Kaiser issues gloomy outlook
Company CEO says smelters won't be restarted until next year
John Stucke - Staff writer
Kaiser Aluminum Corp. won't restart its idled aluminum smelters until next year as poor metal prices and expensive electricity put profit out of reach.
Jack Hockema, who took over as Kaiser CEO this month, told analysts Tuesday morning that the company lost $24.7 million -- about 31 cents a share -- during the months of July, August and September. He blamed soft metal demand and low prices, along with the ongoing curtailment of smelters in Mead and Tacoma.
The problems, he said, are expected to continue.
"We don't anticipate restarting in the fourth quarter," Hockema said.
While the company struggles through the economic downturn, it also faces looming deadlines to repay some $625 million of debt. Much of it must be repaid by February. The rest is slated to be retired in 2003.
By mid-December, Kaiser must have a plan to retire or refinance much of that debt in order to extend its credit agreement, which the company uses for short-term operating cash.
While analysts pushed for details, Hockema said the company would outline its plans before Dec. 15.
"We're working hard and making very good progress," he said. "We had expected to be done."
Already, the company has purchased about $48 million of the notes due in February. It has the right to spend about $50 million from other lenders to repurchase more of the notes.
Also, the company sold part of its stake in an Australian alumina refinery. The sale was reported as a $163.3 million pre-tax gain. Hockema declined to tell analysts what the after-tax proceeds would be.
With aluminum prices down, debt uncertainties looming and a poor bond report issued by Moody's Rating Service, Kaiser's stock price is trading at all-time lows, falling to $1.98 a share at Tuesday's market close. The share price has fallen more than 35 percent during the past several months.
While Hockema acknowledged a difficult business scenario, he pointed out some positive developments.
"Tough market conditions masked efficiency improvements at the Gramercy, La., alumina refinery," he said.
The plant is now running at more than 90 percent capacity, and Kaiser expects to push it to full production by the end of the year.
The refinery was destroyed by an explosion two years ago. The company rebuilt it with insurance proceeds and money netted from the resale of federal electricity. The power had been allotted for use at the Mead and Tacoma smelters, but power prices soared, making electricity more valuable than aluminum.
The fourth quarter of this year and at least the first part of 2002 show few signs of an economic rebound.
Revenues will be flat across Kaiser's business lines, Hockema said.
During the third quarter, Kaiser's sales slipped 21 percent to $430.3 million. During the same period last year, revenues were $545.2 million.
So far this year, however, Kaiser has been a money maker, parlaying its allotment of Bonneville Power Administration electricity into proceeds of $460 million.
The company reported profits of $123.9 million, or $1.55 per share during the first nine months of the year. That compares with a $5.9 million profit, or 7 cents a share, reported during the same nine-month span a year earlier.
In a separate report, Maxxam Inc., which owns about 63 percent of Kaiser stock, reported a $29.4 million profit, or $4.08 per share.
Maxxam is majority owned by Houston financier Charles Hurwitz. The profit results from Kaiser's sale of a partial interest in the Australian refinery.