Q2 2025 Century Aluminum Co Earnings Call
In the presentation portion of the call with an opportunity for your questions and answers at the end at this time I would like to pass the call over to our host Ryan Crawford Ryan you May now begin today's call.
Thank you operator, good afternoon, everyone and welcome to the conference call.
I'm joined here today by Jesse Gary Centurys, President and Chief Executive Officer, and Peter Drip Coffee Executive Vice President and Chief Financial Officer and Treasurer.
After our prepared comments, we will take your questions.
As a reminder, today's presentation is available on our website at www dot century aluminum dot com.
We use our website as a means of disclosing material information about the company and for complying with regulation FD.
Turning to slide one please take a moment to review the cautionary statements with respect to forward looking statements and non-GAAP financial measures in today's discussion.
And with that I'll hand, the call to Jesse.
Thanks, Ryan and thanks to everyone for joining.
We find ourselves today and an excellent market environment for century, So I'll start by reviewing our second quarter performance and the strong macro conditions, we've had so far in 2025.
I will then walk through our operational performance for the quarter and an update on some of our strategic initiatives, including our very exciting announcement regarding the restart of 50000 metric tons of additional production at Mount Holly Pete.
Pete will then take you through the details of the Q2 results and our third quarter outlook before we turn it over for questions.
So let me begin with safety, which is core to everything we do here at century.
Our safety performance has shown improvement across our assets in the first half of the year.
This is rewarding to see as we continue to invest substantial time and effort towards improving the safety culture at each of our locations.
We have been specifically focused over the first half on the launch of our new safety program.
Now Holly will be the pilot site for this new initiative that we've been working on with Dupont safety systems, and we are really excited to get it off the ground as we head into the second half of the year.
Turning to financial results century generated $74 million of adjusted EBITDA in the second quarter.
Rising Midwest premiums offset lower realized <unk> European premiums as well as higher than expected market energy prices in the second quarter.
Realized LNG prices averaged 2540 in Q2, while realized Midwest and European premiums averaged $850 and $220 in the quarter.
Midwest premiums are significant positive improvement during the quarter as we began to see the benefits from President Trump section 232 tariffs impact our results.
As we have discussed in February President Trump restored the effectiveness of the section 232 program by revoking, all country and product exemptions and raising the tariff rate for aluminum from 10% to 25%.
These became effective on March 12th and due to our contractual lags first rolled through our results in Q2.
In June President Trump took additional action to raise the section 232 tear up to 50% in order to support the domestic industry and incentivize domestic production to ensure our national security.
Following this announcement spot Midwest premium today is sitting at close to $600 per ton or <unk> 72 per pound distillates.
Please remember while these tariffs became effective in Q2, they were only partially affect our results in Q3, and then be fully reflected in our results in Q4, Pete will give you more details here.
The best part of this news is if the section 232 program is working.
As we have seen strong domestic demand for all of our products and our customers are increasing orders.
And as the largest producer of primary aluminum in the United States century is doing its part to build and secure the aluminum production that is so essential to U S national security needs.
More on that at the end of my remarks.
In July we were also very pleased to complete the refinancing of our outstanding seven 5% senior secured notes and Icelandic cat South loan facility with the issuance of our new $400 million tranche of six and seven eights notes.
Pete will walk you through the details here, but we're really pleased to simplify our debt structure lower our interest costs and push out the maturities with this transaction.
Speaker #1: Open Q3. And then be fully reflected in our results in Q4. Pete will give you more details here. The best part of this news is that the Section 232 program is working.
Turning to slide four power prices fell quarter over quarter, but unusually warm summer temperatures led to slightly higher than expected energy costs for century in Q2.
Speaker #1: As we have seen strong domestic demand for all our products and our customers are increasing orders. And as the largest producer of primary aluminum in the United States, CENTURY is doing its part to build and secure the aluminum production that is so essential to US national security needs.
These temperatures persistent into July, but we have now returned to more normalized levels.
With natural gas prices also falling to $3 per annum Btu, we expect power prices to continue to move lower as we enter into defaults shoulder season.
Speaker #1: More that at the end of my remarks. In July, we were also very pleased to complete the refinancing of our outstanding seven and a half percent senior secured notes in Icelandic Capital Loan Facility with the issuance of our new $400 million tranche of six and seven-eighths es.
Turning to page five as you can see in the top left graph. We continue to expect constraints on new global supply to drive our global market deficit in 2025.
Global aluminum supply remains challenged with China, very near its 45 million ton production cap and limited announced new global projects.
Speaker #1: Pete will walk you the details here, but we are really pleased to simplify our debt structure, lower our interest costs, and push out the maturities with this transaction.
We believe demand growth will continue to outpace supply in 2025 and for years to come.
Speaker #1: Turning to slide four, power prices fell quarter over quarter, but unusually warm summer temperatures led to slightly higher than expected energy costs for CENTURY in Q2.
Global inventories remained near post financial crisis flows in Q2 at 47 days.
We are seeing U S demand for domestically produced builds continue to grow this year. Following the effectiveness of the revised section 232 tariffs on aluminum in March.
Speaker #1: These temperatures persisted into July, but we have now returned to more normalized levels. With natural gas prices also falling to $3 per MMBTU, we expect power prices to continue to move lower as we enter into the fall's shoulder season.
Centuries, domestic billet shipments are up 8% year over year in the first half as downstream customers look to shift supply chain back to the U S. Following the expansion of the section to the <unk> program to cover extrusion.
Speaker #1: Turning to page five, as you can see in the top left graph, we continue to expect constraints on new global supply to drive a global market deficit in 2025.
As we begin to enter into the 2026 build season, the strong domestic demand growth should be supportive of higher value added aluminum premiums in 2026.
Speaker #1: Global aluminum supply remains challenged with China very near its $45 million ton production cap and limited announced new global projects. We believe demand growth will continue to outpace supply in 2025 and for years to come.
Just as a reminder, our value added products in the U S are sold on an annual basis. So we would expect to see those increased billet prices flow through the results beginning in the first quarter of next year.
