CENX - Final Post

Throughout the semester I have been evaluating/following CENX (Century Aluminum) and I have come to the conclusion that while their stock is more volatile than their larger competitor (Alcoa), Century does appear to be a strong company, taking initiatives (divestitures, stock for debt swap, using site selection for future plant locations to achieve lower costs, etc) to increase competitiveness in the market.

On 8/31 (the date of my first post), CENX stock high was $12.18...today, Friday Dec 4th, CENX's high was $10.88, closed at $10.34.

I believe this company will continue to gain strength and is an attractive company for investors.

CENX Stock Jump

Century closed on Wednesday, December 2nd, at $10.86 due to price jump in aluminum. This is the highest close since October 19th when CENX closed at $10.90. The Motley Fool released an aritcle on the 2nd listing Century as one of tomorrow's monster stocks (see link to article below)....I believe good things are in store for the current (and potentially near future) investors of Century Aluminum.....still kicking myself for not investing back in March when I first wanted to!

http://www.fool.com/investing/general/2009/12/02/tomorrows-monster-stocks.aspx

CENX Stock

Not alot of change in the ending price of CENX from Friday, Nov 20th (closed at $9.89) to Friday, Nov 27th (closed at $9.74)...down 1.5%. However, as the article below states, with the rise in Europe & Asia aluminum premiums, N. American firms (like Century) should see increased demand in overseas markets. Read the full article at http://metals.about.com/gi/dynamic/offsite.htm?site=http://www.amm.com/

If the increase remains, I believe the stock price for CENX should see some spikes very shortly...but as a disclaimer, I would like to say don't bet the farm on my presumption.

Century Culture

Per Century Aluminum's online brochure, the company's culture is as follows:
-entrepreneurial, flexible structure and operating styel
-quick decision making
-emphasis on creativity
-partnership spirit - with our colleagues inside and outside the company
-honest, ethical business dealings...highest respect for health, safety, and environment
-broad international experience
http://www.centuryaluminum.com/images/CABro.pdf

CENX Amends Indenture of Debt

On Friday, November 13, CENX announced it was successful in completing the solicitation of consents to amend the indenture governing a portion of the company's notes to modify certain events of default relating to certain bankruptcies and insolvencies.

I have seen this in recent filings, and even in the company I work for, where the state of the economy has left many companies nearing defaults on covenants. The need for more "relaxed" covenants is growing and growing as the economy has still not fully recovered.

Allocation of Resources

As stated in Century's 10-Q filing, their Helguvik project's cost, scope and schedule is currently being evaluated. Spending has significantly been reduced and cannot be certain when or if it will restart major construction and engineering activities or even complete the project.

This relates to building capacity in Iceland to take advantage of reduced operating expenses related to heating/energy costs. If the decision is made to discontinue the project...the company has already spent through 2008...$83 million and projected spending for 2009 is in the range of $25-$30 million...that would be a very difficult decision to make, but I guess if managment doesn't see benefits panning out, it is best to exit.

Quarterly Report Filed

On Monday, Nov 9, Century filed their quarterly report. Noted in the quarterly report was the commencement of an exchange offer that occurred on Oct 28, which they issued 11,365,693 shares of C/S in exchange for $127.9 million debt. Net income for the quarter was reported at $40.1 million, on sales of $228.7 million...net income was a result of a $57 million gain associated with the exit of their long-term power contract at the Hawesville plant. Even though this wasn't anything new, CENX stock ended on a good note...closing at $9.48 after closing the prior week at $8.99 (5.5%). The increase was more than likely not related to the filing of the Q, but due to market conditions, Alcoa also closed Monday on a high note at $13.34 after closing the prior week at $12.89 (3.5%).

Stock Outlook

According to a recent article on "The Motley Fool", you would be a dope to buy CENX stock right now. The full article can be read at http://www.fool.com/investing/small-cap/2009/11/03/youd-be-stupid-to-buy-these-stocks.aspx.... based on the fact the stock has risen more than 500% since March.

Personnally, I think this is nonsense. Just because a stock has increased as much as CENX since the market downfall, does not deem investors as dopes if they are currently purchasing...it simply means, they decided to buy at a less opportune time compared to the lows that were recorded in March. The potential of this stock (seeing that highs have surpassed the $80/share mark in the past) could mean large gains for these late investors.

