Aleris reported first quarter revenues of $645.0 million and net income of $29.1 million. This compares favorably to the first quarter of last year when the company reported revenues of $278.5 million and net income of $2.7 million. Results were driven principally by continued improvements in rolled products material margins and volumes.
Steven Demetriou, chairman and CEO of Aleris, said, "Results for the quarter exceeded our expectations as we reported adjusted earnings per share about $0.30 higher than our guidance. Stronger than expected performance in rolled products and to a lesser extent, the lower tax rate, more than offset weaker performance in aluminum recycling. As expected, we experienced much improved margins in rolled products as new annual customer agreements became effective in January, while volume and scrap spreads were better than forecast. Our aluminum recycling segment is not yet performing to our expectations and has been impacted by lower metal recoveries and other operational issues. Corrective action plans in this segment have been identified and are being implemented. Aleris overall is well on its way toward significantly improved operating performance in 2005."
Rolled product shipments totaled 259 million pounds in the first quarter, compared to shipments of 247 million the same time last year as the result of continued strong customer demand across all end-use applications.
Income in the rolled products segment was $49.5 million in the first quarter of 2005, which included $5.6 million of purchase accounting charges, compared with pro forma segment income of $20.7 million in the comparable 2004 period, an improvement of 166 percent after adjustment for purchase accounting. Improvement was driven by significantly higher rolled product margins, favorable scrap spreads, higher volumes and improved productivity.
Material margins in the first quarter 2005 of $0.484 per pound improved from $0.376 per pound in the fourth quarter of last year and from $0.344 per pound in the first quarter last year on a pro forma basis.
First quarter processing volume of 508 million pounds for the aluminum recycling segment was down about 2 percent compared with 519 million pounds in the prior-year period. Segment income declined to $4.2 million in the first quarter of 2005 from $6.6 million in the first quarter of 2004 due primarily to lower than anticipated metal recovery performance, higher natural gas and freight costs and tighter spec alloy scrap spreads than in the prior year.
Processing volume of 267 million pounds for the international segment was 5 percent higher in the first quarter of 2005 than in the comparable period of 2004. The increase was due to improved capacity utilization in Germany and Brazil.
For zinc, first quarter processing volume of 57 million pounds for the zinc segment was 2 percent above the level of the year-ago period. Segment income increased to $5.3 million in the first quarter of 2005 from $3.9 million in the prior-year period. Income improvement was due principally to higher average selling prices of zinc and resulting better margins.
Looking forward, Demetriou noted, "We had a better than expected first quarter in rolled products but are forecasting slightly lower volume than previously expected for the second quarter. We believe volume shifted into the first quarter from the second because customers secured volumes early in the rising LME environment in the first quarter. Our forecast for volume for the second half of the year remains unchanged. We expect higher volumes in the third quarter compared with the second quarter as we see steady end-use demand. In aluminum recycling, automotive volumes have been weak and remain uncertain, but we believe our operational improvements in this segment will provide better results in the second quarter compared with the first quarter.”