Century Aluminum Company (CENX) Q2 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents mixed signals. The decrease in net sales and net loss are negative factors, but increased liquidity and shipments provide some optimism. The Q&A section reveals management's lack of transparency on economic incentives and site selection, raising concerns. However, positive factors include the expected benefit from the 45x credit and potential EBITDA growth. Overall, the sentiment is neutral, as the company's financial health and strategic initiatives show both strengths and weaknesses.
Key Financial Performance
Adjusted EBITDA $74 million in Q2 2025, a decrease of $4 million from the previous quarter. The decrease was due to lower realized LME and European premiums, partially offset by higher Midwest premiums and lower energy costs.
Realized LME Prices $2,540 per tonne in Q2 2025, a decrease of $11 per tonne from the previous quarter. The decrease was attributed to market conditions.
Realized Midwest Premium $850 per tonne in Q2 2025, an increase of $247 per tonne from the previous quarter. The increase was driven by the Section 232 aluminum tariffs raised to 25% in March 2025.
Realized European Duty Paid Premium $220 per tonne in Q2 2025, a decrease of $115 per tonne from the previous quarter. The decrease was attributed to market conditions.
Net Sales $628 million in Q2 2025, a decrease of $6 million year-over-year. The decrease was primarily due to lower third-party alumina sales, partially offset by higher shipments and all-in metal pricing.
Net Loss $5 million in Q2 2025, compared to a net income of $30 million adjusted for exceptional items. The loss was due to lower realized premiums and higher operational costs.
Liquidity $363 million in Q2 2025, an increase of $24 million from the previous quarter. The increase was due to improved operational performance and refinancing activities.
Cash Balance $41 million in Q2 2025, a decrease of $4 million from the previous quarter. The decrease was due to capital expenditures and interest payments.
Net Debt $446 million in Q2 2025, relatively flat compared to the previous quarter. The company maintained its debt levels while refinancing to lower interest rates.
Shipments 176,000 tonnes in Q2 2025, an increase of 4% sequentially. The increase was due to strong operational performance across all smelters.
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Operating Highlights
Restart of 50,000 metric tonnes of production at Mt. Holly: Century Aluminum announced the restart of 50,000 metric tonnes of production at Mt. Holly, increasing its production to over 220,000 metric tonnes per year. This project represents a $50 million investment and is expected to create nearly 100 full-time U.S. manufacturing jobs. First hot metal is expected in Q1 2026, with full production by the end of Q2 2026.
New smelter project: Century Aluminum plans to build a new smelter, which will be one of the most modern and efficient in the world. This project will double the size of the existing U.S. aluminum industry, creating over 1,000 full-time jobs and 5,500 construction jobs.
Impact of Section 232 tariffs: The Section 232 tariffs on aluminum were increased to 50%, significantly boosting domestic demand for Century's products. Domestic billet shipments increased by 8% year-over-year in the first half of 2025, and the company expects higher value-added aluminum premiums in 2026.
Global aluminum market deficit: Global aluminum supply remains constrained, with China near its production cap and limited new global projects. This is expected to drive a global market deficit in 2025, supporting strong demand for Century's products.
Safety improvements: Century launched a new safety program in collaboration with DuPont Safety Systems, with Mt. Holly as the pilot site. Safety performance has improved across all assets in the first half of 2025.
Operational performance: Sebree plant completed a major maintenance program without impacting production. Grundartangi faced a slight production headwind due to equipment failure but maintained operations. Jamalco is executing a capital improvement program to reach its nameplate capacity of 1.4 million tonnes.
Debt refinancing: Century refinanced its 7.5% senior secured notes with new $400 million 6.875% notes, simplifying its debt structure, lowering interest costs, and extending maturities to 2032.
Strategic review of Hawesville: The strategic review process for the Hawesville plant is nearing completion, with final terms under negotiation and expected to conclude by the end of Q3 2025.
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Risk or Challenges
Energy Costs: Unusually warm summer temperatures led to higher-than-expected energy costs in Q2, which persisted into July. Although natural gas prices have fallen, energy costs remain a concern for operational expenses.
