Fourth Quarter 2013 Highlights and Recent Events
- Average realized Midwest transaction price per pound shipped was $0.90, compared to $1.01 in fourth quarter 2012
- Net Cash Cost was $0.78 per pound, compared to $0.82 per pound in fourth quarter 2012
- Excluding special items, EPS was a $0.12 loss in fourth quarter 2013 and reported EPS was a $0.26 loss
- Total fourth quarter 2013 segment profit was $20.8 million compared to $30.9 million in fourth quarter 2012
- Operating activities provided $22.0 million of cash flow compared to $33.3 million in fourth quarter 2012
- Initiated CORE projects expected to generate over $30 million of recurring run-rate savings for 2014 and filed rate design petition that, if approved, would reduce smelter power cost by over $0.08 per pound annually
Full Year 2013 Highlights
- Average realized Midwest transaction price per pound shipped was $0.95, compared to $1.01 in 2012
- Net Cash Cost was $0.83 per pound, compared to $0.81 per pound in 2012
- Excluding special items, EPS was a $0.59 loss in 2013 and reported EPS was a $0.70 loss
- Total segment profit was $93.1 million, compared to $134.7 million in 2012
- Operating activities provided $62.8 million of cash flow for the year, compared to $18.9 million in 2012
- Cash and cash equivalents totaled $79.4 million and total available liquidity was $196.4 million, calculated as of December 31, 2013
Franklin, Tennessee - February 19, 2014 - Noranda Aluminum Holding Corporation ( NOR ) today reported results for fourth quarter and full year 2013 and provided an update on the Company`s progress on key productivity projects.
"We delivered solid fourth quarter performance in our key operating metrics. We generated positive cash flow, and made meaningful progress on key productivity projects ," said Layle K. (Kip) Smith, Noranda`s President and Chief Executive Officer. "We saw solid fourth quarter demand for our primary value-added products. Our fourth quarter performance was a strong finish to 2013, which was a year of stable overall demand, focused cost control, and improved reliability and operating effectiveness. Through these efforts, in 2013 we offset all cost inflation and partially offset the effects of lower LME prices."
"For 2014, we will build on the foundation established in 2013," Smith continued. "The demand outlook for our key aluminum products is favorable, supporting stable volumes and product premiums. We continue to believe in the industry`s long-term fundamentals despite continuing low LME prices. We are committed to the actions necessary to create a sustainable cost structure, including the February 2014 petition to reduce New Madrid`s power rate and the December 2013 company-wide workforce reduction. With these and other actions we have created a pathway for a step-change in our financial performance to support both sustainable operations and accretive investments in our integrated platform in the coming year."
Progress on 2014-2016 CORE Productivity Program
The Company summarized its progress towards its $225 million CORE Productivity Program for 2014-2016:
- On February 12, 2014, the Company filed with the Missouri Public Service Commission ("the Commission") a petition to change the rate design for Ameren Missouri customers. If approved, the rate change would reduce the Company`s integrated net primary aluminum cash cost by over 8 cents per pound compared to New Madrid`s 2013 electricity rates.
- Since announcing it`s three year CORE productivity targets, excluding any effects of the rate design petition, the Company has initiated activities expected to generate over $30 million of recurring annual run-rate savings over the course of 2014. These actions included a December 2013 workforce reduction expected to generate approximately $15 million of annual savings.
Fourth Quarter 2013 Results
Sales for fourth quarter 2013 were $313.2 million, compared to $339.9 million in third quarter 2013 and $332.9 million in fourth quarter 2012.
- Sequentially (comparing fourth quarter 2013 to third quarter 2013), sales decreased $26.7 million, or 8%, largely due to lower shipments in the Flat-Rolled Products segment. The combined effects of planned mill turnarounds and seasonal destocking by customers caused flat-rolled product shipments to decrease by 23% compared to third quarter, with a $34.0 million negative impact on sales. This decrease was partially offset by higher external shipments in the Bauxite, Alumina, and Primary Aluminum segments, each reflecting the improved operating reliability and stable demand that has been demonstrated throughout 2013.
- Year-over-year (comparing fourth quarter 2013 to fourth quarter 2012), sales decreased $19.7 million, or 6%, due primarily to lower realized prices in the Alumina, Primary Aluminum, and Flat-Rolled segments, where prices are linked to the LME aluminum price. Improved year-over-year operating reliability in the Alumina and Primary Aluminum segments, were offset by lower year-over-year volumes in the Flat-Rolled Products segment, due to the effects of planned fourth quarter 2013 mill turnarounds and heavier fourth quarter customer destocking in 2013.
