Century Aluminum reports $34.6 million loss for 2nd quarter | Business
Century Aluminum Company reported a net loss of $34.6 million ($0.39 per basic and diluted share) for the second quarter of 2013. Financial results were positively impacted by a gain on bargain purchase of $2.0 million and power contract amortization of $2.7 million associated with the Sebree acquisition. Results were negatively impacted by a charge of $3.3 million for the early extinguishment of its 8.0% Sr. Notes; and a charge for severance and other expenses of $1.7 million related to the corporate headquarters relocation. Cost of sales for the quarter included a $10.2 million charge for lower of cost or market inventory adjustments.
A year ago, Century lost $12.3 million ($0.14 per basic and diluted share) in the second quarter.
Sales for the second quarter of 2013 were $331.9 million, compared with $323.6 million for the second quarter of 2012. Shipments of primary aluminum for the 2013 second quarter were 176,270 tonnes, compared with 160,828 tonnes shipped in the year-ago quarter.
For the first half of 2013, the company reported a net loss of $26.3 million ($0.30 per basic and diluted share). First half results were positively impacted by an unrealized gain of $16.1 million related to a LME-based contingent obligation, a gain on bargain purchase of $2.0 million and power contract amortization of $2.7 million. Results were negatively impacted by a charge of $3.3 million for the early extinguishment of our 8.0% Sr. Notes and a charge of $4.0 million for severance and other expenses related to our corporate headquarters relocation. Cost of sales for the first half included a $16.0 million charge for lower of cost or market inventory adjustments.
This result compares to a net loss of $16.7 million ($0.19 per basic and diluted share) for the first half of 2012. Results for the prior six-month period were negatively impacted by an unrealized net loss on forward contracts of $3.2 million primarily related to the mark to market of aluminum price protection options. Cost of sales for the first half included an $11.6 million benefit for lower of cost or market inventory adjustments.
Sales in the first six months of 2013 were $653.2 million compared with $649.8 million in the same period of 2012. Shipments of primary aluminum for the first six months of 2013 were 335,046 tonnes compared with 320,795 tonnes for the comparable 2012 period.
"We are managing through a period of uncertainty in our industry," commented Michael Bless, President and Chief Executive Officer. "The slowing in China's economy, the extent and impact of which remain difficult to determine, has clearly begun to impact European and other developed and developing economies. In contrast, our U.S. customer markets remain generally sound, with particular strength in the transportation and construction sectors. On a macro level, the relative strength of the U.S. dollar, caused in part by the recent rise in interest rates, has pressured the price of all commodities. Lastly, industry participants are trying to assess the potential impact of the recent proposal by the London Metals Exchange for changes in the warehousing rules. In summary, we are prepared to operate through this challenging environment in the near-term, but remain confident that attractive demand coupled with constrained supply outside of China will push aluminum prices upward over time."
Bless continued, "The past few months have been busy and productive at Century. We reached a definitive agreement with our power supplier for Hawesville; subject to obtaining the required regulatory approvals, this new contract would commence upon the expiration of the existing agreement on August 20. Under the new arrangement, we would buy power at market terms and pay a small fee to the power company to cover its direct costs. We believe that the terms of this new contract would allow Hawesville to be competitive in the global market. In early June, we acquired the Sebree, KY smelter from Rio Tinto Alcan. Sebree's power contract is with the same supplier as Hawesville and expires in January 2014; we are confident that, assuming Hawesville's power contract is approved, we would be able to move this plant to an arrangement similar to Hawesville's pending contract. With these developments, coupled with Mt. Holly's market-based power arrangement, we believe we have significantly improved the competitive dynamic of our U.S. system.
"We are continuing with the investment program at Grundartangi in Iceland," concluded Mr. Bless. "The multi-year expansion of the plant's production capacity is proceeding as planned. The anode plant in Vlissingen, on schedule for a fourth quarter restart, will reduce costs, improve operational readiness and enable Grundartangi's capacity expansion. It will also provide important flexibility for the Helguvik plant when it comes on stream. On that project, we maintain in-depth discussions with the several power providers."