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.