Kaiser Aluminum (KALU) 25 Jul 242024 Q2 Earnings call transcript

Greetings, and welcome to the Kaiser Aluminum Corporation Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with Addo Investor Relations. Thank you.

You may begin.

Thank you. welcome Aluminum's and Earnings Quarter everyone, Call. Conference morning, to Second Kaiser XXXX Good

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

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

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

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

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

Keith reconciliations financial terms In for contains earnings which are discussion of which included adjusted and Further, Slide addition, information and items X excludes rate EBITDA GAAP measures financial in to our included Reconciliations effort. Any appendix. in EBITDA, our reasonably the means the reference we have provided call definitions non-run such today used we forward-looking throughout financial are to be the to questions. I comparable conclusion presentation. of the most for Keith? in will non-GAAP that provided would discussion. reconciliations the open of the or appendix the will for call because outside comparable the cannot like over now in measures items release GAAP to certain company's the financial Harvey. Reconciliations control turn without presentation, we to be At commonly today's certain and in of have required non-GAAP measures presentation. predicted provided measures are unreasonable not our and/or

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

performed to Operationally, as Turning X. well expectations. demand businesses in quarter or met very exceeded our the Slide generally

have cost aggressively operations, on previously, managing stabilizing working been and focused efficiencies, lowering we capital. improving discussed As

a on stable, a $XX strong our industrial packaging, includes during in unable abated second As reduction EBITDA comments. To we which generated summarize results quarter of markets, $X focus GAAP will strength during aerospace million, a despite of the reflecting the LIFO large our This diversified results commercial end jet in result, illustrates noncash builds during quarter, first Neal quarterly million more demand the approximately details and in inventory reduction provide significant quarter. of includes activity the and mirrored his capitalize in of quarter. our of high healthy. In strength destocking applications, following the which remained demand and XX first business this quarter months expected, which with second shipments. In general mix remained demand and was reduced unplanned and category, mainly jet in in underlying engineering, our outages XX shipments the mill of from space, hot our product to the we April. quarter, extended stronger were to that pricing outage due an planned improved to consecutive than defense, which all but charge

pricing. to While from improvements -- benefit modest continued we in demand we improved auto, expect and

detail, outlook. enhanced now discuss and back margin be the remainder execution of efficiencies the performance. I'll we I'll improving growth in on to Neal? execute over the to drive sourcing then our focused strategy, continuing facilities and will the Neal remain turn metal our to strategy XXXX, our For quarter floor of to across to discuss more

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

detail. of strength engineering our revenue unplanned million, high year-over-year The market on a markets shipments end prior a quarter X% the $XX Looking of was an an in a $XXX X% second end million, each second was driven increase to in XXXX, noted the shipments up primarily the diversified increase of quarter demand conversion improvement stable Aero during decrease conversion revenue XX% million Keith. General our reduction revenue remained on at products on relatively of in reflecting and revenue was outage category. Package quarter. as due product decrease a by this in conversion year XX% shipments, improved over in mix as X% totaled X% in the quarter. conversion $XXX year-over-year for by

revenue In year-over-year. which in mix a in on was to products, up higher improved in conversion automotive improvement on of X% shipments addition, the the increase offset decrease of a quarter conversion price. And modest million, XXXX pricing second partially compared reflected $XX plate finally, the revenue

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

Now moving $XX income the to XXXX second was quarter operating Slide XX. for million. Reported

XX, Keith, our result GAAP $X our we payments, This charge exit high-cost to delayered our facility second as of the over we customer ongoing will orders performance inventory review our benefit of our reducing annual in and Texas other approximately our continual The made of which as capital noted associated recorded million financial cash a our will and as be our restructuring reposition operating a noncash a on rate working quarter years. in-depth facilities. quarter to during immaterial non-run $X of portfolio, by by of the of be Sherman, out in needs GAAP employment XXXX. inventories decision a As rightsizing million strategic XXXX, our inventory we focus LIFO million impact with $XX -- LIFO June severance next we few resulted of following the charge the plan paid layer. Also, as on

