Century Aluminum Co 2026 Q2 Earnings Call

Please go ahead. Thank you, operator.

Good afternoon, everyone, and welcome to the second quarter conference call. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer, and Peter Trpkovski, Executive Vice President and Chief Financial Officer. After our prepared comments, we will take your questions. As a reminder, today's presentation is available on our website at www.centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation FD. Turning to slide two, please take a moment to review the cautionary statements with respect to forward-looking statements and non-GAAP financial measures in today's discussion. With that, I'll hand the call to Jesse.

Thank you, Chad, and thanks to everyone for joining. I'll start today by reviewing our second quarter operational performance, including the completion of the Mount Holly expansion and the restart of Potline 2 at Grundartangi, before turning to the continued strong market conditions we are operating in today. Pete will then walk you through our Q2 results and Q3 outlook before I conclude the call with the latest on our new Oklahoma smelter project and on President Trump's important new executive order incentivizing companies like Century that are building new American aluminum capacity. Before we get into the quarter, I want to thank the Century team across all of our sites for another strong quarter of safety performance. Over the last six months, our teams have executed two major capital projects on two continents, all while welcoming hundreds of new employees into our plants, and they did it safely.

That is not luck. It is a product of planning, discipline, and a workforce that looks out for one another. Thank you to each of you. Turning to page four, when we spoke with you in May, I told you that by the end of July, for the first time in over a decade, all Century assets should be operating at full capacity. I'm very proud to report today that our team has delivered on that commitment. At Mount Holly, we completed the restart of the final 90 pots in late June, on time and on budget, returning the plant to full capacity. This project increases total U.S. primary aluminum production by nearly 10% and has added over 150 full-time American manufacturing jobs to the plant.

We were proud to host U.S. Commerce Secretary Howard Lutnick and South Carolina Attorney General Alan Wilson to the plant last week to celebrate this major achievement. At Grundartangi, we completed the restart of Line 2 at the end of July, roughly six months ahead of the timeline we first shared with you last October. It is worth taking a step back for a moment. 10 months ago, we had just lost a pot line in Iceland following an unprecedented transformer failure, and Mount Holly was running at only 75% capacity. Today, both plants are producing at full capacity into a market that needs every unit we can produce. That turnaround was accomplished by our operations and technical teams working across time zones in parallel on two of the most complex projects this company has undertaken. Congratulations to all of you.

This is a remarkable achievement, and you should be proud of it. Staying with page four in operations, we saw strong performance across the portfolio in the second quarter while executing this level of major project work. At Mount Holly, the ramp-up progressed on schedule throughout the quarter, with the plant reaching full production at the end of June. As a reminder, because of the incremental nature of the restart, Q2 reflects only a partial quarter of the expanded run rate. We will see the full benefit of these tons for the first time in Q3. Note that we have seen some instability at the plant following the restart. This is not unusual following a restart of this size. The team is working through it, and the impact is included in your outlook.

Note that we do not expect any impact beyond Q3, and the project remains fully on track to repay its capital costs by the end of 2026. At Grundartangi, the Line 2 restart went smoothly, and the plant is now at close to full production. As we discussed last quarter, we are running Line 2 at slightly reduced amperage until our new replacement transformers arrive and are installed in the fourth quarter. We are being deliberately conservative here to avoid putting undue stress on the repaired units, and the team has managed that balance well. At Jamalco, we brought our new power generation turbine, known as TG4, online at the beginning of August. This is an important milestone. TG4 allows us to run Jamalco on entirely self-generated energy, eliminating expensive, and as we learned last winter, sometimes unreliable purchases from the Jamaican grid.

The full benefit will phase in over the balance of the year and is a significant step change in the Jamalco cost structure. Nice work by the Jamalco team in getting this one across the line. As we discussed last quarter, the refinery does continue to see lower quality bauxite from certain of its mining areas. The team has a revised mining plan in place and is working through it, but we expect this will take another couple of quarters to fully implement. In the meantime, it remains a modest headwind to Jamalco's costs and volumes, Pete has reflected that in our outlook. Finally, Sebree delivered another excellent quarter. This plan has now strung together quarter after quarter of top-tier operating and financial performance, and it continues to set the standard for the rest of the portfolio. Great work again by the entire Sebree team.

Before I hand things to Pete, let's spend a few minutes on the market, starting on page five. The short version is that we are bringing these additional tons from Mount Holly and Grundartangi into as strong a market as this industry has seen in a very long time. Following the limited reopening of the Strait of Hormuz, prices have now returned to pre-conflict levels. LME is approximately $3,250 per ton today, the U.S. Midwest Premium is approximately $1.11 per pound, and the European duty paid premium is approximately $500 per ton. The market continues to evaluate what is happening in the Gulf. Restarts have only been announced at EGA, and that is a welcome development for our friends there.

We have not yet seen restart announcements in Bahrain or Qatar, and I would be careful about assuming that the production levels in the Gulf as a whole will come back quickly. Restarting curtailed hot lines is slow and difficult work. We know that better than most, having just done it twice ourselves, and these plants are doing it while their raw material supply chains are still not fully normalized. We do not have good visibility into how long it will take, nor can any of us say with confidence what further disruption to transit through the Strait would do to those timelines. On the demand side, the U.S. picture is as strong as we have seen it in years. Monday's ISM Manufacturing report for July came in well above expectations, the seventh consecutive month of expansion and the strongest reading since May of 2022.

That is a strong environment our customers are operating in. We are seeing it directly when we speak with them. Aluminum demand is being driven by the power and data infrastructure build-out by commercial aerospace and by defense and rearmament programs, as well as the continued reshoring of extrusion and downstream fabrication following President Trump's April action closing the valuation loopholes in the Section 232 program. When you take the supply and demand picture together, we continue to expect a global deficit of around one million tons this year, and we would expect deficit conditions to continue in 2027. With Middle Eastern smelters producing material less metal in 2026 than they otherwise would have, a large portion of that shortfall is now locked in, no matter how the restarts go from here. You cannot make up lost tons in a market that was already short.

The result is visible in inventories. Global days of consumptions held in inventory have now fallen through the post-financial crisis lows we have referenced on prior calls and are approaching all-time lows. With deficits persisting through the balance of this year and into next, we expect that drawdown to continue. There is very little cushion left anywhere in the system. In a market with no slack, the value of secure domestic units goes up, and with the completion of both restarts, Century now has more of them to sell in both the U.S. and EU markets. Pete will now take you through our second quarter financial performance and Q3 outlook.

Thank you, Jesse. I will begin with the review of our Q2 financial performance and provide an update on the Mount Holly expansion and restart of Grundartangi Line 2, along with an update on cash flow for the business. Lastly, I'll share our Q3 outlook. Turning to slide eight. On a consolidated basis, second quarter shipments totaled approximately 131,000 tons, a 6% increase from the prior quarter due to an additional production from the restart of Line 2 in Iceland and the Mount Holly expansion. Net sales for the quarter were $752 million, a $103 million increase sequentially, primarily due to higher realized LME and regional premiums, as well as higher shipments. For the quarter, we report a net income of $249 million or $2.39 per share. Our adjusted net income was $257 million or $2.46 per share, excluding exceptional items.