CENX Stock Movement

Today, Tuesday November 3rd, CENX is currently trading at $8.50. Last week, the stock opened at $10.35, reached a high of $10.74 and closed the week at $8.67. I believe the fluctuations are linked to a couple of items 1) stock prices rose after earnings reported by Alcoa, which beat expected results, 2) then prices fell once CENX reported quarterly results. Even though the quarter results showed a positive net income, this was entirely due to adjustments related to gains on termination of power contract (after-tax benefit $55.6 million).

I still believe this stock is trading at a bargain rate, and think that once the economy fully recovers, this stock will again exceed market leader Alcoa.

Q3 Earnings Release

On Tuesday, Oct 27th, CENX released their 3rd quarter results. While quarterly profit was up, stock prices fell to a low of $8.26 on Wednesday, from a high of $10.74 on Monday. I believe this is due to the fact that even though Century reported net income from the quarter, they reported a gross loss for the quarter...the income reported was driven by a) a $6.6 million tax benefit & b) $55.6 million primarily from realized/unrealized gains on the termination of an existing power contract. COS (as a % of sales) was 101% during Q3 2009 vs. 78% in the prior year quarter...this, to me, is the reason for the fall in share price. With the reported results, I believe investor confidence fell...thus so did the stock.

Acquisitions

Century Aluminum became publicly owned in March 1996. In 1998 they acquired cast plate Alcoa operations in Vernon, CA. In 1999, Century divested in its fabricating plants to redirect their product and marketing strategy. During and after 2000, Century focused on acquiring primary aluminum capacity, acquiring additional shares in the Mt. Holly, SC plant, 80-percent interest in their Hawesvill, KY operations...which later in 2003, the remaining 20-percent was acquired. In April 2004, the company diversified geographically by acquiring Nordural Aluminum...a primary aluminum plant in Iceland.

CENX Stock Movement

Century Aluminum opened last week at $10.81 per share, reaching highes during the week of $11.05 and a low of $10.21, before closing the week at $10.65 (down 1.5%). Currently, today, CENX is trading at $10.88. Alcoa opened last week at $14.35 and closed at $14.04 (down 2.2%).

CENX benefits from bullish market

A recent article cites share gains and volatility associated with CENX stock...in the past 3 months, CENX has risen 100% compared to industry giant Alcoa rising only 55%. The short article can be found at http://stocks.investopedia.com/stock-analysis/2009/Is-There-More-To-Aluminum-Than-Just-Alcoa-AA-CENX-KALU1012.aspx?partner=YahooSA.

CENX Stock Activity

This past week, CENX stock went for a wild ride...opening at the begining of the week at $8.40, it has risen up 27% closing today, Friday October 9th at $10.69. This increase was said to be a result of Alcoa reporting higher than expected quarterly earnings, boosting investors' confidence in the aluminum industry.

Vertical Integration

Prior to recent activities, Century Aluminum was somewhat vertically integrated backwards, providing bauxite and alumina (primary ore of aluminum) to its aluminum producing plant in Hawesville, KY. In early September, Century Aluminum sold their half of the alumina producing company to increase focus on core aluminum smelting and other growth projects.

Stocks fall

On Monday the 28th, CENX stock opened at $9.51 and closed at $9.78, but fell throughout the week before closing on Friday, Oct 2nd at $8.28. This is said to be caused somewhat by the job loss report. Stock is currently up ($0.56) today.

Tax Benefit Preservation Plan

A tax benefit preservation plan was adopted in late September to preserve Century's current tax assets (approx $1.6 billion) which could be used to offset taxable income earned in the future. See the press release below for details, but essentially this is to prevent substantial limitation on the use of tax assets due to an ownership change (defined by the IRS)...if the company's 5% shareholders increase ownerhsip by more than 50% points over a 3-year period, an ownership change would have occurred and the company's tax attributes would be substantially limited.

http://finance.yahoo.com/news/Century-Aluminum-Adopts-Tax-iw-1790622210.html?x=0&.v=1

Plant Located for Cost Competitiveness

Century Aluminum converts raw material (alumina) into aluminum. The operation requires an extremely large amount of power (per prior conversations with management, it is around 85-90% of the cost). To reduce this cost, Century Aluminum currently has one plant located in Grundartangi, Iceland and is currently constructing another facility in Helguvik, Iceland. The advantage obtained in these two areas is, the Earth's crust is thinner in these areas...which gives Century Aluminum access to thermal energy, resulting in lower energy costs.

