Century Aluminum Company (NASDAQ: CENX) — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; the supplied filing text does not provide a clear standalone fourth-quarter results breakdown. Figures are in U.S. dollars unless noted.
Business context and operations
Century produces primary aluminum at smelters in the United States and Iceland and operates a carbon-anode facility in the Netherlands. It reported one segment. Annual production capacity was approximately 1.016 million tonnes, with about 307,000 tonnes curtailed at year-end; 2022 production was approximately 771,000 tonnes.
- Hawesville was fully curtailed in the third quarter because of historically high energy costs and declining aluminum prices. Mt. Holly’s restart was completed in the second quarter, restoring operations to about 75% of capacity.
- In 2022, the average LME aluminum price was $2,707 per tonne, compared with $2,475 in 2021. The Midwest premium averaged $657 per tonne and the European Duty Paid premium averaged $466.
Financial performance and liquidity
| Metric | 2022 | 2021 |
|---|---|---|
| Net sales | $2,777.3 million | $2,212.5 million |
| Gross profit | $46.7 million; 1.7% margin | $124.2 million; 5.6% margin |
| Operating income (loss) | $(150.2) million | $66.0 million |
| Net loss | $(14.1) million | $(167.1) million |
| Loss per share, basic and diluted | $(0.15) | $(1.85) |
| Cash from (used in) operating activities | $25.9 million | $(64.7) million |
| Capital expenditures and property purchases | $86.3 million | $83.0 million |
Sales rose about 25.5%, mainly reflecting higher LME and regional-premium realizations and improved product mix; lower shipment volume partly offset those gains. Gross profit fell by $77.5 million, principally due to unfavorable raw-material and power-price realizations. A $159.4 million Hawesville impairment contributed to the operating loss. Net income also reflected a $197.1 million gain on forward and derivative contracts, versus a $212.4 million loss in 2021. The company reported $47.4 million of income-tax expense, compared with a $30.6 million benefit in 2021.
At year-end, cash and cash equivalents were $54.3 million; current assets were $677.8 million and current liabilities were $410.7 million. Total debt was $527.7 million, up from $451.2 million. Management reported total liquidity of approximately $245 million, comprising cash, $100.7 million of net availability under revolving credit facilities, and up to $90 million available under the Vlissingen facility; that facility had no borrowings at year-end. Shareholders’ equity was $399.3 million.
Material changes, outlook and risks
- Hawesville’s curtailment resulted in an impairment charge reducing the asset group to an estimated fair value of $15.0 million. Restart timing depends on market conditions, including energy and aluminum prices; management gave no firm restart date.
- The Grundartangi billet casthouse project, with planned capacity of 150,000 tonnes, was expected to start production in the first quarter of 2024. The company said it was progressing on time and on budget, subject to market conditions. Project financing is available through a facility of up to $130 million; $50 million was drawn by year-end.
- Management estimated 2023 capital spending of approximately $24 million, excluding the Grundartangi casthouse project. It said cash from operations and financing activities should cover operations and business needs over the next 12 months; this is a forward-looking assessment, not a guarantee.
- Customer concentration is significant: Glencore accounted for about 60% of 2022 sales and Southwire about 12%. Glencore beneficially owned 42.9% of common stock and all outstanding Series A Convertible Preferred Stock. The company had agreements to sell a substantial portion of 2023 production to Glencore.
- Key exposures include aluminum-price volatility, market-based power costs and availability, raw-material supply and pricing, curtailment and restart costs, take-or-pay commitments, debt and covenant requirements, labor relations, environmental and climate regulation, and currency movements. The company also disclosed a February 2022 cybersecurity intrusion that disrupted its network; the filing does not provide a clear quantified financial impact.
- A subsequent event: a subsidiary agreed in January 2023 to sell approximately 133 acres near Mt. Holly for about $28.5 million, subject to customary conditions.
The company paid no common dividends in 2022 or 2021 and did not plan cash dividends in the foreseeable future. The independent auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Whether Hawesville remains curtailed, and the market, power-contract and funding conditions required for any restart.
- Actual costs, funding and commissioning progress for the Grundartangi casthouse, including whether production begins as planned.
- Liquidity availability, borrowing-base changes, debt service and compliance with facility covenants as aluminum prices and production change.
- Customer concentration and the terms and duration of Glencore sales, supply, financing and derivative arrangements.
- The realized impact of energy and raw-material prices, hedges and any further curtailments on margins and cash generation.
- Completion and proceeds of the Mt. Holly land sale, and any material developments related to the cybersecurity incident or contingencies.