Speaker #1: Global inventories remain near post-financial crisis lows in Q2 at 47 days. We are seeing US demand for domestically produced builds continue to grow this year, following the effectiveness of the revised Section 232 tariffs on aluminum in March.
Turning to alumina global supplies remained stable with market pricing remaining at normalized levels in Q2.
Spot API prices are approximately $375 today.
The Atlantic region, where our <unk> operations are located has become increasingly sort of alumina, resulting in an expanding Atlantic premium for alumina of about $30 today.
Speaker #1: CENTURY's estic build shipments are up 8% year over year in the first half, as downstream customers look to shift supply chains back to the US following the expansion of the Section 232 program to cover extrusions.
This is a good example of how to Melco like centuries smelters benefits from our strategic geographic locations close to its customers in short markets.
Speaker #1: As we begin to enter into the 2026 build season, the strong domestic demand growth should be supportive of higher value-added aluminum premiums in 2026.
The bauxite market also continues to experience turbulence, especially in Guinea, we're operating licenses for several key producers have been suspended and in some cases revoked.
Speaker #1: Just as a reminder, our value-added products in the US are sold on an annual basis, so we would expect to see those increased build prices flow through the results beginning in the first quarter of next year.
These disruptions have blend continued support seaborne bauxite prices and in turn the alumina price.
Speaker #1: Turning to alumina, global supplies remain stable with market pricing remaining at normalized levels in Q2. Spot API prices are approximately $375 today. The Atlantic region, where our gemalco operations are located, has become increasingly short alumina, resulting in an expanding Atlantic premium for alumina of about $30 today.
Please remember that <unk> does not have exposure to seaborne bauxite prices as the plant is totally self sufficient through its long term mining licenses another key strategic differentiator for the plant.
Turning to page six you can see that spot coke HFF in caustic soda prices remain near their year to date average prices.
Okay and operations our assets continued to deliver strong operating results in Q2.
Speaker #1: This is a good example of how gemalco, like CENTURY's elters, benefits from its strategic geographic locations close to its customers in short markets. The bauxite market also continued to experience turbulence, especially in Guinea, where operating licenses for several key producers have been suspended and, some cases, revoked.
Starting with CBRE. The plan had another excellent quarter producing strong operating results. Despite the very hot summer weather.
The plan also completed its planned major maintenance program and the carbon plant on schedule and without any impact on production levels.
The team and see where it continues to deliver quarter after quarter.
Speaker #1: These disruptions have led to continued support to seaborne bauxite prices, and in turn, the alumina price. Please remember that gemalco does not have exposure to seaborne bauxite prices as the plant is totally self-sufficient through its long-term mining licenses, another key strategic differentiator for the plant.
In Iceland Gruner, Tommy continued to ramp up <unk> production as it Optimizes performance during its first full year of operations.
Grid, you're telling me you did see a slight production volume headwind of about 3000 metric tons in the quarter as it experienced a failure in one of its electrical transformers.
Speaker #1: Turning to page six, you can see that spot coke, HFO, and caustic soda prices remain near their year-to-date average prices. Okay. On to operations.
While the plant was able to continue full operations with redundant equipment. It will run on slightly lower amperage until a replacement is onsite.
Speaker #1: Our assets continue to deliver strong operating results in Q2. Starting with SIBRI, the plant had another excellent quarter, producing strong operating results despite the very hot summer weather.
To Melco produced in targeted production levels in Q2 and remains focused on executing its major capital improvement program to return the plant to its nameplate capacity of close to $1 4 million tonnes.
Speaker #1: The plant also completed its planned major maintenance program in the carbon plant on schedule and without any impact on production levels. The team at SIBRI continues to deliver quarter after quarter.
The new steam power generation turbine that we discussed on our last call is now on site and the installation and integration process is underway at the plant.
We continue to believe the turbine will be operational in the first quarter of 2026, which will enable <unk> to be fully self sufficient in its power generation and lowest cost structure by reducing costly third party power purchases.
Speaker #1: In Iceland, Grundertongi continued to ramp its bill of Capital's production as it optimizes performance during its first full year of operations. Grundertongi did see a slight production volume headwind of about 3,000 metric tons in the quarter, as it experienced a failure in one of its electrical transformers.
At <unk> the strategic review process has gone well and we are now negotiating final terms.
We expect to conclude the strategic review process by the end of Q3.
Speaker #1: While the plant was able to continue full operations with redundant equipment, it will run on slightly lower amperage until a replacement is on site.
Just before I turn the call over to Pete I'd like to thank President Trump again for the significant actions that he and his administration have taken to restore American manufacturing and standup for American workers.
Speaker #1: Gemalco produced a geted production level in Q2 and remains focused on executing its major capital-improvement program to return the plant to its nameplate capacity of close to 1.4 million tons.
The section 232 tariffs have truly enabled a new future for the U S aluminum industry.
Speaker #1: The new steam power generation turbine that discussed in our last call is now on site, and the installation and integration process is underway at the plant.
And we believe a key part of that future will be our new smelter project. Once built the new smelter will be amongst the most modern and efficient smelters in the world and will represent the first new smelter built in the U S. In 50 years and will double the size of the existing U S industry, creating over 1000 full time direct jobs and over 5500 construction jobs.
Speaker #1: We continue to believe the turbine will be operational in first quarter of 2026, which will enable gemalco to be fully self-sufficient in its power generation and lower its cost structure by reducing costly third-party power purchases.
Combined with our second new smelter product announcements President Trump took office President Trump's policies have enabled the future, where we could see U S production triple by the end of the decade.
Speaker #1: At Hosville, the strategic review process has gone well, and we are now negotiating final terms. We expect to conclude the strategic review process by the end of Q3.
This is a monumental change from the last 25 years, where failed trading policies led to the destruction of American manufacturing and American jobs.
Speaker #1: Just before I turn the call over to Pete, I'd like to thank President Trump again for the significant actions that he and his administration have taken to restore American manufacturing and stand up for American workers.
And to further centuries commitment to use aluminum production. We are very pleased to announce today that we've made the decision to restart the last 50000 metric tons of capacity at Mount Holly and return the plant to full production.
