Zacks_Analysts' Blog : Century Aluminum Reports Loss - Analyst Blog

Century Aluminum Company (CENX) reported its second quarter results last week. The company reported net loss of $0.70 per share in the quarter, compared to net income of $2.51 in the comparable quarter of 2008. This is the third consecutive quarter of negative earnings.

Sales in the quarter were $189.2 million, down 65.3% from $545.2 million in the second quarter of the prior year primarily due to lower price realizations and decline in volumes. Primary aluminum shipments declined 26.5% year over year to 145,693 tons. The demand for aluminum products has declined sharply due to the uncertainty regarding future economic conditions.

The company stated that demand in China has improved in the second quarter, compared to the first quarter. However, it remained largely unchanged in the rest of the world. The LME aluminum inventory is at a record level of approximately 4.5 million tons. Significant decline in demand along with high inventory levels has lead to pressure on aluminum prices.

In response to the current market conditions, Century Aluminum is moving aggressively to preserve its liquidity. The company is reducing its discretionary capital spending. It is reviewing all areas of the business to improve quality and reduce expenditures. The company has reduced its global production capacity by 28% and U.S. capacity by 42%.

In response to falling demand and low prices, the primary aluminum industry has announced significant production cuts in the last several months. The company stated that aluminum companies worldwide have cut production by 5.0 million tons.

Also, almost all the projects aimed at bringing new capacity on stream during the next several years have been canceled, suspended or delayed. Despite the production cuts, we believe the aluminum market will remain oversupplied for the remainder of the year.