ARNC - Earnings call transcript Q2 2022

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Operator

Good day, and welcome to the Arconic Corporation Second Quarter 2022 Earnings Conference Call. [Operator Instructions].̱ Please note today's event is being recorded. I would now like to turn the conference over to Shane Rourke, Director of Investor Relations. Please go ahead, sir.

Shane Rourke

Thank you, Rocco. to Corporation welcome Earnings Quarter and Call. Conference morning, the Second Arconic XXXX Good by Chief Officer. Tim Erick today joined I'm Myers, Vice and Asmussen, Executive President Chief Financial Executive and Officer; will After Tim comments question-and-answer and we by session. have Erick, a

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

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

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

Timothy Myers

solid and and investment high-return program. to flow shareholders. supporting remained better quarter, growth the Day the some would you our across held adjusted along Shane, ramp-up be X% our to issues you, long-term X we in an of tell remain meet fundamental good on grew we is organic XXXX. our as last with investments live returns will in on of opportunity and time. for EBITDA free I'll for start EBITDA the in which quarter, targets, In which year, highlights Thank quarter. $XXX million in over enjoyed cash many key the X first June, second announced everyone. cash with Investor been generated growing our story have strong, -- and adjusted In I growing markets Phase by to organic morning, Slide pace substantial and to absent our our another year facility. end And Demand deliver Tennessee some we double-digit operations the

orders journey, to demand makers that capacity second continued as in off the Packaging the demand us we setting aluminum. our that trade suffered in second quarter and equipment-related shift just are continues performance in on can leveled in have Despite gives grow demand, to targets. we're While quarter confidence those production strong preferences that saw field strong issues, consumer and add pricing market. industrial meeting due ramp-up Industrial the actions our the hindering at Tennessee. as to playing

full as but working historic the are reach quarter. those issues building accelerating this production the expect stabilized, We North strong aerospace facility the within by Ground recovery nonresidential supported demand. resolve construction growth semiconductor remains production supply quarter still American depressed at and modestly is improving to is and in The fourth versus rates to transportation levels.

expected to $X.X is CAGR run Investor were that a At approximate evaluating we the to our in Day adjusted roughly rate. deliver year-end an plan of long-term XX% EBITDA business. Our XXXX our we Kawneer through at June, billion announced sale also

would we and We highly believe is have to proper the and valuable process under current and Kawneer in for market that current debt markets. value it business, we receive do due to a conditions. uncertainty economic performing decided pause very not

Slide to markets. key more I'll across performed detail our Moving on how provide we X. some

since and internationally. and sustained continues remain to destock. strong demand. through the recovery of continues Building the for led Arconic, quarter at the take up time growth was the grew continued to ramp the accelerate market relative very strong Aerospace in organic the the away? building combination due for construction and and Tennessee you in quarter packaging separation first again should again to what First, to and So construction. channel as Packaging revenue was aerospace, and highest by rate pricing

up year-on-year, levels. some heavy-duty was below in see last We're slide. beginning the decline in on to around levels right corner from first organic Now remain quarter. XX% year-on-year and a In solidly the automotive truck the bottom XX% historical of demand, stability revenue the transportation corner sales year. reversing course but over production go total, XX% organically Ground increased -- let's our

organic construction second XX% This increased a increase Following the again in well year-on-year. as in result actions, quarter and Sales North strength Building pricing is quarter, organically American XX% first sales Construction a XX% of ramp as nonresidential our market ramp-up grew Tennessee the flat to grew in year-on-year was ongoing the in at XX% second organic sequentially revenue quarter. the year-on-year. facility. Russian accelerated due packaging Sales the substantially spending. organically packaging as

capacity The facility-specific organically demand issues to industrial strong as but similar pricing we the headwind third we quarter, this facility the across of had equipment the in Tennessee a in in industrial, that will efficiency full an year-on-year. ramp the We'll will sales automotive, quarter. industrial problems declined it address and quarter disrupted remains that but packaging, market path. that flow meet available outage for in the Tennessee create we and these Second issues industrial to limited ability market some require XX% had our

in be quarter. full the to capacity expect at We back fourth

quarter were basis. year-on-year aerospace XX% sales second up Finally, organic on an

back If several continues organic quarters, to you the year-on-year growth accelerate. last look at

Our XX% for in aircraft. over Erick in digits organically first production XX% to it XX% in the second in last organic and orders fourth travel third ramp turn the up quarter. to of the quarter in first We're returning the I'll aerospace discuss encouraged of the large detail. in XXXX, second results of to the by shipments now growth air and quarter, now commercial quarter year. consumer of more demand by X% They double in in were before the half declined quarter down