Speaker #1: The Section 232 tariffs have truly enabled a new future for the US aluminum industry. And we believe a key part of that future will be our new smelter project.
This project will increase Mount Holly's production to over 220000 metric tons per year at nearly 100 full time U S manufacturing jobs at the plant and representing an investment of approximately $50 million.
Speaker #1: Once built, the new smelter will be amongst the most modern and efficient smelters in the world. It will represent the first new smelter built in the US in 50 years and will double the size of the existing US industry, creating over 1,000 full-time direct jobs, and over a 5,500 construction jobs.
We expect first hot metal from the incremental pods in the first quarter of 2026 and should be at our full 220000 ton run rate by the end of Q2.
Speaker #1: Combined with a second new smelter project announced since President Trump took office, President Trump's policies have enabled a future where we could see US production triple by the end of the decade.
We are confident that the combined efforts of Mount Holly team and our valued partners Santee Cooper will successfully complete this critical project and ensure the long term viability of this excellent plan.
Speaker #1: This is a monumental change from the last 25 years, where failed trade policies led to the destruction of American manufacturing and American jobs. And to further CENTURY's commitment to US aluminum production, we are very pleased to announce today that we have made the decision to restart the last 50,000 metric tons of capacity at Mount Holly and return the plant to full production.
Pete will walk you through more details on the project spend in a bit.
Centuries, Mount Holly expansion will increase total U S primary aluminum production by nearly 10% replacing imported metal.
This project along with our new smelter project would not have been possible without President Trump's section 232 program.
Speaker #1: This project will increase Mount Holly's to over 220,000 metric tons per year, a nearly 100 full-time US manufacturing jobs at the plant, and represent an investment of approximately $50 million.
We look forward to working with the Trump administration to continue to grow U S aluminum production to meet our national security needs.
Pete will now take you through our financial performance in more detail.
Speaker #1: We expect first hot metal from the incremental pots in the first quarter of 2026 and should be at our full 220,000-ton run rate by the end of Q2.
Thank you Jesse let's turn to slide seven and review our Q2 performance.
On a consolidated basis second quarter shipments increased to approximately 176000 tons, an increase of 4% sequentially, reflecting strong operational performance across all of our smelters.
Speaker #1: We are confident that the combined efforts of Mount Holly team, and our valued partners at Santee Cooper, will successfully complete this critical project and ensure the long-term viability of this excellent plant.
Speaker #1: Pete will walk you through more details on the project spend in a bit. CENTURY's Mount Holly expansion will increase total US primary aluminum production by nearly 10%, replacing imported metal.
Net sales for the quarter were $628 million, a $6 million decrease primarily due to lower third party alumina sales, partially offset by higher shipments and all in metal pricing.
Speaker #1: This project, along with our new smelter project, would not have been possible without President Trump's Section 232 program. We look forward working with the Trump administration to continue to grow US aluminum production to meet our national security needs.
For the quarter, we reported a net loss of $5 million or <unk> per share. Our adjusted net income was $30 million or <unk> 30 per share excluding exceptional items.
Speaker #1: Pete will now take you through our financial performance and more detail.
Adjusted EBITDA was $74 million for the quarter as we've discussed the section 232 aluminum tariffs were increased to 25% with no country exemptions on March 12, while.
Speaker #2: Thank you, Jesse. Let's turn to slide seven and review our Q2 performance. On a consolidated basis, second quarter shipments increased to approximately $176,000 tons, an increase of 4% sequentially, reflecting strong operational performance across all of our smelters.
While the Midwest premium began to increase from 25% tariffs in Q2 as a result.
Lower realized <unk> in Europe duty paid premium partially offset this benefit.
Speaker #2: Net sales for the quarter were $628 million, a $6 million decrease primarily due to lower third-party alumina sales, partially offset by higher shipments, and all-in metal pricing.
Moving on we continue to make progress on improving our balance sheet during the quarter.
Liquidity increased to $363 million up $24 million quarter over quarter, and our cash balance stood at $41 million.
Speaker #2: For the quarter, we reported a net loss of $5 million, or $5 cents per share, our adjusted net income was $30 million, or $30 cents per share, excluding exceptional items.
Net debt was relatively flat from the prior quarter at $446 million.
As you saw us announce in July we successfully completed the refinancing of our $250 million senior secured seven 5% notes with new 400 million senior secured notes at six and seven eights.
Speaker #2: Adjusted EBITDA was $74 million for the quarter, as we've discussed, the Section 232 aluminum tariffs were increased to 25%, with no country exemptions on March 12th.
Extending the maturity to 2032 and simplifying our debt structure.
Speaker #2: While Midwest premium began to increase from 25% tariffs in Q2 as a result, lower realized LME and European duty-paid premium partially offset this benefit.
We are pleased to substantially lower our borrowing costs, which speaks to the improvements in our business over the past several years.
Speaker #2: Moving on, we continue to make progress on improving our balance sheet during the quarter. Liquidity increased to $363 million, up $24 million quarter over quarter, and our cash balance stood at $41 million.
The use of proceeds will be to pay down our existing credit facilities across the U S and Iceland, including our Icelandic cast house facility.
Which will lower overall interest expense for the company.
Speaker #2: Net debt was relatively flat from the prior quarter at $446 million. As you saw us announce in July, we successfully completed the refinancing of our $250 million senior secured seven and a half cent notes with new $400 million senior secured notes at six and seven-eighths.
We will maintain our net debt level from before the transaction after we pay down the outstanding credit facility amounts.
Our priority to lower our debt and achieved a $300 million net debt target remains unchanged.
Overall, our Q2 results continued to reflect operational and capital discipline.
Speaker #2: Extending the maturity to 2032, and simplifying our debt structure. We are pleased to substantially lower our borrowing costs. Which speaks to the improvements in our business over the past several years.
Now, let's turn to page eight and I'll provide a breakdown of adjusted EBITDA results from Q1 to Q2.
Adjusted EBITDA for the second quarter decreased $4 million to $74 million.
