Kaiser Aluminum (KALU) 26 Apr 232023 Q1 Earnings call transcript

Greetings, and welcome to the Kaiser Aluminum Corporation First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce our host, Kim Orlando with Addo Investor Relations. begin. may you ma'am, Please,

Thank you. first to Aluminum's and afternoon, XXXX earnings everyone, quarter welcome conference Kaiser Good call.

our Investor If you press page the earnings of copy kaiseraluminum.com. on Relations have not release, seen please a website at our visit

version We the for slide of have a call. presentation posted also PDF this

Chief Jennifer President and me Officer, Chief Joining and Neal the Huey. and Harvey; Keith West; today call Officer, on Vice Chief Financial Officer, Accounting Executive President and are Executive Vice President

to refer of constitute like contained to the remind Before that management's slides I'd we presentation made forward-looking information you first three based on and current our you that begin, are in this the and expectations. presentation statements by the statements management

Form results to materially please the the For forward-looking statements, company's the the Securities to company including differ company's statement reports a December specific and results the on could summary conform of filed refer the changes from full company's release risk to earnings report duty for forward-looking and to ended factors any Commission, the in with Exchange no update undertakes cause or that year XX-K statements annual The expectations. actual XXXX. XX, to

included such outside the we release measures GAAP efforts. non-GAAP to are predicted comparable certain in are addition, for Reconciliations unreasonable provided reasonably the information appendix to not in required measures cannot and have without measures financial financial non-GAAP forward-looking our reconciliations or In included in discussion. control Reconciliations be presentation. because items of and/or most certain provided of our financial GAAP earnings comparable financial are the of the

questions. At items discussion excludes the presentation, in we our for which will the call and today means have of conclusion EBITDA reconciliations for rate the which to open provided we the company's adjusted non-run reference EBITDA, Any appendix.

to the call I Keith? like would to Keith Harvey. now over turn

for quarter XXXX for of results. joining Thanks, you a Kim, us review and all thank our first

Turning X. to Slide

demand business trends and in continued first with despite specific markets drove on better-than-expected results certain execution, on quarter challenges. focus our traction and Our of favorable pricing coupled macroeconomic ongoing

EBITDA adjusted strong reflecting quarter quarter strength our mix to products businesses, of across fourth our and on first XX% costs primarily portfolio the in reducing million, of approximately our pricing, focus increased sold the continued over across platform. XXXX Our of $XX

Our sequentially quarter EBITDA in basis margin XXXX XXX and higher major the commodity higher points and fourth maintenance improved planned the of over quarter. continued costs input despite expenses

of the As cost a to purchased on minimize of effort inventory an reminder, in higher-than-anticipated along we metal of year. reduced last sales with end in year. the disruptions imbalance half at in purchases, impact to packaging metal the of higher supply XXXX customers, the These units second a led XXXX the half our second

imbalance the quarters. this purchases the several and with inventory We normalize next resulting cost expect associated those over to higher

The demand but multiyear with shipments first environment exceeded of these revenue met or good demand in most for generally and our overall mixed, quarter expectations. to products. Aerospace surpassing improve both was expectations. the for With our place pricing conversion continued

accompanying strong mix reflected exceptionally conversion customers than with revenue in products anticipated. in quarter results robust which pricing, and First served an resulted of higher

only customers our of well positive flex remain positioned satisfy moving to We general valued softened, which forward. demand as customers. we facilities, service many In for aerospace led strengthening were available demand capacity results to engineering not to our but these able to for Kaiser,

as continued higher to destocking In adjust customers consumer with on traits to the post-COVID to consumer. beverage continue purchasing environment being with passed packaging, cost the

better due and revenue conversion sold expectations the to in and However, products improved was shipments our than mix better pricing a met expected of quarter.

