been reclassified in the prior periods to present these businesses as discontinued operations on the income statement, as assets held for sale and liabilities of operations held for sale on the balance sheet and as cash flows from (used for) discontinued operations on the statement of cash flows.  All of these divestments are expected to be completed within one year.

The major classes of Assets held for sale and Liabilities of operations held for sale are as follows:

March 31, 2003

December 31, 2002

Current assets held for sale:

  Cash and time deposits

1        

1        

  Trade receivables

39        

36        

  Other receivables

10        

11        

  Inventories

31        

28        

81        

76        

Long-term assets held for sale:

  Deferred charges and other assets

1        

1        

  Property, plant and equipment, net

137        

140        

  Intangible assets, net

14        

14        

  Goodwill, net

53        

53        

205        

208        

Current liabilities of operations held for sale:

  Payables and accrued liabilities

45        

43        

  Short-term borrowings

2        

4        

47        

47        

Long-term liabilities of operations held for sale:

  Debt not maturing within one year

1        

1        

  Deferred credits and other liabilities

-        

1        

  Deferred income taxes

20        

20        

21        

22        

4.  INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE - BASIC AND DILUTED

Basic and diluted income from continuing operations per common share are based on the weighted average number of shares outstanding during the period.  The treasury stock method for calculating the dilutive impact of stock options is used. The following table outlines the calculation of basic and diluted net income per common share.

        Three months ended March 31

2003

2002

        Numerator for basic and diluted income from
          continuing operations per common share:

        Income  from continuing  operations attributable to
           common shareholders

11        

86        

        Denominator (number of common shares in millions):

            Denominator for basic income from continuing operations
            per common share - weighted average of outstanding shares

322        

321        

          Effect of dilutive stock options

-        

2        

          Denominator for diluted income from continuing operations
               per common share - adjusted weighted average of
               outstanding shares

322        

323        

          Income from continuing operations per common share -
               basic and diluted

0.04       

0.27       

In the first quarter, options to purchase 6,231,283 common shares (2002: 353,000) at a weighted average price of CAN$48.79 per share (2002: CAN$64.25) were outstanding during the period but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average price of the common shares.

As at March 31, 2003, there were 321,642,094 (2002 : 321,104,209) common shares outstanding.

5.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Differences relate principally to accounting for foreign currency translation, derivatives, post-retirement benefits, "available-for-sale" securities, asset retirement obligations and goodwill impairment identified as at January 1, 2002.  Refer to the Company's 2002 Annual Report for an explanation of these differences.

On January 1, 2003, the Company adopted, in certain circumstances, the optional hedge accounting provisions contained in the FASB Statements Nos. 133 and 138, Accounting for Derivative Instruments and Hedging Activities.  If certain conditions are met, a derivative may be specifically designated as (a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, (b) a hedge of the exposure to variable cash flows of a forecasted transaction, or (c) a hedge of the foreign currency exposure of a net investment in a foreign operation, an unrecognized firm commitment, an available-for-sale security, or a foreign-currency denominated forecasted transaction. Under this statement, when the Company elects to apply hedge accounting, it is required to establish at the inception of the hedge the method it will use for assessing the effectiveness of the hedging derivative and the measurement approach for determining the ineffective aspect of the hedge.  Those methods must be consistent with the Company's approach to managing risk.

5.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont'd)

Recently Adopted Accounting Standards

On January 1, 2003, the Company adopted the FASB Statement No. 143, Accounting for Asset Retirement Obligations. This statement establishes accounting standards for the recognition, measurement and disclosure of liabilities for legal obligations associated with the retirement of a tangible long-lived asset that result from its acquisition, construction, development or normal operation.  Under this standard, a liability is generally recognized for such an obligation at its fair value when incurred and a corresponding asset retirement cost is added to the carrying amount of the related asset.  In subsequent periods, the carrying amount of the liability is adjusted to reflect the passage of time and any changes in the timing or amount of the underlying future cash flows.  The asset retirement cost is amortized to expense over the asset's useful life. 

