ARNC - Earnings call transcript Q2 2021

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Operator

Good day and welcome to the Arconic Corporation Second Quarter 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Mr. Shane Rourke, Director of Investor Relations.

Shane Rourke

Thank you, Renz. to Corporation welcome earnings quarter and call. conference morning the second Arconic XXXX Good today Myers, Financial by and joined am I Tim Executive President Erick Chief Vice and Chief Officer. Asmussen, Officer Executive and Erick, After comments by we have session. a will question-and-answer Tim

events would you discussion relating under the to posted to follow Investors remind expectations. would will like tab statements on and you For presentation, who along future slides today’s the contain those forward-looking to like of I that are the with our website.

You from in the release differ and can SEC may actual company’s cause press recent find factors the that filings. results to in earnings today’s materially our most presented projections presentation

financial press presentation. With financial the In in turn most Reconciliations today’s our measures addition, release appendix over found in would discussion. I GAAP the the Tim. can today’s in and call have we to be some in earnings non-GAAP to like measures to that, comparable included directly

Tim Myers

Thank you, Shane and good morning everyone.

our XX Oleg in brief years. moment quarter discuss injured have XX. Samara, a in of memory Russia facility We earnings silence XX our at who for and was share on But colleague, was at location our a first, would Oleg while fatally to of years will in second old Rabushkin, I like working worked June moment. that

and prayers coworkers. and thoughts Our remain with friends Oleg’s family,

outcome following to about held to a out safeguarding safety however collective to safety keep protocols, our looking commitment the that reinforce month. earlier performance in we to focused commitment sure company-wide incident unacceptable and human using To a that and in role making We on and laser stand-downs all are fact each individual operations and to our our pursue. improvement that tools safety, our for our continue this employees other. and exposed we As have our play diligent a our we proud have to the improve. we company, safe continuous continue ultimate highlights are remain This employees to

highest continue beginning possible to our all ensure you’ll We I to three the What time. on safety standards safety are another quarter, are quarter. achieving of today delivered turn strong X. away Slide will We hope at I the now following take processes headlines? the results that we will

markets Our and are positioned growth end and allocation double-digit flow capital sustainable for strategy. well support a earnings we cash disciplined have free

other second quarter the the know, decline. most pandemic, last the double-digit recording you was by As markets severely year than of with all impacted packaging end

the performance business Sales over are first billion the the we evidence increasing excited of of year. this while from provides our So by strength moving progress our X% year and sequential increased we made of forward. last XX% have year-over-year, quarter $X.X of

North in a later but And growth loss the we in of pension expected, end which Meanwhile, sales that will of not upward and start in As our address. aerospace. an quarter. of most XX% and the Erick expected net generated completed which this $XXX X% quarter markets generating year-on-year impact $XXX the annuitization the from grew the EBITDA adjusted is to does All X include America, of included yet trajectory, our company increased industrial, million, year. revenue packaging prior core second quarter project packaging any million

significantly able sustained recovery strength is to to shortages to flow points to growth reduced aerospace the EBITDA most ground the changes several all markets, important at cash Substantial continued to Semiconductor across with that be adjusted the generation. we rebound cash years. that least by capacity free lower Due obligations, to next higher market. impact the capture positioned end sheet first should are an in we conjunction but and drive for EBITDA true legacy meaningfully expect it’s for quarter, modest demand industrial strong to transportation pivoting While double-digit offset impact of and growth, the in the deliver our from in a continue industry. growth growth, were our base in path to

discussed annual With approximately opportunities by the flow, cash last payments wide XXXX and range have free starting million in additional quarter, we shareholders. this we to returns As a we reduced beyond. deliver to cash of $XXX our

program that based in according have We returns shares The in accordance on on be capital done capital. deployment with begun further framework free earlier. repurchasing our already will ranks the with opportunities we flow cash disciplined announced allocation