Realized <unk> of $2542 per ton was down $11 versus prior quarter, while realized U S. Midwest premium of $850 per ton was up $247, reflecting the increase in section 232 aluminum <unk>.
Speaker #2: The use of proceeds will be to pay down our existing credit facilities across the US and Iceland, including our Icelandic Capital facility, which will lower overall interest expense for company.
Speaker #2: We will maintain our net debt level from before the transaction after we pay down the outstanding credit facility amounts. Our priority to lower our debt and achieve the $300 million net debt target remains unchanged.
Chris from 10% to 25% in March.
And our realized European duty paid premium decreased $115 per ton to $220.
Speaker #2: Overall, our Q2 results continue to reflect operational and capital discipline. Now let's turn to page eight, and I'll provide a akdown of adjusted EBITDA results from Q1 to Q2.
Higher Midwest premium is slightly offset by lower <unk> and European premium, which when combined together contributed an incremental $11 million compared to the prior quarter.
Speaker #2: Adjusted EBITDA for the second quarter decreased $4 million to $74 million. Realized LME of $2,542 per ton was down $11 versus prior quarter, while realized US Midwest premium of $850 per ton was up $247.
Energy costs were lower driven by improved market energy prices versus the prior quarter.
However in June we saw unusually warmer temperatures to start this summer and market energy prices ended the quarter higher than anticipated.
During the previously anticipated benefit from prior quarter.
Despite this jump in June energy prices drove a $2 million improvement quarter over quarter.
Speaker #2: Reflecting the increase in Section 232 aluminum tariffs from 10% to 25% in March. And our realized European duty-paid premium decreased to $115 per ton, to $220.
Alumina and our other key raw materials were an $8 million headwind in the quarter in line with our previously provided outlook.
Currency headwinds impacted the quarter by $4 million from our foreign operations, primarily from wages denominated in local currencies.
Speaker #2: Higher Midwest premium is slightly offset by lower LME and European premium which, when combined together, contributed an incremental $11 million compared to the prior quarter.
The weaker dollar drove the Icelandic krona to appreciate by more than 8% to the U S currency quarter over quarter.
Speaker #2: Energy costs were lower, driven by improved market energy prices versus the prior quarter. However, in June, we saw unusually warmer temperatures to start the summer, and market energy prices ended the quarter higher than anticipated.
We expect this to continue into the third quarter and I will discuss the impact of that on our Q3 projection in just a moment.
As Jesse discussed we completed the maintenance project in <unk> carbon plant and realize the opex headwind of $10 million in the quarter as anticipated.
Speaker #2: Muting the previously anticipated benefit from prior quarter. Despite this jump in June, energy prices drove a $2 million improvement quarter over quarter. Alumina and our other key raw materials were an $8 million headwind in the quarter, in line with our previously provided outlook.
We ended the quarter strong from an operational perspective, and saw a $5 million benefit from volume and mix.
Now, let's turn to slide nine and look at cash flow we.
Speaker #2: Currency headwinds impacted the quarter by $4 million, from our foreign operations. Primarily from wages denominated in local currencies. The weaker dollar drove the Icelandic krona to appreciate by more than 8% to the US currency quarter over quarter.
We began the quarter with $45 million in cash.
We funded $18 million of Capex in the quarter than wind primarily towards our ongoing investments at our <unk> business.
We also paid $14 million in normal interest in the quarter.
We will see a reduction in future interest payments as the recent refinancing decreased our coupon to $6 7 million.
Speaker #2: We expect this to continue into the third quarter, and I will discuss the impact of that on our Q3 projection in just a moment.
We continue to accrue 45 ex tax credits as of June 30.
Speaker #2: As Jesse discussed, we completed the maintenance project in SIBRI's carbon plant, and realized the OPEX headwind of $10 million in the quarter as anticipated.
We have a receivable of $195 million related to the full year 2023, 2024, and first half 2025 U S production.
Speaker #2: We ended the quarter strong from an operational perspective, and saw a $5 million benefit from volume and mix. Now let's turn to slide nine and look at cash flow.
We continue to expect to receive the FY2023 credit in cash imminently.
And the remaining FY 'twenty four amount over the next six to nine months.
Speaker #2: We began the quarter with $45 million in cash. We funded $18 million of CapEx in the quarter that went primarily towards our ongoing investments at our gemalco business.
Working capital was a build this quarter, but mostly a neutral impact for the first six months of the year.
We ended Q2 with $41 million in cash and strong liquidity in place to support our strategy going forward, including organic growth projects, such as Mt. Holly restart.
Speaker #2: We also paid $14 million in normal interest in the quarter. We will see a reduction in future interest payments as the recent refinancing decreased our coupon to six and seven-eighths.
As Jesse discussed we are really excited to announce the restart of our currently idled capacity at Mount Holly, bringing back 50000 tons of production to reach production volume of over 220000 tons per year.
Speaker #2: We continue to accrue 45x tax credits. As of June 30th, we have a receivable of $195 million related to the full year 2023, 2024, and first half 2025 US production.
The project spend will be approximately $50 million to restart those last 90 pods, which will almost be a straight line spend through the completion of the project by the end of Q2 2026.
Speaker #2: We continue to expect to receive the FY23 credit in cash imminently. And the remaining FY24 amount over the next six to nine months. Working capital was a build this quarter, but mostly a neutral impact for the first six months of the year.
To be clear, that's about 4 million per month over the next year.
We will also have some working capital to procure additional raw materials to support the energizing of these parts.
Speaker #2: We ended Q2 with $41 million in cash and strong liquidity in place to support our strategy going forward, including organic growth projects such as Mount Holly restart.
The additional working capital is approximately $15 million and will mostly come in 2026.
We expect to fund the project through our current balance sheet.
Speaker #2: As Jesse discussed, we are really excited to announce the restart of our currently idle capacity at Mount Holly, bringing back 50,000 tons of production to reach production volume of over 220,000 tons per year.
The financial benefits of the project are incremental volume and favorable margin and fixed cost absorption.
At spot pricing levels, we expect the project to nearly payback on our investment by the end of 2026.