Under the FASB Statement No. 143, the Company recognized, for U.S. GAAP reporting only, additional liabilities, at fair value, of approximately $106 as at January 1, 2003, for existing legal asset retirement obligations.  Such liabilities are adjusted for accretion costs.  The related asset retirement costs are capitalized as increases to the carrying amount of the associated long-lived assets and accumulated depreciation on these capitalized costs recognized.  These liabilities consist primarily of environmental remediation costs, resulting from normal operations, associated with certain bauxite residue disposal sites at its alumina refineries and the disposal of certain of its spent potlining associated with smelter facilities.

As a result of the new standard, as at January 1, 2003, Property, plant and equipment - cost has been increased by $140, Property, plant and equipment - accumulated depreciation has been increased by $90, Deferred credits and other liabilities have been increased by $106, Deferred income taxes have been reduced by $17 and an after-tax charge of $39 recorded in Net income for the cumulative effect of accounting change.  The cumulative effect of accounting change related primarily to costs for spent potlining disposal for pots currently in operation.  Net income for the year ended December 31, 2002 would not have been materially different if this standard had been adopted effective January 1, 2002.  For the three months ended March 31, 2003, net income was reduced by $10 due to the adoption of the standard, resulting principally from higher balance sheet translation exchange losses of $8 relating to Deferred credits and other liabilities.

The following is a reconciliation of the aggregate carrying amount of liabilities for asset retirement obligations and the pro forma impact for the year ended December 31, 2002, as if the standard had been adopted effective January 1, 2002.

(pro forma)

For the period ended

March 31, 2003

December 31, 2002

Balance - beginning of period

389         

363          

Liabilities incurred

3         

12          

Liabilities settled

(4)        

(12)         

Accretion expense

5         

17          

Exchange

27         

9          

Balance - end of period

420         

389          

On January 1, 2003, the Company prospectively adopted the FASB Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  This standard requires that a liability associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of the Company's commitment to an exit plan.

5.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont'd)

      Recently Adopted Accounting Standards (cont'd)

      On January 1, 2003, the Company adopted the recognition and measurement provisions of the FASB Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  The provisions are applied on a prospective basis to guarantees issued or modified after December 31, 2002.  There were no significant guarantees issued or modified after December 31, 2002.

Recently Issued Accounting Standards

In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, which applies in the first fiscal year or interim period beginning after June 15, 2003, to variable interest entities in which the Company holds a variable interest that it acquired before February 1, 2003.  This Interpretation requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risks among parties involved.  An entity that holds a significant variable interest but is not the primary beneficiary is subject to specific disclosure requirements.  The Company is studying this Interpretation and has not yet determined its impact.

Reconciliation of Canadian and U.S. GAAP

Three months ended March 31

(in millions of US$, except per share amounts)

2003

2002

Income from continuing operations - as reported

13        

87        

Difference due to:

 - Valuation of derivatives

16        

99        

 - Asset retirement obligations

(11)       

-        

 - Deferred tax effect on the above

(4)       

(32)       

Income from continuing operations before

  Cumulative effect of accounting changes - U.S. GAAP

14        

154        

Loss from discontinued operations

-        

(1)       

Cumulative effect of accounting changes - net of taxes

 - Impairment of goodwill

-        

(748)       

 - Asset retirement obligations

(39)       

-        

Loss - U.S. GAAP

(25)       

(595)       

Dividends on preference shares

2        

1        

Loss attributable to common shareholders - U.S. GAAP

(27)       

(596)       

 Loss per common share - basic and diluted  - U.S. GAAP

    Income from continuing operations

0.04       

0.48        

    Loss from discontinued operations

-       

(0.01)       

    Cumulative effect of accounting changes

(0.12)      

(2.33)       

    Loss per common share - basic and diluted - U.S. GAAP

(0.08)      

(1.86)       

5.  DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (cont'd)

Reconciliation of Canadian and U.S. GAAP (cont'd)

