Q4 2022 Century Aluminum Co Earnings Call
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Turning to slide one please take a moment to review the cautionary statement shown here with respect to forward looking statements and non-GAAP financial measures contained in today's discussion.
With that I'll hand, the call over to Jessica.
Thanks, Steve and thanks to everyone for joining.
I'll start today by quickly reviewing our 2022 performance before discussing the improving market conditions, we have seen so far in 2023.
Jerry will then take you through the details of the fourth quarter and full year results and then I'll finish with an update on our <unk> project.
Turning to slide three 2022 was a very volatile year in the commodity markets.
Aluminum prices reached 30 year highs in the spring driving strong financial performance across centuries businesses in Q1 and Q2.
However market conditions deteriorated over the back half of the year as high global inflation was met with rising interest rates.
Resulting in a significant strengthening in the U S dollar and pressuring aluminum prices downward.
At the same time, the war in Ukraine, and resulting energy crisis drove power prices to unsustainable levels across the world.
All told century produced adjusted EBITDA of $144 million last year.
Q4, adjusted EBITDA was a loss of $12 million, which was an improvement of approximately 24 million over Q3, as the benefits of improving energy markets and cost cutting measures across our business improved results.
We finished the year with strong liquidity of $245 million.
Our team completed several long term projects last year, including the restart program at Mount Holly, which returned the smelter to 75% of capacity.
We also completed the first stages of our U S cast house Debottlenecking programs.
Which increased our capacity to produce value added products by 20000 tons.
To mitigate record high energy prices, we made the difficult decision in June to curtail our hospital smelter centrally curtailment the team <unk> done a good job, reducing holding costs, while maintaining the assets in a condition that would allow for restart in the future.
In assessing whether the conditions for a restart and that we intend to be disciplined in our approach and we'll wait to see energy costs and <unk> prices reach and sustained levels that will enable the profitable operation of the smelter for the long term.
Finally, we continue to focus on our most important priority to return our employees home safely at the end of each and everyday.
While we will never be satisfied until we achieve zero workplace injuries, our team should be proud to have reduced injuries by 10% over 2021 levels.
We hope to significantly improve on this trend in the coming year.
Market conditions for centuries businesses have improved significantly so far in Q1 and continue to trend in a positive direction as we emerge from winter.
If you turn to slide four you can see the global supply and demand balances remains in deficit last year.
This was driven most significantly by another year of energy driven production curtailments in China, where low hydro reservoirs drove curtailments in several provinces.
Global aluminum balances have now been in deficit for the last five years with the Covid impacted year in 2020, the only exception.
We currently estimate that approximately two 5 million tonnes of Chinese capacity is offline due to energy curtailments and Union, Sichuan and Guizhou with an additional 500000 to 1 million tons of capacity at risk in the near term due to continued water shortages.
This is now the third year in a row significant winter energy shortages in China, suggesting that Chinese production may be subject to increasing seasonality going forward as the country seems to be consistently short energy across the winter months.
Given these continued Chinese production headwinds, we expect global markets to remain in deficit. This year with risks leaning towards larger deficits should further removed capacity cuts and union materialize, our restarts in Sichuan and Guizhou continued to be delayed.
With global inventories, averaging below 50 days <unk> prices should respond favorably if additional supply curtailments confirmed.
In our markets in the U S and EU supply deficit widened last year its high energy prices drove smelter curtailments, especially in Europe , where 50% of remaining capacity has been curtailed due to high energy costs.
Fortunately a relatively warm European winter has allowed EU energy prices to moderate somewhat.
But while lower prices have helped sustain downstream aluminum demand both spot and forward EU energy prices remain well above levels needed to drive widespread smelter restarts.
As you can see from the graph on slide five EU energy prices remaining contango above $150 per megawatt hour with significantly higher prices expected to return later in the year.
But one of our Icelandic energy contracts does have some exposure to EU energy prices through Nord pool, we have hedged 95% of the remaining exposure at 30 euros from.
From 2024 onward, we do not have any nord pool or other EU energy market exposure.
It's an energy markets remained well supplied in 2023 with hydro reservoirs near average levels across the athletics system.
U S energy prices moderated in Q4 with Indy hub, averaging around $60, a 30% reduction over Q3.