CENX - Strategic Objective

Century Aluminum's strategic objective is listed as follows:

Our strategic objective is to strengthen Century's primary aluminum assets and improve our overall competitive position. We intend to acquire assets that lower operating costs and diversify our geographic presence. We are focused on safety, productivity and operational excellence.

Unregistered Sale of Securities - update

Earlier in Sept, Century Aluminum filed a form 8-k for the unregistered sale of equity securities...on Monday, September 21st another form 8-k was filed and it appears the same number of shares (1.9 million) will be issued but for approx. $22 million instead of $21 million. (Link to the filing is http://biz.yahoo.com/e/090921/cenx8-k.html)

Stock Rising

As commodity prices and futures are rising...CENX is showing strong increases in the past couple days. On Monday, Sept 14th, CENX opened at 10.23 and on yesterday closed at $11.18 (9.3% increase). Currently the stock quote for CENX is at $11.96...the company's message board on yahoo is a buzz with anticipated jumps today.

Of course competitor Alcoa (AA) is seeing a jump in stock as well, opening on Monday, the 14th at $12.63, closed on the 15th at $13.99 (up 10.77%) currently trading at $14.27.

Big upgrade for CENX

This past week, Century aluminum stock was upgraded to a 5-star level...compared to a 2-star level the prior year. Article can be found at the link below.

http://www.fool.com/investing/general/2009/09/14/a-big-upgrade-for-century-aluminum.aspx

Unregistered Sale of Securities

On Friday afternoon, CENX filed a Form 8-K for Unregistered Sale of Equity Securities (the link for the filing is http://biz.yahoo.com/e/090911/cenx8-k.html). Century has entered into agreements to exhange 1.9 million shares of common stock for approx. $21 million of its senior notes due 2024. Century has already agreed to issue 4 million shares of common stock for approx. $47 million of its notes.

Per the filing, this is one way the company is trying to combat the current state of financial and credit markets and add strenght to their financial position.

Stock Rises from last week

CENX experienced an increase of $1.20 (12.5%) in their stock price from last Friday, September 4th rising from $9.60 to $10.80 on Friday, September 11th (as reported for after hours trading).

CENX --- Approaching Greatness?

On Tuesday Sept. 8, Century Aluminum's stock was noted as approaching greatness in an article titled "5 Stocks Approaching Greatness" (link to article is: http://www.fool.com/investing/general/2009/09/08/5-stocks-approaching-greatness.aspx)

Century's stock price, along with other aluminum manufacturers, is tied to the price of aluminum...so as aluminum gains strentgh so will CENX.

On Tuesday, CENX stock opened at $9.94 and closed at $10.03.

Divestment of Stakes in Bauxite & Alumina

On Sept 1, 2009, Century Aluminum announced the sale of their 50% joint venture of alumina (key ingredient of aluminum) & bauxite assets. A link to the news release can be found below:
http://investor.shareholder.com/cenx/releasedetail.cfm?ReleaseID=406265

Century Aluminum said the transaction will increase the company's focus on the core aluminum smelting business and other growth projects. Shares dropped 18 cents on the morning of the announcement and were trading at $10.05.

Directors & Senior Managment

According to their website, Century Aluminum has 9 independent members on the board of directors. The Chairman of the Board is John O'Brien (who is not the company CEO). From reviewing the names, it appears out of the 9 members, 8 are male and only 1 is female. The link below provides more detail on the directors:
http://www.centuryaluminum.com/directors.html

The President & CEO of the company, Logan Kruger, also serves on the board. Logan has been with the company since 2005. His profile can be found at the link below: http://www.centuryaluminum.com/logan_w_kruger.html

Other key senior managment members are listed at the following website: http://www.centuryaluminum.com/officers.html

Company Chosen - Century Aluminum

Century Aluminum is a publicly traded company that produces primary aluminum. I chose this company due to two reasons; 1) One of the company's largest facilities is located in Hawesville, KY and 2) I have been following the company's stock movement a little in the past few months (and kicking myself for not buying stock in March when their stock reached a low of $1.04).

The company's stock has fluctuated quite a bit in the past 2 years due to recent price movements in aluminum prices. In May of 2008, the stock price rose to a high of $80.52, then less than 12 months later, dropped off to $1.04 as indicated above. Today, Monday August 31, 2009, their stock is regaining some strenth reaching a high of $12.18.