pricing our continues properly than engineering our expected as demand. the value match satisfaction marketplace. market general to where were semiconductor and rebalance commercial in Prices to other continue distributor current we inventories a In earn quality to in KaiserSelect see plate general better to teams slowdown continue products, preferred focus long products as premium of the continue our customer a an job to excellent and do engineering,

as semiconductor Shipments industry and the and was in continued pricing the recover modestly finally, chain And new also in and challenges. its significantly than supply from expectations to other demand conversion market in existing this quarter. better on evident as automotive improved improved came revenue programs

success. now on update February a we I'd to this our the business brief like on to outlined details to for Warrick following position turn call

the We last mill, of to that have at our operations recover normalize implemented we from continues of it to now the Warrick begun faced year. stabilize and initiatives a rolling challenges has many number to

moving For solid of we of these to ongoing. renegotiations are discussions price pass-through improve remain the our input forward contained metal customers necessary costs. commodity facilitate believe on business packaging to alloy help our impact higher with making and higher timing and contract example, progress We quarterly adjustments costs our will of inflationary and and mitigate in other the measures the material

coat convert project, roll is expected roughly capacity our remains coated XX% expansion to on to output current our track. Additionally, of products which higher-margin

higher prices costs. project we other continued due and inflationary cost to on construction-related are the experiencing mainly However, rising steel

to by mid- fully late-XXXX to operation be remains target Our intact.

coated as the We our investments aluminum we the choice shift in given in of continued focus substrate the making North long-term beverage industry. on the and for secular packaging business, to business the products, remain the and food our optimistic niche are American packaging outlook on market significant

strategy, and improvement we margin strong with multiyear our refined growth. will contracts As ahead, customer we support our continued look long-term relationships and coupled believe

In like to safely. dedication our we following their and execution better-than-expected for challenging a summary, commitment continued operational and start I'd working thank strong to year the team had a highly to XXXX.

stabilizing, holding demand been up are and pricing underlying have well. both operations and Our

inflationary positive us a growth expected broader reinvigorate in focused well results macroeconomic remain, markets to We pressures, yield to from positioned forward term. execution in benefit supply threat trends against stemming plan ongoing are inconsistencies the and strategic uncertainty that While of our XXXX. to from to economy profitable continuing we give chain confidence look secular longer growth the slowing our

turn now call to more Neal? detail over on Neal quarter. for the the I'll

overview Thank quarter million, you, or begin million revenue $XX increase Keith, our morning, of compared with period. revenue. an X of $XXX first of an conversion everyone. to Slide was Conversion XXXX X% the year the and good I'll for prior on

a markets increase quarter of Aero shipments Looking our end revenue high-strength XX% at increase in totaled over over XX% conversion improvement in shipments XXXX, of and the a improvement detail. quarter XX% fourth reflecting each $XXX prior XXXX. in first the on million a the a quarter on X% year in

improved applications. was $XXX the for with higher to The down a first improvement in X% million conversion reflects by quarter per in periods sequential growth pound. year-over-year quarter of shipments predominantly over reduction shipments, a conversion shipments beverage the commercial relatively was driven down revenue On Packaging resulting XXXX. both quarter, revenue XX% basis, the in destocking aerospace can revenue along markets in first the flat conversion X% by fourth from pricing pricing, in strengthening over due offset demand and

conversion products $XX for year-over-year in engineering XX% XX% quarter first down due costs. reduction offset higher a revenue million, was shipments, inflationary to the pricing by General to offset

on conversion lower down Sequentially, XX% was shipments. revenue first quarter XXXX XX%

plate to service products, were lower expected, centers both shipments from and due chip impacts periods in export predominantly the softer the As bar demand our of for destocking rod at to due semiconductor to extruded addition over restrictions.

XX% XX% driven by up was the Automotive in conversion of first increase XXXX, over quarter a revenue million, shipments. $XX

improvement a improved quarter XX% conversion well higher the improvement both pricing. over conversion of as First The driven shipments by periods quarter improved revenue XXXX on XXXX. shipments revenue in XX% in over was as fourth

end market shipments by details conversion of on appendix the in applications and revenue presentation. Additional be found can this

income for $XX operating adjusting million, non-run income was of first Slide down $XX year-over-year. Turning restructuring the of million, items adjusting $X XXXX and other XX% Reported was to for million. corporate X. After operating quarter costs rate

the Our of compared effective the XXXX to year in was for first XX% prior period. tax XX% rate quarter

long effective rate term, the year the before continue to low- regulations. discrete range XXXX tax mid-XX% we over and under expect to For current in our tax full be items to the

anticipate federal XXXX mid-single until the we million. were of taxes cash low- which consume as year-end that in remain our addition, our $XXX NOLs, will to digits we In