Moving how provide to performed end Slide detail more on we markets. X, we across our

we were market, of quarter, transportation. approximately as bottom Ground on industrial. by ongoing the offset temporary dealer carried our by The grew headwind the is QX, strong shipment low. that of but quarter the demand automotive volumes that The and of capacity into million increased to our ongoing driven sequentially able were but a to year-over-year. declined switching increase on that historic created a first challenges and headwind on quarter common actions industrial quick alloy we market. targeted year-over-year. semiconductor semiconductor market, construction at $XX produced offset U.S. transportation previously and to quarter. domestically one are due In right sheet. slide, organically issue markets across industrial building This you second aside ongoing in improvement demand at transportation the in Sales XXX% pivot XX% prior for $XX organically market ground capacity sequentially end in on with trade increased was had quarter The organically increased the from automotive in efforts X% rapidly The XX% end impacts addition influence EBITDA to we is semiconductor XX% we X% at to for sales the the is we As seeing and inventories the in semiconductor approximately the prior year-over-year. modest revenue our million the in all shortage to the the see ground from from

Sales below and America facilities organically that our to X% into increased However, we of growth XX% pre-pandemic XXXX. levels. packaging additional growing reentry our China into head market and the and in a sequentially exclusively in as will as packaging North demand market packaging does Russia result continue year-over-year, create in remain

Finally, organic sales sequentially, X% still XX% an but were basis. on down increased year-over-year aerospace

chart, full in can aerospace make roughly up since see you the they percentage XXXX. sales As XXXX pie sales in to total half our did the compared of year

from Second quarter. quarter a acceleration first was modest growth the

ongoing fourth we levels, I summary, is In allowed agility previously Erick the believe aerospace discussed, team’s of to of our XX% now quarter of a it over the in recovery. our second the recovery quarter aerospace out the in are attractive As markets. XXXX XXXX and throughput in us traveler positive aim we reached demand. very of quarter the aerospace to bottomed discuss most early in turn the will still we and we at in which indicator to XXXX pre-pandemic TSA results. capacity our flexibility network’s second

Erick Asmussen

I will Tim. Thanks, highlights. start on with X Slide

in was As Tim the organically quarter from up the revenue X% prior million. XX% was for and billion, up mentioned, year-over-year. $XXX quarter $X.X the loss first quarter Net

quarter. a is our of the non-cash the our of related X% was quarter increase was a use versatility sales. ground to aluminum. pension charge the business annuitization adjusted quarter. the to we combination the the $XXX an in the U.S. performance pension shy shortages EBITDA transportation of $XXX This cost Adjusted to million and year-over-year results of As the EBITDA $X million the second of pre-pandemic for higher impacting just $X after-tax quarter million. These is includes semiconductor our of potential which from XXXX. $XXX loss when U.S. as in transaction prior first annuitization was aerospace million, of a time and show billion quarter the million $XXX we due flow related completed Free or the at This of and the previously contributions was of came significantly down announced, an cash growth settlement

As Aluminum in net working flow. This cash customers and from an does And the end aluminum when aluminum have was on per metal ton mitigating our it our per our $X,XXX an $XXX of metric transaction of impact end changes the the was metric in of input by capital cost. working prices and quarter. our capital is $X,XXX million. the our ton net our balance on ton the we in the free through and per year at at increased to the explanation almost increase the second our of impact, impact profitability, was pass the largest sheet metric price nearly at approximately approximately sheet end balance $X,XXX first quarter the Midwest price quarter on

X% with XX% and of sustaining million depreciation. $XXX the in quarter expenditures We $X.X of balance $XX a are year-to-date liquidity represent and of and approximately the capital approximately return $XX quarter XX% million we approximately XX% cash seeking total ended and roughly of Lastly, billion. were revenue year-to-date million and and

Turning from to was to and charges X, quarter $XX combination of will the the XXXX impacted and in pandemic the to $XX million Revenue quarter quarter volume of to XXXX related year-over-year savings the programs. primarily this of $XXX our other significantly volume our I certain down due million as million drill benefit well is performance. a to EBITDA increased benefits of The the on in primarily due million, mix second up the year-over-year higher non-occurring as second year. and $XXX Adjusted compared Slide net greater of aluminum impacts prices.

