Century Aluminum Company (CENX)

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Century Aluminum Company (CENX)

Q2 2009 Earnings Call

July 23, 2009 05:00 PM ET


Logan W. Kruger - President, Chief Executive Officer

Wayne R. Hale - Executive Vice President and Chief Operating Officer

Michael A. Bless - Executive Vice President and Chief Financial Officer

Shelly Lair – Vice President and Treasurer


Kuni Chen - Bank of America Securities

Brett Levy - Jefferies & Company

Justine Fisher - Goldman Sachs

Timothy Hayes - Davenport & Company

Mark Liinamaa - Morgan Stanley

Anthony Rizzuto - Dahlman Rose & Co.

David Rosenberg - Oaktree Capital Management


Unidentified Company Representative

(Call starts abruptly) whether as a results of new information, actual events, future events or otherwise. In addition, throughout this conference call we will use non-GAAP financial measures, reconciliations to the most comfortable GAAP financial measures can be in found in the appendix for today's presentation which is available on our website.

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

Logan W. Kruger

Thank you, Shelly. Good afternoon everyone and thank you for joining us. We continue to focus our efforts on preserving the company's value and welcome the opportunity to report on our progress. So let's get started and lets move on to slide number four.

I'll speak about the marketing some detail in a moment and Wayne will also make a few comments. Suffice to say that we do believe the situation has stabilized over the last few months in most regions of the world and in certain end used sector.

I need to emphasis that apart from China we cannot point to any data that show a dependable reduction in growth. Consistent with what you have heard from others in our sector and in the global industrial world generally, we have witnessed a decelerating rate of decline and in certain areas what appears to be a bottom.

That said, we do not believe the industry supply response had been sufficient to match the current rate of global demand. And this situation has been exacerbated recently by restart in China and even some delayed curtailments in Europe. I will provide more detail in a moment.

Against this backdrop Century has had a healthy and successful quarter. Most importantly, and not to be taken the granted especially in times of stress in general, all our plants performed ultimately.

Safety metrics were excellent, and the operations ran efficiently. These results as you would expect all a real credit to our management teams and to the employees at our plant. These are more impressive and our teams that holds low and Grundartangi in Iceland had reduced the ongoing cost of the operation. They have demonstrated their performance consistently over the last few months and proven that they can run the plant safely and reliably at these lower cost levels.

As you would understand, certain actions that they have taken are somewhat temporary and that is that the plant cannot be run in perpetuity at the lowest spending levels in certain areas such as CapEx and maintenance. But critically in this environment which we find ourselves in we believe these operating levels can be achieved for at least the next 12 to 18 months. Wayne and Mike will provide some more detail for you.

After a significant effort we concluded the new long-term power contract for Hawesville, on what we had been waiting for the last several years. The contract provides cost based trial to hold through 2023. Importantly, in the near-term the agreement mitigates Century's financial risk in today's environment. Wayne will speak to those matter in more detail.

We have made good progress on the Helguvik project during the quarter. Modest construction and engineering activity continued on visiting the site one can now see a smelter taking shape. We've also advanced on the project including discussions with key suppliers such as the Iceland smelter companies. We continue to believe that Helguvik will be a world-class smelter and an excellent investment for our shareholders in the future.

In this way, we are pushing forward with determination. But I must remind you only in line with our requirement that we will not jeopardize the well being of the company as a whole. Mike will provide more detail but you will note, the cash flow performance during the quarter was favorable to our expectation. These results came from the hard work of our operating teams and we continue to work on strategic initiatives which will put the company on an even firmer foundation. We hope to be in a position to report on some of these few during the coming month.

Let's move on to slide number five. The LME stock price have been from $1,488 per ton for the second quarter of 2009 and has recently increased to above $1,700 per ton. This is just from low of $1,250 per ton in just February of this year. The most recent spot the alumina price in the Pacific basin was cost at $241 per ton of alumina up from the less than $200 per ton in the first quarter.

In the U.S. and Europe we have seen signs of stabilization as we believe de-stocking has reached the bottom. But demand has yet to show any meaningful indications of growth. Recent economic data of China demonstrated that this stimulus plan which focuses heavily on investment and infrastructure is having the desired effect.

Chinese GDP grew at the pace of 7.9% for the second quarter and industrial production was up by 10.7% last month. These growth levels are lower than we had seen from China in recent years, but impressive in the lack of the global economic recession.

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