US aluminum sheet maker Wise posts $53.93 million net loss in Q3

US aluminum sheet maker Wise Metals on Monday posted a $53.93 million net loss for the third quarter, compared with a $10.47 million net loss in Q3 2005.

The Q3 2006 net loss includes a $22 million unfavorable impact for FAS 133 (accounting for derivative instruments and hedging activities) and a $25 million LIFO adjustment due to rising metal costs.

The quarter saw the effects of increased pricing, widening scrap spreads and improved results at Wise Recycling, which was offset by a $13.5 million effect of aluminum price caps and increased interest expense of $2.2 million.

"The adjusted EBITDA of $4.8 million includes a loss due to metal ceilings of $13.5 million," said Wise Metals Group Chairman and CEO David F D'Addario. "In other words, the adjusted EBITDA before the ceiling effect would have been $18.3 million, which is approximately the same as what the second quarter would have been without the effect of the metal caps," commented D'Addario.

Metal price caps or ceilings have been an industry standard in the aluminum can industry and set a maximum price for the aluminum component that is passed through to customers through the industry chain. The price ceiling suppressed the sales price and resulting revenue for the third quarter by
about $13.5 million and is expected to have a similar but reduced impact in the fourth quarter due to reduced volumes, offset somewhat by higher metal prices, saids Wise.

Sales increased by about 34% to $272.1 million for the third quarter and 18% to $771.6 million for the nine months ended September 30, compared with year-ago figures, principally due to higher metal prices.

Shipments of Wise Metals Group's aluminum beverage can stock, other rolled aluminum products and scrap in the third quarter totaled 203.8 million lb, compared with 173.2 million for the same period in 2005, an increase of 18%. Shipments of scrap at Wise Recycling increased 26% in the third quarter versus a year ago, while at Wise Alloys, shipments of commercial products, or common alloy, increased 166% and can sheet shipment volumes increased 3%. For the nine months, shipments totaled 581.1 million lb, compared with 569.2 million lb for the same period in 2005, a 2% increase.

Wise added that it had completed a financing transaction with the Employees' Retirement Systems of Alabama and the Teachers' Retirement System of Alabama to provide funding of up to $30 million with an initial tranche of $14.9 million funded on Monday. The remaining tranche is set to fund in early
December.