Speaker #2: The project spend will be approximately $50 million to restart those last 90 pots, which will almost be a straight-line spend through the completion of the project by the end of Q2 2026.
Now, let's look ahead for the next 90 days at current realized prices. We expect Q3 adjusted EBITDA in the range of $115 million to $125 million.
Speaker #2: To be clear, that's about $4 million per month over the next year. We will also have some working capital to procure additional raw materials to support the energizing of these pots.
For Q3, the lagged <unk> of 2495 per ton is expected to be down about $45 versus Q2 realized prices.
Speaker #2: The additional working capital is approximately $15 million and will mostly come in 2026. We expect to fund the project through our current balance sheet.
The Q3 lagged U S Midwest premium of $1 $450 per ton is up $600 versus Q2, and partially reflects the section 232 aluminum tariff increase from 25% to 50%.
Speaker #2: The financial benefits of the project are incremental volume and a favorable margin, and fixed cost absorption. At spot pricing levels, we expect the project to nearly pay back our estment by the end of 2026.
The European delivery premium is expected to be $200 per ton in Q3 are down about $20 per ton.
Speaker #2: Now let's look ahead to the next 90 days. At current realized prices, we expect Q3 adjusted EBITDA in the range of $115 to $125 million.
Taken together the lagged <unk> and delivery premium changes are expected to have a $15 million increase to Q3, adjusted EBITDA when compared with Q2 levels.
Speaker #2: For Q3, the lagged LME of $2,495 per ton is expected to be down about $45 versus Q2 realized prices. The Q3 lagged US Midwest premium of $1,450 per ton is up $600 versus Q2, and partially reflects the Section 232 aluminum tariff increase from 25% to 50%.
U S energy prices remain slightly elevated in Q3, thus far but we have started to see historical levels return in August.
Lower oil prices will also benefit the price of heavy fuel oil a key input at our <unk> refinery.
At these prices total energy headwinds should reduce adjusted EBITDA by $5 million.
Coke pitch and caustic prices have all remained steady in recent months and are expected to be flat in Q3.
Speaker #2: The European delivery premium is expected to be $200 per ton in Q3, or down about $20 per ton. Taken together, the lagged LME and delivery premium changes are expected to have a $50 million increase to Q3 adjusted EBITDA when compared with Q2 levels.
We continue to expect further headwinds from currency into the third quarter at our foreign operations on the U S dollar impact on wages and other local currency denominated expenses.
We are estimating a $5 million impact in Q3.
As previously discussed we completed the carbon plant maintenance project at our Sebree, Kentucky facility in Q2 as.
Speaker #2: US energy prices remain slightly elevated in Q3 thus far. But we have started to see historical levels return in August. Lower oil prices will also benefit the price of heavy fuel oil, a key input at our gemalco refinery.
As anticipated and expect our Q3 opex to improve by $5 million to $10 million.
Volume and mix are expected to decrease by zero to $5 million from Q2 levels.
Speaker #2: At these prices, total energy headwinds should reduce adjusted EBITDA by $5 million. Coke, pitch, and caustic prices have all remained steady in recent months and are expected to be flat in Q3.
We also include the estimated hedge and tax impacts to help model our business.
We expect a $5 million to $10 million headwind from realized hedge settlements.
And as zero to five tax expense, both flowing through the Q3, P&L and impacting adjusted net income and adjusted earnings per share.
Speaker #2: We continue to expect further headwinds from currency into the third quarter at our foreign operations on the US dollar impact on wages and other local currency-denominated expenses.
As a reminder, our appendix details the full hedge book and continues to show the vast majority of ome and regional premium volumes are exposed to market prices.
Speaker #2: We are estimating a $5 million impact in Q3. As previously discussed, we completed the carbon plant maintenance project at our SIBRI Kentucky facility in Q2, as anticipated, and expect our Q3 OPEX to improve by 5 to 10 million dollars.
Finally, we are very excited to deliver results in such a favorable market environment.
Because of our contractual lags on our revenues the strong price environment. We see today will continue to drive our earnings growth beyond Q3 and into Q4.
Speaker #2: Volume and mix are expected to decrease by 0 to 5 million from Q2 levels. We also include the estimated hedge and tax impacts to help model our business.
With spot LNG prices exceeding $2600 per ton and Midwest premium has 72 per pound or approximately $600 per ton.
Speaker #2: We expect a 5 to 10 million headwind from realized hedge settlements and a 0 to 5 tax expense. Both flowing through the Q3 P&L and impacting adjusted net income and adjusted earnings per share.
We are extremely well positioned to capitalize on this momentum and achieve additional earnings growth in Q4.
Speaker #2: As a reminder, our appendix details the full hedge book and continues to show the vast majority of LME and regional premium volumes are exposed to market prices.
We thank you for your time and look forward to taking your questions.
Speaker #2: Finally, we are very excited to deliver results in such a favorable market environment. Because of our contractual lags on our revenues, the strong price environment we see today will continue to drive our earnings growth beyond Q3 and into Q4.
We will now begin the question and answer session. If you would like to ask a question. Please press.
Star of about one I guess telephone keypad.
Any reason you would like to remove a question. Please press star followed by Kim I can ask a question press star one.
As a reminder, if you are using a speaker phone. Please remember to pick up your handset before asking a question.
Speaker #2: With spot LME prices exceeding $2,600 per ton and Midwest premium at $72 cents per pound, or approximately $1,600 per ton, we are extremely well-positioned to capitalize on this momentum and achieve additional earnings growth in Q4.
Thanks for taking our questions are interesting.
The first question is from the line of Curt <unk> with BMO you May proceed.
Hi, Thank you for taking my questions, maybe starting on Mount Holly.
Can you talk a bit about your sourcing plans for raw materials, especially alumina.
Speaker #2: We thank you for our time. And look forward to taking your questions.
Sure Hi, Gotcha and thanks for the question.
Yes, we will be able to service the additional aluminum alumina needs for Mt. Holly within our already set alumina book for 2026, So we don't see any changes necessary to our current alumina sourcing planning in order to serve the additional alumina needs for the smelter you can continue to use the.
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Speaker #3: If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, press star one.
