Kaiser Aluminum (KALU) 24 Oct 242024 Q3 Earnings call transcript

Greetings, and welcome to the Kaiser Aluminum Corporation Third 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.

welcome Aluminum's and Earnings Quarter everyone, Call. Conference morning, to Third 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 factors materially Securities the reports Exchange For ended a statements, for filed Commission, to forward-looking and risk XXXX. annual company's year including full XX-K cause December earnings results refer Form that XX, from specific report and the the to on differ summary with please of the company's could the

to to The statement company expectations. duty results no company's to undertakes forward-looking update conform changes the actual the or in statements any

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

the today's conclusion and contains used call definitions for will At open presentation, of of the Slide presentation. that we commonly measures will company's X questions. Further, terms be the throughout

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

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

X. Slide Turning to

in expansion expense, and expectations EBITDA $XX we an with in LIFO against million largely We to growth approximately company. business in to execute the performed strategy line the Neal our quarter, margin a continue as for third GAAP $X few will of the approximate sustainable which discuss Our includes which our moments. in million generated quarter, long-term drive

As capital and serve we year to our investing the deliver we provide the customers to profitable continued margin have of laid and these years fourth move our our as towards for as are come. for for on We our many our for goals revenue quarter, to next believe in are remains approach outlook we to track meet the products to disciplined the into outlook we expansion. meet outlook needs robust, foundation we are markets industry-leading The well we year-over-year the our progress for long-term and growth conversion continuing margin year strong expansion shareholders. and

turn over to discuss now Neil? outlook. be floor back I'll discuss in our the more the detail, I'll then quarter and to Neil to

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

revenue decrease broader reflecting a X% each detail, in XXXX, on and of markets year the primarily our quarter, aero supply high million X% in challenges market. chain prior conversion of Looking the end shipments at in quarter over in strength $XXX third decline the totaled a

pricing. improved Packaging mix was X% of and year-over-year revenue on $XXX increase million, conversion an

in year, strong, our we shipments stabilize X%, and as underlying remained period While levels destocking the outage following production reflected declined work results. second our this to as quarter earlier demand

And stable despite finally, was on due automotive X% pricing quarter import improved pressures. to a year-over-year million, increase was the XXXX to up in remained increase demand product primarily and revenue X% third on in conversion shipments, a revenue $XX pricing of X% products mix. decline conversion X% shipments $XX relatively million, engineering and General compared a uneven higher

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

income relatively Now increase moving to the depreciation quarter a for expense includes charges million, our an amortization to rate third million and environmental Newark non-run operating at facility, income was for Slide related at adjusting $X quarter the $XX million. third our XXXX $X $XX XX. of reserves in Reported operating which legacy million was After of stable of increase year-over-year in adjusted over XXXX. approximately

mid-XX% taxes XXXX low- to for in million were regulations. consume until $X current million. NOLs, year-end continues our no with rate and foreign anticipate $XXX federal to range at Our the to in tax tax state that be the $X tax We cash we of million under effective U.S. taxes be federal which our range cash the XXXX will

to per Reported the related of adjusted of charges net insurance income per quarter. for or $X.XX $X per in per the $XX $X.XX diluted of year and mentioned After land prior share sales income $X legacy settlements and in claims, quarter. previously of of share adjusted XXXX diluted compared prior net million $X $X.XX quarter compared adjusting the income was net in to million $X million share or for rate third year non-run year $X prior or the to nonoperating quarter approximately million XXXX diluted third net diluted was $X.XX million income income approximately share or million

the XX.X%, the margin turning up for XX.X% was quarter Now period. year quarter Adjusted the primarily or and from million, period. revenue, costs in charge. EBITDA EBITDA offset $X driven adjusted Slide was higher $XX approximately GAAP EBITDA million to up EBITDA conversion higher from partially energy margin in X% was year LIFO XX. an for by and increase increase The by prior a prior the in

million. net by $X income approximately the by for LIFO quarter noted adjusted charge negatively EBITDA impacted As Keith, and of third GAAP a were

attributed costs we beginning was inventory and the lower at at inventory at primarily charge LIFO to higher the on end of the quarter's metal quarter hand had quarter. valuing This pounds

