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Century Aluminum Drops on Outlook

Century Aluminum shares tumble Wednesday after the company details a slew of challenges in its fourth-quarter report.
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MONTEREY, Calif. (TheStreet) -- Investors reacted to a series of near-term problems detailed by Century Aluminum (CENX) - Get Free Report in its fourth-quarter report and conference call by selling off the company's shares on Wednesday.

Century posted results that met analysts' expectations after the market closed on Tuesday evening. But the company also noted weak operating margins at one aluminum plant due to problems with its suppliers. Meanwhile, another of Century's plants, this one in Hawesville, Ky., could see its power costs jacked considerably once its current contract with an energy producer expires at the end of 2010.

Further, the contract between Century and its biggest customer of Hawesville-produced aluminum, a company called Southwire, ends in March 2011. Dahlman Rose analyst Anthony Rizzuto, in a note to clients Wednesday morning, wrote that Century executives "would not comment on its current discussions with Southwire" during the fourth-quarter conference call.

Rizzuto slashed his profit forecast for Century's full-year 2010 to 50 cents a share from $1.80, which represented the high end of the range of analysts' estimates. On average, Wall Street's sell side had a target of 92 cents a share for Century's 2010 earnings.

Rizzuto also cut his price target on Century stock to $17 from $20, but remained bullish on the company, saying "we believe the shares exhibit an attractive risk/reward profile."

On Wednesday, shares of the aluminum producer, highly linked to the price of its eponymous metal, tumbled 10% to $11.46. Volume reached 11 million shares, more than double the daily average turnover in the name.

For its fourth quarter, Century reported a loss of $24.4 million, or 28 cents a share. That included several items -- charges and benefits -- that the company did not break out on a per-share basis in its press release.

Stripping out the items brought Century's bottom line up to 3 cents a share, according to Rizzuto's calculations, which matched the consensus forecast, according to a poll of analysts by Thompson Reuters.

A year ago, the company posted an enormous loss -- $693 million -- brought on by writedowns and a big tax ding.

Revenue in the most recently ended quarter came to about $257 million, down 36% from a year ago.

-- Written by Scott Eden in New York

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Scott Eden has covered business -- both large and small -- for more than a decade. Prior to joining, he worked as a features reporter for Dealmaker and Trader Monthly magazines. Before that, he wrote for the Chicago Reader, that city's weekly paper. Early in his career, he was a staff reporter at the Dow Jones News Service. His reporting has appeared in The Wall Street Journal, Men's Journal, the St. Petersburg (Fla.) Times, and the Believer magazine, among other publications. He's also the author of Touchdown Jesus (Simon & Schuster, 2005), a nonfiction book about Notre Dame football fans and the business and politics of big-time college sports. He has degrees from Notre Dame and Washington University in St. Louis.