Erick Asmussen

our per million of X for $X.X billion, income with loss Revenue million XX% Thanks, net year-over-year. organically start or Net Slide quarter was second up on quarter $XXX XXXX. second share the financial a Tim. was of with in I'll the $XXX quarter compared highlights. $X.XX

year to is noncash pension for foreign million, exchange focus of an declining $XXX quarter working was $XXX included was an related EBITDA net days was last Our fluctuations improving net of Also primarily flow of million the approximately result second second the quarter after-tax and charge after-tax and income the gain million. of on approximately in capital. Adjusted in an increase quarter, as capital currency Russia which settlement X% days continue we our included quarter smart sizing a Free of $XXX million, foreign to by year-over-year. improved aluminum prices. system X as further we cash our working $XX

last cash the now million Since shares. approximately lower Tim we flow end quarter, we quarter, the X.X repurchased increasing X% shares of we the or of our of X.X $XXX approximately mentioned, million May In reflect program. price. million outstanding million in $XXX to $XXX and free against repurchased the through for program to million second our the for approximately year As this approximately guidance are we shares year our announced aluminum

available $X.X Lastly, cash billion. of we ended approximately liquidity the quarter and liquidity with with strong

and $XXX of our actions aluminum financial Slide impact to as or discuss Revenue for due due to as prices, volume year-over-year EBITDA inflation. realization pricing the up pricing, was I'll improved improved by and X. to X% detail. and in performance in increased year-over-year, of quarter the partially million, Turning offset second more mix, well volume higher Adjusted the million $XX million $XXX mix. primarily quarter

issues we completed pairs As Tennessee in experienced equipment impacted ramp-up this Tim the we And the earnings. and expect quarter. have in mentioned, to

inflation. with actions, push pricing to we and experienced offset to have inflation continue We high

materials. was $XXX shaft alloying quarter, issues inflation energy, as the were and savings and million from transportation $XXX our Our negative due could the of limited offset net a inflation to primarily impacts million productivity not production approximately in

Revenue increased year-over-year our second we in are million volumes Turning million the offset segment was X, EBITDA and Extrusion productivity industrial, issues, Adjusted segment This up by in X% the reflecting was of higher was quarter $X Products year's was organically $XX aluminum in pricing approximately a up offset the legacy inflation. $XXX impacted Starting to the million second $XXX $X and loss and by Slide I'll million, issues EBITDA by compounded organically. $X.X second million, operational year-over-year, by XX% Adjusted Systems detail. last Rolled and actions, inflation XX% quarter our issues. was up up $XX to market, which the loss quarter and labor the by cost in which by performance and million segment growth operational were up Revenue driven $XXX Construction volume was and on Tennessee. equipment Revenue every Adjusted inefficiencies growth year-over-year. million, were XX% experiencing. Building of price, mix, billion, year-over-year, underperform the contracts. was costs XX% prices, quarter $XX million, stronger our up segment. in year-over-year, segment or versus million review due declines driven $XX which more operational in a organically in with our in except and driven by continues EBITDA or inflation offset to

X, outlook Slide remains to moving I'll our revenue year-on-year. Ground Transportation in range XX% X% of Now to the organic by review market.

production While customers. improving, see uneven automotive from we our continue order patterns is to

trends seeing in markets. transportation commercial similar We are also

to to in XX% reducing are second revenue year-over-year issues growth XX% to XX% quarter. X% the to in organic We Tennessee our industrial expectation from due the

to chain of XX% pricing expectations activity grow the view is we Nonresidential to the to which to working China get America full Tennessee XX% with allow strong, Russia. a able growth outlook supply North remains improvements now its XX% our us and XX% in year-on-year range remains Aerospace be serve to growth run our things Packaging to and will expect remain our rates year-on-year. better in be in on in expected organic supporting track, the and back are due in quarter, and revenue XX% solid XX% to year-on-year. uncertainty market. We fourth now of operations for at to and construction wide to ongoing industrial

have expectations rates. the to been production throughout as their continue for aerospace increase Our growth OEMs year improving

over to growth I'll back projects. capital to it Now discuss turn our Tim

Timothy Myers

on growth provides you, X of and overview at X Phase undergoing is now our Slide organic trials. an and Thank programs. completed Davenport XX Erick. casting The was to expansion budget Phase

next EBITDA through begin the of in XXXX. on the with to in We project quarter and The rate trials We plan year. Mill qualification production is the benefit September, hot Lancaster some fourth start in see first to run as will and in well. XXXX up from on time project quarter, the occurring ramping Hot mill budget full stand install

