Century Aluminum Company Reports Third Quarter 2022 Results
Chicago, November 7, 2022 (GLOBE NEWSWIRE) -- Century Aluminum Company (NASDAQ: CENX) today announced its third quarter 2022 results.
Business Highlights
•Shipments down 19% sequentially related to the Hawesville curtailment
•Realized LME aluminum price of $2,636/T in third quarter is down $425/T from prior quarter
•Strong total liquidity of $215 million as of September 30, 2022
•Fixed remaining 2022 - 2023 Nord Pool exposure at attractive prices; derisks Iceland power costs
•Expanded and implemented cost reduction plans across plants and corporate
•New Vlissingen credit facility of $90.0 million agreed to in November 2022
Third Quarter 2022 Financial Results
$MM (except shipments and per share data)
Q2 2022
Q3 2022
Shipments (tonnes)
214,084
173,725
Net sales
$
856.6
$
637.2
Net income
$
37.4
$
44.3
Diluted earnings per share
$
0.36
$
0.43
Adjusted net income/(loss)(1)
$
30.4
$
(34.2)
Adjusted earnings/(loss) per share(1)
$
0.30
$
(0.34)
Adjusted EBITDA(1)
$
86.6
$
(35.9)
Notes:
(1) Non-GAAP measure; see reconciliation of GAAP to non-GAAP financial measures.
Shipments of primary aluminum for the quarter ended September 30, 2022 decreased 19 percent sequentially, driven primarily by reduced volumes from Hawesville in connection with the previously announced curtailment of production at the facility. Net sales for the third quarter of 2022 decreased by 26 percent sequentially due to lower realized aluminum prices and unfavorable volume, primarily attributable to the decision to fully curtail our Hawesville smelter.
Century reported net income of $44.3 million for the third quarter of 2022, a $6.9 million increase sequentially. Third quarter results were impacted by $78.8 million of net exceptional items, in particular $69.5 million of unrealized gains on derivative instruments, $6.3 million lower of cost or net realizable value adjustment and $3.6 million in curtailment costs related to the Hawesville plant, partially offset by $0.6 million in share-based compensation costs. Thus, Century reported an adjusted net loss of $(34.2) million for the third quarter of 2022, a $64.6 million decrease sequentially.
Adjusted EBITDA for the third quarter of 2022 was $(35.9) million. This was a decrease of $122.5 million from the prior quarter, more than explained by lower LME and regional premiums, as well as higher energy and other raw material costs, partially offset by the curtailment at our Hawesville facility.
Century's liquidity position at quarter end was $215.1 million. Additionally, we agreed to a new $90.0 million credit facility secured by our Vlissingen assets. The Vlissingen credit facility will be available beginning December 2022, increasing liquidity by $90.0 million.
“While the global energy crisis and difficult industry conditions continued to present challenges in the third quarter, Century remains well positioned to operate all of our businesses through this portion of the commodity cycle and benefit from the long-term trends towards value-added aluminum products," commented President and Chief Executive Officer Jesse Gary. “We took several proactive measures to lower our cost structure, reduce our exposure to market energy prices and improve our liquidity. Among
these measures, we have agreed with our energy supplier in Iceland to convert our remaining unhedged Nord Pool exposure to a fixed price. We have also significantly bolstered our liquidity position with a new $90 million credit facility secured by our Vlissingen assets. We are confident that these actions, combined with the continuing excellent work from our operations teams, leave us well-situated to continue to execute on our long-term strategies and create value for our stakeholders.”
About Century Aluminum Company
Century Aluminum Company owns primary aluminum capacity in the United States and Iceland. Century's corporate offices are located in Chicago, IL. Visit www.centuryaluminum.com for more information.
Non-GAAP Financial Measures
Adjusted net income (loss), adjusted earnings (loss) per share and adjusted EBITDA are non-GAAP financial measures that management uses to evaluate Century's financial performance. These non-GAAP financial measures facilitate comparisons of this period’s results with prior periods on a consistent basis by excluding items that management does not believe are indicative of Century’s ongoing operating performance and ability to generate cash. Management believes these non-GAAP financial measures enhance an overall understanding of Century’s performance and our investors’ ability to review Century’s business from the same perspective as management. The tables below, under the heading "Reconciliation of Non-GAAP Financial Measures," provide a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, Century's reported results prepared in accordance with GAAP. In addition, because not all companies use identical calculations, adjusted net income (loss), adjusted earnings (loss) per share and adjusted EBITDA included in this press release may not be comparable to similarly titled measures of other companies. Investors are encouraged to review the reconciliations in conjunction with the presentation of these non-GAAP financial measures.
