NEW YORK (TheStreet) -- Shares of Noranda Aluminum Holding (NOR) were taking a hit, sharply down 18.7% to $1 in late morning trading Thursday, after the company announced it is suspending its quarterly dividend this morning.
It has hired Morgan Stanley to serve as financial advisor to help evaluate strategic alternatives, as the company battles low aluminum prices.
Noranda said it will seek stockholder approval of a reverse stock split at a ratio to be determined.
The stock has fallen about 71.3% so far this year.
"In the face of low aluminum prices, I am proud of the progress we have made in improving our cost structure and overall productivity, as well as our investments that support future improvements," said company president and CEO Layle Smith in a statement.
"This strategic review builds on that work, and is an exciting part of optimizing the positioning of the company," Smith added.
Franklin, Tenn.-based Noranda Aluminum is a producer of primary aluminum and rolled aluminum coils.
The company sells its primary aluminum shipments in the form of products, such as billet, rod and foundry.
Separately, TheStreet Ratings team rates NORANDA ALUMINUM HOLDING CP as a Sell with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:
"We rate NORANDA ALUMINUM HOLDING CP (NOR) a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its generally high debt management risk, poor profit margins and generally disappointing historical performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is very high at 10.18 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. To add to this, NOR has a quick ratio of 0.66, this demonstrates the lack of ability of the company to cover short-term liquidity needs.
- The gross profit margin for NORANDA ALUMINUM HOLDING CP is rather low; currently it is at 16.38%. Regardless of NOR's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, NOR's net profit margin of -0.78% significantly underperformed when compared to the industry average.
- NOR's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 66.28%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Metals & Mining industry and the overall market, NORANDA ALUMINUM HOLDING CP's return on equity significantly trails that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 251.28% to $29.50 million when compared to the same quarter last year. In addition, NORANDA ALUMINUM HOLDING CP has also vastly surpassed the industry average cash flow growth rate of 13.64%.
- You can view the full analysis from the report here: NOR Ratings Report