Noranda Aluminum Holding Corporation Reports First Quarter 2010 Results

FRANKLIN, Tenn.--(BUSINESS WIRE)--Noranda Aluminum Holding Corporation (“Noranda”, or the “Company”) announced its consolidated financial results for first quarter 2010.

Important metrics and events included:

*First quarter 2010 revenues were $301.5 million, operating income was $7.6 million and net loss was $0.1 million.

*Operating cash flows provided $100.6 million of cash during first quarter 2010, including $58.7 million from hedge terminations and $10.0 million of cash used for working capital.

*Adjusted EBITDA was $57.0 million for first quarter 2010, compared to $7.6 million in first quarter 2009 and $28.3 million in fourth quarter 2009.

*Integrated cash cost for primary aluminum production was $0.72 per pound compared to $0.85 for first quarter 2009 and $0.78 for fourth quarter 2009.

*New Madrid smelter returned to producing at full capacity at the end of March 2010.

*Total indebtedness at March 31, 2010 was $728.3 million. Cash and cash equivalents balances totaled $31.5 million. At April 15, 2010, the monetization of fixed-price aluminum hedges would have generated proceeds totaling $90.1 million.

*Senior revolving credit facility had no outstanding borrowings and $216.2 million available borrowing capacity at March 31, 2010.

First Quarter 2010 Results

For first quarter 2010, the Company reported operating income of $7.6 million, compared to an $85.2 million operating loss in first quarter 2009. The improved results reflect higher first quarter 2010 LME prices and Midwest Premiums, as well the return of the New Madrid smelter to full capacity by the end of the quarter. First quarter 2009 operating results included goodwill and intangible asset impairment charges of $43.0 million, and $4.1 million of unrecovered costs associated with the January 2009 ice storm.

*Consolidated sales in first quarter 2010 increased to $301.5 million, 83.5% over first quarter 2009.

First quarter 2010 primary aluminum product sales to third-party customers increased to $107.0 million, 59.5% over first quarter 2009. Volume increases associated with operating the smelter at a higher production level had a $16.1 million favorable impact on segment sales. Favorable pricing trends contributed $23.8 million to increased segment revenue, as the average realized Midwest Transaction Price (“MWTP”) per pound for primary aluminum products was $1.04 in first quarter 2010 compared to $0.70 in first quarter 2009.

First quarter 2010 consolidated revenues included $14.9 million and $53.9 million of third-party bauxite and alumina sales, respectively.

First quarter 2010 flat-rolled product segment revenues increased to $125.8 million, 23.9% over first quarter 2009. Volume increases associated with increased demand contributed $16.4 million to the segment revenue increase. Favorable pricing trends, particularly a higher LME, generated $12.1 million of the flat-rolled products segment revenue increase.

*Compared to first quarter 2009, operating income reflects $56.6 million of improvements in sales margin (sales minus cost of sales). Approximately half of the improvements were due to the higher LME and average realized Midwest transfer price discussed above. The remaining increase was due to the effects of operating New Madrid at higher production levels relevative to capacity in first quarter 2010 than in first quarter 2009, combined with the favorable effects of Noranda’s cost control measures. The integrated net cash primary aluminum production cost was $0.72 per pound in first quarter 2010, compared to $0.85 per pound in first quarter 2009.

*Selling, general and administrative costs increased $6.8 million to $29.0 million in first quarter 2010 compared to first quarter 2009 due primarily to the inclusion of Gramercy and St. Ann, acquired in August 2009, in first quarter 2010 results.

For first quarter 2010, net income was essentially breakeven, as $7.6 million of operating income and $1.8 million of hedging gains were offset by $9.2 million of interest expense. In first quarter 2009, the Company reported a $44.3 million net profit, as an $85.2 million operating loss and $45.3 million impairment on the Company’s equity-method investments in Gramercy and St. Ann were offset by $152.2 million of debt repurchase gains and $45.1 million of hedge gains.

Liquidity

Operating cash flows provided $100.6 million in first quarter 2010 compared to $75.2 million provided during the comparable 2009 period.

*First quarter 2010 Adjusted EBITDA was $57.0 million, a $49.4 million improvement over first quarter 2009. This improvement was due to the combined effects of rising LME prices and Midwest premiums, stronger demand, effective productivity initiatives, and progress in returning our New Madrid smelter to full capacity.

*Proceeds from hedge terminations contributed $58.7 million to operating cash flow in first quarter 2010, $8.3 million more than in first quarter 2009.

*The Company funded $10.0 million of working capital growth during first quarter 2010, due to the increase level of volume and the process of returning New Madrid to full production capacity. In first quarter 2009, working capital reductions provided $15.4 million of operating cash flow, as operations contracted due to the recession and the smelter outage.

During first quarter 2010, the Company invested $13.0 million in capital expenditures, compared to $8.9 million the comparable prior quarter. This increase was principally due to the inclusion of Gramercy and St. Ann in the Company’s consolidated results in 2010.

During first quarter 2010, the Company used $215.9 million of cash to pay off the revolver portion of the senior credit facility. In that same period, the Company made a $7.5 million cash flow sweep payment against the term B portion of its senior credit facility. The Company ended first quarter 2010 with total indebtedness of $728.3 million and $31.5 million in cash and cash equivalents. At March 31, 2010, the Company had no outstanding draws on our senior revolving credit facility and $216.2 million of available borrowing capacity. In addition, as of April 15, 2010, the monetization of all the Company’s fixed-price aluminum hedges would have generated proceeds totaling $90.1 million.