Century Aluminum Company (CENX)

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Century Aluminum Company (CENX)

Q4 2009 Earnings Call Transcript

February 23, 2010 5:00 pm ET


Shelly Lair – VP and Treasurer

Logan Kruger – President and CEO

Wayne Hale – EVP and COO

Mike Bless – EVP and CFO


Kuni Chen – Banc of America

Justine Fisher – Goldman Sachs

Mark Liinamaa – Morgan Stanley

Brett Levy – Jefferies

Chris Doherty – Oppenheimer & Company

Tim Hayes – Davenport & Company

Tony Rizzuto – Dahlman Rose

John Tumazos – John Tumazos Very Independent Research



Ladies and gentlemen, thank you very much for standing by, and welcome to the fourth quarter 2009 earnings conference call. At this time all participants are in a listen-only mode. Later there will be a question-and-answer session. Instructions will be given at that time. (Operator instructions) And as a reminder, this conference call is being record. At this point, I’d like to turn the meeting over to our host, Ms. Shelly Lair. Please go ahead.

Shelly Lair

Thank you, David. 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 and discussion may include 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. For summary of the risk factors that could cause actual results to differ from those expressed in these forward-looking statements, please review Annex-A and refer to Century's Form 10-K for the year ended December 31, 2008; Form 10-Q for the quarter ended September 30, 2009; and other reports filed with the Securities and Exchange Commission.

Information provided in this presentation and discussion is based on information available as of February 23, 2009. Century undertakes no duty to update or revise any forward-looking statements, whether as the result of new information, actual events, future events, or otherwise. In addition, throughout the conference call, we will use non-GAAP financial measures. Reconciliation to the most comparable GAAP financial measures can be found in the appendix of today's presentation, which is available on our website.

I'd now like 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 welcome the opportunity to report on our progress. So let's get started and move on to slide number four. Given the events of the last 12 months or so, I think it makes sense to take a step back and provide a quick review before we summarize Century’s achievements and therein where would we go from here.

It goes without saying that the shock of 2008 and 2009 were unprecedented in most of our lifetimes. The rapid and sharp drop in the economic activity and the resulted impact on the value of almost all assets were breathtaking to say the least. Commodities, as you know, given the direct exposure to the global economic activity, were affected in an outsized manner. I will comment in more detail on the market in a few moments. Suffice it to say that we believe that we are in a dynamic environment with positive, long-term forces at work. But some substantial near-term uncertainties remain.

In a nutshell, global economic activity appears to be at least to have stabilized. China, in particular, has shown a remarkable recovery and returned to robust growth. Despite some recent concerns about the governance intent in China to restrain certain perceived excesses, we continue to believe and think these particular concerns might be exaggerated.

Aluminum is tight in physical markets virtually everywhere in the world. On the other side of that coin, this physical tightness, which is certainly keeping premiums high and maybe having an impact on the actual price as well, is largely supported not by fundamental forces, but by interest rates and other financial factors. In addition, the much reported inventories, both in warehouses and elsewhere, are likely to be a drag in the metal prices for some time to come.

Lastly, we continue to see older and economic smelters continue to produce for a variety of reasons. We worked tirelessly through this difficult environment to preserve Century’s unique assets and the overall value. I think it’s at first instructive to note that our smelter at Grundartangi in Iceland produced positive cash flow throughout the year of 2009. We have a great business in Iceland, run by a great team.

One of the five lines remained curtailed at Hawesville. Our team there has done an extraordinary job managing the plants in an uncertain environment and in taking significant cost out of the business. This is a major continuing focus at Hawesville that our cash power cost will increase significantly after this year 2010 when the support from E.ON, which we negotiated when we terminated the old power contract comes to an end.

Mt. Holly has had a poor year from a performance standpoint. This was disappointing given the timing and the fact that this plant has generally performed well and has been well managed. We have had detailed discussions with our partner who operates Mt. Holly. Ravenswood remains totally curtailed since February. We are maintaining a skeleton staff to keep the plant safe and secure and ready for a restart if the conditions were to warrant it. Wayne will provide additional commentary on those.

And lastly, we divested 50% interest in Gramercy and St. Ann’s alumina, a bulk sized business. This has been a tactical and defensive investment for Century in 2004, and the time and the circumstances were right for us to exit this in the last year.

Let’s move on to slide number five. This is the overview. Mike will provide details, but given significant work we did to improve the company’s financial situation, I wanted to note this upfront. We raised a substantial amount of cash and made major changes in our debt structure that will provide the company with much more flexibility.

Bottom line, as I look back to the last year, I’m proud of the aggressive and sometimes difficult actions our team took to keep the company on a level footing through these difficult times. As important, the operational and financial actions we have taken had set the company up in a good position for our return to growth as we go forward.

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