March 31, 2003

December 31, 2002

As reported

U.S. GAAP

As reported

U.S. GAAP

Other receivables

466      

475      

542      

542      

Inventories

1,992      

1,997      

1,959      

1,955      

Deferred charges and other assets

644      

649      

666      

663      

Property, plant and equipment

- Cost (excluding Construction work in progress)

17,719      

17,859      

17,630      

17,630      

- Accumulated depreciation

(8,329)     

(8,420)     

(8,107)     

(8,107)     

Intangible assets, net of accumulated amortization

315      

458      

318      

461      

Payables and accrued liabilities

2,315      

2,316      

2,294      

2,311      

Deferred credits and other liabilities

1,454      

2,187      

1,418      

2,028      

Deferred income taxes

1,146      

981      

1,120      

963      

Retained earnings

3,466      

3,462      

3,503      

3,537      

Deferred translation adjustments

277      

223      

259      

205      

First Quarter

Comprehensive income (loss)

2003

2002

Loss

(25)       

(595)       

Net change in deferred translation adjustments

18        

8        

Net change in excess of market value over book value of   "available-for-sale" securities

2        

4        

Valuation of derivatives

13        

-        

Comprehensive income (loss)

8        

(583)       

March 31,

December 31,

Accumulated other comprehensive loss

2003

2002

Deferred translation adjustments

223       

205        

Minimum pension liability

(320)      

(320)       

Unrealized gain on "available-for-sale" securities

8       

6        

Valuation of derivatives

13       

-        

(76)      

(109)       

6.  RESTRUCTURING, IMPAIRMENT AND OTHER SPECIAL CHARGES

In 2001, the Company implemented a restructuring program aimed at safeguarding its competitiveness, resulting in a series of plant sales, closures and divestments throughout the organization.

Restructuring and asset impairment charges

A schedule is provided below showing details of the provision balances and related cash payments for the restructuring and asset impairment charges relating to the 2001 restructuring program:

2001

Severance
costs

Asset Impairment
 provisions

Other

Total

Charges

111    

268        

29     

408     

Cash payments - net

(7)   

-        

(7)    

(14)    

Non-cash charges

-    

(268)       

-     

(268)    

Provision balance as at December 31

104    

-        

22     

126     

2002

Charges

36    

26        

27     

89     

Cash payments - net

(63)   

-        

-      

(63)    

Non-cash charges

(6)   

(26)       

(7)    

(39)    

Provision balance as at December 31

71    

-        

42     

113     

2003

Charges

-    

1       

1     

2     

Cash payments - net

(15)   

-       

(15)    

(30)    

Non-cash charges

-    

(1)      

-     

(1)    

Provision balance as at March 31

56    

-       

28     

84     

In the first quarter of 2003, the Company recorded charges of $1 pre-tax for asset write-downs (Engineered Products) and $1 pre-tax for other costs (Packaging).

In 2002, the Company recorded charges of $89 pre-tax related to the restructuring program, which consisted of severance costs of $36 related to workforce reductions of approximately 950 employees (Q1; nil, Q2; 295 employees, Q3; 315 employees, Q4; 340 employees), impairment of long-lived assets of $26 and other exit costs related to the shutdown of facilities of $27.  Severance charges of $36 (Q1; nil, Q2; 14, Q3; 6, Q4; 16) related primarily to the closure of the Burntisland facility, U.K. (Bauxite, Alumina and Specialty Chemicals), certain cable operations in North America (Engineered Products) and extrusion operations in Malaysia and light-gauge operations in Fairmont, West Virginia (Rolled Products Americas and Asia).  Asset impairment charges of $26 (Q1; 9, Q2; nil, Q3; 13, Q4; 4) related primarily to the extrusion operations in Pieve, Italy (Engineered Products) and the Borgofranco plant in Italy (Rolled Products Europe).  Other exit costs of $27 (Q1; 5, Q2; (3), Q3; (4), Q4; 29) consisted principally of closure costs of $19 for the Burntisland facility, U.K., a loss of $5 on the sale of the extrusion operations in Thailand that arose from the realization of deferred translation losses (Rolled Products Americas and Asia), a loss of $4 on the sale of the rolled products circles production unit at Pieve, Italy (Rolled Products Europe), other costs of $3 and was offset in part by income of $4 from the write-back of excess contract loss provisions upon settlement with a customer (Engineered Products).

