Century Aluminum (CENX)
Q4 2010 Earnings Call
February 15, 2011 5:00 p.m. ET
Shelly Lair – VP and Treasurer
Logan Kruger – President and CEO
Wayne Hale – EVP and COO
Mike Bless – EVP and CFO
Brett Levy – Jefferies & Company
Dave Gagliano - Credit Suisse
Paretosh Misra - Morgan Stanley
John Tumazos - Tumazos Independent
Previous Statements by CENX
» Century Aluminum CEO Discusses Q3 2010 Results - Earnings Call Transcript
» Century Aluminum Company Q2 2010 Earnings Call Transcript
» Century Aluminum Company Q1 2010 Earnings Call Transcript
Thank you, operator. Good afternoon everyone, and welcome to the conference call. Before we begin, I would like to remind you that today’s discussion will contain forward-looking statements related to future events and expectations, including our expected future financial performance, results of operations, and financial condition.
These forward-looking statements involve important known and unknown risks and uncertainties, which could cause our actual results to differ materially from those expressed in our forward-looking statements. Please review the forward-looking statement disclosure in today’s slides and press release for a full discussion of these risks and uncertainties.
In addition, we have included some non-GAAP financial measures in our discussion. Reconciliation to the most comparable GAAP financial measures can be found in the appendix to today’s presentation and on our website at www.centuryaluminum.com.
I’d now like to introduce Logan Kruger, Century’s President and Chief Executive Officer.
Thanks Shelly. Thank you all for joining us today. We had a busy quarter in a business environment with improving market conditions. I'd like to make a few brief introductory comments before speaking in more detail about the market. So, let's turn to slide four.
First, I'd like to give you a quick summary of our view of the external environment to set a context as we speak about the company's performance in 2010 and what we see before us for the year of 2011. Global demand growth continued at a reasonable pace during the last quarter of 2010. Annualized GDP growth grew at 3.2% in the U.S. in the fourth quarter and approximately 1.9% in the Euro Zone countries during the third quarter of 2010.
Industrial activity has been strong, with most sectors, barring perhaps commercial and residential construction, exhibiting good to robust growth. As you're well aware, most developing economies have continued to produce strong results. In the fourth quarter, China's GDP was 9.8% and industrial production was 13.5% in the month of December.
Brazil has been another excellent performer. As you are aware as well, inflationary pressures in these countries have continued to build, and governments are taking what will hopefully prove to be action sufficient to avoid severe dislocations. Growth in India has also continued on a strong footing.
In particular, in the metals markets, and our sector specifically, commodity prices have found solid support with risks reasonably well balanced. And there seems to be some evidence for potential toward the upside.
There are many factors supporting this environment, including the macro fundamentals, which I've just discussed. In addition, a continued increase in the cost of power and certain petroleum based raw materials will end up in the aluminum price. Mike will discuss in more detail how we see these trends impacting us at Century in 2011.
You are well aware that investor interest in commodities has continued to grow, and new vehicles are being introduced that provide enhanced flexibility in investing in these assets. On top of the commodity price, regional premiums have remained strong due to a variety of factors, including the limited availability of material out of the warehouses.
We continue to monitor factors that could weigh on the markets. Inventory levels in the absolute continue at historically high levels. That being said, the relationship of these stocks to final demand appears less onerous as the global economy strengthens. Similarly, planned capacity additions could be more than offset by the expected increase in demand. I will provide more detail on global balances in a moment.
Turning to the company specifically, Century has had a busy last few months of the year. in December, the represented employees at Hawesville ratified a new five-year labor agreement. The process took the better part of the year and involved significant effort from multiple parties. I personally believe that it is a credit to the plant's leadership and all of the employees that the smelter's operating performance remains strong for the year.
With the labor discussions behind us, we have turned our attention to the restart of the pipeline we idled during the financial crisis. Wayne will explain the process and timing, and Mike will provide detail on the modest restart costs. This additional capacity will produce a meaningful improvement in the plant's cost structure, and will produce incremental cash flow at metal prices well below current levels.
At Grundartangi, performance in 2010 was good. Despite the transformer outage continuing for most of the year, the plant produced very close to its pre-incident output. As Wayne will detail, the unit is now back in Iceland and has been commissioned. He will also speak about some high return, low risk investment programs in development for Grundartangi.
By the year end, Mt. Holly was at current efficiency and production run rate expected for this plant, a welcome return to operational performance. Wayne will also provide detail on the status of our efforts to restart the Ravenswood smelter. We have made some progress with the participation of many parties in the process of reaching a long-term power contract that would support the plant's operations.