Noranda reports fourth quarter results, sequential and year-over-year profit improvement

Fourth Quarter 2014 Highlights

• Excluding special items, earnings per share ("EPS") was a $0.14 profit compared to a $0.15 loss in fourth quarter 2013; reported EPS was a $0.02 profit compared to a $0.26 loss in the fourth quarter 2013
• Total segment profit was $49.6 million compared to $36.6 million in third quarter 2014 and $20.8 million in fourth quarter 2013
• Average realized Midwest transaction price per pound shipped was $1.12 compared to $1.08 in third quarter 2014 and $0.90 in fourth quarter 2013
• Net Cash Cost was $0.80 per pound compared to $0.90 per pound in third quarter 2014; fourth quarter 2013 Net Cash Cost was $0.78 per pound
• Cash and cash equivalents totaled $20.5 million and total available liquidity was $158.3 million as of December 31, 2014

Full Year 2014 Highlights

• Excluding special items, EPS was a $0.34 loss compared to a $0.68 loss in 2013; reported EPS was a $0.39 loss compared to a $0.70 loss in 2013
• Total segment profit was $127.3 million compared to $93.1 million in 2013
• Average realized Midwest transaction price per pound shipped was $1.03 compared to $0.95 in 2013
• Net Cash Cost was $0.86 per pound compared to $0.83 per pound in 2013

Fourth Quarter 2014 Results

Sales for fourth quarter 2014 were $336.2 million compared to $361.4 million in third quarter 2014 and $313.2 million in fourth quarter 2013.

Sequentially (comparing fourth quarter 2014 to third quarter 2014) sales decreased $25.2 million, or 7.0%, primarily driven by seasonal customer destocking in the Flat-Rolled Products segment. The positive effects to sales from higher realized Midwest Transaction Prices were largely offset by the effects of smelter production levels which, as expected, were sequentially lower. The Company expects the smelter to return to full production by the end of first quarter 2015.

Year-over-year (comparing fourth quarter 2014 to fourth quarter 2013) sales increased $23.0 million, or 7.3%. Higher realized LME aluminum prices ($0.10 per pound increase) and Midwest premiums ($0.13 per pound increase) increased revenues by $39.6 million. Higher Flat-Rolled products volumes contributed $13.2 million to the increase in sales, as fourth quarter customer destocking was less severe than in 2013; also there were no significant rolling mill production outages in 2014 where fourth quarter 2013 flat-rolled production was negatively affected by a planned mill turn-around at the largest rolling mill. These improvements were offset by lower volumes in the Primary Aluminum segment because of the lower production levels.

Total fourth quarter 2014 segment profit was $49.6 million, compared to $36.6 million in third quarter 2014 and $20.8 million in fourth quarter 2013.

Sequentially, segment profit increased $13.0 million. Results improved primarily due to seasonal reduction in Primary Aluminum segments electricity costs ($15.1 million) and higher LME aluminum prices and Midwest premiums ($6.4 million), partially offset by the volume decreases in the Flat-Rolled Products and Primary segments.

Year-over-year, segment profit increased $28.8 million largely due to a $39.6 million impact from higher LME aluminum prices and Midwest premiums. This improvement was partially offset by the $10.9 million negative impact from production issues in the Primary Aluminum segment, which caused lower volumes and higher electricity and material usage costs.

Reported fourth quarter 2014 results were net income of $1.7 million (income of $0.02 per diluted share), compared to a $3.9 million third quarter 2014 net loss ($0.06 loss per diluted share) and a $17.7 million fourth quarter 2013 net loss ($0.26 loss per diluted share).

Excluding special items, Noranda's fourth quarter 2014 results were a net income of $9.6 million (income of $0.14 per diluted share), versus a net loss of $2.8 million ($0.04 loss per diluted share) in third quarter 2014 and a net loss of $10.2 million ($0.15 loss per diluted share) in fourth quarter 2013. The $12.4 million sequential increase in net income (excluding special items) primarily reflects a $13.0 million ($12.0 million after-tax) improvement in segment profit. The $19.8 million year-over-year increase in net income (excluding special items) reflects a $28.8 million improvement in segment profit ($26.7 million after-tax), partially offset by a $5.4 million change in last in first out inventory valuation.

2014 Full Year Results

Sales in the year ended December 31, 2014 were $1.355 billion compared to $1.344 billion in the year ended December 31, 2013, an increase of 0.9%. Of the $11.6 million increase in sales, higher LME aluminum prices and Midwest premiums increased sales $42.5 million. Increased shipment volumes in the Bauxite, Alumina and Flat-Rolled Products segments increased sales $28.8 million. Offsetting these improvements was a 10% decrease in external Primary Aluminum shipments which had a $56.0 million unfavorable impact, driven by lower production levels in the second half of 2014.