6.  RESTRUCTURING, IMPAIRMENT AND OTHER SPECIAL CHARGES (cont'd)

In 2001, Restructuring, impairment and other special charges of $654 pre-tax were recorded, which included restructuring and asset impairment charges of $408 and other special charges of $246.  The charges of $408 included severance costs of $111, which related to workforce reductions of approximately 2,190 employees, impairment of long-lived assets of $268 and other exit costs related to the shutdown facilities of $29.  Other special charges of $246 related to environmental provisions for treatment costs of $150 for stored spent potlining in Canada as well as remediation costs of $96 for bauxite residue disposal sites in Canada and the U.K.

Workforce reductions relating to the 2001 restructuring program and subsequent terminations are as follows:

First Quarter

2001

2002

2003

Total

Bauxite, Alumina and Specialty Chemicals

-  

380  

-      

380   

Primary Metal

500  

-  

-      

500   

Rolled Products Americas and Asia

200  

250  

-      

450   

Rolled Products Europe

400  

-  

-      

400   

Engineered Products

-  

200  

-      

200   

Packaging

790  

120  

-      

910   

Other

300  

-  

-      

300   

Planned workforce reductions

2,190  

950  

-      

3,140   

Terminations in period

390  

2,490  

135      

3,015   

Total remaining employees

125   

In the context of the Company's objective of value maximization, a detailed business portfolio review was undertaken in 2001 to identify high cost operations, excess capacity and non-core products.  Impairment charges arose as a result of negative projected cash flows and recurring losses, and related principally to buildings, machinery and equipment and some previously capitalized project costs.

6.  RESTRUCTURING, IMPAIRMENT AND OTHER SPECIAL CHARGES (cont'd)

Asset Impairment Provisions

Assets Held and Used ⁽¹⁾

Assets Held for Disposal ⁽²⁾

2001

2002

Q1-2003

Total

2001

2002

Q1-2003

Total

Bauxite, Alumina and

  Specialty Chemicals ⁽³⁾

45   

-   

-    

45   

-   

-    

-    

-   

Primary Metal ⁽⁴⁾

22   

-   

-    

22   

-   

-    

-    

-   

Rolled Products

  Americas and Asia ⁽⁷⁾

14   

3   

-    

17   

8   

-    

-    

8   

Rolled Products

  Europe ^{(5) (8)}

79   

-   

-    

79   

22   

9    

-    

31   

Engineered Products

3   

13   

1    

17   

-   

-    

-    

-   

Packaging ^{(6) (9)}

42   

1   

-    

43   

12   

-    

-    

12   

Other

21   

-   

-    

21   

-   

-    

-    

-   

Total

226   

17   

1    

244   

42   

9    

-    

51   

(1)  An impairment provision was recorded to the extent that the net book value exceeded the fair value.

(2)  An impairment provision was recorded to the extent that the net book value exceeded the fair value less selling costs.

Assets Held and Used

(3)  Charges principally relate to the specialty chemicals plant at Burntisland, U.K.

(4)  Charges principally relate to the engineered cast products plant in Quebec, Canada.

(5)  Charges principally relate to the cold mill at the Rogerstone plant in the U.K.

(6)  Charges principally relate to the foil facilities at Glasgow, U.K.

Assets Held for Disposal

(7)  Charges principally relate to the extrusion operations in Malaysia and Thailand.

(8)  Charges principally relate to certain rolled products and recycling operations at the Pieve and Borgofranco plants in Italy.

(9)  Charges principally relate to the Pharmatech rubber stopper and aluminum seals operations in the U.S.

