Century Aluminum Company (CENX)

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Century Aluminum Company (CENX)

Q2 2011 Earnings Call

August 4, 2011 5:00 PM ET


Shelly Harrison – VP and Treasurer

Logan Kruger – President and CEO

Michael Bless – EVP and CFO


Brett Levy – Jefferies & Company

Sai Tharani – Goldman Sachs

Richard Garchitorena – Credit Suisse

Cyan Gosh – Millennium Partners

Sal Tharani – Goldman Sachs



Ladies and gentlemen, good afternoon. Thank you for standing by, and welcome to the Second Quarter 2011 Earnings Call. (Operator Instructions) As a reminder, this conference is being recorded.

I’d now like to turn the conference over to our host, Ms. Shelly Harrison. Please go ahead.

Shelly Harrison

Thank you, Tom. 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 statements 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. Reconciliations 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.

Logan Kruger

Thanks, Shelly. Thank you all for joining us today. Let’s move on to slide four to get started. I’ll provide detail on the market in moment, but we will make some introductory comments here to set the contest for our broader discussion. Obviously, you’ve all seen what the equity markets have done today.

Otherwise, I would characterize the aluminum market conditions for developed economies as continue to accelerate steady but slow growth. The phase of economic activity in the developing regions remain strong. The economic data from China, India, Brazil and other fast growing countries continue to look good. Other than well capitalize macro concerns, we see another signals of pending slowdown from these growing areas.

Physical supply of metal continues to be tied for a variety of reasons. The dialogue around the rules covering the LME warehouses that’s recently become quite animated. Clearly different types of market participants will continue to have a distinct view. The LME had studied this issuing detail and has made some changes. We don’t believe these changes will have a significant impact on prices or premiums. In this environment, physical premiums in the most regions have remained at or near all-time highest. While this environment may not be attainable over the long-term, we do not see major changes for at least the balance of this year.

I obviously do not need to comment on the global macroeconomic conditions. Suffice it to say that we are managing the company under the assumption that the issues in the EU and in the U.S. do not significantly impact the broader economy or markets. The same philosophy applies to China, where it looks for a hard economic landing, out of control for inflation or the popping of potential asset bubbles which can materialize the world would surely be a different place. We like clarity managing recent global economic data, which have been somewhat sobering.

Overall, we remain generally positive on the aluminum market for the medium term, but some concern for the slowing global economic activity may be more than temporary. Now, I’ll give you a few quick comments on the company’s operations, again, just to set the scene. Let’s say in my remarks, I’ll provide a more detailed review of the situation also what happened, where we stand today and most importantly much as we learnt and where we are going. (Inaudible) to say that we does not adequately compensate for the relative and experience of new personal in the plot.

We are responsible for the first line operations, including the restart of the previously curtailed line number five. Those coupled with the challenges in our plant technical improvements, as well as logistical problems caused by the historic flooding in the region resulted in a situation that you saw harder than expected to get back under control. The good news is that, we believe we now have reached stable operations. I will speak further on this in a few moments.

If we look further, the company’s other operations stand in a very good quarter continues to perform well and happily, Mt. Holly under its new leadership has largely regained its strong historical performance. We had some milestones on the Helguvik project in Iceland during the quarter and I will detail those at the end of my remarks.

Let’s turn to slide number five. Now turning to an updates on the market, in the second quarter, the LME cash price averaged about $2,600 per tons, the highest quarterly level since the quarter – third quarter of 2008. Prices remained in the $2,500 per ton range despite macro concerns I discussed earlier. Aluminum spot prices have just developed with the most recent tender quoted about $380 per ton as there appears to be sufficient material available in this market. It’s our expectation that the aluminum market will remain reasonably in balance for the rest of this year.

Chinese aluminum demand remained strong during the second quarter almost across all of the sectors. Annualized production reached a record over about 19.5 million tons, yet demand still out pay production by other 200,000 tons in the quarter. If you just take a poles on an annualized basis that near a 1 million tons per year. It is our view that China will be imbalanced by a modest net import of aluminum of the medium term. Aluminum demand outside China continues to recover as Japan ranched up its manufacturing industry after the earthquake and the Tsunami. Western (inaudible) demand continues to grow driven by demand from transportation and beverage section.

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