reminder, of a about budget the this X $XXX by and these XXXX, run million. In expands drive projects had output about $XX total, rate by As should million pounds per end XXX of total Lancaster annum. a project EBITDA million of

see is On the There are of stages detail returns projects in presentation. various X budget. to planning, bringing program. the that these comprised bottom announced you total, In All and we have in organic slide, our on advancing $XXX approximately are Phase over X they're on June projects in additional to of on have them that Investor growth the of can completion projects part we XX%. these committed of investment Day a time and projects million our targeted June these budget capital on well, and

internal previously, rooftop As program. Phase additional high we we projects evaluating are the for return a mentioned under currently X

Now with several potential May on facility, we let's to turn Russia Russian We currently XX. and we buyers. announced our that in talks Slide sell are to intend having

are As production we and it a the levels ultimate our the some makes our predict impact sale. conditions or This subject to on the ability of timing degree, the sell certain difficult change operations to legal to probability reminder, facility. to that

employees options. X,XXX comply obligations our our continue pursue support we We to all while with legal and

Our currency will EBITDA sales quarter was rest in to $XX is $XX of are Increased million reflect second a great at in from end full started fluctuations. XXXX. second export primarily be operations million, increasing of guidance to aluminum with to million and There's result $XX in million prices year-end quarter. to quarter deal Russia million million was our at quarter third uncertainty to run of still year, is last $XX This the $XX continue and at the the in $XX restrictions same the quarter flat which from Cash performance. of year. we the $XXX foreign impacting slightly million, Adjusted in strong July capacity. in the the declining but million near $XX a up

our Let's rest outlook where now of move the I'll the year. review to Slide for XX,

aluminum the range cash $XX that's Our free impact view $XXX billion transportation $XX.X revenue cost to of high full $XXX $X.X will from to with guided to American year the aluminum due also Century's flow. lower XXXX issues associated result prior the end prices, down at to with $XX.X ramp-up the well now billion majeure to is XXXX be force as of to dispute. We in billion be low a million the issues announcement labor in to expected EBITDA previously expect billion, and North which our million. the as associated of year full now is range adjusted purity replace of of railcar This of benefit Tennessee,

is We are to well costs as railcar deliveries, currently material driving Davenport to in seeing inefficiencies to operations, at which support production. a slowdown transload truck as our additional

energy see and to alloyed prices. high continue we Additionally, material

in While for to still situation forecast, contracting these pricing address plan execute remains pressures XXXX. current and our on our these the to are additional in fluid actions season we

EBITDA in at as due Europe. Looking quarter, these to is managing expected adjusted through seasonality well sequentially the decline issues, to third as

full ramped primary failure in of the the production can with The and disrupted in at addressing production. production second also rapidly to action quarter issue facility depend amount recycling higher-cost failure inputs that lower-cost equipment as can and quarter. The underway margins sheet we of to the the in is our aluminum rates on beverage diluted full to scrap can plans are We it used content. beverage production substantial issues get Tennessee overall amounts have increased that an up fourth operation our occurred

ramp million. knock-on asset production facility. resolved quarter working production now updated the predominantly can driven we The an scheduled volumes, have increase network repurchased million of There's able we the increase to $XXX industrial sheet to rates. appendix the cash $XXX significant $XXX $XXX announced third to North in issues a for full in for million in X.X The the this of full included approximately program be forecast is on flow meet these of our million, the repair Rolled capital through million adjusted the a your had compared shares reducing expect an After We prices expectations While prior the by the to of walk we was free in is lower approximately the Products in impact the beginning of the outage for Since for September. year free of disruptions quarter, year. flow the at reaches reference. American cash last EBITDA May XX, we July fourth aluminum as ramp authorization. effect approximately

today's you We program year-end. expect complete away take the call. what like to to before Wrapping here's up, from I'd

compounded consecutive have to growth. to We EBITDA line grow sight adjusted continue and of years double-digit of earnings

of set any in grow markets medium are are the end and to diverse we all to expected term, Our well-positioned weather downturns.

new Our now shareholders. projects growing returns our free cash flow is and opening over growth to doors call organic like to facilitate back Thank turn it Rocco open the to to and questions, those. you. I'll I'd for up substantial for

Operator

from question first Research. Wolfe Today's Instructions]. comes [Operator Tanners Timna with

Timna Tanners

just confident need that question understand demand? interest a rates we ask or sale, you more else to you'd that And that? it are of price Kawneer about get for bit the there something that where Is wanted I with a that the signs on more weakness find what in should any do asset? is you see think right to to of