Price declines have accelerated significantly so far this year as record U S. Natural gas production paired with increasing renewable generation and recovering coal production have combined with a warmer than average winter to drive energy prices significantly lower.
Indy hub prices are now back below pre crisis levels with January averaging $37 per megawatt hour in February averaging $29 a month to date, while spot prices have declined significantly Indy hub forward prices remains in contango with the forward strip approximating $41 for the balance of 2023.
Significantly improved supply and demand fundamentals have recently driven forward prices lower with U S. Natural gas reserves in utility coal stockpiles, now effectively sitting 17% and 40% above year ago levels.
Increasing natural gas reserves and continued record production could continue to pressure forwards downward spot levels and begin to make power price hedging more attractive as we move into spring.
Turning to regional premiums strong aluminum demand in both the EU and U S have driven premiums higher so far this quarter.
With the spot Midwest premium above 29 cents per pound, a 40% increase over Q4 levels and EU duty paid premium returning to levels above $300 per ton.
This trend has continued affirmation of our long term strategy to focus our production in these two short markets.
Which allow us to better serve our customers and benefit from the strong premiums.
As a reminder, all of our remaining Midwest premium hedges matured in Q4, so we will realize the full cash benefit of increasing premiums in both the U S and Europe this quarter and going forward.
One area of relative weakness in the market has been in spot billet demand.
While annual contract prices have remained well above historic levels, we did experience a measurable decline in spot billet orders in November and December as our customers look to destock their inventories.
This has been buffered somewhat by relative strength in our HVAC markets and continued resilience in automotive demand.
This destocking process appears to have bottomed in January as we have seen increasing month over month orders in both February and March.
We anticipate further improvement in April orders.
The expected impact of this destocking process is included in our Q1 outlook on slide nine and Jerry will walk you through the impact on our Q4 results in a minute.
Despite these near term headwinds, we continue to anticipate very constructive long term billet demand trends in both the U S and Europe as electric vehicles substitution drives increasing aluminum consumption.
As we've discussed in the past electric vehicles 200 pounds more aluminum on average in an internal combustion vehicle with an even larger increase in primary aluminum consumption as the secondary based internal combustion engine block is replaced by value added primary aluminum intensive components like battery trays, HVAC and crashed systems.
We expect this trend to support significant long term demand expansion for primary aluminum fillets and flat in the EU and U S.
Turning to operations, we saw a strong and stable performance across our smelters in Q4, while also exceeding expectations on our cost and head count reduction programs.
This strong operating performance combined with production creep programs at Sebree, and <unk> and completion of the Mt. Holly expansion project allowed us to offset a significant amount of the production loss from the hustle curtailment with total shipments last year down just 15000 tons from 2021 levels.
Yes.
In the U S. We finished our first stages of our capital Debottlenecking projects, increasing our billet and plant capacity by approximately 10000 tons each.
We will start the next phase of these programs in 2023, which we expect will expand our total billet and flat capacity by an additional 10000 tonnes each by the end of 2024.
Paired with the expected completion of the <unk> cast house by the end of this year, we should enter 2024 with the ability to sell approximately 80% of century's total production. It's value added products in the form of billet slab foundry alloys or natural low carbon aluminum.
On the raw material side, we continue to see slow decreases and coke prices in Q4, a pitch prices remained stubbornly elevated in both the U S and Europe .
We do expect coke prices to slowly moderate over the course of this year as Chinese supply is expected to increase from any relaxation of Covid protocols.
Gerry will now walk you through the quarter and our Q1 outlook.
Jesse let's turn to slide six and I'll walk you through the results for the fourth quarter.
On a consolidated basis Q4, global shipments were down about 2% quarter over quarter, driven by the hospital curtailment and partially offset by the completed Mount Holly restart project.
Realized prices decreased substantially versus prior quarter, due primarily to significantly lower lagged <unk> prices and delivery premiums, resulting in a 16% decrease in sequential net sales.
Looking at Q4 operating results adjusted EBITDA was $12 million loss, an improvement of $24 million compared with the third quarter.
Adjusted net loss was $31 3 million.
<unk> 31 per share.
In Q4, the major adjusting items were $82 9 million for the unrealized impacts of forward contracts $5 $4 million related to excess power capacity charges associated with the hospital smelter and $2 2 million.
For share based compensation.