Cautionary Statement
This press release and statements made by Century Aluminum Company management on the quarterly conference call contain "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are statements about future events and are based on our current expectations. These forward-looking statements may be identified by the words "believe," "expect," "hope," "target," "anticipate," "intend," "plan," "seek," "estimate," "potential," "project," "scheduled," "forecast" or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," "might," or "may." Our forward-looking statements include, without limitation, statements with respect to: our assessment of global and local financial and economic conditions; our assessment of the aluminum market and aluminum prices (including premiums); our assessment of alumina pricing, the outlook on when energy prices, both in the United States and Europe, may return to more normalized levels, costs associated with our other key raw materials, and supply and availability of those key raw materials, including power (and related natural gas and coal), the likelihood and extent of any power curtailments; the impact of the COVID-19 pandemic, and governmental guidance and regulations aimed at addressing the pandemic, including any possible impact on our business, operations, financial condition, results of operation, global supply chains or workforce; the impact of the war in Ukraine, including any sanctions and export controls targeting Russia and businesses tied to Russia and to sanctioned entities and individuals, including any possible impact on our business, operations, financial condition, results of operations and global supply chains; the future financial and operating performance of Century and its subsidiaries; our ability to successfully manage market risk and to control or reduce costs; our plans and expectations with respect to future operations, including any plans and expectations to curtail or restart production, including the expected impact of any such actions on our future financial and operating performance; our plans and expectations with regards to future operations of our Mt. Holly smelter, including our expectations as to the restart of curtailed production at Mt. Holly, including the timing, costs and benefits associated with this restart project; our plans with regards to future operations of our Hawesville smelter, including our expectations as to the timing, costs and benefits associated with restarting curtailed production; our plans and expectations with regards to the Grundartangi casthouse project, including our expectations as to the timing, costs and benefits associated with the Grundartangi casthouse project; our ability to successfully obtain and/or retain competitive power arrangements for our operations; the impact of Section 232 relief, including tariffs or other trade remedies, the extent to which any such remedies may be changed, including through exclusions or exemptions, and the duration of any trade remedy; the impact of any new or changed law, regulation, including, without limitation, sanctions or other similar remedies or restrictions; our anticipated tax liabilities, benefits or refunds including the realization of U.S. and certain foreign deferred tax assets and liabilities; our ability to access existing or future financing arrangements and the terms of any such future financing arrangements; our ability to repay or refinance debt in the future; our ability to recover losses from our insurance; our assessment and estimates of our pension and other postretirement liabilities, legal and environmental liabilities and other contingent liabilities; our assessment of any future tax audits or insurance claims and their respective outcomes; negotiations with current labor unions or future representation by a union of our employees; our assessment of any information technology related risks, including the risks from the previously disclosed February 2022 cyber incursion event; and our future business objectives, plans, strategies and initiatives, including our competitive position and prospects.
Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from future results expressed, projected or implied by those forward-looking statements. Important factors that could cause actual results and events to differ from those described in such forward-looking statements can be found in the risk factors and forward-looking statements cautionary language contained in our Annual Report on Form 10-K, quarterly reports on Form 10-Q and in other filings made with the Securities and Exchange Commission. Although we have attempted to identify those material factors that could cause actual results or events to differ from those described in such forward-looking statements, there may be other factors that could cause actual results or events to differ from those anticipated, estimated or intended. Many of these factors are beyond our ability to control or predict. Given these uncertainties, investors are cautioned not to place undue reliance on our forward-looking statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
(Unaudited)
Three months ended
June 30,
September 30,
2022
2022
NET SALES:
Related parties
$
483.5
$
404.9
Other customers
373.1
232.3
Total net sales
856.6
637.2
Cost of goods sold
840.7
680.2
Gross profit (loss)
15.9
(43.0)
Selling, general and administrative expenses
5.8
8.7
Asset impairment charge
159.4
—
Other operating expense (income) - net
0.2
(0.2)
Operating income (loss)
(149.5)
(51.5)
Interest expense
(5.7)
(7.9)
Interest income
—
0.1
Net gain (loss) on forward and derivative contracts
231.8
112.6
Other income (expense) - net
3.1
11.6
Income (loss) before income taxes
79.7
64.9
Income tax benefit (expense)
(42.3)
(20.6)
Income (loss) before equity in earnings (losses) of joint ventures
37.4
44.3
Equity in earnings (losses) of joint ventures
—
(0.0)
Net income (loss)
$
37.4
$
44.3
Less: net income (loss) allocated to participating securities
2.3
2.7
Net income (loss) allocated to common stockholders
$
35.1
$
41.6
EARNINGS (LOSS) PER COMMON SHARE:
Basic
$
0.38
$
0.46
Diluted
$
0.36
$
0.43
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic
91.2
91.3
Diluted
97.6
97.3
CENTURY ALUMINUM COMPANY
CONSOLIDATED BALANCE SHEETS
(in millions, except per share amounts)
(Unaudited)
December 31, 2021
September 30, 2022
ASSETS
Cash and cash equivalents
$
29.0
$
64.8
Restricted cash
11.7
1.2
Accounts receivable - net
80.6
72.1
Due from affiliates
8.3
14.7
Inventories
425.6
383.2
Derivative assets - current
34.8
198.1
Prepaid and other current assets
28.2
24.5
Total current assets
618.2
758.6
Property, plant and equipment - net
892.5
740.9
Due from affiliates - less current portion
—
0.2
Derivative assets - less current portion
8.1
29.9
Other assets
51.1
54.0
TOTAL
$
1,569.9
$
1,583.6
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Accounts payable, trade
$
186.5
$
170.9
Due to affiliates
65.8
15.1
Accrued and other current liabilities
62.7
66.0
Derivative liabilities
102.1
22.6
Accrued employee benefits costs
8.9
10.2
U.S. revolving credit facility
63.6
63.5
Iceland revolving credit facility
50.0
50.0
Industrial revenue bonds
7.8
7.8
Total current liabilities
547.4
406.1
Senior notes payable
245.8
246.4
Convertible senior notes payable
84.0
84.3
Grundartangi casthouse debt facility
—
39.4
Accrued pension benefits costs - less current portion
28.6
24.1
Accrued postretirement benefits costs - less current portion
93.3
90.9
Other liabilities
46.3
39.7
Leases - right of use liabilities
22.9
19.8
Due to affiliates - less current portion
21.9
4.5
Deferred taxes
58.7
111.8
Total noncurrent liabilities
601.5
660.9
SHAREHOLDERS’ EQUITY:
Series A Preferred stock (one cent par value, 5,000,000 shares authorized; 160,000 issued and 58,542 outstanding at December 31, 2021; 58,046 issued and outstanding at September 30, 2022)
0.0
0.0
Common stock (one cent par value, 195,000,000 authorized; 98,418,132 issued and 91,231,611 outstanding at December 31, 2021; 98,533,750 issued and 91,347,229 outstanding at September 30, 2022)
1.0
1.0
Additional paid-in capital
2,535.5
2,537.6
Treasury stock, at cost
(86.3)
(86.3)
Accumulated other comprehensive loss
(82.3)
(88.2)
Accumulated deficit
(1,946.9)
(1,847.5)
Total shareholders’ equity
421.0
516.6
TOTAL
$
1,569.9
$
1,583.6