Currency Headwinds: The Icelandic krona appreciated by more than 8% against the U.S. dollar in Q2, leading to a $4 million impact on foreign operations. This trend is expected to continue into Q3, further affecting costs.
Transformer Failure at Grundartangi: A failure in one of the electrical transformers at the Grundartangi plant caused a slight production volume headwind of about 3,000 metric tonnes in Q2. The plant is operating on redundant equipment but at slightly lower amperage until a replacement is installed.
Bauxite Market Turbulence: Disruptions in Guinea, including suspended or revoked operating licenses for key producers, have caused turbulence in the bauxite market, supporting higher seaborne bauxite prices. While Jamalco is insulated from this, it reflects broader supply chain risks.
Debt Levels and Refinancing: While the company successfully refinanced its debt to lower interest costs, net debt remains high at $446 million, posing a financial risk. The company aims to reduce net debt to $300 million, but this remains a challenge.
Operational Costs at Sebree: The Sebree plant incurred a $10 million operational expense headwind in Q2 due to a planned major maintenance program. While this was anticipated, it highlights the cost pressures of maintaining operations.
Section 232 Tariff Lag: Although the Section 232 tariffs have increased to 50%, the financial benefits will only be fully realized in Q4, creating a lag in revenue impact.
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Guidance & Outlook
Restart of Mt. Holly Capacity: Century Aluminum announced the restart of 50,000 metric tonnes of capacity at Mt. Holly, aiming for full production of 220,000 metric tonnes per year by the end of Q2 2026. This project will cost approximately $50 million and is expected to create nearly 100 full-time jobs. First hot metal production is anticipated in Q1 2026.
New Smelter Project: Century Aluminum plans to build a new smelter, which will double the size of the existing U.S. aluminum industry. This project is expected to create over 1,000 full-time jobs and 5,500 construction jobs, with the potential to triple U.S. aluminum production by the end of the decade.
Global Aluminum Market Outlook: The company expects a global market deficit in 2025 due to constrained supply and growing demand. U.S. demand for domestically produced billets is projected to grow, supported by higher value-added aluminum premiums in 2026.
Jamalco Operations: The installation of a new steam power generation turbine at Jamalco is underway and expected to be operational by Q1 2026. This will enable the plant to be fully self-sufficient in power generation and reduce costs.
Q3 2025 Adjusted EBITDA Guidance: Century Aluminum projects Q3 adjusted EBITDA to range between $115 million and $125 million, driven by higher Midwest premiums and partially offset by energy and currency headwinds.
Q4 2025 and Beyond Outlook: The company anticipates continued earnings growth into Q4 2025 and beyond, supported by strong spot LME prices exceeding $2,600 per tonne and Midwest premiums at $0.72 per pound.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you talk about your sourcing plans for raw materials, especially alumina, for Mt. Holly?
A:The additional alumina needs for Mt. Holly will be serviced within the already set alumina book for 2026. No changes are necessary to the current alumina sourcing plan. The alumina information in the slide deck on Page 18 can be used to model alumina exposure for 2026.
Q:Will the incremental 50,000 tonnes at Mt. Holly benefit from the 45x credit, and how much could it be?
A:Yes, the incremental 50,000 tonnes will benefit from the 45x credit. By comparing the incremental tonnes to the existing tonnes and credit (averaging $70 million to $80 million), a pro forma amount of additional 45x credit can be calculated.
Q:When can we expect the manufacturing credit receivable of $195 million to be converted into cash?
A:The FY '23 amount is expected imminently, and the FY '24 amount is expected over the next 6 to 9 months. The FY '23 return is in the final stages of processing, and the FY '24 return was just filed.
Q:Can you provide details on the economic incentives from Berkeley County and Santee Cooper for Mt. Holly?
A:The details of the economic incentives are not public and cannot be disclosed at this time. Agreements in principle exist, and finalization is expected in the coming weeks without anticipated issues.
Q:What is the update on Hawesville and the decision between a deal with a developer versus a potential restart?
A:The process is in final negotiations, and progress is being made. A decision on the strategic review process, including negotiations and restart analysis, is expected in the next quarter.