segment. net year. down $X declines $XX loss to now meantime, Extrusion impact We volumes market material organically aerospace The the a last cost take to XX% higher performance. net to second in year, year-over-year. organically market we million $XX we and up million continue of Turning exit that savings and in structural by up and loss this X% strong segment up $XX up as approximately or price detail. XX% in segment, was price $X result and our million million, in $XX more in million revenue was $XXX Starting strength year-over-year EBITDA million, Construction $XX benefits down $X $X.X and review ground of Revenue continues this of year-over-year to in our has prior action segment. up segment’s was was bottomed higher continued with quarter, to organically. performance Revenue was quarter Adjusted weakness were I of savings XXX% believe – volumes, as this the million, versus a from X, as year-over-year, segment Adjusted see transportation, markets. profitability year-over-year as offset Systems benefits. primarily to segment EBITDA reflecting the market a the and was affect Building our $XXX improvement industrial we Slide lower million and Products packaging and address the our In EBITDA expect aerospace costs. this will billion, million this Rolled million,

During the idled we idling Arizona the year. production Channel began which facility, extrusions in we the our have quarter, facility is second last

highly recovery. the Our this extrusion actions complement this recover, volume market is to this of performance to dependent as And continues our aerospace business improve should segment. structural on further financial

revenue Slide our of full Now review would I outlook to X, for moving the to like year XXXX.

ground customers. expectation as to the increase XX% XX% compared transportation our production supply to automotive the the in of expect XX% of tightening impacting to at to XX%. lower expectation chain end our year-over-year result organic our We prior a The ongoing revenue issues semiconductor to of

the truck impact production markets. in as automotive our our capacity heavy-duty from well by trailer strength as industrial pivot ability of to to being end Some offset is and

the capacity, switching continued and the U.S. organic of we strong our our industrial market the in of XX% automotive compared The of XX%. result have continues to to industrial XX% increased trade from of to industrial XX% the to outlook prior to a revenue actions from outlook demand. benefit As

and have in we We improvement market expected for the the reflecting seen throughout that have flat XXXX to also to our raised expectation of year. of from is growth year-to-date the modest range Building to X% continue in Construction X%, end end the that

Tennessee to XX% XX% facility. Our North as to some of production this America to improve full remains ramp in see Russia XX% year compared and view we and of to We packaging late XX%. organic growth at to now outlook as prior year growth expect strong we expect modest continues our our China demand

to at of slow XX% in aerospace to Our of ongoing the and production supply year-over-year chain destocking remains revenue decline the due outlook unchanged, a OEMs. ramp at the XX%

is it order much we supply about see book, believe destocking. to is yet recovery, have chain there we While in still the our talk

impact sequential market the the at of believe we discussed, bottom end previously the As and us quarter XXXX of growth forward. reached fourth we to going the expect

front Tim Now turn I opportunities back of us. discuss call in the over will the to to

Tim Myers

growth future. market the us Erick. to sustained of foreseeable us have capital and you, The allocation combination end Thank for before positioned grow opportunities the

we next to explain Over materialize. will returns I and growth those how slides, few expect that the

XX, Turning by consistently grow of end our all macroeconomic now next years, to few expected as supported Slide over to markets of X are drivers. number the favorable a

market of which and users improving to trailer, across First, and commercial contain is strength versus aluminum aluminum and X to in aluminum forecasting and years prior modest markets demand experience heavy-duty U.S. a helping XXXX, associated is shrinking packaging instituted years, of X% is grow. automotive products then of the countervailing by for and projecting the in content. the that XXXX. cyclical nonresidential a global is That Demand an for growth and common vehicles are quarter. with construction segment in in case growth place truck industrial now increasing the antidumping transportation, has additional industry. Industry trade domestically of a through the supported several is rate year-over-year The market XXXX. into to imports the rolled by vehicles pricing X supported electric the automotive experts topic of in in to as from base improve X% first rate contraction instances, the American lightweighting, a by construction as the is XXXX, ground recovery hot growth in still same sustained U.S., X% market. is years. accelerating a because includes The dramatically sheet that for markets. for effect end both to and and our to U.S. growth return vast of in predictions time, the growth vehicles challenged for of aluminum a trade in sheet XXXX for Building and in in the starting CRU to supply CRU momentum been is rate while expected body carry in the percentage sustained The At majority supported in reduced projecting through industrial case of XXXX. duties a light demand demand is XXXX. case, through are continues North went expected protection