Speaker #3: As a reminder, if you are using a speakerphone, please ember to pick up your headset before asking a question. We'll pause it briefly while your questions are registered.
Alumina information that we include in our slide deck on page 18 to model our alumina exposure for 2026.
Speaker #3: The first question is from the line, of Cat Jensick with BMO. You may proceed.
And then maybe just on the 45 ex credit I'm, assuming that that incremental 50000 tons is going to get that benefit as well is that fair and how much could it be if that's true.
Speaker #4: Hi. Thank you for taking my questions. Maybe starting on Mount Holly, can you talk a bit about your sourcing plans for raw materials, especially alumina?
Yes, that's correct.
Speaker #1: Sure. Hi, Katya. And thanks for the estion. Yeah, we'll be able to service the additional alumina needs for Mount Holly within our already set alumina book for 2026.
So you can just take those incremental tons and compare that to our existing tons and our existing credit, which we said should average in the $70 million to $80 million range.
You shouldn't get sort of a pro forma amount of additional 45 ex credit for those additional 2000 tons yes.
Speaker #1: So we don't see any changes necessary to our current alumina sourcing planning in order to serve the additional alumina needs for the smelter. You can continue to use the alumina information that we include in our slide deck on page 18 to model our alumina exposure for 2026.
Kathy I would just add it's Pete.
Obviously 45 X is just the U S production. So just look at the U S production volume for that.
I know you mentioned that the manufacturing product foreseeable it still had $195 million.
Speaker #4: And then maybe just on the 45x credit, I'm assuming that that incremental 50 thousand tons is going to get that benefit as well. Is that fair?
Some of that around 60 million was expected. This quarter can you talk about maybe is there any are there any delays or when could we see some of that credit actually.
Speaker #4: And how much could it be if that's true?
And cash.
Yes, Thanks, Scott, It's Pete again as I mentioned in my prepared remarks, we currently continue to expect the FY2023 amounts imminently and.
Speaker #1: Yeah, that's correct. So you can just take those incremental tons and compare that to our existing tons and our existing credit, which we've said should average in the 70 to 80 million range.
And expect our FY 'twenty four amount over the next six to nine months.
Speaker #1: And you should get sort of a pro forma amount of additional 45x credit for those additional 50,000 tons.
So just just to elaborate we do have some visibility into the tax return.
Speaker #5: Yeah. And Katya, I was just add, it's Pete. Obviously, 45x is just the US productions. So just look at the US production volume for that.
We have a certain level of engagement with the IRS and we can see that our return is in the final stages of processing and Thats for the FY2023 a model.
We did just file or FY 'twenty for return and that's why I said, we expect that one over the next six to nine months.
Speaker #4: And then I know you mentioned that the manufacturing credit receivable is still at $195 million. I saw some of that around 60 million was expected this quarter.
That should be a good timeframe going forward.
As we process towards Alex credits in the future.
Speaker #4: Can you k about maybe is there any are there any delays or when could we see some of that credit actually in cash?
Okay. Thank you I'll hop back into the queue.
Thanks Scott.
Speaker #1: Yeah, thanks, Katya. It's Pete. Again, you know as I mentioned in my prepared remarks, we currently continue to expect the FY23 amount imminently. And expect our FY24 amount over the next six to nine months.
The next question is from the line of Nick <unk> with B Riley you May proceed.
Okay.
Thanks, operator, good afternoon, everyone.
Okay.
Mount Holly announcement here.
Speaker #1: So just to elaborate, we do have some visibility into the tax return and we have a certain level of engagement with the IRS. And we can see that our return is in the final stages of processing.
I read in the release that some final details are subject to a definitive agreement with Santee Cooper and then also some economic incentives provided by Berkeley County, and South Carolina were you able to give us a sense for those incentives or how much. They ultimately played into the decision.
Speaker #1: And that's for the FY23 amount. We did just file our FY24 return. And that's why I id we expect that one over the next six to nine months.
Those are not public next so we can talk about those at this time.
Speaker #5: And that should be a good timeframe going forward. As we process 45x credits in the future.
It is obviously helpful and important for the restart and the state of South Carolina.
Speaker #4: Okay. Thank ou. I'll hop back into the queue.
Speaker #1: Thanks, Katya.
Has been a very good partner and making sure that those important manufacturing jobs stay in the state. So we're very thankful to the work they've done.
Speaker #3: The next question is from the line of Nick Giles with BYE. You may proceed.
But both the power contract and those incentives while we have agreements in principle, we'll just need to get nailed down over the coming weeks don't anticipate any problems there.
Speaker #6: Thanks, operator. Good afternoon, everyone. Guys, nice to see the Mount Holly announcement here. I read in the release that some final details are subject to the definitive agreement with Santee Cooper.
And again Im just like to thank our partners at Santee, who we've been partners with for.
For nearly 50 years now.
Speaker #6: And then also some economic incentives provided by Berkeley County and South Carolina. We were able to give us a sense for those incentives or how much they ultimately played into the decision?
Hi.
Got it.
Maybe next one just was hoping to get an update on hospital.
How should we think about your appetite to continue to.
Speaker #1: Those are not public, Nick. So we can't just talk about those at this time. It is obviously helpful and important for the restart and the state of South Carolina has been a very good partner in making sure that those important manufacturing jobs stay in the state.
Pursue a deal with a developer versus a potential restart.
Yeah.
That process as I said continues but we are now in final negotiation. So we do make are we are making good progress.
Speaker #1: So we're very thankful to the work they've done. But both the power contract and those incentives, while we have agreements in principle, we'll just need to get nailed down over the coming weeks.
And we would expect that we will finish the entire strategic review process, which includes both those negotiations and also our analysis on a restart over the next quarter and be able to really.
Speaker #1: Don't anticipate any problems there. And again, I would just like to thank our partners at Santee who we've been partners with for nearly 50 years now at Mount ly.
Make a decision on go forward for hospital at that time.
But the process continues to be good and constructive Nick.
Speaker #6: Got it. Maybe next one. Just was hoping to get an update on Hosville. How should we think about your appetite to continue to pursue a deal with a developer versus a potential restart?