We had strong liquidity of $245 million at the end of the quarter, consisting of $54 million in cash and $191 million available on our credit facilities.
Now turning to slide seven to explain the $24 million fourth quarter sequential improvement in adjusted EBITDA.
Realized lagged alumina prices were slightly better than anticipated in our outlook provided during our last call.
Fourth quarter <unk> of 2000, and $308 per ton was down $330 versus prior quarter, while realized U S. Midwest premiums of $470 per ton were down $168 and European delivery premiums of $499 per ton were down 89.
Together these factors amounted to $79 million headwind in the quarter.
Realized alumina costs was $397 per ton $99 lower on a sequential basis contributing $36 million EBITDA.
Moderating power costs added $53 million in line with expectations.
Finally volume was off a bit, but our global cost savings initiatives, including the hospital curtailment action and other head count reductions and efficiencies contributed $18 million of incremental benefit as expected.
We expect these efficiency programs also to benefit 2023 results and have reflected those assumptions in our Q1 outlook, which I will speak to in a moment.
In total adjusted EBITDA for the fourth quarter was a loss of $12 million again, a $24 million improvement sequentially.
Let's turn to slide eight for a look at cash flow.
We started the quarter was $65 million in cash and ended December with $54 million cap.
Capex spending totaled $17 million $13 million, which relates to the <unk> cast House project.
Semiannual interest payments were $11 million hedge settlements net borrowing in working capital contributed 13, 12 and $5 million respectively.
Now, let's turn to slide nine and I'll give you some insight into our expectations for the first quarter.
For Q1, the lagged <unk> of 2000 and $350 per ton is expected to be up about $45 versus Q4 realized prices.
The Q1 lagged U S. Midwest premium is forecast to be $560 per ton up $90 and the European delivery premium is expected at $275 per ton are down about $225 per ton versus the fourth quarter.
Lagged realized alumina is expected to be $395 per ton down slightly.
Taken together, the <unk> delivery premium pricing and alumina changes are expected to decrease Q1, EBITDA by approximately $5 million versus Q4 levels.
Power prices have decreased substantially from what we experienced during the fourth quarter.
In fact, Indiana hub and Nord pool markets are down, 45% and 30% respectively in Q1 compared to Q4.
We expect this reduction in total energy costs to contribute approximately $32 million of improvement to EBITDA compared with Q4.
Coke and pitch prices remain above historical averages, but we expect sequential improvement in realized coke prices to be about $110 better than Q1 at $670 per ton.
Realized pitch prices remained stubbornly high at $1550 per ton or about $140 higher than Q4.
Together, we expect coke and pitch to contribute about $5 million to EBITDA improvement compared with the fourth quarter.
Finally, we expect a headwind from mix and other factors of between $5 million to $10 million, mainly driven by the near term weakness in billet sales at Jesse mentioned earlier.
All factors considered our outlook for Q1, adjusted EBITDA is expected to be in a range of between $10 million to $15 million.
From a hedge impact standpoint, we expect a realized gain of about $5 million in the first quarter, we expect tax expense of approximately $5 million and as a reminder, both of these items fall below EBITDA and impact adjusted net income.
Now referring to slide 15 for some full year 2023 financial assumptions we.
We expect shipments to decrease by nearly 69000 tons down about 9% versus 2022, primarily due to the curtailment of our Huntsville, partially offset by growth at our other three smelters.
From a cash standpoint, we expect to invest about $15 million to $20 million of sustaining capex in 2023.
In addition, we expect to invest approximately $60 million to $75 million and are fully financed Iceland cast house and $5 million to $10 million and other capex.
Fact of the hedge book will vary with market conditions throughout the year, but to assist with anticipating these impacts on a go forward basis. We have updated our previously reviewed financial hedge landscape, which can be found on page 17 in the appendix.
No we have no remaining Midwest premium hedges and for Nord pool, we are 95% hedged in 2023.
With that I'll turn the call back over to Jesse.
Thanks, Jerry if.
If you turn to slide 10, I'd like to give a quick update on our <unk> project, which when finished we will produce 150000 tons of low carbon natural ability.
All of this production will have the capability to be cast as natural or low carbon aluminum brand, which has total scope one two and three emissions of less than four tons of cotwo per tonne of aluminum.
