Nicholas Giles

Nicholas Giles asked for clarification on the Q1 Adjusted EBITDA guidance, specifically whether it includes the lost margin from the Grundartangi outage, and inquired about Century Aluminum's earnings power under various metal tariff and Midwest Premium scenarios, as well as its implications for capital allocation. He also questioned the progress on the energy contract for the Oklahoma smelter project and how its energy costs would compare to the rest of the portfolio. Additionally, he asked about the company's plans for cash generation, including debt paydown and shareholder returns, and the logical alumina supply sources for the new Oklahoma smelter.

Answer

Pete Trpkovski, Executive Vice President and Chief Financial Officer, confirmed that the Q1 guidance of $215 million-$235 million Adjusted EBITDA does include the lost margin from Grundartangi. He then detailed the sensitivity of Adjusted EBITDA to changes in LME, U.S. Midwest Premium, and European Duty Paid Premium, noting potential uplifts based on current spot prices. Trpkovski also highlighted the $20 million Adjusted EBITDA headwind from Winter Storm Fern at Sebree and the subsequent improvement in Indiana hub power prices. Jesse Gary, President and Chief Executive Officer, stated that good progress is being made on finalizing the power contract for the Oklahoma smelter with EGA and PSO, emphasizing the need for an attractive contract. Regarding capital allocation, Jesse Gary referred to the company's targets, mentioning capabilities for debt paydown, funding organic CapEx (Mt. Holly Restart, TG4 at Jamalco), opportunistic M&A, and potential shareholder returns. For alumina supply, he cited Jamalco production, the Gramercy refinery, and third-party contracts as potential sources.

Nicholas Giles asked for clarification on the Q1 guide's inclusion of Grundartangi EBITDA, inquired about Century Aluminum's earnings power in various market conditions and its impact on capital allocation, sought an update on the Oklahoma smelter's energy contract progress and its cost comparison to the existing portfolio, and followed up on the company's plans for cash utilization before significant Oklahoma project spending, as well as the logical alumina supply sources for the new Oklahoma smelter.

Answer

EVP and CFO Peter Trpkovski confirmed that the Q1 guide includes the add-back of lost margin at Grundartangi. He then detailed the potential uplift in Adjusted EBITDA by marking current LME, Midwest Premium, and European Duty Paid Premium to spot prices, and highlighted the positive impact of moderating energy prices after Winter Storm Fern. President and CEO Jesse Gary elaborated on the Oklahoma project's energy contract, stating that discussions with EGA and PSO are progressing with state support, emphasizing the need for an attractive contract to ensure ROI. Regarding cash utilization, Mr. Gary referred to the company's capital allocation targets, indicating that significant cash flow from operations should cover financing needs for the Oklahoma smelter, allowing for debt paydown, organic CapEx, M&A, and potential shareholder returns. For alumina supply, Mr. Gary mentioned Jamalco production, the Gramercy refinery, and third-party contracts as potential sources, to be optimized with EGA for the new EX technology.

Nicholas Giles asked about Cleveland-Cliffs' open capacity, the potential for new contracts, and the associated EBITDA sensitivity. He also sought guidance on the Q1 2026 outlook, specifically regarding average selling prices (ASP), costs, and shipment volumes.

Answer

CEO Lourenco Goncalves detailed significant available downstream capacity across various facilities, such as the galvanizing line in Columbus, Ohio, and facilities in Rockport and New Carlisle, Indiana. He attributed underutilization to lower domestic automotive production and emphasized Cliffs' readiness to absorb increased demand from made-in-USA automotive production. CFO Celso Goncalves provided Q1 2026 guidance: shipments are expected to return to 4 million tons, Q1 auto shipments should improve to Q3 2025 levels or better, and ASP is projected to increase by $60 per ton. He outlined a new ASP calculation breakdown: 35%-40% fixed full-year price, 25% CRU month lag, 10% CRU quarter lag, and 25%-30% spot and other volumes. Q1 costs are expected to be up $20 per ton before normalizing in Q2, with a full-year 2026 unit cost decline of $10 per ton.

Nicholas Giles inquired about Cleveland-Cliffs' available open capacity, the potential for new contracts, and the EBITDA sensitivity related to utilizing this capacity. He also asked for the Q1 outlook regarding average selling prices (ASP), costs, and volumes.

Answer

Chairman, President, and CEO Lourenco Goncalves explained that Cliffs has significant downstream capacity, citing examples like the Columbus, Ohio galvanizing line operating below its 450,000 tons/year capacity due to lower domestic automotive production. He emphasized that Cliffs possesses the technology and capacity, awaiting increased 'made-in-USA' automotive orders. EVP and CFO Celso Goncalves provided Q1 2026 guidance: shipments are expected to return to 4 million tons, automotive shipments to improve to Q3 2025 levels or better, ASP to increase by $60 per ton, and costs to rise by $20 per ton before normalizing in Q2. He also detailed the new ASP calculation methodology.

Nicholas Giles inquired about the factors that could push AZZ's adjusted EBITDA guidance to the higher end of the range, distinguishing between end-market and operational drivers. He also asked about the incremental EBITDA contribution from the Washington facility's ramp-up and potential capital-intensive margin expansion opportunities within the Metal Coatings segment.

Answer

Tom Ferguson, President and CEO, attributed the EBITDA impact primarily to the AVAIL joint venture's transition, noting potential upside from a strong fall season for WSI, continued interest savings, and potential galvanizing acquisitions. He also highlighted Precoat's sustained margins and Metal Coatings' focus on 30-31% margins despite higher growth in slightly lower-margin solar/T&D projects. Jason Crawford, SVP and CFO, confirmed Washington, Missouri was a margin drag in H1 but is on track to turn positive in H2, with production ramping to 50% capacity by Q4, aligning with original guidance. He also mentioned multiple incremental projects for margin expansion across both businesses.

Nicholas Giles asked about the factors influencing AZZ's adjusted EBITDA guidance, distinguishing between end-market and operational drivers, and the incremental EBITDA contribution from the Washington, Missouri facility's ramp-up.

Answer

President and CEO Tom Ferguson cited the AVAIL EBITDA impact as the primary factor, with potential upsides from WSI's fall season, interest savings, and galvanizing acquisitions. He noted Precoat's margin targets and Metal Coatings' strong growth. SVP and CFO Jason Crawford detailed Washington, Missouri's $2 million H1 margin drag, expecting positive contributions as it reaches 50% capacity by Q4.