We continue to have positive engagement and those negotiations are moving forward well.
Good to hear.
Just one more if I could.
Can you remind us just how should we think about milestones.
Speaker #1: Yeah. That process, as I said, continues. But we are now in final negotiations. So we do make or we are making good progress. And we would expect that we'll finish sort of the entire strategic review process, which includes both those negotiations and also our analysis on restart over the next quarter.
With regard to the new smelter would thanks selection be kind of the first announced spin.
Is that kind of.
Could we see something there before year end or should we look to 2026 for that to progress further.
Yes, Nick the first milestone or the next milestone that youll see will likely be that site selection, which is tied to coming to an agreement on the energy. So youll see those two announcements likely at the same time.
Speaker #1: And be able to really make a decision on go forward for Hosville. At that time. But the process continues to be good and constructive, Nick.
Speaker #1: We continue to have positive engagement in those negotiations are moving forward well.
And while I won't sort of handicap the timeframe. There. We do continue to work actively on that as you might imagine that is one of the more complex parts of developing the project given the large amount of energy thats needed and given the significant state incentive packages that will also play a role in citing that project.
Speaker #6: Good to hear. Just one more if I could. You know, can you remind us just how should we think milestones with regard to the new smelter?
Speaker #6: I mean, would site selection be kind the first announcement? You know, is that kind of a could we see something there before year-end? Or should we look to kind of 2026 for that to progress further?
But so I'll just say we continue to work hard on it make making positive progress and we will come back to you as soon as we can but thats. The next announcement. The next stage would be to do the next phase of engineering work site specific answer I'll give you another six to nine months of engineering time, So again like we are.
Speaker #1: Yeah, Nick. The first milestone or the next milestone that you'll see will likely be that site selection, which is tied to coming to an agreement on the energy.
On the last call you probably low teens in the second half of 2026 before you see any major spending on the project on the capital side.
Speaker #1: So you'll see those two announcements likely at the same time. And while I won't sort of handicap the timeframe there, we do continue to work actively on that.
Got it very helpful guys.
Guys I appreciate the update and continued best of luck.
Speaker #1: As you might imagine, that is one of the more complex parts of developing the project. Given the large amount of energy that's needed and given the significant state incentive packages that will also play a role in citing that project.
Thank you Nick Thanks, Nick.
There are no questions much to at this time so as a reminder, it is star one to ask a question.
Speaker #1: But so I'll just say we continue to work hard on it, making positive progress. And we'll come back to you as soon as we can.
Speaker #1: But that's the next announcement. The next stage would be to do the next phase of engineering work, which will be site-specific. Which will give you another six to nine months of engineering time.
The next question is from the line of Canada, Johnson with BMO you may begin.
Dan.
Hi, Thank you for taking my follow up maybe just quickly you mentioned that in <unk>, we're not going to fully see the benefits from the Midwest premium as it stands currently and the LMA aluminum prices also at higher levels than what's baked into your <unk> guide.
Speaker #1: So again, like we said on the last call, you're probably looking in the second half of 2026 before you see any major spending on the project on the capital side.
Speaker #6: Got it. Very helpful. Well, guys, appreciate the update. And continue best of luck.
We assume your sensitivities and D.
Current spot prices.
Speaker #1: Thank ou, Nick.
Speaker #5: Thanks, Nick.
Is it fair to assume that your EBIT generation could be in the range of $140 million to $150 million.
Speaker #3: There are no questions registered at this time. So as a reminder, it is star one to ask a question. The next question is from the line of Katyja Jensick with BMO.
Thanks, Cassia, Greg Great question.
Let me walk you through it I think I think you hit around but as I mentioned in my remarks, because of the contractual lags, we expect that earnings growth beyond Q3 and into Q4 at these spot levels. So today spot LMA is sitting just above 2600, a ton and if you compare that to our Q3.
Speaker #3: You may begin.
Speaker #4: Hi. Thank you taking my follow-up. Maybe just quickly, you mentioned that in two queue, we're not going to fully see the benefit from the Midwest premium as it stands currently.
Realized expectation of about 2500, that's about $100 per ton increase so if we do realize that all of me for a full quarter as you probably already been in the sensitivities, that's about $46 million for a year for $100 per ton change or about $11 million to $12 million.
Speaker #4: And the LME aluminum price is also at higher levels than what's baked into your two queue guide. So if we assume your sensitivities and the current spot prices, is it fair to assume that your EBITDA generation could be in the range of 140 to 150 million?
Per quarter, that's just for <unk>.
We also see spot Midwest premium of 72 today.
Speaker #1: Thanks, Katya. Great question. Let me walk you it. I think you hit it right on the head. But as I mentioned in my remarks, because of the contractual lags, we expect that earnings growth beyond Q3 and into Q4 at these spot levels.
Nearly 600 per ton and again, if you compare that against our Q3 realized expectation today of $14 50 per ton.
Thats approximately 150 per ton better so again looking at the sensitivities if you took that.
Speaker #1: So today, you know spot LME is sitting just above $2,600 a ton. And if ou compare that to our Q3 realized expectation of about $2,500, that's about $100 per ton increase.
When compared against the realized price for a full quarter spot against realized.
You should expect to see another $15 million uplift on Midwest premium into Q4 from the Q3 levels. So together about $12 million in <unk> and another $15 million of Midwest premiums. So I think that takes you right about into the range that you were that you were quoting.
Speaker #1: So if we do realize that LME for a full quarter, as you probably already did in sensitivities, that's about, you know, it's $46 million for a year for $100 per ton change.
Perfect. Thank you so much.
Speaker #1: Or about $11, 12 million per quarter. That's just for LME. We also see spot Midwest premium of $72 cents today. That's nearly $1,600 per ton.
The next question is from the line of Nick <unk> with B Riley Securities you may begin.
Speaker #1: And again, if you compare that against our Q3 realized expectation today of $1,450 per ton, that's approximately $150 per ton better. So again, looking at the sensitivities, if you took that and compared it against the realized price for a full quarter spot against realized, you should expect to see other $15 million uplift on Midwest premium into Q4 from the Q3 levels.