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine months ended September 30,
2021
2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)
$
(227.5)
$
99.4
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
(Gain) loss on derivative instruments
160.6
(302.3)
OPEB curtailment gain, net
—
(8.0)
Lower of cost or NRV adjustment
—
46.5
Depreciation and amortization
62.4
57.5
Loss on early extinguishment of debt
24.7
—
Deferred tax provision (benefit)
(40.9)
52.3
Asset impairment charge
—
159.4
Other non-cash items - net
2.6
(12.5)
Change in operating assets and liabilities:
Accounts receivable - net
(27.6)
8.5
Due from affiliates
(1.7)
(5.6)
Inventories
(52.2)
(4.1)
Prepaid and other current assets
(4.8)
5.6
Accounts payable, trade
46.7
(9.6)
Due to affiliates
43.1
(34.0)
Accrued and other current liabilities
3.5
12.5
Ravenswood retiree medical settlement
(2.0)
(2.0)
Other - net
1.0
(6.4)
Net cash provided by (used in) operating activities
(12.1)
57.2
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment
(45.7)
(70.2)
Proceeds from sale of property, plant and equipment
0.0
0.1
Net cash used in investing activities
(45.7)
(70.1)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of Senior Notes due 2025
(250.0)
—
Early redemption and tender premiums paid
(18.1)
—
Proceeds from issuance of Senior Notes due 2028
250.0
—
Proceeds from issuance of Convertible Senior Notes
86.3
—
CENTURY ALUMINUM COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
Nine months ended September 30,
2021
2022
Repayments on Hawesville term loan
(15.0)
—
Borrowings under revolving credit facilities
644.2
910.2
Repayments under revolving credit facilities
(641.8)
(910.4)
Debt issuance costs
(7.5)
(1.6)
Purchases of capped calls related to Convertible Senior Notes
(5.7)
—
Borrowings under Grundartangi casthouse debt facility
—
40.0
Net cash provided by financing activities
42.4
38.2
CHANGE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
(15.4)
25.3
Cash, cash equivalents and restricted cash, beginning of period
84.3
40.7
Cash, cash equivalents and restricted cash, end of period
$
68.9
$
66.0
Supplemental Cash Flow Information:
Cash paid for:
Interest
$
26.0
$
14.0
Taxes
0.0
1.9
Non-cash investing activities:
Capital expenditures
6.1
1.1
Capitalized Interest
0.8
3.4
CENTURY ALUMINUM COMPANY
SELECTED OPERATING DATA
(in millions, except shipments)
(Unaudited)
SHIPMENTS - PRIMARY ALUMINUM(1)
United States
Iceland
Total
Tonnes
Sales $
Tonnes
Sales $
Tonnes
Sales $
2022
3rd Quarter
95,502
$
320.3
78,223
$
283.7
173,725
$
604.0
2nd Quarter
139,630
$
564.8
74,454
$
273.2
214,084
$
838.0
1st Quarter
134,953
$
494.8
76,458
$
247.5
211,411
$
742.3
Notes:
(1) Excludes scrap aluminum sales, purchased aluminum and alumina sales.
CENTURY ALUMINUM COMPANY
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(in millions, except per share amounts)
(Unaudited)
Three months ended
June 30, 2022
September 30, 2022
$MM
EPS
$MM
EPS
Net income (loss) as reported (1)
$
35.5
$
0.36
$
41.9
$
0.43
Lower of cost or NRV inventory adjustment, net of tax
52.8
0.54
(6.3)
(0.06)
Unrealized (gain) loss on derivative contracts, net of tax
(221.8)
(2.27)
(69.5)
(0.72)
Asset impairment
159.4
1.63
—
—
Hawesville curtailment costs
8.2
0.08
(3.6)
(0.03)
Share-based compensation
(6.0)
(0.06)
0.6
0.01
Impact of preferred and convertible shares
2.3
0.02
2.7
0.03
Adjusted net income (loss)
$
30.4
$
0.30
$
(34.2)
$
(0.34)
Notes:
(1) In periods of positive earnings, this represents earnings allocated to participating dilutive shares. For the three months ended September 30, 2022, this includes earnings allocated to common stockholders, an add-back of $0.7 million net interest expense related to the convertible notes, and a reduction of $0.4 million in share-based compensation related to the equity classified awards. For the three months ended June 30, 2022, this includes earnings allocated to common stockholders, an add-back of $0.7 million net interest expense related to the convertible notes, and a reduction of $0.3 million in share-based compensation related to the equity classified awards.
Three months ended
June 30, 2022
September 30, 2022
Net Income (loss) as reported
$
37.4
$
44.3
Interest expense
5.7
7.9
Interest income
0.0
(0.1)
Net (gain) loss on forward and derivative contracts