Total fourth quarter 2013 segment profit was $20.8 million, compared to $11.0 million in third quarter 2013 and $30.9 million in fourth quarter 2012.
- Sequentially, segment profit increased largely due to a $16.9 million seasonal reduction in Primary Aluminum segment electricity costs as peak power rates are not in effect in the fourth quarter as they are in the third. This reduction was partially offset by the impact of lower aluminum prices and by lower shipment volumes in the Flat-Rolled Products segment.
- Year-over-year, segment profit decreased, driven primarily by the $23.4 million impact of lower aluminum prices, as well higher natural gas prices and electricity costs, which had a combined negative impact totaling $5.1 million. The Company offset a substantial portion of these negative drivers through productivity improvements ($12.6 million from improved production rates and usage rates for key inputs), improved non-LME linked pricing ($5.0 million on external bauxite shipments and product premiums for primary and flat-rolled aluminum), and lower prices for key commodity inputs of $2.8 million.
Reported fourth quarter 2013 results were a $17.7 million net loss ($0.26 loss per diluted share), compared to an $18.2 million third quarter 2013 net loss ($0.27 loss per diluted share) and $4.2 million fourth quarter 2012 net income ($0.06 income per diluted share).
Excluding special items, Noranda`s fourth quarter 2013 results were a net loss of $8.5 million ($0.12 loss per diluted share), compared to a net loss of $20.3 million ($0.30 loss per diluted share) in third quarter 2013 and a net loss of $7.8 million ($0.12 loss per diluted share) in fourth quarter 2012.
- The $11.8 million sequential decrease in net loss (excluding special items) primarily reflects a $9.8 million ($6.0 million after-tax) increase in segment profit combined with lower depreciation expense and favorable changes in LIFO-basis inventory adjustments.
The $0.7 million year-over-year increase in net loss (excluding special items) primarily reflects a $10.1 million decrease in segment profit ($6.2 million after-tax) and higher interest expense, offset by the impacts of lower depreciation expense, and favorable changes in LIFO-basis inventory adjustments.
Full Year Results
Sales for the year ended December 31, 2013 were $1.3 billion, compared to $1.4 billion in the year ended December 31, 2012. The $51.4 million decrease in sales, was primarily attributable to $48.5 million of lower realized prices in the Alumina, Primary Aluminum, and Flat-Rolled Products segments, primarily due to lower LME aluminum prices in 2013. Strong operational performance and stable demand in the Company`s Bauxite, Alumina, and Primary Aluminum segments drove improved shipment levels for those products. In the Flat-Rolled segment, the effects of planned fourth quarter 2013 mill turnarounds and heavier fourth quarter customer destocking in 2013 contributed to the year-over-year revenue decline.
Total segment profit decreased $41.6 million, to $93.1 million in 2013 from $134.7 million in 2012. Lower aluminum prices had a negative $49.5 million impact, and higher electricity and natural gas prices had a combined negative impact of $33.5 million. The Company offset a substantial portion of these negative drivers through productivity improvements ($22.8 million from improved production rates and usage rates for key inputs), improved non-LME linked pricing ($15.5 million on external bauxite shipments and product premiums for primary and flat-rolled aluminum), and lower prices for key commodity inputs ($6.5 million).
|Three months ended|
|December 31, 2013|| September 30, |
|December 31, 2012|
|Key Primary Aluminum segment metrics:|
|Average realized Midwest transaction price (per pound)||$||0.90||$||0.92||$||1.01|
|Net Cash Cost (per pound shipped)||$||0.78||$||0.89||$||0.82|
|Total primary aluminum shipments (pounds, in millions)||150.5||149.0||145.1|
|Segment profit (loss) (in millions):|
|Total integrated upstream business segment profit||19.2||4.9||27.8|
|Total segment profit||$||20.8||$||11.0||$||30.9|
Bauxite . The Bauxite segment reported a $1.0 million segment profit in fourth quarter 2013, compared to $2.3 million in third quarter 2013 and a loss of $4.1 million in fourth quarter 2012.
- Sequentially, the $1.3 million decrease in Bauxite segment profit reflects the $0.7 million impact of lower selling prices and a $0.5 million increase in demurrage costs associated with weather-related ship loading delays.
- Year-over year the $5.1 million improvement in segment performance was driven by a $4.8 million favorable impact of improved reliability and efficiency in the segment`s mining and shipping operations and a $1.0 million impact from improved third party pricing. These favorable effects were partially offset by lower internal selling prices and higher diesel fuel prices.
