Century Aluminum Company (NASDAQ: CENX) — FY2023 Form 10-K
Reporting period: Year ended December 31, 2023. This is an annual filing; the supplied text does not provide a separate set of fourth-quarter financial results. Dollar amounts are in millions unless stated otherwise.
Business context
Century produces primary aluminum at smelters in the United States and Iceland, owns a carbon-anode facility in the Netherlands, and acquired a 55% interest in Jamaica’s Jamalco bauxite mine and alumina refinery on May 2, 2023. The company reported one segment. Its results are sensitive to aluminum prices and premiums, power and alumina costs, production volumes, and product mix.
Annual primary-aluminum capacity was approximately 1.016 million tonnes, including 307,000 tonnes curtailed at year-end. FY2023 production was approximately 690,000 tonnes. Hawesville remained fully curtailed; Mt. Holly operated at about 75% capacity.
Financial and operating performance
| Metric | FY2023 | FY2022 |
|---|---|---|
| Net sales | $2,185.4 | $2,777.3 |
| Gross profit | $91.9 | $46.7 |
| Gross margin | 4.2% | 1.7% |
| Operating income (loss) | $31.8 | $(150.2) |
| Net loss | $(52.3) | $(14.1) |
| Net loss attributable to Century stockholders | $(43.1), or $(0.47) per share | $(14.1), or $(0.15) per share |
| Net cash from operating activities | $105.6 | $25.9 |
| Capital expenditures | $95.0 cash outflow | $86.3 cash outflow |
Net sales fell $591.9 million, mainly from lower LME and regional premium realizations ($384.6 million unfavorable) and lower volume ($376.7 million unfavorable), partly offset by alumina sales and pricing, including Jamalco. The average LME aluminum price fell to $2,252 per tonne from $2,707; the average Midwest premium fell to $512 from $657, and European Duty Paid premium to $277 from $466.
Gross profit improved by $45.2 million, reflecting favorable power and raw-material price realizations and $56.5 million of Section 45X production credits, partly offset by weaker metal pricing and volume/product mix. The 2022 comparison included a $159.4 million Hawesville impairment charge. FY2023 also included a $61.8 million net loss on forward and derivative contracts, compared with a $197.1 million gain in 2022; this contributed to the year’s net loss despite positive operating income.
Liquidity, debt, and capital
At December 31, 2023, cash and cash equivalents were $88.8 million, and reported available liquidity was $312.5 million, comprising cash and $223.7 million of unused credit-facility availability. Total debt was approximately $479.2 million, down from $527.7 million a year earlier. Debt includes $250 million of 7.5% senior secured notes and $86.3 million of 2.75% convertible notes, both due 2028, as well as revolving and project-related borrowings. The $104.3 million Grundartangi casthouse facility is due in 2029.
Operating cash flow increased year over year, primarily due to working-capital timing. Investing cash use was $57.8 million; the company received $25.7 million from a Mt. Holly land sale, whose proceeds are restricted to capital expenditures. Financing cash use was $13.0 million. Management said available cash and financing were expected to cover operations and business needs for the next 12 months. Estimated 2024 capital spending, excluding the casthouse project, is $20–$30 million.
Material changes, outlook, risks, and unusual items
- Jamalco acquisition: Century acquired its 55% interest for $1.00 and consolidated results from May 2, 2023. Jamalco contributed $150.3 million of revenue and a $41.1 million loss for the included period. A June 2023 power-generation equipment failure reduced Jamalco production by approximately 84,000 tonnes and had an estimated $30.4 million impact; equipment returned to full capacity by late October, though inefficiencies continued into early 2024. Insurance recovery remained under review.
- Purchase accounting and restatement of release balances: The audited year-end balance sheet reflects preliminary Jamalco purchase accounting, including a $273.4 million deferred bargain purchase gain. After its February 2024 earnings release, Century adjusted certain December 31 balances: the deferred gain increased by about $92.2 million, noncontrolling interest decreased by about $85.8 million, and other asset and liability balances were revised. The filing says the net adjustment reduced total liabilities and equity by about $6.4 million. No other reporting dates changed.
- Production and projects: The Grundartangi billet casthouse, with capacity to convert up to 150,000 tonnes of existing production into billet, was expected to begin production in Q1 2024. The company expects the project to increase value-added output; it provides no specific earnings guidance. A new Mt. Holly power contract runs through December 2026 and supports current operations, with potential to restart the remaining curtailed 25% subject to economics. Hawesville restart depends on aluminum prices, energy costs, and other market conditions.
- Tax credit: Century recorded $59.3 million of Section 45X credits as a receivable and reductions to operating expenses, based on proposed regulations. Final rules could change the estimate and eligibility.
- Financial controls: Management and the auditor identified a material weakness in controls over Jamalco acquisition accounting, specifically allocation between noncontrolling interest and the preliminary bargain purchase gain. The auditor gave an adverse opinion on internal control over financial reporting, while issuing an unqualified opinion on the financial statements. Management said it redesigned controls in Q1 2024; purchase accounting remained preliminary.
- Principal risks: Aluminum and regional-premium volatility, market-priced power at Kentucky facilities, energy supply disruptions, concentrated customer exposure, and restart/project execution risks. Glencore accounted for 73.8% of FY2023 consolidated sales, owns 42.9% of common stock and all outstanding preferred stock, and is also a lender to Vlissingen. Other risks include Jamalco integration, joint-venture governance and permitting, labor negotiations, environmental obligations, hedging and collateral needs, and the ability to realize tax benefits. No common dividends were declared in 2023 or 2022; none are planned for the foreseeable future.
Most important facts for investors to verify
- Final Jamalco purchase-price allocation and remediation of the disclosed material weakness.
- Actual Jamalco insurance proceeds, operating recovery, and labor-contract outcomes.
- Grundartangi casthouse start-up, spending, output, and realized product premiums.
- Liquidity and covenant headroom if aluminum prices or borrowing-base availability decline, and refinancing or repayment needs for near-term and 2028 debt.
- Final Section 45X rules and the amount and timing of credits ultimately realized.
- Glencore sales concentration and related-party commercial and financing terms.