Assets Held for Disposal

Rolled Products

Rolled Products

Americas & Asia

Europe

Packaging

Total

Sales & Operating Revenues

  First Quarter 2002

10    

26    

30     

66   

  First Quarter 2003

3    

20    

-     

23   

Net Operating Losses

  First Quarter 2002

-    

-    

(1)    

(1)  

  First Quarter 2003

-    

-    

-     

-   

Assets

  December 31, 2002

10    

5    

-     

15   

  March 31, 2003

9    

4    

-     

13   

Liabilities

  December 31, 2002

5    

35    

-     

40   

  March 31, 2003

5    

19    

-     

24   

7.  INTERIM INFORMATION BY OPERATING SEGMENT (cont'd)

Rolled Products Americas and Asia

Headquartered in Cleveland, U.S.A. encompassing aluminum sheet and light gauge products, operating 16 plants in six countries.

Rolled Products Europe

Headquartered in Zurich, Switzerland comprising aluminum sheet, including automotive, can and lithographic sheet, plate and foil stock operating 11 plants in four countries.

Engineered Products

Headquartered in Neuhausen, Switzerland producing fabricated aluminum products, including wire and cable, components for the mass transportation, automotive, building, display, electromechanical and other industrial markets, as well as sales and service centres throughout Europe, operating 47 plants in 17 countries.

Packaging

Headquartered in Zurich, consisting of the Company's worldwide food flexible, foil, specialty, pharmaceutical and cosmetics packaging businesses, operating 76 plants in 14 countries.  Seven of these plants have been excluded from the operating segment information as they have been reclassified to discontinued operations and assets held for sale.

Intersegment and other

This classification includes the deferral or realization of profits on intersegment sales of aluminum and alumina as well as other non-operating items.

7.  INTERIM INFORMATION BY OPERATING SEGMENT (cont'd)

Period ended March 31

Sales and operating revenues - intersegment

First Quarter

2003

2002

Bauxite, Alumina and Specialty Chemicals

201 

187 

Primary Metal

605 

540 

Rolled Products Americas and Asia

19 

48 

Rolled Products Europe

123 

70 

Engineered Products

2 

6 

Packaging

5 

5 

Intersegment and other

(955)

(856)

- 

- 

Sales and operating revenues - third parties

First Quarter

2003

2002

Bauxite, Alumina and Specialty Chemicals

120 

101 

Primary Metal

586 

561 

Rolled Products Americas and Asia

843 

782 

Rolled Products Europe

509 

411 

Engineered Products

453 

398 

Packaging

692 

625 

Other

10 

10 

3,213 

2,888 

EBITDA

First Quarter

2003

2002

Bauxite, Alumina and Specialty Chemicals

54 

64 

Primary Metal

214 

214 

Rolled Products Americas and Asia

80 

92 

Rolled Products Europe

47 

30 

Engineering Products

23 

27 

Packaging

86 

72 

EBITDA from operating segments

504 

499 

Depreciation and amortization

(224)

(199)

Restructuring, impairment and

  other special charges

(2)

(14)

Intersegment, corporate offices and other

(75)

(70)

Interest

(48)

(50)

Income taxes

(141)

(79)

Minority interests

(1)

- 

Income from continuing operations

13 

87 

8.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION

The Company does not recognize compensation expense in earnings for options granted under the share option plan for employees as stock options are granted at an exercise price equal to the market price of the underlying stock on the grant date.  For pro forma income purposes, the fair value of options granted is being amortized over their respective vesting periods.  Pro forma net income and net income per common share - basic and diluted, as if the Company had elected to recognize compensation expense using the fair value method for all stock options is presented below:

Three months ended March 31

2003       

2002       

Net income as reported

13       

86       

Compensation expense if the fair value method was used

2       

6       

Pro forma net income

11       

80       

Net income per common share - basic and diluted - as reported

0.04       

0.26       

Pro forma net income per common share - basic and diluted

0.03       

0.23       

The compensation cost for stock-based employee compensation awards that can be settled in cash, which is based on the change in the share price during the period, is recognized in income.  For the first quarter of 2003 total compensation cost for such awards was $2 (2002: $3).