Our driven demand our customer higher packaging by primarily products. were inventory the we've levels for strong experienced

metal to inventory, in changes based costs of costs, with provide difficult mix market-driven accounting. impact sell-through in future the forecast our is without on changes EBITDA the adjusted we projected LIFO GAAP it As for our unit ending outlook of along

We will actual to continue call out present performance. our LIFO quarterly GAAP the adjustments we when accounting

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

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

the Capital expenditures attributed continuing third million, investment quarter totaled allocation. Warrick to Turning facility. $XX our fourth in our primarily at to capital project coating for line

XXXX range at now have in work million. be the forecasted expenditures Warrick our primarily $XXX capital Our reflect Elevated expenditures full are been the to to million year of $XXX doing facility. we capital this year

our our future annual capital expenditures be prior expect line more averages. We to with historical and significantly year's lower in

management share, debt profitability, dividend Directors that our confidence XX, of board team our ratio Finally, net our and the and have per reduce improve declared quarterly a of and reflecting announced in strategy we stockholder our on value. leverage $X.XX our common Board October increase

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

Neil. Thanks,

very Slide We outlook for as turn on aerospace meet to OEMs aerospace healthy Now I outlook. quarter with to strength I'll remain for and provided our XX. remain The aircraft track production high aircraft on conversion backlog. commercial drivers and Beginning years of revenue. last the hold shipments market

full. Passenger traffic remain stays planes and very strong

for we all to defense, of product rates plan jet year which expect production our and we other business industrial and build offerings remain in very categories, complement momentum throughout XXXX, the aircraft As application steady healthy. space,

our Kaiser years strength remain and end markets aerospace expect strong will I come. high to for for

and outcome Machinist have the resolution shipments. monitoring of on The short-term closely Union. this and a are may negotiation and timing We demand Boeing impact between

which packaging this turning in at Now XX. earlier packaging Warrick to like top to period of of destocking, facility our following on ended I'd strong Slide market the the year. highlight end demand a the on performance

this shipment time. levels the at quarter, an continues comes for fourth rose packaging the Our the The in quarter consecutive ideal year. and momentum of fourth into momentum

the also which will to throughput. coating shift higher-margin near our while line, of approximately our of improving mix coated fourth products we XX% As our completion

growth The be to we to performance coating line Initial remains commissioning in expect long-term this already production full our contributor market. line has output up begun, to year a next and we within early key as strategy component ramp new to this a XXXX. from our strong

approximately full margin. is margin project consolidated run expected XXX to to basis rate, At to businesses our of this points expansion provide XXX

our to forward we you year. look to optimize XXXX years how beyond Warrick our this call and strategic progressed few expectations February for we efforts in will last meet over fourth investment next contribute of Our the to sharing quarter EBITDA with again as have and

on XXXX. key the seen engineering believe end general levels our service you We to determine give demand. turning within metrics Slide health to are use center its end long we since of market, To at run one and underlying not at now matching products shipments levels we long a currently, Now true this for believe products, look course destocking the XX. market inventory has of are

any generally Low half as inventory given bolstered the have of positions customers inventory conditions orders warrant they in rebuild as our our attention historically first year.

our channel, remain customers seeing we're signs inventories they semiconductor an order equipment prepare the For from as improving XXXX. plate, cycle while initial elevated for recovery in in of

will improvement plate for improved pricing While outlook stability North and an the long semiconductor environment in need low create American into inventory service for center support manufacturing. the of demand, products for continued an levels XXXX

destocking generally Historically, of adverse purchasing had extended on indices impact manufacturing periods price. an have and manager contracting

strength held positive lines, due are of product encouraged of that the has reshoring. impacts to However, the expected pricing and thus than better far our up position market we

turn from an conversion and are XX. track levels value-added highlight shipment on to up to the Slide meet like target automotive previously Next, improved remain on modestly mix communicated that products. I'll we I'd revenue to our higher on of XXXX

the have adjusted market. production broader and as outperform Even truck automotive SUV heavy platforms, have lower light automotive the where continued participate, to and year, throughout the rates we

to turn one outlook summary Turning now full with the I'll I for year last our the is to which consistent XX. quarter. XXXX, shared Slide

