Noranda Aluminum has hired Morgan Stanley and Co. and is exploring “strategic alternatives” in the face of low aluminum prices and a plummeting stock price.
The announcement could signal trouble for a company that buys so much electricity from Ameren Missouri that it affects the price paid by other St. Louis utility customers.
The news sent Noranda tumbling. The shares fell 26 cents, or 21 percent, to close Thursday at 97 cents.
Noranda’s stock price has dropped 68 percent since May 11, when private equity firm Apollo Global Management announced it would sell off a nearly one-third stake in the company; it completed the sale a few days later.
After the departure of its largest shareholder, Noranda prices have fallen to under $1 from about $3.
Aluminum, like many commodities, is under pressure from foreign imports and slower-growing demand. It is near three-year lows on the London Metals Exchange.
Noranda CEO Layle “Kip” Smith said Noranda would “proactively identify and evaluate prudent actions.”
“In the face of low aluminum prices, I am proud of the progress we have made in improving our cost structure and overall productivity, as well as our investments that support future improvements,” Smith said in a statement. “This strategic review builds on that work, and is an exciting part of optimizing the positioning of the Company.”
The aluminum company’s struggles come less than two months after it won a hard-fought battle with St. Louis utility Ameren Missouri over its electric rate. Noranda, which employs about 850 people at its aluminum smelter in the Bootheel, convinced Missouri regulators it needed a lower electric rate at the energy-intensive plant in order to keep it humming.
Noranda is Ameren’s largest customer, buying about 10 percent of the utility’s electricity. Regulators and consumer groups worry that if the smelter closes, it could drive up prices for other Ameren ratepayers.
One of the options Noranda is considering is a reverse stock split, the company announced Thursday. The move could raise the price of Noranda’s stock by reducing the number of outstanding shares, a strategy sometimes employed to keep share prices high enough to remain listed on a major exchange. Noranda is traded on the New York Stock Exchange.
The Franklin, Tenn., company also said it would suspend its 1-cent per share quarterly dividend.
Noranda said it wouldn’t disclose further details.
Just days before, Noranda touted a $15 million financing deal for a new aluminum rod mill near New Madrid, Mo., that would boost its production capacity 43 percent. The company said it would start producing at the $55 million mill by the second quarter of 2016.
The company cited its lower electricity rate, which took effect this month, when it announced the rod mill. The lower rate — which is made up by other Ameren customers to the tune of about $1 per month for an average household — is expected to save Noranda between $17 million and $25 million a year.