Aleris Reports For Quarter

Aleris International reported financial results for the first quarter of 2006.

In the first quarter of 2006, Aleris reported revenues of $847.5 million and net income of $28.2 million. For the same time last year Aleris reported revenues of $645 million and net income of $29.1 million

Operating income increased to a record $59.5 million in the first quarter of 2006 from last year's record of $43.1 million, an increase of 38 percent. EBITDA excluding special items totaled $76.7 million in the first quarter of 2006, an increase of 12 percent compared with $68.5 million in the first quarter of 2005. As anticipated, improved results in the aluminum recycling and zinc business units in the first quarter, the impact of acquisitions, and the benefits of merger and acquisition synergies and productivity initiatives, offset lower rolled products volumes, excluding acquisitions, compared with the extremely robust prior-year first quarter.

Steven Demetriou, chairman and CEO of Aleris, said, "We are very pleased that we were able to improve upon the unusually strong operating results achieved in last year's first quarter with EBITDA excluding special items increasing 12 percent from the prior year. The company's performance is an indication of the momentum we are gaining and a reflection of the underlying operational improvements that we have made in recent quarters. As anticipated, rolled products results were lower than the unseasonably high performance during last year's first quarter when the sheet industry was restocking inventory.

“We are extremely pleased that the aluminum-recycling segment exceeded our expectations indicating early-on success in implementation of our turnaround strategy. We are also excited with the surge in zinc profitability driven by the impact of rising prices on the London Metal Exchange.”

Rolled product shipments totaled 275 million pounds in the first quarter, including about 61 million pounds from acquisitions, compared with shipments of 259 million pounds in the same period of 2005. Excluding acquisitions, rolled products shipments were down about 18 percent compared with the record first quarter of 2005 as customers continued to delay orders due to high LME prices, and as the Company continued to focus on profitability rather than volume. Rolled products segment income was $43.5 million in the first quarter of 2006, excluding charges of $1.1 million related to adjustments for purchase accounting, compared with segment income of $55.1 million in the comparable 2005 period on the same basis. Reduced income was driven primarily by lower volume, partially offset by favorable scrap spreads, the favorable FIFO impact of the rising LME, improved productivity, and the acquisition of ALSCO and certain assets of Ormet.

The company’s aluminum recycling segment income significantly improved to $15.8 million in the first quarter of 2006 from $4.2 million in the comparable quarter of 2005. First quarter processing volume of 502 million pounds for the aluminum recycling segment was essentially flat compared with 508 million pounds in the prior-year period. Increased volume related to the acquisition of Alumitech and certain assets of Ormet was offset by lower volume due to the shift of management responsibility for certain recycling facilities to rolled products beginning in 2006. The more than threefold increase in profitability was due to higher selling prices, operational improvements implemented in recent quarters, productivity benefits and the impact of the Alumitech acquisition.

On the international side, processing volume of 314 million pounds for the international segment in the first quarter of 2006 was 18 percent higher than the 267 million pounds processed in the first quarter of 2005. The increase was attributable to increased volume in Europe due to the start-up of the Stuttgart plant and the 2005 acquisition of Tomra Latasa in Brazil. First quarter 2006 segment income of $2.4 million was lower than the $4.5 million reported in the comparable 2005 quarter as a result of higher scrap costs and resulting lower margins in Germany, along with start-up costs associated with the Stuttgart facility. These negative factors more than offset improvements in Brazil where the Tomra Latasa acquisition generated higher profits.

Demetriou said, "We continue to anticipate a favorable economic environment in 2006 and expect Aleris top-line results to benefit from 2005 acquisitions and related new products along with higher LME prices. Reduced costs from the Commonwealth merger and 2005 acquisition synergies, favorable scrap spreads in rolled products, continued improvement in our recycling operations and the results from our Six Sigma effort should underpin 2006 results and drive earnings acceleration in the second quarter. For the second quarter 2006, we are expecting further volume increases in rolled products and continued operational improvements in our aluminum recycling businesses globally, as well as the favorable impact of continued strength in the zinc LME on our zinc business.”