Amongst the lowest carbon footprints in the world and less than 25% of industry average.
We expect to complete the cast house by year end with.
With its first commercial sales expected in January 2024.
Our team has done an excellent job keeping this project on budget and on track through the difficult deflationary environment over the past 15 months.
Europe today is over 1 million tons short of domestic billet production with over 300000 tons of European build capacity curtailed in the last two years.
Given this shortage the golar tundra cast house will be well timed to supply European customers that would otherwise be left to import higher carbon filler products for the middle East or India.
We have already seen strong interest from our existing customer base to purchase bill it from <unk> and expect to host customers in Iceland and the back half of the year to finalized sales and qualification of our products. We believe that we will have no issue of placing those billet to high quality customers in the European market and that natural buildup will receive an additional green premium and the.
Marketplace.
We look forward to your questions today, and we'll turn the call over now to the operator.
Thank you.
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Our first question comes from the line of David Gagliano with BMO.
Your line is now open.
Hello, Thanks for taking my questions.
I appreciate the guidance as always and I'm going to ask the usual questions about.
Sort of annualized run rate EBITDA generation, if I, if I do the math on slide nine.
$10 million to $15 million of the outlook for the first quarter.
And then I.
Comparator.
Yeah the spot prices.
Sensitivities I think on.
Slide 16, I think it is.
The conclusion were coming to us.
Can you spot pricing.
Quarterly EBITDA generation goes to maybe 2025 to 30 million or $100 million to $120 million annualized.
Based on.
Adjusting for spot for what's available.
Hunter talking 20 million annually is that a reasonable run rate in the world that we're in now and Motorola.
Aside from restarting.
But what are some of the additional.
EBITDA boosters that we should expect as the year progresses.
Yeah, Hey, David Thanks for the question.
As we've said in the past, we're going to provide expectations for one quarter out in general.
For modeling purposes, we provide them deal with the sensitivities as you referenced.
Obviously, it will move back into its about one month only a month now and talk about Q2.
But if we continue some of the trends we've discussed already.
Starting to see some improvement.
<unk>.
On a number of fronts.
First we're already starting to see our sales mix improved from the customer customer destocking of inventory as we mentioned earlier.
We expect that to ramp up and should hit our full run rate sometime in late Q2 early Q3.
Second you mentioned the pricing convention with respect to revenue as the lag spot prices. So you can use the sensitivities to update that and.
And we've seen regional premiums come up in both the us and EU.
So that's yet to flow through the results.
We also expect further cost pressure moderation, so energy prices continue to price below what we had in Q1.
There are signs of other raw materials like Coke should start to alleviate now as well.
And then if you just look at EBITDA and obviously still reflects the market price for our remaining <unk> exposure.
Once you factor in the 30 euro per megawatt hour hedged you Shouldnt see further improvement to hedging from our guide as those prices continue to show a contango.
And then if we start to see some China curtailments as I discussed in my prepared remarks.
Didn't see a response melamine side, which will start to drive results.
And then going forward from there because I think you're asking a little bit broader question. Obviously the fingers on behalf of <unk> can have a material impact to the positive on the business.
We will think we think will be amongst the lowest cost producers in the world with that new cast house.
And when you pair it with taking amongst slowest cotr footprints in the world as well, we think that will have a very.
A nice impact on margins at <unk>, and we think all of that Philip will be in very high demand, especially in the European market.
So maybe there is some thoughts you can redirect me further but as we look forward, we see a very nice future.
And some really nice opportunities in these two U S and EU markets as we move for them.
Okay. That's helpful qualitative listen and a number of those have actually been quantified.
The math that I just went through.
But some of them Werent. So I was just maybe asking again.
The ones that are that you mentioned on that list.
That are not quantified it seems like volume mix and other maybe that line and maybe coke and pitch.
Have more upside potential in the near term can you quantify potential order of magnitude on EBITDA uplift for those two things as we get beyond the first quarter.
I don't really want to speculate as to where pricing will grow in some of those.
Coke prices and relax, but it's been much more stubborn than maybe what we've talked for the past 12 months.
Obviously, you know where coke prices have been historically.
There is no real reason no fundamental change and reason why we can't start to approach. The long term historical levels. So you can start to model that in a bit I think you can model out the run rates there.
On the mix side.
As we've said the.
Pricing.
