Aleris Forecasts Strong Year

Aleris International, Inc. reported financial results for the fourth quarter and full year of 2004.

During the fourth quarter of last year Aleris reported revenues of $372.6 million and a net loss of $26.5 million. For the fourth quarter of 2003, the company reported revenues of $237.9 million and a net loss of $3.9 million.

On a pro forma basis, Aleris had revenues of $578.1 million and a net loss of $16.5 million in the fourth quarter of 2004.

Steven J. Demetriou, chairman and CEO of Aleris, said, "We are very pleased with our progress since the merger closed in December and with the underlying earnings improvement in all of our segments. As expected in the fourth quarter at rolled products, improved pricing translated into stronger margins and improved earnings net of FAS 133 hedge accounting and restructuring items. We expect higher rolled products pricing in the first quarter as new annual customer agreements became effective in January. The resulting higher margins, along with our company-wide focus on synergy capture and productivity improvement, should be the principal drivers of significantly improved operating performance for Aleris in 2005."

Broken out by industry segments, Aleris reported that its rolled products division reported shipments of 248 million pounds in the 2004 fourth quarter compared to 217 million in the same period of 2003 as the result of continued strong customer demand across all end-use applications.

The rolled products segment had pro forma segment income of $18.1 million in the fourth quarter of 2004, compared with pro forma segment income of $13.9 million in the comparable 2003 period. This improvement was driven by stronger volumes and higher material margins. Based on rolled products' previous LIFO method of accounting for inventory, and including the effects of the hedge, material margins improved from $0.333 per pound to $0.386 per pound.

For its aluminum recycling division, fourth-quarter processing volume of the aluminum recycling segment rose 6 percent from the year-ago period due to the recovery in U.S. industrial activity, a stronger overall aluminum market and new business the company has obtained.

Segment income totaled $1.8 million compared with a loss of $2.7 million in the fourth quarter of 2003. In the 2004 quarter, an asset impairment charge of $3.7 million was recorded related to the Shelbyville alloys plant. In addition, the Company decided to permanently close the Rockwood, Tenn., facility which had been temporarily idled

On the international side of its business processing volume was 13 percent higher in the fourth quarter than in the comparable period of 2003. This increase was due to improved capacity utilization in Germany and Brazil resulting from improved economic conditions. 2004 fourth-quarter segment income of the international segment, which included a charge of $0.7 million related to an asset write- down, was $4.4 million compared with $5.7 million in the fourth quarter of 2003.

For zinc, fourth-quarter processing volume was 5 percent above the level of the year-ago period. Fourth-quarter 2004 segment income increased to $2.8 million from $0.8 million for the prior-year period. This improvement was due to an increase in zinc prices, better margins and higher volumes. EBITDA, excluding special items, in the fourth quarter of 2004 was $3.7 million compared to $1.7 million in 2003.

For the full year of 2004, which includes Commonwealth's operations for only the month of December, Aleris recorded revenues of $1.2 billion and a net loss of $23.8 million.

Steve Demetriou continued, "We are excited regarding our prospects for the first full quarter at Aleris and expect that continued strong volumes and further improved pricing in our rolled products segment will drive improvements in profitability. Although the outlook for automotive volumes is uncertain and could impact us negatively, particularly in the spec alloy business, the combination of improved rolled product margins, a strong zinc business, and reduced costs as merger synergies begin to take hold, should provide for a strong first year."