strong North we Our is several have for in opportunity clearly our been essentially a and was to And capacity facilities XX% And sold growth from to to headed for to six biggest Boeing full and And in And for went biggest for through we are believe the grow XXXX. American are from rates down XXXX Russia customers quarter. out in expected indicators XXXX through time all upcoming build at XXXX. This industry quarters. timing. already American extremely announced at are China demand our when market. recovery today. boils X% can return contracts question while to have last the finally, mark North to XXXX. we frame. qualified aircraft the it Meanwhile, encouraged grow by sheet XXXX is just aerospace, remains annually our portfolio, combined pre-pandemic expect between to rate really we question we Airbus believe and We levels and fully that in the to We market the end, that XX% expected

good vehicles. ones. line, some clearly, to XX, core On bottom around We five GDP. about growing to adoption the And It’s growing we of markets at choices. let’s So vehicle pretty benefit electric a from all multiple good talk have world. our always have are of Slide wave the electric of stand

of sales light only up represent XXXX. by them a make market vehicle forecast experts the vehicles industry of quarter percentage electric today, While global to small

chart winners. to transitions fully than are lower of vehicles more in corner industry to the XX% vehicles. to XX% roughly as shown vehicles engine big automotive electric energy the combustion intensive vehicles, in slide, projected left be the the internal comparable the alternative As are aluminum Electric

as growth of automotive vehicles gain fully would platforms, same share the electrical segment market, vehicle gain we many electric rates. total vehicles and prominent cooling as aluminum battery on this and conventional to outperform As make compressors we build larger they sheets components, structures automotive vehicles, content lids doors, expect the On further vehicles. to systems material are sheet and produce and products electric we of a of in we for But also brazing aluminum such body advanced provide more cases. as in hoods, that such deck for

electric we a the and nameplates hybrid are We world. the brazing to of technologies electric of across to range electric XX develop expect revenue full primarily related helping to or applications in vehicles and more advanced In life. well for in total that in XXXX, $XXX over North are use friendly America wide rest battery be improved vehicles environmentally our million

is on number in it to not a this sales fully for in grow yet, faster combustion absolute major us we transportation vehicles. growth While internal driver conventional expect ground than terms that

mile We delivery help to companies a are working in an on fashion. also last to and delivery get number sustainable customers energy-efficient of products fleet applications

announce continue OEMs We platforms growing on and new additions hope few a some to new next number of the over quarters. exciting with working

While that profitability sustainability contributions our the their our long-term, we’re for on opportunity about excited we’re the the globally. will equally growth electric excited represents to have vehicles about in impact

some of to of social governance turn to to I’ll and we environmental, ways prioritize Now our the aspects the that organization. continue other XX Slide review

stand-down As performance. priority and our top I previously, last committed and to month as mentioned we and practices improving safety a continuously initiated company-wide safety our remain

we we conduct and During company governance standards. our environmental, social the of advance then our our Sustainability ESG June, goals. code and we In supplier published our updated and continued quarter, XXXX efforts to report,

which are website. our on available of All

we developing year. on addition, end our CDP announcing completed our disclosures, made GHG we progress long-term and water the this which goal, before significant In target and of climate

our Together first XX,XXX and our charitable as our employees engaging nearly like well and diversity as inclusion survey, Together campaign. programs engagement also Grow our Giving empowering initiative worldwide donation We’re through

which Finally, Global representation, the female participation we leadership at Target are helps participating to in and Compact Equality program, achieve UN also Gender globally. Arconic

combination Now generate cash moving XX, environmental end-market obligations Slide well cash of and us positioned has strength to significantly the driving substantial pension growth to flow. lowering and profitable left free

now to So cash. what talk going that I’d about all like do with we’re to

on highest to are X-year are repurchase of always or capital program whether goal on investing instituted would and capital saw We’ve market that return organic we over options growth. returning share as considering share repurchases return benefit through is our a First our a $XXX already evaluated or inorganic dividends all close, for the in shares. all, shareholders. begun same: basis, we thoroughly of The repurchased allocation Through we’ve or maximize million of million the have for executing Friday’s our the that, shareholders. rate $XX

generate We dividend last the a year. to ability demonstrated of continue has under intended this to free the right onset company prior At consideration. to cash the in instituting the when evaluate sustainable to pandemic will be the flow, time, we as

good evaluating also believe We We to we seriously. are consistently take be opportunities. project each made, M&A there and deals are

going end, current to packaging that industrial in debottlenecking conditions portfolio organic intended the markets transactions need presents to are that projects attractive the take most we international markets. transportation low-risk, options. are The market investment advantage To in M&A and assessment of ground and compete returns. very industrial the currently strong suggests options packaging, a high-return our be in However, with to organic range of to attractive currently evaluating debottlenecking

