Century Aluminum's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Century Aluminum Co. (CENX)

Q2 2012 Earnings Call

July 24, 2012 05:00 pm ET

Executives

Michael Bless - President & CEO

Bill Leatherberry - EVP, CLO, General Counsel & Secretary

Steve Schneider - SVP, CAO & Controller

Analysts

Kuni Chen - CRT Capital Group

David Gagliano - Barclays

Lloyd O'Carroll - Davenport & Company

Richard Garchitorena - Credit Suisse

Tim Hayes - Davenport

John Tumazos - Very Independent Research

Sal Tharani - Goldman Sachs & Company

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the second quarter 2012 earnings conference call. At this time all participants are in a listen-only mode. You will have an opportunity to ask questions after the presentation with instructions being given at that time. (Operator Instructions) As a reminder, the call is being recorded.

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

Enrique De Anda

Thank you, Sarah. 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 actual our 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 centuryaluminum.com.

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

Michael Bless

Enrique, thanks very much and thanks to all of you for joining us this afternoon. Enrique and I are here today with Bill Leatherberry and Steve Schneider, our colleagues. We’ve let Shelly Harrison, our colleague who normally joins us on these calls, we've let her take this one off. Shelly is due to have her first baby here within the next couple days and we figured that wasn’t the kind of excitement we needed on this phone call. So Shelly is going to sit this one out. We wish her and her husband, John all the very best and we’re looking forward to having her back obviously after she takes a couple of months off. And with that, let's get started. If you could turn to slide three please.

As usual, I’ll give you some highlights of the quarter that just ended and I'll give you a sense of some of the things on which we’ve been working. First and importantly, Hawesville continued to show a significant improvement during the second quarter. Most importantly, the safety performance has been very good. I think it’s worthwhile to note that very soon we will cross an important metric. We will have gone 12 months at the plant, without a lost time accident. That’s obviously an admirable performance and something that we’re celebrating down at Hawesville.

The team at Hawesville under the leadership of Dave Whitmore and Sean Byrne have done a terrific job across the operations and we’re proud of them. They’re targeting further improvements in the quarters to come and one of the things that we’ll be working on significantly and about which I’ll talk here in a moment is the power situation at Hawesville. At this point in time to be blunt, the plant is not viable at the current power rate and we’re spending a lot of time and effort to fix that situation.

Moving on down, cost across the company have continued to fall this quarter, coming from a variety of factors. Number one, better operating leverage and higher production volumes at all of the plants, most specifically Hawesville; two, better efficiencies at Hawesville; three, we have seen a reduction in the power rate at Mt. Holly despite the lack of movement at Hawesville. Again I’ll speak about all these things in more detail in a few moments. And fourth, we’ve seen carbon costs start to fall across the system. Again I’ll provide more detail.

As you saw us announce in June, we made an acquisition of a carbon anode plant in Netherlands this quarter, obviously that's the supply, that key raw material for Nordural operations at Grundartangi today and Helguvik in the future. It’s a good investment for us that comes at an attractive invested costs and it’s going to produce a good IRR for us. I’ll give you some more details here in a couple of slides.

At Mt. Holly, as I said we’ve seen a good reduction in fuel costs translated into our power rate and also as you saw announced in June, we’ve come to a contract amendment with the power provider there. Importantly, that will give us some additional flexibility if we had to, to terminate that contract at very low LME prices and importantly that will give us some runway as we and Alcoa obviously are partners there, working on long-term power solutions.

Very importantly, we've made progress on the restart of the Ravenswood plant. A key milestone we submitted in April, our application to the Public Service Commission of West Virginia for a LME-based power rate. Since then, we’ve engaged in detailed discussions with all of the major constituencies in West Virginia. We’re very focused on this process. And we continue to believe that the restart of this plant would be a very good investment for our shareowners.

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