GAAP charges rate, non-run approximately adjusting million by of was $XX noncash $X depreciation LIFO mark-to-market income year-over-year, million $X the certain down million, for approximately XX% of a charge operating charge approximately million, adjusted rate recorded associated and increase and the $X of quarter-over-quarter we hedges. approximately expense. predominantly $XX million amortization After non-run with addition, In driven for

mentioned net net in of net per $X.XX After share net another rate the of which XXXX be the that prior range with adjusted $X.XX of $XXX to federal share income $X or income quarter we for adjusting per tax income compared net net regulations. million $XX no rate to share We tax to $X anticipate or the quarter. XXXX million million foreign rate in in in $XX to adjusted $X.XX U.S. were non-run as approximately net non-run compared million income cash million our tax quarter nonoperating our the items, range income of until million or million second diluted federal charges for XXXX continues second net previously for per diluted diluted state of $X was low consume cash $X adjusted adjusted will income year and or diluted current the tax NOLs, or million. Reported XXXX year-end effective the prior to million mid-XX% under $X Our $X.XX $XX year be income was and share taxes per income quarter.

primarily noncash EBITDA Slide which unfavorable the from XX% Now the prior XX. result or was of XXXX Adjusted quarter turning million million, $XX year was the LIFO second down period, $XX aforementioned for to charge. approximately

overhead Additionally, addition sourcing manufacturing $XX improvement was reduction costs. quarter and to quarters, million metal discussed second our the in continued revenue offset which we managing in conversion in have our by our prior strategy, in

Our resulting EBITDA compared year. margin to XX.X% XX.X% last was

and revolving cash flow. no $XX facility Now approximately total turning to at and liquidity our a approximately million, million it remains On of undrawn. quarter under of sheet availability balance provided of total borrowing $XXX June discussion cash $XXX in XXXX, and during XX, credit of our facility our million revolving with borrowing and credit approximately end,

XX, debt against XXXX, ratio leverage target net As X.Xx. to of June of is leverage our ratio X X.Xx our

capital for coat our to to continued second invest we project. totaled Turning as $XX quarter million Capital allocation. in the roll #X expenditures

$XXX declared Board $X.XX in common XXXX I'll million. outlook. to Keith? we that quarterly our a capital in range improve value of of increase strategy full of a XX, Our forecasted still per share, July to announced stockholder expenditures time. And Board our $XXX our our and are to to our turn Directors and be dividend million have year the now call reflecting discuss management Keith team confidence back over profitability the to On over

Thanks, Neal.

Now of with the XX. I'll turn fiscal for on to our XXXX. Slide aerospace year outlook Beginning

our demand remains diversification other as that over aerospace to commercial the remain underscored in and has industrial a and position of by us relationships business agnostic all strengthening unchanged, market jet for maintain strong for applications, in and outlook supplier allowed as our strategy further highlight the like XX strong. platform customer years. I'd long-term position positive markets, well remain to defense, space high-strength which a key Our

previous we related the and reported expected on call, revised market, noted for commercial and stance jets aerospace widely XXXX Airbus However, production for large primarily as our more XXXX a the build to challenges. reflect to rates on domestic cautious our outlook Boeing

in half the expected outlook the X% of by slightly for slightly build year. approximately balance rates lower and down recently lower-than-expected conversion continued Given down build announced our the the the rates for for by adjusting we Airbus are first XXXX, Boeing revenue of corresponding and year shipments of

expect for our by the build second of year X% XXXX revenue full result high down jet shipments XXXX levels. aero a now approximately to half of strength As the X% and lower we be to announced and versus conversion XXXX, commercial rates

packaging Now on to Slide turning XX.

the first outages As shipments. we of negatively experienced mentioned, the impacted year the in half

expect from now slated #X expected with of This early roll are quarter, line of long-anticipated excited in packaging be the we XXXX. beginning the our completion plan. nearing we our internal outages behind levels budget significant in remains the production improve on shipments with remainder XXXX. Further, with throughout investment line With qualifications to begin to coat us, fourth to in current

in improve to and year-over-year estimated to XXX margins outages now this XXX X% of to shipments, project we we approximately product XX% anticipate X% in As mix previously impact improved of company capacity higher total our conversion revenue to during existing X% increase a benefit to on second basis reflecting the convert by coated is value-added incurred pricing due quarter. packaging which to our XXXX will the X% approximately points. Accordingly, by to extended products, expect our the discussed,