– focused in quarter ramping that in First, North we six on announced earlier America. the we up announced last are packaging, contracts

we exploring are best forward capacity there. the packaging our are adding Additionally, path evaluating Russian to and

to environment. meeting on be but remaining opportunities to access the in would current return packaging also of capacity million mill, there Tennessee explore expectations million our latent capital-efficient continue the XXX our very We challenging the XXX pounds to cold

we industrial there U.S. expected and expand is service in market believe the grow Next, and to the opportunity to growth. capacity to is abroad, that

and evaluating opportunities to Hungary. Tennessee We’re facilities our at industrial capacity currently expand Lancaster, in Davenport,

in Finally, very ground look term our in for international strong. remains we some output to And the transportation, and the continue despite that of in the increase near-term outlook rolling longer mills. headwinds ways our U.S. to industry

rooftop for shareholders, in capacity value very already many our we have with expanding in know we option is and run our how people facilities to create of agenda. high the markets opportunities on we under While already lead to the know we

think update growth can process. all Slide have of disciplined million EBITDA total maintaining allocation earnings it’s one provide $XXX we We is the And an XX tranches believe level. while capital but to X% on capital total our EBITDA a that significant we deliver to shown of growth, XXXX previously, on incremental forward. remain opportunity access we’ve below We to revenue program. expenditures we important compared track going three

by at last combined favorable As of capacity range. the industrial pricing in and million savings $XXX agreements quarter environment industrial productivity to this working rate packaging at part million $XX and high end the facility. reach new the run an out of secured The the to performance are of organic this ramping packaging attractive million incremental The we’ve full-scale of of production $XXX pricing are support additional toward $XXX both been we market, million their to EBITDA, million we and year. with end Tennessee $XX expected of were up secured permanent our with cost

benefit legacy – progress half free implications we’ve cash to Slide cash XXXX. run We XX of the starting recaps free in year. step made and in fast flow will basis the the full the second on up for flow of the program next rate on achieve obligations a

sequentially end an for adjusted XXXX. ground the long-term additional we’re In by and quarter, the XX the opportunities after-tax project gross summarizes with market, OPEB path down River, and while our on with wind growth. Grass Slide down our – have us and liability pension New our our in X% reminder, that by grew down the largest net we is a in since Combining As our going largest cash in XX% environmental to OPEB frame. same York, over step million be needs lower $XXX separation, transportation. XXXX, tax time this XX% pension liability the EBITDA second are in a of has despite positioned declined decline

conditions to with that in the in of ground and obvious are the it’s temporary demand underlying most transportation strong, very we volume. able Although are industrial offset industry were issues automotive impact

a also billion together, cash to with free XXXX EBITDA completed years. each reductions is that expect said make and adjusted we we And to based based reduces flow and legacy the year liabilities and the legacy for disciplined. will of another strength several is alone, market generation beyond. them million XXXX. our small change On with we the excess investments pension We the on meaningfully That well in the This transformative up organic also grow threshold capacity step-up associated or by in annuitization them. volatility combination overhang are on All structural $X of returns our in step expansions. expected greatly top end support in in broad-based and will markets cash be profile, investments of $XXX can where

uses As cash. profitability evaluate continuously we best and will grow, the free cash of flow

their as opportunity substantial there share invest to and in dividends place all organically, M&A, have believe repurchases we well. growth will is While

billion have robust $X.X growth and We’ve increasing shareholders, our of has from XXXX to a in guidance the outlook early billion billion. $X.X price. very returns to much our of range to a reflect metal story. revised updated impacts We of innings billion Revenue we the been to are $X.X full toolkit to year $X.X for generating

in we improvement XX% year million the the yet million previous $XXX of $XXX million. is of now be We expect of range Adjusted a be prices the metal at third in continue million, impact of quarter the us. reflects previously $XXX our to adjusted as net as sequentially, the to expected flat $XXX Erick have on roughly center free range, seasonality million million issue cash the capital, of with relatively flow to to behind compared approximately to semiconductor not is mentioned. to year-on-year change view The in rising and Europe full EBITDA working for $XXX from $XXX outlook