XXX We basis X% with compared up resulting XX accounting. expect between And to points LIFO X% including year-over-year, be revenue continue GAAP the growth to to estimated as stable conversion impact and is margin not EBITDA from to XXXX. remain our overall

shipments due that to reflect chain markets. supply note additional orders outlook this aerospace end the within declared or does challenges labor delays not Please in current of

we markets positioned am transformational I will year capitalize facility. Kaiser pleased significant is in I XXXX, for confident this to we at our summary, expect am of In a with make on well be stabilize and advancements as year investments the the several serve. which business key efforts ahead Warrick our packaging we company,

always, will sharing efficiencies. As improving on focus operating cost you with on February. highly I diligent we and outlook forward remain look our in XXXX to our

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

from Instructions] The Tanners first Wolfe is [Operator Timna Research. question from

I wanted side a more. bit to probe the aerospace

from We destocking other that some there is hearing to happening. are the some suppliers sector

suppliers proceed Some just the to other and lower rates because of across slower destocking Boeing of Airbus. this also build is just a and

So getting doesn't question forecast a your about And delayed resolved you more is, that looking you that? bit little challenges term, not that and know us I seeing give to are strike the what expect can like proceeds? guess, I markets. Boeing the if it's But color orders reflect aero first with end any near in you said

call. back reflect little it moved associated the I we that earnings higher down. out -- inventory that in and that. our We the were Yes, we in it with could shipments channel that our felt notice and put conversion second quarter revenue And we was listen, a impact

Our as XXXX. to on and outlook conversion both down compared X% to record is -- year to revenue shipments the be X% revenue of

we that And still the we've envelope through of balance within with our comments the so that reiterated year. we're today, believe

high our a Now we've reflects in some again, strength. at and lot our it products the Kaiser, that: around aerospace to markets of and about least color as talked diversity

through business And which reflection all and of defense back on we a quarter. saw so the enhanced that's space,

to There all inventory levels. you rates of been is that OEMs, because line of not there the airframers expect they've that situation. OEM certain build would all their Now control supply large are to that those the as and have obviously, build it buying reflected aren't to relates in we're in as rates that

negotiated color over some I'm pleased of very for with we've the quality with the and types years. But contracts specifically us, the

this bulk year. built help insurance of we declarations declarations that through the through in us the So for of OEM airframers, we already I those the times. some tell levels on shipped all can large to have you

So exposure thinking or obviously, stated minimal is our a what's prolonged with really rates our delay in year. to the compared I'm what others, -- I to I to going build outage happen but were predict can't for declarations think

to gears, about wanted tariffs. I helpful. further I if That's switch impact potential Okay. talk could, of to the

the So being think you topical, you imports how could how impact haven't much coming I about and election products, tariffs up given that as on that of your in can of aluminum remind downstream and about kind us past targeted business? which been the further think

-- products. the we're for we're businesses participate, say, aerospace mainly North our Look, America with would semiconductor, our Yes. of than side the on outlets on that focused I customers majority other for the we and and the on

positive big helps us. So the I quite to frankly, additional anything North that tariffs, strengthen manufacturing will going is a help American be for -- believe,

tariff tariffs. XX% existing they We've as Canada were and XX% earlier. you've I impose those seen momentum to opposed seen on the Mexico maybe think levels move some what

that America how ultimately, positioned do but that I building, Timna. there believe, strengthen stronger and I nothing will manufacturing is think And momentum So this we're company. North

So believe the in and positive in asked. you we're I moving the area momentum forward question just a

Peterson from next JPMorgan. Bill from The is question

too, posting the and actually I markets wanted packaging a to presentation if ask Thanks a other the few for on few of I advance. may. in end

First looks year quarter, the but in looks sequentially. on to significant didn't the improve a step expected as like full like up much packaging, the third guidance with X% shipments plus of X% as it

in we maybe And there just we XQ? exceed of even saw about or out can we guess, XQ? like should saying XXXX impacts how I further, And second the call guess, shipments were get back think the any XXX-plus to run in range rate? I half in

you orders. as we backlog quarter, we into might second The of went quarter, recall, that had questions. we Good said a

delivery been some that quite we've we've in our customers, And frankly, caused mode. from performance so our pain of catch-up

moving that to to trying up that way really and everyone been customers, sure here, make we've catch gets make in while our some. don't we've everyone so any been And to provide sure settled we disruption resolved gets a

may been efficiency the had as of hoped. some not as So have we large

is that beginning the ramping and the demand, And of basis we're up backlog to the monthly on to beginning However, hit facility. we're a strong to continue with fall. output