The annual contracts for this year on the billet side, we're not so different than last year.
Yeah.
Volume Destocking impact over the quarter.
So if you start to look towards the volume levels, we saw last year, though it could be a little bit of a sense of where the upside could be there.
And then again on the long term will come back and talk more about the quarter. Tommy has helped us to get closer to next year in terms of its impact on the business and the profitability of the business, but as I said I think thats a material upside for us and one that we're really excited about.
Okay. Thanks, I'll turn it over somebody else.
Okay.
Thank you David.
Our next question comes from the line of Lucas pipes with B Riley. Your line is now open.
Thank you very much operator, good afternoon, everyone.
I think you mentioned the potential for energy hedging in the prepared remarks, and I just wanted to make sure I understand.
The strategy, they're properly is that related in any way to Haas well aware is it more opportunistic.
For locking in what you might deem to be attractive energy prices now that power prices have corrected. Thank you very much for your perspective on this.
Sure Lucas Thanks.
Well, it's relevant most immediately for sebree, because thats, where our largest market exposure.
Lives at this point.
And then as I mentioned, we have seen those indy hub prices come down quite significantly.
The forwards are just a little bit more stubborn as they come down so when we look at that you'll see a fairly extensive risk premium built into the Florida right now, but we continue to believe as you looked at natural gas storage in this country natural gas production in this country and Henry hub has obviously come off significantly.
Compare that with increasing renewable generation.
Especially as some of these new projects start to hit.
And stronger coal production on.
On the backend and utilities. If you remember this past year were a little bit short going into winter. This year. They look much better situated and copilots are quite quite high. So we continue to think that for me.
Collapsed that risk premium they collapsed, a little bit and kind of closer to spot, which could provide some opportunities for us. So most relevant for sebree as we've looked to hospital going forward that is also something that we can look at there so on the hospital side.
As I said.
Market conditions are definitely better than when we made the decision to curtail.
But we would like to see both energy and metal prices reached and then sustained levels that enable the profitable operation for prolonged periods.
Okay.
That's helpful. I appreciate that I may come back to hospital later.
Okay.
In the presentation you.
Highlights opportunistic M&A and our you'd noted rather and.
I wondered if you could maybe comment on what sort of opportunities.
You have been looking at of course.
I wouldn't expect you to share specifics, but that would be helpful to get a sense for that.
The type of transactions that could make sense. Thank you very much.
Yes, I think youre referencing the comment on the capital allocation page in the appendix.
And obviously as we look at capital allocation and we've talked about this at some length in the past we've got some.
Targets that we'd like to hit before we look at.
How we use that cash flow going forward.
Our immediate focus is going to be as kept the cash flow improves as we go into this year to put that on the balance sheet and start to improve and.
Improved improve the balance sheet.
Here.
Yeah.
But as the next step once we hit those targets.
Have you approached those will definitely come back and talk to more.
Laid out sort of our view on how we use our capital going forward.
To your specific question on M&A.
Last night stand by it is.
If we are looking at opportunistic M&A will for liquid you've seen from us in the past.
These are usually probably going to be smaller bolt on transactions as we see assets become available that have attractive long term returns and fit within our general footprint and strategies that we've laid out.
So nothing nothing really more exciting than that but when the opportunity is there and I think you've seen it from us in the past we're ready to act.
Complete transaction.
They offer those long term returns.
Okay.
I appreciate that thank you.
I'll ask a final one on slide 20.
You lay out the volumes for value add product.
The increase in 'twenty four is there kind of a good approach to quantifying.
How this would translate into into revenue.
Would appreciate your color on.
Value add product typical link to revenue.
Sure.
I think generally if you look at this obviously the big gain is coming as the <unk> cast House comes online.
I think you can sort of count on most of that going into the European market and so you can take a look at the premiums that we see in European markets.
Unbilled over the past couple of years, I think notably that market has become much shorter.
It's about 1 million tonnes short today with.
300000 tons of billet capacity coming offline over the past 18 months. So since we have started that project to market opportunities for it with our customers has actually gotten more attractive.
So when looking at revenue you can you can count on that additional 150.
<unk> thousand.
