Business Overview and History
Century Aluminum Company (CENX) is a global producer of primary aluminum, operating facilities in the United States and Iceland. With a focus on innovation, sustainability, and operational excellence, the company has established itself as a key player in the ever-changing aluminum industry.
Founded in the 1990s, Century Aluminum has grown to become one of the largest primary aluminum producers in the world. The company's operations are centered around several smelting facilities, including those in Hawesville and Sebree, Kentucky, as well as its Grundartangi facility in Iceland. In its early years, Century Aluminum focused on establishing its presence in the U.S. aluminum market by building and acquiring smelting facilities.
The company faced significant challenges in its early days, particularly due to the volatility of the aluminum market. Aluminum prices can fluctuate significantly based on global supply and demand dynamics, and in the 2000s, Century Aluminum had to weather periods of low aluminum prices that put pressure on its profit margins. In response, the company implemented cost-cutting measures and explored new growth opportunities.
A major milestone in Century Aluminum's history came in 2008 when it acquired a majority stake in the Grundartangi aluminum smelter in Iceland. This strategic move allowed the company to diversify its production footprint and take advantage of more stable power costs compared to its U.S. operations, as the Icelandic facility is powered by renewable hydroelectric and geothermal energy.
Throughout its history, Century Aluminum has faced various regulatory and trade challenges. In 2018, the implementation of Section 232 tariffs on imported aluminum by the U.S. government had both positive and negative impacts on the company's operations. While Century Aluminum advocated for these tariffs to protect domestic aluminum production, it also had to navigate the resulting changes in the trade landscape.
Despite these challenges, Century Aluminum has demonstrated resilience and a commitment to innovation. The company has consistently invested in upgrading its facilities, expanding its product portfolio, and exploring new technologies to improve its environmental footprint. These efforts have helped Century Aluminum maintain its position as a leading global producer of primary aluminum.
Financial Performance and Ratios
Century Aluminum's financial performance has been marked by periods of volatility, reflective of the cyclical nature of the aluminum industry. In 2024, the company reported net sales of $2.22 billion and a net income of $320.7 million, a significant improvement from the previous year. The company's annual operating cash flow was -$24.6 million, with annual free cash flow at -$106.9 million.
For the most recent quarter, Century Aluminum reported revenue of $630.9 million and net income of $45.2 million. The company experienced year-over-year revenue growth of 23.2%, driven by higher LME and regional premiums, which offset lower aluminum volume and product mix.
Century Aluminum's gross profit increased by $93.1 million in 2024, driven by favorable raw material price realizations, $33.2 million attributable to the Inflation Reduction Act manufacturing production credit, and favorable power price realizations. This was partially offset by unfavorable volume and product mix and higher operating expenses. The company also recognized a $245.9 million bargain purchase gain related to the Jamalco acquisition in 2024.
Liquidity
The company's liquidity position remains strong, with $32.9 million in cash and cash equivalents and $211.6 million in available credit facility capacity as of December 31, 2024. Century's current ratio stands at 1.73, indicating a healthy ability to meet its short-term obligations. The quick ratio is 0.57, suggesting a moderate level of immediate liquidity. The company's debt-to-equity ratio of 0.73 indicates a moderate level of leverage, which could be a potential concern during periods of industry downturns.
Operational Highlights and Strategic Initiatives
One of Century Aluminum's key strengths is its focus on operational efficiency and cost control. The company's Sebree smelter, for example, achieved record-breaking operational performance in 2024, highlighting the team's commitment to excellence. Additionally, the Jamalco acquisition has provided the company with a stable supply of alumina, a critical raw material, helping to mitigate price volatility.
Century Aluminum's operations are organized into one reportable segment - primary aluminum. The company's smelting facilities have a combined annual production capacity of approximately 1.02 million tonnes per year (tpy), of which 308,000 tpy was curtailed as of December 31, 2024. In 2024, the company produced approximately 690,000 tonnes of primary aluminum.
The Grundartangi facility in Iceland, with a production capacity of 320,000 tpy, is Century's most modern facility. It produces standard-grade aluminum ingot as well as value-added primary foundry alloy. In 2024, Century completed construction of a new billet casthouse at Grundartangi, increasing its annual capacity to produce value-added billet and primary foundry alloys to 150,000 tonnes and 120,000 tonnes, respectively.