income for or previously quarter. for share of diluted share in diluted income pretax income net million $X $X of million the adjusting non-run first After the per and year the first adjusted in quarter. per million the or compared share $X.XX $XX per net sale, other adjusted income to million quarter a adjusted a $XX of $X.XX of to legacy mentioned was $X.XX land adjusted prior quarter diluted share items was rate the prior $X.XX for income diluted million net $X million $X per XXXX net Reported related compared XXXX or year of or to

year the from quarter first $XX approximately XX. from and $XX $X EBITDA was Slide million XXXX fourth approximately Adjusted the to million, turning quarter. quarter Now million prior of down up XXXX of for

inflationary improving Keith actions, increase highlighted, higher year which as by XXXX. was driven the and the The by during sequential XXX of the costs as conversion input offset extracts only EBITDA As the quarter the as of outperformance cost revenue basis moderating XXXX, quarter through projects. a to actions well ongoing surpassed was Adjusted expectations pricing our improvement pricing recovery cost efficiency taken in improved XX.X% of from points prior percentage reflected first fourth costs. our reductions efforts from

costs. of increased, furnace activity was offset rebuilds $X maintenance On adjusted lower million freight basis, partially with a EBITDA by year-over-year impacted by planned associated major

margin other operations. lag with In be time our addition, production input inventory continues associated packaging the costs passing along performance to through metal commodity for and our ongoing higher by within costs hindered imbalance with certain

were of cash Now $XX of of turning and the our most more liquidity invest XX, flow. $XXX facility the projects, in XXXX, meet million total to as requirements. credit our roll and capital approximately balance borrowing million. March we revolving a project capital facility million cash $XXX than in outstanding packaging revolving availability working XX provided capacity under as on borrowings sheet March of On a as our discussion in of to There credit continue as $XX total approximately improvement well notably growth coat million to

remains total quarter, use in our of strong. cash Notwithstanding the liquidity believe we our position

costs our interest $XX debt and notes fixed XXXX. are no annually, As at until senior we a have maturing million reminder,

strategy, per $X.XX to board value. announced a supporting stockholders In our our that of capital through common declared management cash strategy long-term we make share, dividend On continuing returns and XX, quarterly increasing April our of our profitable and allocation XXXX, to growth our to regards confidence we while focused the board on growth have for Kaiser's reinforcing in stockholder remain dividends. quarterly directors in

the For million. the anticipate of in million range we expenditures capital $XXX full be to our year to XXXX, $XXX

our I'll back Keith now call outlook. Keith? discuss to over turn And to the

Neal. Thanks,

continue XXXX. the be seeing The into the outlook XX, we've believe attainable Slide which on the our aerospace with anticipate pre-pandemic in in to turn has XXXX. to I'll we been high-strength Now aero levels, aerospace, we and continue particular commercial for momentum in Beginning quarter. continued quarter in second to should second towards to shipments recovery of strong ramp

Slide Build single-aisle are and increase to for this rate a being declarations miles passenger Now increases the support turning chains XX. to jets and for stronger improve, by airline airframer XXXX. planned year continue as supply wide-body

our XXXX. X% such, approximately quarter sequentially to shipments by first expect versus As we second in X% the will improve quarter

to demand space-related period over quarter. defense not for the expected be as remain as to and Underlying we as of we is anticipating revenue Conversion mix are a are jet, experienced strong. strong same the in expected products business of sales flat first

the second well to market in with facilities, we to quarter the incremental remain capacities to and previously, along positioned support upgrades investments aerospace to our we mentioned demand. following continue pivot existing make in high-strength and and our with ability beyond, As adjust demand

on packaging XX. to Turning Slide

we packaging experienced following are at our stabilizing earlier, chain our mill. in operations challenges the significant mentioned Warrick As XXXX rolling supply

fully impacts ahead and in costs continue costs expect contracts. certain in with few with operations lingering continued metal pass some lag to adjustments remaining we price to customer a from a XXXX, higher Looking through normalize to

beverage in products continue is the Destocking into quarter. expected second to

margins We market, targeted guided to shipments longer first and the for on anticipate our However, focus remain prospects X% to quarter coat the growth of new strong customer revenue we row investment by conversion XXXX. and position in improved line our to second the and the niche compared term bullish quarter relationships. improve in packaging X% approximately

on to first be expected engineering conversion and general general for products similar are Now Sales in the quarter to revenue XX. engineering second the to turning quarter. slide

to reduce reduced expect and our bar as match We to in lower rod mainly demand due softening products for in continue to continued and semiconductors distributors plate inventories sales.

