Kaiser Aluminum Corporation (KALU)

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Kaiser Aluminum Reports Second Quarter 2008 Financial Results

Kaiser Aluminum Corporation (NASDAQ:KALU) today reported net income of $22.8 million for the second quarter 2008, compared to net income of $34.7 million for the second quarter 2007. Earnings per diluted share were $1.12 and $1.71 for the second quarter 2008 and 2007, respectively.

For the six months ended June 30, 2008, the company reported net income of $61.9 million, compared to $51.8 million for the same period in 2007. Earnings per diluted share were $3.04 for the six months ended June 30, 2008 compared to $2.56 in the prior year period. Net income and earnings per diluted share for the six months ended June 30, 2008 were favorably impacted by unrealized gains on derivative transactions.

“We continued to experience robust demand for aerospace and defense products,” said Jack A. Hockema, Chairman, President and CEO. “However our results were negatively impacted by escalating energy related costs and operating inefficiencies in our rod/bar value stream, which our energy surcharge and our Kalamazoo initiative are intended to address.” Consolidated net sales for the second quarter ended June 30, 2008 increased 7 percent to $413.5 million, compared to $385.1 million for the second quarter 2007. The increase primarily reflects an 8 percent increase in shipments from the Fabricated Products segment and an increase in Primary Aluminum realized prices, partially offset by a reduction in Primary Aluminum shipments due to the fire at Anglesey that significantly reduced production in the latter half of June 2008. For the six months ended June 30, 2008, consolidated net sales increased 5 percent to $812.5 million compared to $777.3 million in the six months ended June 30, 2007. The increase in net sales is primarily the result of 8 percent higher shipments, partially offset by a reduction in average realized price from our Fabricated Products segment as well as lower shipments in the Primary Aluminum segment.

Operating income on a consolidated basis for the second quarter decreased to $38.0 million from $62.7 million in the prior year period reflecting weaker results from both Fabricated Products and Primary Aluminum segments. In addition, the second quarter of 2007 benefited from several non-run-rate gains recorded in the Corporate segment. Operating income on a consolidated basis for the six months ended June 30, 2008 increased to $106.1 million compared to $95.0 million for the six months ended June 30, 2007, partly due to significant unrealized mark-to-market gains on the company’s derivative hedging contracts.

Fabricated Products Operating income in Fabricated Products was $42.9 million for the second quarter 2008 compared to $48.1 million in the prior-year period. Operating income for the six months ended June 30, 2008 was $82.9 million compared to $89.5 million for the same period in 2007. Operating income for both the quarter and six months ended June 30, 2007 reflected record results in the Fabricated Products segment. Operating income in 2008 for both the quarter and six month periods reflect a favorable impact from an 8 percent increase in shipments, which was more than offset by unfavorable energy related costs, operating inefficiencies in the rod/bar value stream and higher depreciation related to the commissioning of new production assets. The six month period also was impacted by unfavorable currency exchange rates and higher major maintenance expense.

“We expect our strong overall shipments trend to continue throughout the second half 2008, driven by sustained strong aerospace and defense demand for heat treat plate and other products,” said Mr. Hockema. “Our new automotive programs and selected export opportunities are anticipated to partially offset the weakness in domestic automotive demand, and we anticipate the energy surcharge implemented as of July 1st will begin to soften the negative impact of volatile energy costs.” Primary Aluminum Operating income in Primary Aluminum was $8.1 million for the second quarter 2008, compared to $14.2 million for the second quarter 2007. The impact of higher realized aluminum prices net of hedging was more than offset by lower shipments as a result of the production outage at Anglesey in June 2008, higher power costs, and the impact of unfavorable currency exchange rates net of hedging.

Operating income for the six months ended June 30, 2008 was $48.7 million compared to $18.4 million in the prior year period, reflecting $34.1 million of higher unrealized mark-to-market gains for metal and currency derivatives. Additionally, the favorable impact of higher realized prices was more than offset by lower volume due to the production outage at Anglesey, higher power costs, and the net impact of unfavorable currency exchange rates net of hedging.

The first of two potlines at Anglesey was restored to full production in late July. Anglesey is anticipated to begin production on the second potline in late August and be at full production by the end of November. The company expects that Anglesey’s property damage and business interruption insurance will cover financial losses of Anglesey and its owners although the timing of insurance recoveries is uncertain and could have a potentially significant impact on quarterly results.

Corporate Highlights The third and final phase of the heat treat plate expansion program began as planned in June, resulting in a scheduled production interruption on one heat treat furnace to expand its capacity. The furnace is expected to be fully operational by the end of 2008.

Other projects are proceeding as planned. The Kalamazoo facility is on track for completion by late 2009 and is expected to significantly improve the cost structure of the rod/bar value stream. Additional planned outages are scheduled in the third quarter of 2008 to install equipment upgrades at our Los Angeles, Chandler and Tulsa operations. Major maintenance expense related to planned projects is anticipated to result in higher costs in Fabricated Products during the third quarter.

The company increased inventory during the second quarter (resulting in higher working capital and lower cash from operations) to continue to serve customers during the upcoming scheduled outages.

The company continues to maintain sufficient liquidity to support expansion plans and strategic initiatives for profitable growth.

During the quarter the company announced a 33 percent increase in its quarterly dividend to $0.24 per share and a $75 million share repurchase program.

Conference Call Kaiser Aluminum will host a conference call on August 7, 2008 at 10:00am (Pacific Time) to discuss second quarter 2008 results. To participate, call the conference call line at 1-877-440-5785. A link to the simultaneous web cast can be accessed on the company website at http://investors.kaiseraluminum.com/events.cfm. A copy of a presentation will be available for download prior to the start of the call. An archive of the call will be available at the same website location until September 7, 2008.