9.  INCOME TAXES

First Quarter

2003

2002

Current

116 

75 

Deferred

25 

4 

141 

79 

The composite of the applicable statutory corporate income tax rates in Canada is 39.1% (39.4% for 2002). In 2003, the difference between income taxes calculated at the Canadian composite rate and the amounts reported is primarily attributable to exchange.  In 2002, the difference is primarily attributable to exchange and the impact of potential future tax benefits that were not recognized since their realization is not likely.

10.  SUPPLEMENTARY INFORMATION

Statement of Cash Flows

First Quarter

2003

2002

Interest paid

57 

57 

Income taxes paid (recovered)

33 

(48)

11. COMMITMENTS AND CONTINGENCIES

In 1997, as part of the claim settlement arrangements related to the British Columbia Government's cancellation of the Kemano Completion Project, the Company obtained the right to transfer a portion of a power supply contract with BC Hydro to a third party.  The Company sold the right to supply this portion to Enron Power Marketing Inc. (EPMI), a subsidiary of Enron Corporation (Enron) for cash consideration.  In order to obtain the consent of BC Hydro to this sale, the Company was required to retain residual liability for EPMI's obligation arising from the supply contract, including in the event that EPMI became unable to perform.  This contingent liability is subject to a maximum aggregate amount of $100, with mitigation and subrogation rights.  On December 2, 2001, EPMI and Enron filed for protection under Chapter 11 of the U.S. Bankruptcy Code.  Powerex, the BC Hydro affiliate which now holds the rights to the power supply contract, maintains that it has terminated the power supply contract and as a result filed a claim for $100 against Enron on March 15, 2002 as a necessary step prior to making the same claim against the Company.  Enron did not respond to that claim and the Company received, on March 22, 2002, a demand for payment in the amount of $100 from Powerex. On January 17, 2003, the Company received a decision following arbitration hearings held in December 2002, on a contractual dispute between Powerex and Alcan.  The arbitrator confirmed Powerex's claim for $100.  A standstill agreement, which had been in effect, has now expired.  The parties remain in discussions while taking steps to preserve their respective rights.  To this end, Alcan is pursuing an application before the courts of the State of Oregon for the judicial review of the arbitrator's decision.  Alcan has been advised that Powerex cannot enforce the arbitrator's decision while this application is pending. The judicial review is not expected to take place before August 2003. A provision of $100 pre tax was recorded in the fourth quarter of 2002.

The Company has guaranteed the repayment of approximately $6 of indebtedness by third parties. Alcan believes that none of these guarantees is likely to be invoked.  These guarantees are primarily for employee housing loans and potential environmental remediation at former Alcan sites.

Alcan, in the course of its operations, is subject to environmental and other claims, lawsuits and contingencies.  The Company has environmental contingencies relating to approximately 29 existing and former Alcan sites and third-party sites.  Accruals have been made in specific instances where it is probable that liabilities will be incurred and where such liabilities can be reasonably estimated.

Although it is possible that liabilities may arise in other instances for which no accruals have been made, the Company does not believe that such an outcome will significantly impair its operations or have a material adverse effect on its financial position.

12. CAPITALIZATION OF INTEREST COSTS

Total interest costs in the first quarter were $49 (2002: $50) of which $1 (2002: nil) was capitalized.

13. PROPOSED ACQUISITIONS

      Agreements to acquire Baltek Corporation

On March 5, 2003, the Company announced that it has entered into agreements to acquire Baltek Corporation (Baltek) for approximately $35.  Under the agreements, the Company will acquire Baltek on the basis of $15.17 per share.  This reflects a premium of approximately 77% based on the 20-day average trading price to March 5, 2003. With corporate head offices in New Jersey, Baltek, the world leader in balsa-based composite materials, has production and sales facilities around the world. Baltek has operated balsa plantations in Ecuador, one of the world's largest sources of balsa wood, for nearly 60 years.