Alumina . The Alumina segment reported a $2.8 million segment profit in fourth quarter 2013, compared to $3.9 million in third quarter 2013 and $5.8 million in fourth quarter 2012.
- Sequentially, Alumina segment results reflect a $0.9 million unfavorable impact of lower LME-linked prices, with production rates and shipping levels remaining stable on a quarter-to-quarter basis.
- Year-over-year Alumina segment profit decreased by $3.0 million, due to a $7.8 million negative impact from lower LME-linked prices and the $2.2 million impact of higher natural gas prices. The Company was able to offset the majority of these negatives with $4.8 million of productivity improvements in the form of higher volumes and improved usage rates for key inputs.
Primary Aluminum . Segment profit in fourth quarter 2013 was $14.9 million, compared to a loss of $1.1 million in third quarter 2013 and segment profit of $24.8 million in fourth quarter 2012.
- Sequentially, Primary Aluminum segment profit increased by $16.0 million, primarily reflecting the benefit of relief from normal seasonal peak power rates in third quarter 2013. There are no seasonal peak power rates in first or fourth quarters.
- Year-over-year Primary Aluminum segment profit decreased by $9.9 million, driven largely by a net $14.7 million negative impact of lower LME-linked prices and the $2.9 million negative impact from higher electricity costs. The Company was able to offset a large portion of these negative drivers through productivity improvements ($2.9 million from improved production rates and usage rates for key inputs), higher product premiums on value-added products of $3.3 million, and lower prices for key commodity inputs of $1.5 million.
Net Integrated Aluminum Cash Cost . Net Cash Cost in fourth quarter 2013 was $0.78, compared to $0.89 in third quarter 2013 and $0.82 in fourth quarter 2012.
- Sequentially, Net Cash Cost decreased by $0.11 per pound, reflecting the benefit of relief from normal seasonal peak power rates in the Primary Aluminum segment.
- Year-over-year Net Cash Cost decreased by $0.04 per pound, as a $0.06 per pound benefit of improved production rates and usage rates for key inputs and a $0.03 per pound benefit from improved value-added product premiums outpaced the combined $0.05 per pound negative effects of higher electricity rates and lower LME-linked prices for alumina sales.
Flat-Rolled Products . Segment profit in fourth quarter 2013 was $8.4 million, compared to $13.6 million in third quarter 2013 and $10.3 million in fourth quarter 2012.
- Sequentially, the decrease in segment profit was due to lower shipment volumes, partially offset by $1.0 million of mix-related improvements in fabrication premiums.
- Year-over-year segment profit decreased due to lower shipment levels and the negative affects of metal timing in a period of declining prices.
Corporate. Corporate expenses in fourth quarter 2013 were $6.8 million, compared to $7.5 million in third quarter 2013 and $7.2 million in fourth quarter 2012. Sequentially, corporate expenses were lower due primarily to lower consulting and other professional fees in fourth quarter 2013 compared to third quarter 2013.
Liquidity and Capital Resources
At December 31, 2013, the Company had $79.4 million of cash and cash equivalents, a $15.5 million increase from September 30, 2013. The table below summarizes the key drivers behind changes in the Company`s cash positions for each period:
|Three months ended|
|(in millions)|| December 31, |
| September 30, |
|December 31, 2012|
|Prepaid expenses and other||(3.9||)||(2.6||)||(2.8||)|
|Taxes (paid) refunded||2.4||(0.1||)||0.1|
|Operating working capital||24.2||25.3||24.9|
|Cash provided by operating activities||22.0||26.1||33.3|
|Cash used in investing activities||(15.6||)||(16.1||)||(27.6||)|
|Cash provided by (used in) financing activities||9.1||(3.9||)||(3.5||)|
|Change in cash and cash equivalents||$||15.5||$||6.1||$||2.2|
Fourth quarter 2013 financing activities include $11.0 million of borrowings from a third party financing agreement in place but undrawn since December 2012. This agreement allows the Company to borrow up to $20.0 million to fund capital improvements related to port expansion and railing improvements designed to increase shipping capacity at the St. Ann bauxite mining operation.
There were no borrowings outstanding as of December 31, 2013 under the Company`s asset-based revolving credit facility, and available borrowing capacity under the facility was $117.0 million, calculated as of December 31, 2013. Together with $79.4 million of cash and cash equivalents, the Company`s total available liquidity at the end of 2013 was $196.4 million.
NORANDA ALUMINUM HOLDING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in millions, except per share data and where noted)
|Three months ended December 31,||Year ended December 31,|