OPEB As the in a Wrapping up, and year. approximately total is cash what you remember. excludes million pension, hope flow free environmental adjusted here of in I $XXX a payments reminder,

delivered another we strong First, quarter.

we earnings Renz we’d Second, help flow growth. are time, our capital us support disciplined double-digit cash for those. this strategy. like I’ll markets open to allocation generation, it for over end to positioned free third, facilitate by sustainable questions. turn supported And to And At it up well

Operator

Thank you, from Woodworth our sir. the Credit from [Operator first have question line Instructions] We Suisse. of Curt

line Your open. is

Curt Woodworth

and Good Thanks. Yes. morning, Tim Erick.

Tim Myers

morning. Good

Erick Asmussen

morning. Good

Curt Woodworth

guess, significant market grow Asian with over to sheet is at then that your very the – some are I And obviously assets your what’s there driven can is, and when further growth European primarily in support you potential in But be from deploy on But industry, sorry, look market? can when kind investments to respect you line the expand when the with can you about at with you a potential. the capacity we you’re to really major of resources growth other the Basin next can industry, there, look to they mean, I would and you limited or that. to question beverage I going go in Russia of sheet Pacific creep mobilizing First capacity and several can how been M&A, can capital years. to respect know restarting of some capacity idle comment big strategy? talk there more think is China, on with the some been players. beverage

Tim Myers

Great.

equipment had didn’t the makers. getting aluminum sustaining are Tennessee, it firing the pretty where that up back That’s all, we the yes, capacity that can can, in straightforward. growth makers of capital up. any to fire for make we the other looks of about we’re And have clearly, than value excited some idle investment First with can kind like very to

capital significant on I conditions more think return that to to have get see to market a a in order to we’re commitment, going improve. continue

not of when in a be at think And what years. kinds of you’d that greenfield at industry to first about, the look type are decades, be start looking the that those are billion all, can of Here a at of kind might investment I measured returns you market. margins you paybacks billion – in in that U.S., thinking $X $X.X

we fraction for we look new ways have are facility a at need of but those we probably So, unleash still in an profile to mill because would to the When going put debottleneck Tennessee capacity decisions. to for what it the we the a to and continue overseas, has growing very market place, very could to is particularly very on where Europe, position look acceptable return Northern packaging very, Russian in tightness export positioned Russia itself, also growth there is strong in the And double-digits. in also to at at strong well our facility which facilities market. into it’s a cost

pricing it better conditions we are an something expansion. on does we now. get And right studying that look there. a That’s very deeply see like we return So, then reasonable can

Curt Woodworth

Okay. and talked opportunities talked or previously, set about about normalized M&A – when am you of potential then slightly $X.X just higher. some I And curious billion you EBITDA there.

that And were transactions Your higher about on stock trading is Xx done at M&A at multiples a than significantly EBITDA of that. basis. historically, lot

how be. are Thanks. you set, I there weigh So, whatever reinvesting would And it other could in currently of markets you just opportunity curious external equity doing that to opportunity am that you get or into? own products the tangential this are kind relative what be your would like point to at to or set

Tim Myers

options the that it the listening we we that already a If we very And really compete the good I seriously. are we I it comes with opportunities think in value. profiles return with it need that are rates to return. in of So, and M&A, script high feel a But kind have run plants are And really organic strong we level when to lowest find opportunistic and gives nice that some we risk very very we going mentioned have very of be the on taking certainly, of and think kinds growing I the those markets are position we that are strong projects evaluating. in, they confidence already that us to board. of

So think it. how hopefully, with helps that might about we

Curt Woodworth

can to And working of But in year? free third is one third to seasonality what and kind the quarter in guide, going your relative of think sequentially, this of usage the then an are quick to, sequential pieces cash Yes. quarter. the And It speak the still do flow one I with some like then just overhang. you quarter? could business the better. second EBITDA doing capital parts the on, just moving most like capital you some see But shortage chip I know into packaging. progression you working seems look guess, respect there is

Tim Myers

So let’s the yes, start with sequential.