select for remain under to products differentiated strong due and warrant a more Pricing confident is imported customer as products. semiconductor expected pressure premium and long highly Kaiser will our to more becomes relationships suppliers. broad customer availability going term We domestic to continue satisfaction forward come plate available offering increases industry slowing metrics, from demand capacity and these product leading

at a rising mill key On highlighting note, of more diversification semiconductor our has aerospace in Trentwood rolling slowdown plate a demand, our capacity the strategy. opened positive benefit unique accommodate to

as America, chains position general in be support products back the While markets to and than movers in long the demand of first slows, supply certain reshoring that manufacturing with the the stronger engineering these any more the growing with supply have domestic past, in depth economy of than to North associated decline shallow in is past. trough there long industries is of the a will dislocations strong been and

of Kaiser. Our any differentiators slowdown for the mentioned minimize previously are expected impact to

America. modestly been trucks which our conversion for until quarter, revenue than Currently, don't expect a North higher expected least gave Next, XXXX. recovering XXXX I'll Demand mid being as to expect at said, late recovery and and higher in when were we XX. first in for light to meaningful to the rates on outlook has first our quarter. reminder automotive in automotive a automotive we in more on February turn That mirror we vehicles shipments build slide for

execute Turning applications as technically position our in Kaiser in that products given end XX, key to market be challenging with strategic a diverse is current key require supplier can environment, contracts to multiyear demand we slide partners. believe positioned well and that markets solid the

control, efficiencies managing our our reductions actions We operations remain to improve and elements intently as cost in stabilize, manufacturing our pursuing improving commercial on operations, margins. our continuing within focused including

discussed. expect to and improve inventories successfully we first quarter we input cost flat our our our through be such, EBITDA margins and will efficiencies rebalance second pass As slightly previously compared positive results XXXX and commodity to higher as to as continued quarter

responsible us adversity to while liquidity our and market of if solid We Importantly, ahead we capital demonstrated needed. cyclicality, and are opportunities highly economic position strong the prepared address and of to our remain our of to structure, deliver growth to of given to shareholders. advantage take cost returns debt continuing flex ability manage variable ahead stewards

investments a with execute to growth. slide the long of to start I'm today's we turning summary Now to for margin revenue XX, mid and our of profitable on We approaching remarks. our years revenue XX% in billion subject and can expected range, portfolio high remain and this $X conditions. an term against pleased conversion deliver confident sustainable and strategy timing EBITDA which macro the conversion to continue remain economic the to

With questions that, I'll the to any Operator. now open you may have. call

Thank now you. Emily a session. Chieng conducting from question-and-answer Please Goldman WE go first with Sachs. question comes will Our ahead. Instructions] be [Operator

the the being might translate pricing have wanted EBITDA what you frames outlook? the in I my for what's numbers the optimistic Are out for an of Keith and your you morning, and Thank of and you the level cautiously optimistic cautiously to taking And half in this back put generation of margin to come able Good profile potential Neil. second in morning. of comments around around questions full that there. margin to year? both to year terms in volume the confidence or reference some cost of terms EBITDA

out we the about have second quarter. And hard that plenty beyond we Yeah, a our out seeing out been caution morning, of year last the and That's as comments, how indicators Emily, there the -- question. given well, we positive there economy, mentioned us whether had markets. good or for not still has the about in pretty Emily, we're landing. on our coupled soft challenges or really Well, discussion with thanks going

forward continuing opportunities to pricing negate move really will you, the on costs. we're tell I inflationary these to fixated on But

us last we're We year, also seeing fruition XX% think those impacted incremental to last costs mentioned we late that year, us. behind of and they're XX% to we come that expected that

lag metal situation have. And a that half. cost, the input second for we so cost saw really cost the associated the passing There's we about play improving it's a the in with cost through us, on