The Hawesville facility in Kentucky, with a capacity of 250,000 tpy, was fully curtailed in August 2022 due to high energy costs and declining LME prices. Century continues to explore strategic alternatives for this smelter. The Sebree facility, also in Kentucky, has a capacity of 220,000 tpy and produces standard-grade aluminum that can be cast into sow and value-added products like billet. The Mt. Holly facility in South Carolina, with a capacity of 230,000 tpy, produces standard-grade aluminum and several value-added products, including billet and foundry products.
Looking ahead, Century Aluminum is actively pursuing strategic initiatives to bolster its competitive position. The company is making progress on the development of a new, state-of-the-art aluminum smelter in the United States, which is expected to double the country's primary aluminum production capacity. This project, supported by a $500 million grant from the U.S. Department of Energy, underscores Century's long-term commitment to the domestic aluminum industry. The company has completed the second phase of engineering work and is nearing completion of site selection and energy supply negotiations for this project.
Furthermore, Century Aluminum is exploring opportunities to expand its value-added product offerings, such as billet and foundry alloys, to better serve its customer base and capture higher margins. These strategic moves are aimed at diversifying Century's revenue streams and enhancing its resilience in the face of evolving market dynamics. The company is also evaluating a potential restart of their Mt. Holly smelter, with a decision expected in the near future.
Industry Trends and Competitive Landscape
The global aluminum industry has been navigating a complex landscape, marked by supply chain disruptions, geopolitical tensions, and shifting demand patterns. Century Aluminum has demonstrated its ability to adapt to these challenges, leveraging its operational agility and strategic partnerships to maintain its competitive edge.
The recent strengthening of U.S. Section 232 tariffs on aluminum imports from 10% to 25% has provided a significant tailwind for domestic producers like Century. The company noted that each $0.01 increase in Midwest Premium equates to an additional $9 million in annualized EBITDA, although this impact will mostly be realized in Q2 2025 due to the pricing lag. This change has helped to level the playing field and support the domestic industry's growth.
Century Aluminum's focus on sustainability and low-carbon aluminum production positions it as an attractive supplier for customers seeking environmentally responsible solutions. The company offers low-carbon aluminum products under its Natur-Al brand, aligning with growing market demand for sustainable materials.
However, the industry continues to face headwinds, such as volatility in energy and raw material prices, as well as the threat of overcapacity and global trade disputes. Century Aluminum's ability to navigate these challenges will be crucial in determining its long-term success.
Risks and Uncertainties
As with any industry, Century Aluminum faces a range of risks and uncertainties that could impact its future performance. These include:
1. Commodity price volatility: The price of aluminum, a globally traded commodity, can be highly volatile, affecting the company's profitability. 2. Energy cost fluctuations: Electrical power represents a significant portion of Century's cost structure, and changes in energy prices can significantly impact its bottom line. 3. Regulatory and trade policy changes: Shifts in trade policies, such as tariffs and quotas, can have a material effect on the company's operations and competitive positioning. 4. Environmental and sustainability concerns: As the industry focuses on reducing its carbon footprint, Century must continue to invest in sustainable practices to remain a preferred supplier. 5. Labor relations: Maintaining stable and productive labor relations is critical, as the company's operations rely on a skilled workforce. 6. Customer concentration: Century Aluminum's customers are primarily a small number, with Glencore accounting for 59.1% of 2024 consolidated sales, creating potential risks if there are changes in these key relationships.
Outlook and Conclusion
Despite the challenges facing the aluminum industry, Century Aluminum remains well-positioned to navigate the evolving landscape. The company's focus on operational excellence, strategic investments, and diversification of its product portfolio position it for long-term success.
For Q1 2025, Century Aluminum is guiding for adjusted EBITDA in the range of $75 million to $85 million. For the full year 2025, the company expects shipments of 700,000 tonnes, sustaining capital expenditures of $45-$50 million, and investment capital expenditures of $25-$30 million. These projections reflect the company's confidence in its operational capabilities and market positioning.
As the global demand for aluminum continues to grow, driven by trends in transportation, construction, and emerging technologies, Century Aluminum is poised to capitalize on these opportunities. With its commitment to sustainability, strong customer relationships, and innovative mindset, the company is well-equipped to strengthen its position as a leading global producer of primary aluminum.
Century Aluminum's strategic initiatives, including the potential new smelter project and the evaluation of restarting the Mt. Holly facility, demonstrate its proactive approach to growth and market adaptation. By leveraging its operational expertise, investing in value-added products, and maintaining a focus on cost control and efficiency, Century Aluminum is positioning itself for sustainable growth in the dynamic aluminum industry.