There think not is I in our highlight. do in se, a have What QX. segments packaging QX of of to we be Europe, seasonality have all things would is per there I three right. meaningful positions three would lot

Whether capital little August. got in have not, do weeks to we Then take customers are we bit the of rest couple product. see also we are obviously, running sustaining those a window. we that lose our to a to the there we then when opportunity more we of to bit or take aren’t continue to where a And So, a have drag, take from plants in work semiconductor some going chips.

the at year. was the in impact When recovery quarter saw million provided $X the a net we factor we quarter, the largest our have We risk outlook of quarters semiconductors. time the of guidance about of first the last that increased two seen

million quarter are you on And from the bottom, of to see so we we another based about the range the of the $X seeing think automotive what customers. a in going think quarter third impact that. covers I the in our top that are pulls million certainly when kind $X to of kind from

stimulus present still challenges, lot are see overtime. modest we And of And U.S. a So, continuing one staffing comes that with and states, the those next states that the is to would in be then the some in some here the third one. is, in

probably juggling QX three of think why flat. I we we go and to kind the headwinds are relatively those as into are that it’s so going And be

Curt Woodworth

Great. Thanks for the luck. Best all color. of

Operator

Thank go Deutsche Blanchard Please from you. one, Corrine The we ahead. next have Bank.

Corrine Blanchard

you were I morning #X? my then Good the taking Tim. growth would priority, question most had would you Thank for up. of Hi. are think just you and as to organic if like the dividend be questions. into more cover priority rank on it, second But mean, putting you maybe how few of follow-up order you sign. my capital them But already And allocation a then the if the in of industry do we up and you etcetera. just you terms seen seen have yet book recovery on first aerospace? any of year second the and air aerospace know for have versus Obviously, see seen if traffic of the picking have in terms half we half any year impacts and

Tim Myers

Great. for questions thanks and Well, thank you the for joining.

on we capital really with going return period all, then the focus dividend, organic well. do to and mentioned, and what on rates the and payback of the are as use of of the First as we I

are organic we than opportunities, rate at when at a weighted of these our capital. hurdle we that’s more So, double cost looking are looking

So, being and the of rates let’s of XX% the say, watermark then neighborhood low above. return in

about did we same we think, we not to return competing very, when disciplined think, about with quite way quarter. or aerospace, are as that. our frankly, so we were regards that whether dividend, out the which share being we for it fourth shareholders repurchase the bottom to the an in I well. In the program, creates it’s equivalent And think And around

We last modest the seeing improvement over couple quarters. of are

wouldn’t I our But a books it call recovery. clearly, filling. are So, V-shaped order

than We And are order we are this are out in of already And that’s our we QX extrusions activity we rebound in bottomed in seeing load. in QX. a seeing better QX business terms – quarter.

the activity that of also good the are business, I seeing a So, OEMs, a seeing some to say the I the very up. we certain destocking would happen sheet it, are And which and what stronger starting of supply would in that starting bounce say than in get part in that view the network of distribution from as I terms the more in are with first, quicker extrusions to chain. we we plate sign which business, is the parts are that

Corrine Blanchard

up need, aerospace the Is capital that cash Great. the working are maybe packaging maybe free stronger the in from on flow as I that credit, about? you guidance. assumption guidance? and just capital one impact embedded Thank But and cash price. has ramp on for think the free is you. I And flow last well working metal if like obviously, also a with improvement that question you the just need talked Obviously, may, one

Tim Myers

question to the that is yes. answer short So,

We outlook. growth anticipating in are free flow our cash

$XXX million. guidance At about all the you that’s our metal. If think range, the revenue, center for of up it’s about

in it that capital. And and for I real think see grow our it so will terms, in payables metal essentially when simple part about dollar actually you see is the you And Q, clearly inventory dollar. working largest but the of can

other. each they so offsetting And are

the and And of we our a timing. on day, offsetting it of impact inventory. got on through, use working so our of payables end a inside has have that. at up, that Metal And hedge of have metal kind you got the And cash. to we pass consume impact it on really program degree, the it’s revenue on is any some a pass-through But the metal of become the does of doesn’t because have goes performance cash EBITDA as capital. cost what

Corrine Blanchard

on unchanged. of are or for the your are you lift range. take – was It And way I the full to put reach likely this to sense. $XXX of maybe last promise But maybe terms maybe a – the it to achieve year? probably one. another I do you how know I So in top What’s it the it’s view driver the guidance, maybe think guidance? is I is, the or you And investor just what EBITDA a approved expecting million think up. and makes Sure. But

Tim Myers

annualize the range. puts first center you it in the third roughly in the if looking half, Sequentially, quarter, half. the of like you first So, the

will industrial. in quarter really like and the how things the much comes And some so it to can fourth how on recover ramp-up benefit additional drive chips down much we packaging and

Corrine Blanchard

Okay. Thank you.