I with we're year. the So move, those as starting to see in we're and our first are be from going comments quarters you positive. markets the positioned here. well But to few living that are the And think of from cost higher markets can

think we over come place the XX As perhaps that hopefully We depression build. And have those that and us be think engineering continue with these than we're going broad storm, we might offering markets in side is product anyone been positioned, any any that for relationships to weather to long shallow. especially in at years. better to well but have the general

we're trends again, we're focus now. years. really area we're think to that our very think I we're mentioned to positive going And stabilizing that's our And very performing. right I be for businesses, focused So and an the we moving what on seeing

our So positive on outlook. now right and remains outlook solid our

pricing were minimum get And moving where demand well. mentioned, XX%, I of that back what And XX% well, -- targets think those as stabilize our are we to to year a were up to has to up see we continually beyond time perhaps As margin period that move last intent to but our we going has be to there's is early a the that obviously held there. range. business, up held up we we and have,

coat Right, then guidelines you that helpful. the pushing remind risk labor that the Warwick roll give do be steel perhaps coat if us some around And up? was what could costs and upside for capital line? inflation what outlay Actually, can up that's think [ph] have here creep we follow Can line. very there just might mentioned number potential A some the been you roll CapEx I around Warwick higher. that

in our going that we're more million. to going it's the of costs central of with outlook a positioning as the Yeah, we to exceed in these was cost provide clarity investment with for the on And to overages Emily. investments investment, cost in really return still project, of assessing But now, we the forward. our And assessing this approximately going this a defensible packaging and to construction. certainly the continue strategy we're and the us go the spite right strong And forward process of those associated initial long deliver higher higher we're even expect $XXX margins, this market. rate really, inflationary the capital, this with and costs term to reminder, position

evaluated and And giving minimize we're in these clarity assessing more and upcoming those. we'll we've trying costs be to So an calls.

thank you. Understood,

you. Thank

Sorry.

at next Sullivan from Our Please ahead. question Josh comes Benchmark [ph]. go

morning. Good

Morning Josh.

in jumping call here. another for Just

So apologies.

a On pretty demand, of through more month had and of been much Boeing the we've some chain, quarter the this going was the has that forward? the consistent, per strong moving market to supply from a or is calls, dynamic on disruptions. aerospace just confirmed they're Curious the overall reflection on strength pulling how of XXX, XX this more regardless other it

seeing Josh. well, a expected while. the plan framers and Well, air increases been about we've ahead Yeah, thanks, rate a We with time. of for generally the year talk coming

fruition this through associated this, a what we accelerated coming and will it's little with expected. I tell than expectations space faster the were. But to strong actually our jet So is business defence with you, actually

increased And well That's we positioned us. So as think good news supply the that's continue chains. good We're accelerate going to news. to outlook. handle that's only to for the

a to level, to we're not XXXX talked companies is actually COVID we're timeframe, accordingly. hit. back our back And there. was the the right to about all to back we that on is hold catching chain, record. all up that XXXX the a as up which return the it. both this when We XXXX have It's now really, XXXX, well coming company, on think But way about expected And looking up issues supply to ramp demand. I talked

outlook I'm as as business strong Kaiser. pleased very is especially expected. relates the say that So in defence, it jet seeing is at demand we're only to would I what the and difference the

the together up 'XX those beyond. of to that to coming wrap levels expected really all and gets it hope going So are to we this in

automotive automobile We some later. on had year. question recovery you're, maybe a the know bit at last more a similar little you're I side. shutdowns plant And looking

to kind So the catch of for relative much how seller feel to up trying year? get that recent a for this of to strength the was automotive expectations

right Yeah, I economics -- think mixed it's are now. the

overall is you think I little I a prepared. period rates, be challenging they're the to other of the But to up of going bit for challenging side very there. on consumer. still time the rising going vehicles inventories is We see more. the for see cost demand interest see the

on for lot a you the I us numbers our that, approach. than say conservative think first I see better generally the we're we quarter expected. but were

cost, are getting Now the with ability that believe our and to pass that I provide. in, get products. higher programs better prices, through to on a that is those on And coming most we little pricing the of products new we're

a I believe think rates I those that these to our we're have had and in part response 'XX to so year, second do And rates to So numbers as really whether be we've our determiner continue But those have half ability know, improved it. we're demand to a the But and or breakout positioned or year. portfolio. than to the pay in watching we're the overall. great going for are more you smaller a it's that really numbers the of we're well not of to consumers' the going far a going to with interest muted year. challenges start

you Thank that. for

Thank you.

I would to Keith turn like no being closing over time, floor sir, There ahead. at for this Please, further the comments. Instructions] to questions go [Operator Harvey

All you, forward Have And us thanks in for being on Hey, look you I day. updating to our quarter a second right. July. XXXX with great operator. results Thank today.

teleconference. today's concludes This

Thank time. for this at your lines participation. you your disconnect may You