<unk> thousand metric tons at Guernsey autonomy and the other big increment being the 60000 tons of additional foundry alloy capacity coming out of <unk> as well. So again, you should be able to look at European market prices, obviously, they fluctuate so I'm not going to speculate where there'll be in 2024, but that should give you a good sense on.
The additional revenue opportunities.
From a margin perspective, I think as I said earlier I think you can sort of count on.
This asset being a brand new modern cast house built.
Low cost hotel being amongst the lowest cost producers. So you can use that.
To think about how the margin outlook.
I'll start with my pencil on that I appreciate the color I'll turn it over for now and best of luck.
Thanks, so much.
Thank you Lucas.
Our next question comes from the line of John Tumazos.
With very independent research LLC. Your line is now open.
Thank you.
Just looking at your cost of goods sold per pounds shipped excluding depreciation.
It calculates to 27, 6% improvement or cost decline from the September quarter.
Is there any mix effects that might have been influencing less alloy less so.
Value added product.
And this is a reasonable expectation.
Power and other costs.
Improve.
In the March quarter, maybe not 27, six but at least half of that much.
Yes, John Thanks, It's a good question.
You are right to point to energy the majority of that impact is going to be on the energy side.
As Jerry went through we also saw much better alumina costs running through the results.
And marginally lower coke prices.
Of that mix as you mentioned.
We expect to have continued improvements.
Really not far off the bad news is that.
You mentioned.
And we should see incremental coke improvements.
Probably roughly roughly flat.
And then a little bit of course.
Our natural gas consumers, so Henry hub by reducing.
Thanks.
Sure, maybe not 27, but at least half that much or is it a good guess for the March quarter.
Yes.
Sure.
Go ahead, Jeff sometimes in the investment business, we don't know whether to buy or sell.
Maybe we still have a position or a quarter of a position.
Incrementally a little bit of time.
It would seem like with gas falling almost $2 per million.
It's probably pretty close to the bottom.
It could go negative crude oil do three years ago, because theres no storage capacity.
That's a pretty decent price.
And Henry hub power fallen below three.
Kilowatt hour.
It had been roughly.
Proportional to the fall in the gas price and other rises and falls fluctuations.
Yes, we agree with you John on this so it does appear that there is a higher risk premium embedded in the forward Indy hub prices than seen in years past.
As you mentioned if you just mark the gas price and you can also look to falling coal prices as well and I mentioned references to the coal stockpiles and.
And utilities.
You can start to see that the marginal cost of energy production in actuality has gone down quite significantly and of course with the.
Products like energy, which can't be stored you can see that reflected in spot prices and so the sub $30 energy that lease that we told you about at Indy hub for February starts to reflect and look like thus lower Henry hub and lower thermal coal prices as you discussed.
So on balance.
We think thats, mostly risk premium and probably a lot due to the volatility we've seen in the past year.
But we think that probably continues to collapse as we move forward into the year.
And storage continues to increase and.
Can we start to add a little more certainty about what.
2023, it looks like.
So I think on balance we're in agreement probably with your statement.
So is this a good enough price to maybe hedge.
Quarter, the power you use sebree.
Yes, I think I mentioned in my prepared remarks, that's definitely something we're going to look at.
As we go into summer and we watched these forward prices and hopefully hopefully they start to collapse and a little bit of that risk premiums.
As we move a little bit further out one part of the equation.
Power is pretty pretty low.
And.
It would certainly seem like it's possible that a hospital comes back.
As long as autos are settling in houses are getting built.
Yes.
<unk> I said earlier I think we're going to be disciplined here.
And make sure.
Sure.
We've exited what's been an extremely volatile environmental for the past 18 months.
So, we'll just see that energy and metal prices both regions sustained levels.
That work and.
We can be sure that if we take the effort and cost to restart hospital and that we will see the returns and it will be profitable over the long run for us.
But certainly the trends are favorable as you mentioned as energy prices have started to return towards normal.
<unk> relatively LMB remains relatively constructive levels.
Okay.
So one of the earlier questions was about M&A.
And I always imagine like century, showing out selling the company.
To another entity with a stronger balance sheet.
Whether it's a volatility better and.
Better credit for renewable energy supplier to do project financing off your purchase contract.
Hi.
Firepower from them.
Is that the way you think of M&A or is.
Sure sure thinking about going out and buying things your balance sheet.
And earnings have been a little volatile so I hadn't.
Jim.
