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Century Aluminum’s Profit Margins Rose In 4Q14

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Mar. 3 2015, Published 9:05 a.m. ET

Century Aluminum’s profit margins

Century Aluminum’s (CENX) share price crashed more than 12% after it released its fourth quarter earnings. However, its profits increased significantly compared to previous years. Higher aluminum prices and premiums helped Century Aluminum post higher profits in the fourth quarter.

A shift to value-added products also helped enhance Century Aluminum’s profit margins. Currently, it forms 3.99% of the SPDR S&P Metals and Mining ETF (XME).

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Reliance Steel & Aluminum (RS) forms 3.41% of XME. Reliance Steel acts as a distributor for primary metals producers. It acquires primary metals—like carbon steel, aluminum, stainless steel, brass, copper, titanium, and alloy steel—from metals producers and processes them to customer specifications.

Margins rise

The above chart shows Century Aluminum’s net profit margin. As you can see, its profit margins increased over the previous quarters. Century Aluminum’s net profit margin in 4Q14 was 11.22%. Its profit margin in 4Q13 was a -2.41%. An increase in Century Aluminum’s profit margins is a positive sign for its investors.

Alcoa (AA) is also working to improve its profit margins. Its focus on value-added products helped it increase its profit margins. Constellium N.V. (CSTM) has low profit margins—compared to other aluminum fabricators. This could be one reason for its lackluster performance on Wall Street.

Working capital

Century Aluminum made some changes to its working capital in 4Q14. It’s important to note that working capital management is a key driver for companies in the metals and mining space. It impacts companies’ profits. We’ll discuss Century Aluminum’s working capital management in more detail in the next part of this series.

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