The transaction, which is subject to approval by Baltek's shareholders, has received the approval of Baltek's board of directors and the support of its major shareholders.  Completion is subject to other usual conditions for a transaction of this nature, although no clearances from anti-trust or competition authorities are required.  Alcan expects the transaction to be completed in the second quarter of 2003.

Acquisition of VAW Packaging

On April 30, 2003 the Company completed the purchase of VAW Packaging group of businesses (FlexPac) from Norsk Hydro for approximately €345 million.  FlexPac includes 14 plants in 8 countries and has 5,400 employees.  FlexPac comprises a set of custom manufacturing businesses producing high-quality flexible packaging products for a wide variety of end-use customers and manufacturers' of consumer goods, including those in the food, dairy and pharmaceutical industries. The purchase price is subject to post-closing adjustments.

In the opinion of management, all adjustments necessary for a fair presentation of interim period results have been included in the financial statements.  These interim results are not necessarily indicative of results for the full year.

FIRST
QUARTER

FOURTH
QUARTER

(US$ millions, unless otherwise noted)

2003   

2002   

2002   

Sales & operating revenues

          3,213

         2,888

          3,123

Shipments (thousands of tonnes)

            Ingot products¹

             338

             315

              396

            Rolled products

             511

             497

              503

            Conversion of customer-owned metal

             105

               75

              119

            Aluminum used in engineered products & packaging

             147

             126

              141

Total aluminum volume

          1,101

         1,013

          1,159

Ingot product realizations (US$ per tonne)

          1,578

         1,497

          1,498

Average London Metal Exchange 3-month price
(US$ per tonne)

          1,392

         1,395

          1,359

Included in Income from continuing operations are:

Foreign currency balance sheet translation

             (96)

            (14)

             (12)

Other Specified Items

             (13)

               (7)

             (86)

Income from continuing operations

               13

               87

                25

Discontinued operations

                   -

               (1)

                  1

Net income

               13

               86

                26

FIRST
QUARTER

FOURTH
QUARTER

(US$ millions)

2003   

2002   

2002   

Earnings before interest, taxes, depreciation and amortization (EBITDA)

            Bauxite, Alumina and Specialty Chemicals

            54   

          64   

             44   

            Primary Metal

          214   

        214   

           201   

            Rolled Products, Americas and Asia

            80   

          92   

             95   

            Rolled Products, Europe

            47   

          30   

             30   

            Engineered Products

            23   

          27   

             19   

            Packaging

            86   

          72   

             83   

EBITDA from operating segments (sub-total)

           504   

        499   

           472   

            Depreciation & amortization

       (224)  

       (199)  

          (217)  

            Restructuring, impairment and other special charges

            (2)  

         (14)  

            (43)  

            Intersegment, corporate offices and other

         (75)  

         (70)  

          (102)  

            Interest

         (48)  

        (50)  

            (51)  

            Income taxes

       (141)  

        (79)  

            (30)  

            Minority interests

            (1)  

            -     

               (4)  

Income from continuing operations

             13   

          87   

             25   

Discontinued operations

               -   

          (1)  

               1   

Net income

            13   

          86   

March 31,

December 31,

(US$ millions unless otherwise noted)

2003

2002

2002

Debt

       Short-term borrowings

             350

             408

             381

       Debt maturing within one year

             334

             516

             295

       Debt not maturing within one year

         3,104

          3,005

          3,186

       Debt of operations held for sale

              3

                  2

                  5

Debt

         3,791

          3,931

          3,867

Equity

       Minority interests

             135

             129

             150

       Redeemable non-retractable preference shares

             160

             160

             160

       Common shareholders' equity

         8,451

          7,918

          8,465

Equity

         8,746

          8,207

          8,775

Total invested capital

       12,537

       12,138 

       12,642

Debt as a percent of invested capital (%)

            30%

           32%

           31%