Q:What are the milestones for the new smelter, and when can we expect site selection?
A:The next milestone is site selection, tied to an energy agreement. Announcements on both are expected simultaneously. The next phase of engineering work will follow, taking another 6 to 9 months. Major capital spending is expected in the second half of 2026.
Q:Is it fair to assume EBITDA generation could be in the range of $140 million to $150 million for Q4 based on current spot prices?
A:Yes, based on current spot LME aluminum prices and Midwest premium levels, EBITDA generation could be in the range of $140 million to $150 million for Q4. This includes approximately $12 million from LME and $15 million from Midwest premium.
Q:What is the progress on the casthouse at Grundartangi, and what are the expectations for value-added premiums in Europe?
A:The casthouse project is progressing well, with ramp-up and process optimization ongoing. Billet premiums in Europe have firmed recently, and the market has accepted the new billet positively. Expectations are good for the 2026 billet season.
Q:What should be penciled in for CapEx at Jamalco in 2026?
A:For Jamalco in 2026, sustaining CapEx is expected to be $10 million to $15 million, and investment CapEx is also expected to be $10 million to $15 million. Investments include the steam turbine generator and other projects to restore nameplate capacity and improve cost efficiency.
Q:Review of Unclear Management Responses
A:Management avoided providing details on the economic incentives from Berkeley County and Santee Cooper for Mt. Holly, citing that the information is not public. Additionally, they did not provide a specific time frame for the site selection milestone for the new smelter, using vague language about ongoing progress and complexity.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Jamalco
Page
President Section
President action
Section program
Section tariff
administration
afternoon
aluminum production
announcement
bauxite price
billet
capacity
casthouse
effectiveness Section
effort
expansion
future
industry
license
manufacturing job
note
policy
power generation
producer
production security
project President
project smelter
result President
review process
safety
season
security need
site
smelter project
tariff result
temperature
tonne production
turbine
CENX Transcript
Century Aluminum Company (CENX) Q3 2025 Earnings Call Transcript
Positive11-7
The earnings call highlights strong financial performance with increased net sales, net income, and adjusted EBITDA. The restart and new smelter projects, along with positive market outlooks, suggest growth potential. Despite some operational challenges, management's optimistic guidance and strategic plans, including shareholder returns through buybacks, contribute to a positive sentiment. The Q&A session reinforces this with management's confident responses on growth and capital allocation, despite some uncertainties. Overall, the positive aspects outweigh the negatives, suggesting a positive stock price movement over the next two weeks.
Century Aluminum Company (CENX) Q2 2025 Earnings Call Transcript
Unknown8-8
The earnings call presents mixed signals. The decrease in net sales and net loss are negative factors, but increased liquidity and shipments provide some optimism. The Q&A section reveals management's lack of transparency on economic incentives and site selection, raising concerns. However, positive factors include the expected benefit from the 45x credit and potential EBITDA growth. Overall, the sentiment is neutral, as the company's financial health and strategic initiatives show both strengths and weaknesses.
Century Aluminum Company (CENX) Q1 2025 Earnings Call Transcript
Unknown5-7
The earnings call presents a mixed picture: stable financial performance with strong liquidity and debt reduction, but offset by one-time costs and lack of clear guidance on future cost benefits. The Q&A reveals some concerns about cost pressures and lack of clarity on future savings. Despite positive elements like increased shipments and pricing, the absence of strong forward guidance or new partnerships tempers the outlook. Thus, the stock is likely to remain neutral in the short term.
Century Aluminum Company (CENX) Q3 2024 Earnings Call Transcript
Positive11-5
The earnings call summary indicates strong financial performance with increased adjusted EBITDA and net income. Despite a decrease in net sales due to operational issues, the company has managed to improve liquidity and expects additional benefits from tax credits. The Q&A session highlighted management's cautious approach to capacity restarts and asset repurposing, with analysts showing interest in the company's strategic decisions. Although there are some operational challenges and liquidity concerns, the overall sentiment is positive, with optimistic guidance and potential for future growth.
CENX Slides
CENX Report
Frequently Asked Questions
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