Century Aluminum Company (CENX)

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Century Aluminum Company (CENX)

Q1 2009 Earnings Call Transcript

April 21, 2009 5:00 pm ET


Shelly LairVP and Treasurer

Logan Kruger – President and CEO

Wayne Hale – EVP and COO

Mike Bless – EVP and CFO


Kuni Chen – Banc of America

David Gagliano – Credit Suisse

Tony Rizzuto – Dahlman Rose

David Rosenberg – Oaktree Capital

Mark Liinamaa – Morgan Stanley

Brett Levy – Jefferies & Company

Brandon Senese [ph] – Cobalt Capital



Ladies and gentlemen, thank you for standing by and welcome to Century Aluminum Company First Quarter 2009 Earnings call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator instructions) And as a reminder, today’s conference is being recorded.

I would now like to turn the conference over to Ms. Shelly Lair. Please go ahead.

Shelly Lair

Thank you, Art. Good afternoon everyone and welcome to the conference call. For those of you joining us by telephone, this presentation is being webcast on the Century Aluminum website, www.centuryaluminum.com. Please note that website participants have the ability to advance their own slides.

The following presentation, accompanying press release, and comments, includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties.

Century’s actual results or actions may differ materially from those projected in these forward-looking statements. These forward-looking statements are based on our current expectations, and we assume no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

For risks related to these forward-looking statements, please review Annex A and our periodic SEC filings, including the risk factors and management’s discussion and analysis sections on our latest annual report and quarterly report.

I'd now like to introduce Logan Kruger, Century’s President and Chief Executive Officer.

Logan Kruger

Thank you, Shelly. Good afternoon everyone and thank you for joining us. We have been very busy on many fronts. All of our efforts are focused on preserving the value of your company and we welcome the opportunity to report to you on our progress. So let’s get started on slight number four.

I will address the market in more detail over the following slides. So let me just provide context here by saying we have not as yet seen many concrete signs of improvement in the end markets either in North America or around the world. There are some signs out that particularly from China that could indeed indicate stabilization or at the very least, a significant slowing to the decline. Yet until we see more evidence it’s difficult to gain much confidence at this time. Bottom line, the industry remains in an over-supplied position. We do not believe it’s prudent for producers to plan that improving demand will solve the problem any time in the near term.

In the shadow of this very difficult business environment, I could not be more proud of how our employees have performed. It is during such times as we are experiencing at the moment that effective performance is even more critical. Most importantly, the safety performance at the smelters has been very good, especially in the face of full curtailment at Ravenswood and the one line curtailment at Hawesville. It is during these times such as that we sometimes forget about the bedrock principles like safety.

These principles should not be trivialized. Our employees have proven their commitment and I want to thank them more. The curtailments have been handled efficiently and at or near the targeted costs. Wayne will provide more details when he talks with you and will discuss the remaining operations.

Grundartangi, which is cash flow positive even at today’s current metal prices continues to produce well about its rated capacity. Our near-term strategy is straightforward, to strengthen the company's cash flow and thus preserve Century as a survivor when the conditions improve. To that end, we have significantly improved our liquidity during the last quarter. Mike will provide the details. And as Wayne will discuss, we are all working on the operations to institute significant changes to allow for the long-term value preservation.

Let me now move on to slide number 5. The Icelandic economy continues to experience challenging times with unemployment reaching 9% recently. This is a significant change from the base of effectively zero a year ago. With the financing packages from the IMF and individual countries in place, we are seeing some stabilization in the local banking system. General elections are being held this weekend at which point a formal coalition will be formed. Recent polls indicate that the parties, which had been leading the government since February may well remain in power. Obviously, we shall see on April the 25th.

As Wayne will discuss when he talks about operations, our Grundartangi plant has essentially been unaffected by the political and economic turmoil in Iceland. Efficiencies continue to improve and operating costs primarily power, carbon, and labor, continue to decline.

We have significantly reduced activity and spending commitments on the Helguvik project as we reassess the path forward for this world-class project. We're refining the project cost based on a smaller initial phase and recent commodity prices and construction costs. We expect that the analysis will be completed in the second half of 2009.

Just last week the Investment Agreement was approved by the Parliament in Iceland and is now awaiting ratification by the European Surveillance Authority. This as you know, is a very positive milestone for the project as this evidences the government support for the project and addresses important aspects of the project such as the fiscal regime. As you would expect we are investigating many financing alternatives for this project. At this point in time, we have not made any commitments with respect to financing. Any agreement we would consider entering into the future specifically for the project would not be – would be non-recourse to the Century parent and to Grundartangi.

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