Century Aluminum's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Century Aluminum Company (CENX)

Q1 2012 Earnings Conference Call

April 24, 2012 17:00 ET

Executives

Enrique De Anda – Corporate Financial Analyst

Michael Bless – President and Chief Executive Officer

Shelly Harrison – Vice President and Treasurer

Analysts

Brett Levy – Jefferies

David Gagliano – Barclays

Kuni Chen – CRT Capital Group

Sal Tharani – Goldman Sachs

Tim Hayes – Davenport & Company

John Tumazos – John Tumazos

Richard Garchitorena – Credit Suisse

Timna Tanners – Bank of America Merrill Lynch

Paul Massoud – Stifel Nicolaus

Paretosh Misra – Morgan Stanley

Tony Rizzuto – Dahlman Rose

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the First Quarter 2012 Earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to our host, Mr. Enrique De Anda. Please go ahead.

Enrique De Anda – Corporate Financial Analyst

Thank you, (Christina). Hello 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 conditions. 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 presentation 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 on today's presentation and on our website at www.centuryaluminum.com.

I'd now like to introduce Michael Bless, Century Aluminum's President and Chief Executive Officer.

Michael Bless – President and Chief Executive Officer

Thanks very much, Enrique. If we could turn to slide 4 now, I'd like to make some introductory comments before we move on with the detail. I am going to talk on the next slide about the external environment, so I won't be repetitive here. Suffice it to say, as you all know that the aluminum price along with the price of other commodities has been held down here recently and quite frankly has performed poorly over the last couple of months due to a variety of factors. Again, I'll mention them just a moment and most of them will be if not all of you well known to you.

Moving on importantly to our operations, at Hawesville, we did indeed reach and maintained stable operations this quarter as we expected with the plant now operating essentially at full capacity. As we predicted, the cost has started to move down nicely and though we still have ways to go here, I would say, the team has done a really, really excellent job. They inherited say about 9 months ago a reasonably new team, a pretty seriously difficult situation in the middle of last summer, and they have done an extraordinary job in getting the plant to where it is today. We still got ways to go and I'll talk about that in a moment too, but we are very gratified that the job has been done by the management team at Hawesville. The biggest issue remaining at Hawesville now is the power cost. I mean, it's a complex situation and I will talk about it in some detail towards the end of my remarks.

Moving on we had a very busy quarter at Ravenswood as we predicated. I mean, importantly, we reached a key milestone there in reaching an agreement about post-retirement health benefits with our retiree group. That was a complex process that went for some months and we are gratified that we did indeed reach that key point.

Next, we had a tax bill passed in support of our power price in the West Virginia legislature in the last couple of weeks. We had great support here from a variety of constituencies in West Virginia on this and importantly terrific leadership from Governor Tomblin of West Virginia and we are very grateful for that leadership.

Next on in West Virginia will be the submission of our application to the Public Service Commission for a new contract and I'll talk about that in some detail again later in my remarks. We've begun discussions with representatives of the steelworkers. Those are going well so far, obviously a key part of getting to a restart. So, we are moving along well here and developing again continuing I should say good traction and let me just take a step back for a moment and remind everybody what we are trying to accomplish here in Ravenswood and more importantly, why? You might ask the question we seemed to be bucking a trend a little bit. Others who own similar capacity in similar markets as you all well know tend to be at the very best maintaining that capacity and in many circumstances curtailing that capacity. So, in essence, what's different about Ravenswood? There is a couple of things here and a couple of reasons why we continue to think that this could be a very good investment for our shareowners, i.e., restarting this plant.

First and foremost, we think the market environment in the U.S. both current and prospective is conducive to reopening this plant. The supply demand equation in the U.S., the products that this plant will produce has produced successfully and will produce, and the customers for whom it will produce. We think that whole mix is an attractive one.

Second, the physical plant here is in reasonably good shape as you've heard us talk, we've been spending modestly, but spending to maintain the plant in reasonably good order ready for a restart. And though despite the fact that as we've told you before that total cost of a restart here is quite substantial on the order of $80 million it might add that about half of that amount is to build the working capital that you need for a restart. A portion of that non-working capital amount that's attributable to CapEx is relatively modest. So, the plant is reasonably ready to go.

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