Noranda Credit Analysis

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Noranda Aluminum Holding Corporation |

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Credit Analysis Report |

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Noranda Aluminum Holding Corporation |

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Credit Analysis Report |

February 10, 2014

Authored by: Dalai Jin

February 10, 2014

Authored by: Dalai Jin

Analyst: Dalai Jin

COMPANY DESCRIPTION

Noranda Aluminum Holding Corporation (NOR) is a leading North American integrated producer of value-added primary aluminum and high-quality rolled aluminum coils. It has two businesses: upstream business and downstream business. Its upstream business is one of the largest U.S. producers of primary aluminum, and consists of three reportable segments: Primary Aluminum, Alumina and Bauxite. Price of primary aluminum fluctuated with LME, and lower LME aluminum price has a significant influence on Noranda upstream business. Moreover, Energy and alumina are the main cost components for primary aluminum production. Noranda is committing money to expand the aluminum production capacity. It spent $2.6 million on the Rectifier Project during the year ended December 31, 2012 and have spent $10.3 million since re-launching the project in late 2010. In 2012, Primary Aluminum business produced approximately 575 million pounds (261,000 metric tones), representing approximately 13% of total 2012 U.S. primary aluminum production, based on statistics from CRU. Alcoa Inc (AA), Aluminum Corporation of China Limited (ACH), BHP Billiton Limited (BHP) are its direct competitors in Primary Aluminum. Noranda has to compete on a global basis and other materials on the basis of production cost.

Its downstream business comprises Flat-Rolled Products segment, which is one of the largest aluminum foil producers in North America, and consists of four rolling mill facilities with a combined maximum annual production capacity of 410 to 495 million pounds, depending on production mix. Price of aluminum rolled product is highly related to the cost, which include raw material and energy. During...