XX. on engineering general Slide to turning Now

prices expected half second seasonality While strong to the a which compression demand slight stable is first half forecast continue and anticipating and are has of relatively have to the shipments. Further, of throughout year, Therefore, we resulting of we levels. general in demand by largely as be the we the price high held to revenue subsequent year, modest to to XXXX at and approximately remained X% in typical the the slowed flat has to to our historically in the up XXXX. outlook conversion anticipate second demand year be improve engineering half historically X% pricing our compared to remains X% and year-over-year shipments headwind

automotive Next, on to Slide I'll XX. turn

demand year, remains late largely relatively to held. increases last price enacted flat XXXX While have compared in

to to range X% As to X% a continue XXXX result, versus XXXX. and expect automotive increase we in the shipments conversion our revenue

Now summary turning to to Slide full XX. year I'll the outlook for revised XXXX. turn our

margins demand be revenue to today for optimistic future year-over-year. that expect investments slightly us XXXX summary, whole to We flat X% now are by slightly positions growth Accordingly, approximately points remain remain well basis up and to conversion we to expect up on flat by XXXX. we to improve Concurrently, XX XXX making we to compared beyond. we EBITDA the to support year-over-year. In expect to the

the driving our any efforts through I operating Operator? stringent questions for may our growth efficiencies. With we ahead, have. that, term, will strategic on you management achieve profitable improve cost which call will remains investments, continuous long to the open overall and Looking to now focus sustainable,

question Instructions] [Operator Peterson, first Our comes JPMorgan. Bill from

XX now, Yes. in growth? On row. quarters year-on-year maybe I new changed to guess you you that What assume return I a down the have? bottom. segment taken a last visibility guess expectations could do a we is days? I aerospace, And in when this what's few guess, the should

Bill. rates successful not shown build issues that side then on Yes. We -- continuing Bill, area of Business by But pretty when least expecting from that's business to been supply very being their at to of challenged detrimental anticipate some materials, supply our a with at opportunities the been side longer orders that activity, being raw has Airbus as our Defense We've And in in aluminum. we're chain There's document, levels, jet And Farnborough term. issues. We've are talked, strong. movement as challenges those any space. somewhat Keith. strength seen has the really been steady we But continues flow really on back soon and noted the of and ] challenges, good this guys strong. of as is well-publicized get bookings considerable continues is those well expected impacted those have. get of the Boeing other [ challenged challenges those airshow. back of coin. end return not we remains those

We at than time, continue rates orders. we're reduced lower to build into that and will that expected, have in point some anticipating flow

Now we perspective, minimums place. from have Kaiser in a

there We have have are been and for outlook after the declarations expect -- that is made commitments are improved made. that our XXXX

right little that pipeline build bit now. those right until we're rates now back And get up, a the so we're we just just anticipating filling

you EBITDA type help reach think -- Great. you wanted next think and year. could And to sometime guess I were can I EBITDA have hoping guess margin, can you some of as getting a XX% are return you and historical long market occur we I of that about XX% -- kind today know even this Or to EBITDA to bridge I with this investors to more help story? above like margins. of the challenges operational some where 'XX beyond? levels the is today where 'XX given bridge we of Is that back are the we occur fast with challenges or can more have? margin? How

XXX can additional path the going the on higher add then the return margin that, with the next on in to the historically on the we've X that you X% to we're can coated of to higher Then you efficiencies automotive back and have another kick of new mid-XXs I'm rates year-to-date, And to portfolio deliver going had them points. metal on getting or of going basis And to we're the And those, are build change on top XXX Bill, historically strategy, think, rise be XXX confident on very underway, years. And XX% the level around margins. And which of back things then puts we over see around capacities some And X, anticipate to aero the and on then the to the XX% we to that type X That going basis back those roughly you Phase strategy, that we've we of that's just to commercial side. expected up side, indicated back so relatively the XX-ish in basis where points. we've track back. announced into deliver invoking right and Yes, the so We're at roughly higher going a No. you efficiencies to beginning is I the we move if top to the points around, beginning that that getting the across businesses. we margin. deliver to on look of see where us had another where okay? the which on of they're to strategy which again, to XXX putting we're X% above XXX things our XXXX. back been XXX

markets investments place. place. detriment So directed. we've pretty we've a with our down in see outline but bit don't growth been seen got We're the the have well some up major in any plans destocking putting we restocking, and and to little as The

we're to back the historic position we're put we've very of things opportunities. quickly I right got advantage in moving to that to So us market pulling feel take those and the right confident that now levels,

to turn closing would for over There further back time. questions are I this Keith the comments. to now no at floor like Harvey

today. results October. being in a on have our day. forward thank third I updating with good XXXX look to Well, Everyone, for quarter you Okay. us you

today's concludes teleconference. This

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