Ormet starts sixth line, sees full capacity in 2007
NEW YORK, Dec 19 (Reuters) - Ormet Corp. (ORMT.PK), a closely held U.S. aluminum producer based in Hannibal, Ohio, restarted the last of six potlines at its smelter on Nov. 28, and anticipates a full pot count in the line by the end of 2007, Chief Executive Officer Mike Tanchuk said on Wednesday.
The line restart is currently 65 percent complete. At full capacity Hannibal produces 260,000 tonnes of aluminum a year.
Tanchuk said work continues on bringing the other potlines up to full capacity as well. November's average count came to 768 operating pots compared with 1,032 total pots.
Tanchuk joined James Riley, chief financial officer, on a conference call and told analysts Ormet lost $19.6 million on revenues of $130.5 million in the third quarter ending September 30. Riley said 2006 comparisons were not meaningful.
Ormet's smelter was idled in 2005 following a bankruptcy filing and a prolonged labor strike. Last December, under new management, the smelter restarted its first potline and has since refocused operations and gradually restarted its lines.
Asked by an analyst whether the company is gearing itself up to be sold, company executives said Ormet was focused on getting the Hannibal plant fully operational and reducing costs.
"When that is in place, the board will make a decision. What we're saying is that now is not the time," said Riley.
Riley reported third quarter aluminum sow sales at $101.7 million or 78 percent of total sales, with billet sales of $19.1 million or 15 percent. The rest of the quarterly revenues came from selling bauxite.
For the first nine months, Ormet sold $213 million of sow for 60 percent of total sales with billet accounting for $77.9 million or 22 pct of nine month sales. Sales of excess alumina and bauxite earlier in the year made up the rest of sales.
Ormet curtailed its billet operation on Oct. 17, and Riley said the company will increase sow sales for the rest of 2007.
For the year through November, Hannibal produced 142,824 tonnes of molten metal, less than anticipated earlier in the year because of the delay in restarting the sixth potline.
In August, Ormet said damage to its alumina supplier's facility in Jamaica from Hurricane Dean curtailed deliveries to the Hannibal smelter and delayed the potline start up.
Its 2008 alumina contracts are in place with about half given to each of two suppliers. With a uniform source for the raw material, quality should improve, Tanchuk said.
Ormet also set 2008 anode contracts at adequate quantities of 166,000 tonnes, but with significant price pressures.
"It is realistic that we could see the cost rise by as much as $32 million per year over current costs," the CEO said.
"Some current contracts are not being honored by suppliers because of the rapid increase in petroleum coke prices in China and high anode demand from smelter start-ups. We are working hard to find ways to reduce this unacceptable cost increase both short and long term," the executive added.
Ormet set metal sales agreements for 98 percent of its 2008 metal units and agreed to sell about 50 percent of its higher purity aluminum in 2009.
"Having agreements in place provides a platform for us to put hedges in place, which we support. We are watching the market daily and will execute them when the price meets appropriate thresholds for 2008 and 2009," said CFO Riley.
To cut costs, executives said they were working with their power supplier and the Ohio legislature to cut its electricity rate and were reviewing ways to cut holding costs or to sell its facility in Burnside, Louisiana, among other measures. (Reporting by Carole Vaporean; editing by Carol Bishopric)