Timothy Myers

Timna. Thanks,

first. start Let with question me the second

take pause. I it's why really primary factors think we to X for a decided

take pause like a was our parties the I say, that that expressed The we let's has we and impacting maybe the first one place number that, compared been believe announcement. to say, then going over were and a in both debt a markets, to economy asset, a the made -- decided uncertainty X those in of high-yield last the us leading let's in continue been to particularly initial being kind as is asset projections, it's and be think, to And sponsors different was when which interest facts, going until it's and they get constrained the XXXX, to X very, so to well. discounting and by look strategic to the weeks growing of was the debt showed what to operate performing conversations

continuing continue demand, of market have transaction. the we come that's through. as kind see aerospace to largest contemplate great I In to better the all Building The it as segment to accelerate. through, well. think clearly stability We're segment, conditions will beverage Ground seeing to a on is we're ramp to that Erick walked Construction when value regards the secured and which Transportation market, and continued ramping up in more our have can

holding We opportunity book continue good U.S. And up in in the order and industrial that to see in it's of far terms certainly quoting our market, activity business. the so

industrial in softening some seen Europe in have recent months. in We

the by with I think of in we'll of seasonality the European and a have Ukrainian August. shutdowns caused with conflict, associated lot here the normal of that month some disruptions some the

Timna Tanners

ask I'll off. hand and I If one could more,

Extrusion presentation to the I might disappoint, color side, give take I the the how were hopeful and candid was the that that think pretty or on about in talking product -- drive clarify On reassessing turnaround you about portfolio any that you've been to actions comment further about? could you continues any you us

Timothy Myers

Sure.

business, as the in are simplified facilities looking the of have that weren't and at look that's it. majority the new the business long-term at through, the is the and of took opportunities We've lot which to terms simplify additional and volumes restructure facilities, We industry. laid flowing as out couple rooftops one quite profitability at volume of not converting we as certainly do running the months. some restoring efficiently contracts. taken particularly in think they I volumes a from facilities, that as the to investment But have we in we're units, We under the a started in casting of our in restructured old look out structural so actions the and own business. internal last that We've XX of of restore.

that, update and thoughtful going have about So to through that next on should transition we an we're how quarter. be we

Operator

from next Benchmark Sullivan our question The And Company. today comes of Josh

Joshua Sullivan

seeing Just, of build or you're the bottom by top-down the more look that from through seeing aerospace rate increase in the driven from chain? you're a up supply a what assumptions what outlook, was demand on pull look

Timothy Myers

lead have aerospace, I the nature of latter. does the longer times, mean, us, It's it for Josh.

And so most order the through book year of end can we aerospace almost our way of see the all much the products. on our pretty out

rate changed XXXX. build the assumptions So significantly for haven't

what for might our announcements our in the regards slower with seen OEMs. ramp through it's You've XXXX, where really XXXX up single-aisle outlook coming in seeing a X large in some orders. But little to we're

Joshua Sullivan

the guess looking side. are pull you Are the Or a through? similar on the [indiscernible] question from And they're automotive OEMs here? rates coming I you at as auto

Timothy Myers

Well, What we you now. had unpredictable at are second as rates. the most is, their almost in or earnings pull in pull probably been I releases though release, they quarter better a for to look The rates Ford. say would saw years And X have quarter. we exposed the

out we've quarter, door the the versus So in and more the what the stability seen that, we're goes that continues on in actually hoping releases in half. second second

Operator

next our question Bank. today from Deutsche And Corinne with comes Blanchard

Corinne Blanchard

my wanted I been answered, ask questions magnesium have but to on of Most supply.

some issues. heard some or having competitor of peers have We your

of supply management and I in security be any be think second would your going would So the second cost insight the then inflation XXXX. helpful. into question around half And the

Timothy Myers

Thanks, Corinne.

shape marketplace we into the last in magnesium comment is accepted. the saw on prices continue First all, did that that increase surcharge year, to regards in the rapid put And that and to on a would we We for has XXXX. good supply. mechanism XXXX that and in a say been of I magnesium, be

that to that with haven't at our other think, That's what's with announcement expand basket into the good let's high we intention is, will are we We our past of are primary the we we that into their out and on to we'll to have say, the of going curtailment, secure in of we're customers, fact covered I it be seen high records XXXX haven't levels materials seeing was through aluminum, indexed to contracted, a a we of to escalate bit supplier the or socializing already history. going be been, because inflation the as costs contracting seen mag go I they news haven't might also those just we headwind a because I'm adequately touch levels we're are -- passing while at XXXX sure that that very purity. high marketplace purity Century in season. supply, also recent And into will purity, in XXXX to go supply surcharge the the had XXXX. put we've through and and looking cover in The because be but some make

