Release Date: May 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Century Aluminum Co (CENX, Financial) reported strong operational performance and declining costs, leading to an adjusted EBITDA of $25 million in Q1.
- The Jamalco acquisition has provided Century Aluminum Co (CENX) with a captive supply of high-quality alumina and bauxite, making the company roughly net neutral to API pricing.
- Recent sanctions on Russian aluminum and other metals are expected to support US delivery and value-added product premiums, benefiting Century Aluminum Co (CENX).
- Century Aluminum Co (CENX) has initiated exciting growth projects, including a new US greenfield smelter and a secondary joint venture with MX Holdings for secondary aluminum production.
- The company has maintained strong liquidity with $302 million at the end of the quarter, consisting of $93 million in cash and $209 million available on credit facilities.
Negative Points
- Despite strong operational performance, Century Aluminum Co (CENX) experienced a sequential decrease in adjusted EBITDA by $32 million, primarily due to the timing of recognizing the Section 45X benefit.
- The power curtailments in Iceland led to reduced production volumes from the Grundartangi facility, impacting overall output.
- Century Aluminum Co (CENX) faces ongoing challenges with the global trading environment, particularly with the majority of available metal being comprised of Russian stocks.
- The company reported a net sales decrease of 4% sequentially to $490 million, influenced by lower value-added and regional delivery premiums.
- There are significant capital and operational challenges associated with the new growth projects, including the greenfield smelter and secondary aluminum production, which require careful management and strategic planning.
Q & A Highlights
Q: Can you articulate the impact of the new casthouse in Iceland as it ramps up production?
A: Jesse Gary, President and CEO of Century Aluminum, explained that the volumes in Q2 and Q3 will be limited to trial loads for the European customer base, with significant volume increases expected in Q4 and full production in Q1 of 2025. The cost structure during the ramp-up is included in the guidance, with no significant incremental costs expected.
Q: What are the economics and expected returns for the new secondary aluminum casthouse project announced with MX Holdings?
A: Jesse Gary noted the project is expected to be very complementary to Century's existing billet business in the US, offering a complete suite of primary and secondary products. The final investment decision is anticipated in Q3, with more details to be provided then. The project is expected to secure attractive financing, with minimal cash requirements from Century in 2024.
Q: What is the total cost and potential partnership opportunities for the new green aluminum smelter project?
A: Jesse Gary indicated that the smelter would be a multibillion-dollar project, with various financing alternatives being considered. The project aims to double the size of the existing US industry and fulfill the strategic need for a secure domestic supplier of low-carbon primary aluminum.
Q: What is the current operational status of the Jamalco facility?
A: Jesse Gary reported that the Jamalco refinery has returned to profitability and is operating at an annualized volume of around 1.2 million tonnes. The focus has been on stabilizing operations and maintaining profitability.
Q: How does Century Aluminum balance the decision between restarting existing capacity and building new capacity?
A: Jesse Gary explained that the company sees opportunities to replace imports and fill the US's 4.1 million tonne aluminum shortfall with domestic production. Both restarting existing capacity and building new capacity are being pursued to meet growing demand and ensure secure supply chains.
Q: What are the expected benefits from the IRA Section 45X credit, and how might it impact future operations?
A: Jesse Gary highlighted that including direct and indirect material costs could increase the annual benefit by $50 million to $55 million for 2023 and similar amounts going forward. This benefit would scale up proportionately with any increase in production at existing or new US smelting sites.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