Shopping for acquisitions.
Yes, John I'm, mostly going to punt on this question, but as you might imagine we think theyre very positive long term opportunities for century, both in our current.
<unk>.
Setup and we also think there's a number of opportunities for the business as we go forward.
We've already mentioned the wintertime cast house, and we've got potential to restart the remaining capacity at Mount Holly.
Hopefully, we see market conditions that enable the long term and we started to hospitals. So we're excited about this business and and.
We plan to be here for good long time.
Thank you John .
There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.
Okay.
Okay, well, we thank everyone for the time.
Sorry go ahead, we'll take that cohort Lucas.
I apologize. Our next question is from the line of Lucas pipes with B Riley. Your line is now open. Thank you.
Thank you for taking my follow up question I appreciate it I know that was.
Last minute here.
Yes.
On the <unk>.
On the M&A side.
Mentioned bolt on.
Sometimes it.
It's hard time.
That could mean, a few things when a smelter would be considered bolt ons for example.
Yes, I think thats the type of transactions, you've seen from us before right. So.
Actually our entire footprint at one point or another was with the bolt on smelter transaction.
Each and every one of the operating smelters and then we've added added value where he could so whether that'd be in expansion.
At <unk>, our ability test hasn't gone into Tom <unk> are expanding the billet cast outs at Sebree and Mt. Holly.
That's an area we think we.
<unk> expertise in.
And we can add value. So I think that's that's the type of transaction.
And the ballpark transaction, if such opportunities were to come out.
I appreciate that and then.
Chuckling circling back on Haas well.
So you noted economics better today than they were when you.
You made the island decision and Youre looking for it looks like a little bit more just clarity on.
On March is it clarity on margins or are you looking really for a wider margin and a greater margin of error.
To restart the facility I'm, just trying to get a better sense for.
What could what could trigger a decision to restart the facility.
You very much for the additional color.
Yes, sure I think probably the key thing Youre looking for there is it's really both reached levels that that work from a profitability standpoint, but also we need to see some period, our sustainable sustainability of those levels.
So really the energy price decline here has been quite significant.
It wasn't one six months ago, obviously that we saw we saw high energy prices.
And while we are quite.
<unk>.
Confident that when you look at energy storage levels in the U S that we do see market conditions that should keep energy prices lower.
For longer here.
That's something you might understand we would like to be prudent and make sure that those are going to confirm some for some period of time here.
So really both reach those levels and then and then importantly sustained those levels for a period of time that we can be confident.
<unk>.
We make that decision.
That's helpful. Thank you.
Can you.
Mind us what would be a reasonable level of restart costs.
For hospital to kind of return to.
Nick.
Capacity utilization.
Yes.
We'll give you some direct guidance on that.
When we get closer to making that decision.
But what I would say as you've recently seen as we start a number of lines of hospital back in 2018.
And just as a reminder, in that instance, we basically had to rely on all of the parts and those top lines as we brought them back up.
At this time around we would not have to do that so it would be materially cheaper. This time around than what you saw from us in 2018.
But we will give more direct guidance as we get closer to making that decision.
That's helpful. Thank you and then.
Turning to slide nine and the outlook.
The headwind.
10 to 5 million negative with volume mix other.
<unk>.
Looking out to Q2, and the remainder of the year quarter of magnitude.
Which which.
Direction could this turn positively.
Would appreciate your color on that.
Yeah sure I think it is.
As Jerry had mentioned.
The majority of this is really is really mix.
And really has to do with that ability talking event, we spoke about earlier.
And we have already started to see that improve.
<unk> month over month over month orders are up both in February and then again in March.
And we would expect the same in April there's actually a number of our customers that have a march 31 calendar year. So.
We're looking forward to to them reentering the market in April .
And so that's one that we think could materially improve and have already started to see improve as we head into into Q2, but but really it's probably going to see.
The most improvement as you get into the middle or back half of the year.
Okay.
Right I appreciate the color and again best of luck. Thank you.
Thank you Lucas.
Okay.
With no additional questions waiting at this time, so I'll pass the conference back over to the management team for any closing remarks.
Thank you everyone for your questions today, and we'll be talking to you again very soon.
That concludes the century aluminum company fourth quarter 2022 earnings call. Thank you for your participation I Hope you have a wonderful day.