Corinne Blanchard

on next how like cost year? just it like And or inflation about think we are inflation, prices, for what can so Like energy you seeing? the

Timothy Myers

we've been through. to Well, it able pass

the think secure first new I -- labor contract. did all, steelworker of we our

have a X-year We there. deal

a have we which of cost around predictable of very wages, now set inflation our one so And largest is buckets.

to we focus that I on are the Europe. think year both have for energy, and certainly new ones really in here next

cases, the again, the have transportation. A that's shock many paying we aluminum, inflationary With the energy from a indexes. us. in our is other relatively new Ukrainian conflict pressures are that and are come lot already the And our the for customers of in high-purity one for

So pressure commercial and look at it to our is we that inflation passing team sure through. make continue

Operator

Emily [Operator [indiscernible] next comes question Sachs. Goldman Instructions]. Chieng Today's with from

Emily Chieng

the will that forward is question CapEx just you how Could likely carried sort exactly what first And highlight around prior including sort now of that versus small guidance? the into is increase. of XXXX? sustaining My be

Erick Asmussen

Yes.

you driver year. at drivers, Tennessee, the the small can be one think pressure going is this big going to and to sustaining, sustaining look that's of a be I to

going of a in lot be done so And the that is to year.

Emily Chieng

are what vein, know money projects? put some And to to for again, on X lead But in do you required projects. for likely that of that confidence maybe your line items growth Have expectations? time prior with ordering you to those started those I Phase then have the projects remain in work some level same budgets longer starting you're

Timothy Myers

of which we We we projects there is typically items the engineering. phase until of various phases lead are third to Emily, engineering. So get in FELX, secure don't call long the -- what the

got we've So those projects. of several

the items. ones in look are to where bit ones that we are are that the make can little presentation, still lead can those work slide long the the commitments. XXXX year ending we getting that's you before XXXX a secure at need The the more point If in

going our projects going fourth contingency in going these the in we to environment. to you're quarter We towards see those So because on securing some that's contracts. an are inflate spending did be inflationary

So for surprises far projects first we in had that significant the haven't XXXX. X surprises up delivered, had haven't the that and we we're any we queuing on any ones

Operator

is follower Our from next question today a Timna Tanners with Wolfe Research.

Timna Tanners

I'd guidance a do for I hop hit missing the a something that and second second is didn't cut back more of Or to I'm guidance half? there you thought to the is a meeting you end if on missing -- sorry along lines, the a more. is still about But same little I why guide there of in, low misunderstood. end? Russia, but reasoning ask am there And on put domestic? half range, little and hard, mostly high falloff the the just potential the lower reason bit still kind it's a there in range I the then sanctions want around the end? What how I if understand

Timothy Myers

Sure.

of approximately Russian start majority Russia. majority When with packaging, are sales and domestic. are those our of facility we'll vast So XX%, XX% in from the the the

you issue sheet sanctions. can we So the the can't have as into export part that is Europe of

And a for July. period which middle Package X. there of the sanctioned in was phase-in I ended was think it that,

the Russian the sales. to impact So is that's where

the from regards continuing to will sanctions, there. guidance, to see some I In ramp putting lot of But that I some pressure the don't and to work in equipment chain upside course, the reducing us. in which also companies supply any have in automotive. side I through facing -- front in on needs year. We show is those in We some Of improvement Western coming We not around certain chemicals see the still still half. and restrictions have that other a the we're mean, hope of up second be there forecast. of think could halfway in the aerospace are

have casting As have in year. the as end benefit I Davenport get we of we financial online, the should a the coming which mentioned, to pit

up So through labor, can that we're effectively. ramping and flow we

call. I where to improve next going think and we're opportunities give an you the we're our to throughout us will continue outlook charge at are there year, on to to hard update for and as our

Operator

Ladies this to Myers closing remarks. the concludes back the session. turn to conference gentlemen, for over question-and-answer like I'd and Tim

Timothy Myers

Okay. forward Well, closing, and joining for to I'm you, for you everyone, thank interest growth, of again, I'd path giving an we for continued In us multiple as double-digit earnings your the thank Arconic years you quarter. today. to in update set like looking next

Operator

Thank We for concludes thank today's attending you. you all conference This call. presentation. today's

and now disconnect a wonderful You may have day. your lines,

Arconic (ARNC) 2 Aug 222022 Q2 Earnings call transcript