levels a fourth in XXXX. So our we are for of customers front outlook about us. have very strong And quarter talking increased already

going very new to the that into frankly, very done there move been us on A excited have. of I'm to as we've that line other to quite X for is to shift putting that we deploying lot be XXXX. we up about investment complement a because, going mix the efficient is lines mix able be in-house

new should we've So implement XXXX at improve into really output there the as as facility. we and only our the investment move we got

really of we'll So efficient, right through fourth quarter we're can, believe into have every XXXX. run running really more and now, we we're going and shift and we to better a mix as become getting we products

coat the any guess, further X on Has a roll on or new granular sticking Is the later I year? timing ramp? more the there or line. and on the qualification -- commitments? more What progress are this customer we into -- -- towards the year point as quarters expectations, few X the likely on last Great. new Maybe of in that been

Yes.

negotiate we're So Bill. to continue with -- customers, we

we're in some can contracts actually customers we that the the mix we're Some to the to of ensure discussion that of are pulling us. due so be really requesting up discussing that XXXX, were from that forward get

got of we discussion, of probably talked and already So is in speak. for contracted remaining that's underway. XX% XX% past, about, that we've We as some under the the capacity about

per we of we're commissioning my hot And comments, at so we're line. look that rate here, -- aspects already certain so as ramp as

very there a quarter we'll weeks progress for for up and fourth customer couple the and start-up was customer, really of line of has I ago, a been and here, the qualifications with testing begin well looking product that. and in

XXXX. So we'll in and early beginning qualify debug

of year. reach to of full we'll are enter of as level we rate. to first end or that begin the second quarter beginning expectations the perhaps quarter We'll My next hopefully, the into that the ramp get

bit seeing might you much been thus would spreads? metal strategy. maybe Maybe a discuss margin benefit realized? And can maybe the are pivoting if impacts from any so, has I revert? you project how you scrap expect tighter far, guess, to And sourcing when those

Yes.

very we've implementing scrap moving are second prime levels strategy the spreads that So but the up at much forward, been will very in compressed we as reiterate got our discussed call. the the We've versus moment. position quarter set well, I

And expected X to at over is the least so compressed years that X historic at a to last see that the moment. pretty gain the or from or you level might

content, when the to know Bill. All more will spreads recycled generally, -- utilize to out get answer there's when end, we'll our a advantage used scrap, in in of intend whatever it. maximize is more businesses that take I be for is we're we there, compression have will to recycled, and some to compression don't and all be the that position gain better? of Now whatever okay, I preparing that,

I any from then platforms doing to impacting can that of speak how take to one automotive, first of the And and obviously I can more you makers, is is lot offline. your then what to Kaiser help more, and Pivoting negative this of evidence types further sneak these if sort European obviously, all, business levered of of guess, mitigate although which and could there's a I you're weakness, trends? domestic. some Great. of so others to

years. XX see a There's We of platforms this lot that We've I to for down provide. for automotive position in won't you Kaiser. just provide. you gets competitive think a participate products what we been on, about of products what don't Yes. Bill, industry a the lot

on that that that's applications and side, we're the really do, product really we that are and extruded platforms us. benefit those However, --

So agnostic an hybrids whether even some or in to applications. it's we're or EV ICE

we So us. very that's well all for of provide, going that been those utilize the and components

I mentioned the heavy on truck and on light, As comments, SUVs. heavily we're focused

Fortunately, up for us, well. that's very holding

General think very of sentiment. that category and really the others, see consumer on I results the continue and you by being they Motors be focus strong supported back from -- marketplace to

not North right on So in We're the on America. we're vehicles. We're Europe.

automotive, up. focused saw in are as products. our very though even where And the business we are we're area is you with there, shipments down with overall in results of the our So that

And I some into of that XXXX. think we'll going continuing to see strengthening

there. very pleased with exposure our So I'm

it's As revenue position are smallest participating. where conversion from we you our a probably but like know, perspective, we

Good sense. you makes Yes, luck on have. the projects here all

Bill. Thanks,

This concludes comments. Keith would the session. CEO, like I question-and-answer floor to turn Harvey, to back the closing for over

thanks And today. you look our Have you. for quarter in with a Thank full I Yes. year results being to February. us fourth day. and updating forward good on XXXX

This concludes today's teleconference.

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