Okay.
With all that's going on in the U S. I didn't want to leave your Iceland footprint out here can you just speak to progress at <unk> on the cast house.
How have operation has been going there and then can you also speak to just kind of value added premiums in Europe.
What are your expectations today.
Anything would be helpful. There. Thanks.
Sure, Yes, Cathouse project continues to go well, it's a great brand new cast house and a lot of people at the U S assets are dealt with our brand new shiny cast house that we have.
Speaker #1: So together, you know, about $12 million of LME and another $15 million of Midwest premium. So I ink that takes you right about into the range that you were that you were quoting.
Speaker #4: Perfect. Thank you so much.
In Iceland.
And as you might imagine as you start up a new cast house.
There is.
Speaker #3: The next question is from the line of Nick Giles with BYE Securities. You may begin.
A ramp up period, where you are both ramping up production and also sort of dialing in your processes and getting a lot of new people up to speed on what really is a skilled.
Speaker #5: With all that's ing on in the US, I didn't want leave your Iceland footprint out here. Can you just speak to progress that Grundertongi on the Capital?
Workforce to cast billets.
So that process continues to go well to continue to make progress and we're really excited to kind of go into the 2026.
Speaker #5: I mean, how have operations been going there? And then can you also speak to just kind of value-added premiums in Europe? You know, what are your ectations today?
Bill its season.
Really running on.
On all cylinders. So so lots of progress there good things to come in.
Speaker #5: Anything would be helpful there. Thanks.
Speaker #1: Sure, Nick. Yeah, Capital's project continues to go well. It's great brand new Capital. A lot of people at the US assets are jealous with that brand new shining Capital that we have.
In the market and the market has continued to accept that new bill It with open arms people people are liking, what they're seeing and I think the quality has been really good.
So all good on that front more generally on the market side.
Speaker #1: In Iceland, and as you might imagine, as you start up a new Capital, there is a ramp-up period where you're both ramping production and also sort of dialing in our processes and getting a lot of new people up to speed on what really is a skilled workforce to Capitalists.
Europe has been weaker than what we've seen in the U S.
Of course, and Thats been persisting for a number of quarters now.
We have more recently seen.
Billet premiums firming a bit.
As the European duty paid premium has gone down on commodity grade aluminum the billet premiums have actually.
Speaker #1: So that process continues to go well. They continue to make progress. And we're really excited to kind of go into the 2026 build season really running on all cylinders.
Expanded a bit to fill in the gap. So that's been a positive development. There obviously good for us with the additional volumes will be bringing in.
Speaker #1: So lots of progress there. Good things to come. And the market has continued to accept that new billet with open arms. People are liking what they're eing.
Next year.
So all is looking pretty good there.
It is summer in Europe today, So we'll wait for summer to end and come out ready to go into the fall season and into 2026.
Speaker #1: And I think the quality has been really good. So all good on that front. More generally, on the market side, you know Europe has been weaker than what we've seen in the US.
Great to hear.
Maybe just one more on <unk> can you remind us of.
What should we be penciling in for Capex there.
Speaker #1: Of course, and that's been persisting for a number of quarters now. We have more recently seen billet premiums firming a bit as the European duty-paid premium has gone down on commodity-grade aluminum.
In 2026 as it relates to incremental production.
Yeah.
Yes, Nick it's Pete again.
We do break out sustaining an investment in capital in our appendix for the whole business.
Speaker #1: The billet premiums have actually expanded a bit to fill in the gap, so that's been a positive development there. Obviously, it's good for us with the additional volumes we'll be bringing in.
But I can just kind of give you a sense of what sustaining and investment Capex, we expect for <unk> in 2006.
Speaker #1: Next year, so I was looking pretty good there. It is summer in Europe today. So we'll it for summer to end. And come out ready to go into the fall season and into 2026.
It's basically for our 55% interest about $10 million to $15 million and next year for sustaining as well as the investment so as Jessica said earlier and we are continuing our investment program at <unk>, mainly right now it's the steam turbine generator, but we have identified.
Speaker #6: Great to hear. Maybe just one more on Gemalco. Can you remind us of what we should be penciling in for CapEx there in 2026, as it relates to incremental production?
Some other projects to get the business back to its nameplate capacity and get it back to the second quartile of the cost curve, but for right now and we will update this again on the Q4 call as we always do but I would expect to have that repeat in 2006, so again $10 million to $15 million in sustaining as well as $10 million to $15 million in inverse.
Speaker #1: Yeah, Nick, it's Pete again. We do break out sustaining and investment capital in our appendix for the whole business. But I can just kind of give you a sense of what sustaining and investment CapEx we expect for gemalco in '26.
<unk> etch milestone next year.
Okay.
Very clear.
Thanks again, guys all the best.
Thanks, Nick.
Speaker #1: It's basically for our 55% interest, about 10 to 15 million in next year for sustaining. As well as the investment. So as Jesse said earlier, you know we are continuing our investment program at gemalco.
Thank you there are currently no questions registered at this time I'll pass the call back over to management team for any further remarks.
Okay. Thank you and thanks to everyone for joining and we'll talk to you guys again on the Q3 call. Thanks a lot.
Speaker #1: Mainly right now, it's the steam turbine generator. But we have identified some other projects to get the business back to its nameplate capacity. And get it back to the second quartile of cost curve.
Thank you that concludes today's conference call. We appreciate your participation.
Speaker #1: But for right now, and we'll update this again on the Q4 call like we always do. But I would expect to have that repeat in '26.
Have a wonderful day and at this time you may now disconnect your line.
Speaker #1: So again, 10 to 15 million in sustaining as well as 10 to 15 million in investment at gemalco next year.
Speaker #6: Very clear. Thanks again, guys. All the best.
Speaker #1: Thanks, Nick.
Speaker #3: Thank you. Yeah, I currently no estions registered. So at this time, I'll pass the call back over to our management team for any further remarks.
Speaker #1: Okay. Thank you. And thanks to everyone for joining. And we'll talk to you guys again on the Q3 call. Thanks lot.