Century Aluminum(CENX) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Century Aluminum generated $78 million of adjusted EBITDA in Q1 2025, a modest decrease from Q4 2024 primarily due to polar vortex-related weather conditions impacting energy prices and one-time alumina costs [21][22] - Net sales for the quarter were $634 million, reflecting a $3 million increase due to higher metal volume and all-in metal pricing, partially offset by lower third-party alumina sales [23] - Net income was reported at $30 million or $0.29 per share, with adjusted net income at $37 million or $0.36 per share [23][24] - Liquidity increased to $339 million, up nearly $100 million quarter over quarter, and net debt declined by $55 million to $442 million [25] Business Line Data and Key Metrics Changes - First quarter shipments rose slightly to nearly 169,000 tonnes, an increase of 1% sequentially, with all smelters operating at targeted utilization levels by quarter end [22] - Jamalco produced its highest quarterly volume in Q1 since acquisition in 2023, while Grundartangi returned to full production levels in March [22][14] - Billet orders from Grundartangi were lower than anticipated in Q1 due to demand weakness in the European market, but a small uptick was noted entering Q2 [16] Market Data and Key Metrics Changes - Realized LME prices averaged $2,553 per ton in Q1, up $91 per ton from the prior quarter, while the Midwest premium averaged $6.00 per ton, up $165 per ton [26] - Global market is expected to face a deficit of approximately 400,000 tonnes in 2025 as China reaches its production cap [10] - U.S. energy prices have eased since the polar vortex conditions in Q1, with Midwest Indiana hub prices down approximately 15% compared to the last quarter [31] Company Strategy and Development Direction - The company is focused on achieving lower production costs through capital improvement programs, particularly at the Jamalco facility [22][18] - Century Aluminum is committed to building a new smelter project, which will be the first new smelter built in the U.S. in fifty years, aiming to double the size of the existing U.S. industry [37] - The company is actively working to secure supply chains in response to recent tariff implementations, aiming to mitigate cost increases [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for aluminum, particularly in the U.S., as customers are nearshoring their supply chains [61] - The company anticipates continued support for higher aluminum prices due to low global inventories and ongoing demand growth [11] - Management remains cautious about market volatility but expects a small deficit in the aluminum market this year, with prices likely to rise in the near to medium future [62][65] Other Important Information - The company plans to complete a major capital improvement program at Jamalco by year-end, which will enhance power generation and lower production costs [18] - A one-time increase in maintenance spending of about $10 million is expected in Q2 due to planned outages at the Sebree facility [20] Q&A Session Summary Question: Confirmation on the one-time OpEx cost of $10 million to $15 million in Q2 - Management confirmed that this cost is indeed one-time and should reverse in Q3 [40][41] Question: Clarification on alumina costs being one-time - Management explained that the higher alumina costs were related to timing of vessel sales, with a high-priced vessel sold in Q1 and lower prices expected in Q2 [42] Question: Update on manufacturing credit receivable - Management expects to receive about $60 million of the FY '23 amount in Q2, with the remaining $20 million expected later this year or early next year [44][45] Question: Confirmation on debt reduction as a priority for excess cash - Management confirmed that reducing debt remains the top use of excess cash while continuing existing CapEx programs [50] Question: Update on operations at Jamalco - Management reported that Jamalco is operating well, with plans to introduce a steam generation turbine by year-end to reduce third-party power purchases [53] Question: Expectations on aluminum market and inventory replenishment - Management indicated that they do not foresee a replenishment of inventories and expect aluminum prices to continue rising [65] Question: Key milestones for the new aluminum smelter project - Management highlighted that finalizing power arrangements and site selection are the next key milestones, with significant CapEx expected in 2026 [74]