Operator

from from our Please ahead. go line Benchmark. of question have Josh the next We Instructions] [Operator Sullivan

Josh Sullivan

morning. good Hi,

Tim Myers

Josh. Good morning

Josh Sullivan

Yes.

idea is need is question. about a on follow-up to back opportunities. have the to industrial about mean some versus pivot that And a CapEx – these markets? here? trying we talking to are take an get that I just we the by automotive transition industrial into account side, of do investments one-for-one, the those incremental think should on mean, gated that automotive the or the of Just last we investments I you exposure return so kind of the

Tim Myers

So, no.

period only there flip we not products when we They the cold okay, – make thing off time. going to of can we over some basically can and make if timing think we across – I that pounds where, it, mills see are trading are our is automotive, industrial Josh. for

making in they so we line, say, some, the capacity the not heat have because use and heat treat idle industrial make automotive Some of don’t we continuous treat short-term, products pounds. continuous are the let’s

that’s contracts thing we is And have orders would little a say and requirements automotive. bit are inflated. for did other because have I The our we inventories got

very So, high to that levels high. very because be will it demand sheets at our opportunity buffer us, are is consumer resolve shortage the stocks automotive for the and right, inventory are eventually because and starts should, dealers. low chip when And the for an itself,

us make to will continuing for then period of that a out would out We shipping products industrial we and which of constrained allows inventory, will inventory automotive still be out of be be shipping time.

seems our pushed out it the getting it’s to The chips, going determine about now, talks to keeps discussion exactly for right every hard time happen. semiconductor just like crystal couple So, quarters it of ball when a that’s it. somebody around

Josh Sullivan

the you Got it. And know number on of just then on total – sheet said qualifications. can I

the think that need got we from I to is that qualifications should you thinking ‘XX ‘XX just done number had done? far here. quarter last six as and you What about be be total for that as

Tim Myers

oversubscribed can with interest were in sheet. the we So,

third North as qualifying trials preliminary we take Those in are of able still have quarter. customers. we qualification XX were us But shipping the gotten six the really qualification customers So, are some we on the through in XX we currently shape. successfully to six through XX. actually lines on on we America. only good go And And have

Josh Sullivan

solutions you those? advanced electric then of for some are? on around last Can any the you opportunities of solutions, what Got any timing can, pushing brazing you vehicles mile are some just and the mentioned. it. of detail EV you those just And And if

Tim Myers

major with the sheet ongoing customer. of kind brazing It’s

development performing alloy sheet of to doing we of in work higher let’s technical to our tune lot inside that materials brazing through center a the predominantly our it’s so market. alloys be, are temper And really say,

sharing And when So, in be about specific. development, being that. portfolio, our as of they would certainly, too expand will us comfortable be that we continue part to are we customers sensitive

Josh Sullivan

Tim. you, Thank Okay.

Operator

showing Thank time. this no the you. like am Tim questions turn further to now would I I at back Mr. to Myers. conference

Tim Myers

quarter. very I just strong deliver would Very of all, that, like XXXX the projected again, for to XX% our guidance. we we everybody today. closing, delivered profit In to us you another uplift Well, track And on thank reaffirm to good. joining in are first

meaningful the which on We deliver program we million well improvement support track are announced will last growth also additional year, that profitability in to $XXX also XXXX.

allocation option. also returns finally, enabling to quarter, balance look the our and us. sheet range growing improved Our for beyond upsize multiple you double-digit a thank core pipeline organic commitment markets of and extend updating steadily again while full to fund pursuit options this are growing And all of you debottlenecking we And it EBITDA forward of the at XXXX easily growth GDP. next developing sustainable are joining in capital earnings a growth and will growth. We

Operator

this Thank and for conference. wonderful a you Ladies concludes have day. today’s gentlemen, your and participation,

You disconnect. may all

Arconic (ARNC) 3 Aug 212021 Q2 Earnings call transcript