Total segment profit was $127.3 million and $93.1 million for the years ended December 31, 2014 and December 31, 2013 respectively. Improvements in realized aluminum prices, driven largely by higher Midwest Premiums in 2014, contributed $46.6 million to the year-over-year increase in segment profit. Lower commodity-based input prices (other than natural gas), and productivity gains contributed a total of $34.9 million. These improvements were partially offset by higher natural gas prices and the $32.8 million impact of certain 2014 operating disruptions in the Alumina and Primary Aluminum segments. These operating disruptions arose from extreme weather-related conditions in the first half of 2014 ($16.5 million) and lower production volumes in the Primary business during the second half of 2014 ($16.3 million.)

Segment Information

Bauxite. The Bauxite segment reported a $6.3 million segment loss in fourth quarter 2014 compared to a $1.5 million loss in third quarter 2014 and a profit of $1.0 million in fourth quarter 2013.

Sequentially, Bauxite segment results reflect an $8.4 million negative impact of adjustments to the internal transfer pricing for bauxite sold to the Alumina segment offset by a reduction to the production levy obligation to the Government of Jamaica ("GOJ").

Year-over year the $7.3 million unfavorable swing results from the transfer price discussed above, lower external selling prices and $1.0 million in higher demurrage fees. These changes are partially offset by lower fuel costs, shorter mining routes and a reduction to the production levy obligation to the GOJ.

Alumina. The Alumina segment reported a $17.1 million segment profit in fourth quarter 2014 compared to segment profit of $6.5 million in third quarter 2014 and segment profit of $2.8 million in fourth quarter 2013.

Sequentially, the $10.6 million improvement primarily results from the transfer price adjustment discussed above, lower maintenance costs from completion of third quarter projects and favorable alumina prices. Partially offsetting these improvements is the fact that third quarter results benefited from a favorable inventory adjustment that occurred in the third quarter of 2014 but did not repeat in the fourth quarter.

Year-over-year, the $14.3 million increase in Alumina segment profit predominantly reflects the higher retro-price adjustment from the Bauxite segment ($8.7 million) and benefit from higher LME-linked alumina selling prices ($4.1 million), offset by higher natural gas prices ($1.8 million) and the timing of maintenance projects.

Primary Aluminum. Segment profit in fourth quarter 2014 was $31.7 million, compared to $20.4 million in third quarter 2014 and a segment profit of $14.9 million in fourth quarter 2013.

Sequentially, Primary Aluminum segment profit increased by $11.3 million. Primary Aluminum benefited from sequential non-peak season electricity pricing ($15.1 million) and higher realized Midwest Transaction Prices ($5.4 million) which were partially offset by higher electricity and material usage costs due to the impact of lower production levels.

Year-over-year, Primary Aluminum segment profit increased by $16.8 million. This improvement was driven largely by the higher realized aluminum prices ($28.6 million, net) partially offset by the effects of lower second half 2014 production levels.

Net Integrated Aluminum Cash Cost. Net Cash Cost in fourth quarter 2014 was $0.80 per pound, compared to $0.90 per pound in third quarter 2014 and $0.78 per pound in fourth quarter 2013.

Sequentially, Net Cash Cost decreased by $0.10 per pound, with the predominant factors being the switch out of seasonal peak power rates in the Primary Aluminum segment, which had a favorable impact on Net Cash Cost by $0.12 per pound.

Year-over-year, Net Cash Cost increased $0.02 per pound resulting from temporary operational production issues in the Primary Aluminum segment partially offset by improved Alumina prices and savings from the Company's CORE program combined with lower key production input prices.

Flat-Rolled Products. Segment profit in fourth quarter 2014 was $12.3 million, compared to $17.6 million in third quarter 2014 and $8.4 million in fourth quarter 2013.

Sequentially, the $5.3 million decrease in Flat-Rolled Products segment profit was due primarily to lower seasonal volume ($3.2 million) and unfavorable metal timing. Year-over-year, Flat-Rolled Products segment profit increased $3.9 million due primarily to a lower fourth quarter 2014 seasonal decline in customer demand than that experienced in 2013. CORE productivity savings and favorable metal timing also contributed to year-over-year improvement in fourth quarter Flat-Rolled Products results.

Corporate. Corporate expenses in fourth quarter 2014 were $5.0 million, compared to $6.0 million in third quarter 2014 and $6.8 million in fourth quarter 2013. Sequentially, corporate expenses decreased primarily due to lower employee benefits costs. Year-over-year, lower corporate costs primarily reflect labor savings and lower professional fees.