Power sales help Kaiser trim losses

Hannelore Sudermann - Staff writer

Third-quarter losses at Kaiser Aluminum were not nearly as severe as year-ago totals, the company said Thursday.

For the quarter ended Sept. 30, losses were $16.8 million on earnings of $537.1. That's an improvement over the same quarter in 1999, when losses totaled $39.2 million on sales of $520.3 million.

In a conference with industry analysts Thursday, Ray Milchovich, Kaiser president and chief executive, said much of the loss could be attributed to special items, including expenses for bringing Steelworkers back to work in five plants after the two-year labor dispute.

One-time items in quarterly returns included "gains on the sale of power and real estate as well as charges for asbestos, the labor settlement and the return of Steelworkers to work and the restructuring that in large part is the result of that," Milchovich said.

On the plus side, Kaiser took advantage of soaring power prices by curtailing aluminum smelting in the Northwest and selling the power.

On the other side, the company faces 115,000 asbestos-related claims with a net liability of $110 million.

Excluding special items, income was $2.1 million, Milchovich said.

He said liquidity improved, adding, "Kaiser ended the period with $236 million available under its credit agreement -- and no outstanding borrowings. In addition, the company's balance sheet showed $46 million in cash."

In the fourth quarter, the company anticipates higher shipments of raw alumina as the plant in Gramercy, La., reopens following extensive remodeling and repair, Milchovich said. But the volatile energy prices remain a nagging problem for Kaiser. Under the new contract with Bonneville Power Administration, Kaiser could operate at just 40 percent of the combined capacity at Tacoma and Mead.

Kaiser could be close to break-even results in the fourth quarter, Milchovich said.

He praised the smooth return to work of the Steelworkers at all plants, including Trentwood and Mead.

"To date, the transition has been very smooth, due in part to the hard work of the management folks at these plants," Milchovich said.

He also commended the Steelworkers, "who in our judgment simply wanted to get back to work."

Milchovich told the analysts that the economic offer of the labor contract in the settlement "is slightly less than the offer we had on the table in October 1998."

The company also made sweeping changes in the contract language, which offers Kaiser more flexibility in its operations, he said.

While the labor dispute is over, a trial over unfair labor practice charges filed against Kaiser by the National Labor Relations Board is still scheduled to start Nov. 13 in Oakland. If guilty, Kaiser could be liable for back pay and benefits for the Steelworkers during the 18- month lockout implemented by the company that ended earlier this fall.

"We are very, very comfortable with our position with the merits of our case," Milchovich said.

For the first nine months of this year, Kaiser reported income of $5.9 million on sales of $1.645 billion. For the same period a year earlier, the company reported a loss of $93.1 million on sales of $1.524 billion.

Kaiser shares closed unchanged at $5.06 Thursday.