Wise Metals CEO looks for year of `transition'

BUSINESS DIGEST

May 12, 2006|By ALLISON CONNOLLY | ALLISON CONNOLLY,SUN REPORTER

A disappointing first quarter, the departure of a top executive and the termination of a promising acquisition set the tone for a "transition" year at Wise Metals Group LLC.

Chief Executive Officer David F. D'Addario told analysts during a conference call yesterday that the Linthicum Heights-based company, which produces aluminum sheets for the beverage can industry, is navigating a volatile market.

"As we have previously stated, 2006 is a transition year, and we anticipate poor earnings but adequate cash flow," D'Addario said. "However, this can change dramatically on a day-to-day basis with the rising cost of metal."

The privately held company is required to file with the U.S. Securities and Exchange Commission because it has publicly traded bonds.

First-quarter net income was $3.5 million, reflecting a favorable gain of $4.7 million from an accounting rule adjustment. For the same period a year ago, the company posted a loss of $6.2 million, including a $3.6 million charge due to the same accounting adjustment. Excluding adjustments, Wise Metals lost $1.2 million for first quarter 2006, compared with a net loss of $2.6 million during the same year-ago period.

Shipments of aluminum beverage can stock, other rolled aluminum products and scrap declined to 169.9 million pounds, from 196.5 million pounds during first quarter 2005. The company shipped fewer aluminum can sheets due to the fact that customers typically reduce their inventories during the first quarter and because the company renegotiated higher prices with customers, officials said.

Shipments of scrap at Wise Recycling increased 9 percent during the quarter over a year ago. But a previously-announced deal to buy a "large mid-Atlantic recycling company" fell through, D'Addario said during yesterday's call.

Also during the quarter, Wise Metals' president and chief operating officer, Randall R. Powers, was terminated. Officials declined to explain why Powers was fired. An SEC filing dated April 11 said little other than that his departure was effective immediately.

D'Addario blamed first-quarter results on a 64 percent spike in the company's energy bill. He said the company tried to avoid higher energy costs during the winter by buying gas futures, locking in at $12.25 per decatherm. The company ended up spending $5.5 million more for energy during the first quarter than the same period a year ago, when the average price was $7.46 per decatherm, he said.

allison.connolly@baltsun.com

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