KALU - Earnings call transcript Q1 2019 | Kaiser Aluminum Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Kaiser Aluminum First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a remainder this conference is being recorded. I will now like to introduce your host for today's conference. begin. may you Melinda,

Melinda Ellsworth

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

on at If our visit page earnings not release, Web you've seen please our a Investor kaiseraluminum.com. copy of our site Relations

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

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

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

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

we we the our reference the for now turn Jack have adjusted release included the and over Any of the to the the At Hockema. would our non-run most In excludes in are presentation. conclusion in open addition, like in provided today which to have rate call in earnings presentation, the reconciliations non-GAAP company's of call which EBITDA items in I to to we EBITDA, comparable Reconciliations for measures Jack? questions. the discussion. information appendix. will financial included GAAP financial discussion appendix means the

Jack Hockema

demand cost from EBITDA at revenue and driven strong cost positive increased reported $X million, a in consistent efficiency an Thanks, non-contract necessitated despite on market Compared temporarily to and our equipment aerospace the to efficiencies Trentwood, results, business. million, to call finishing increased was margins was for pricing furnish prices results of casting related value-added rolling by our The by value-added offset important were of quarter strong rate by sales higher first $XX another operations results proactive first Melinda. partially of downtime have of purchased our Trentwood. and and XXXX, at trend pricing to unplanned run and today. Continuing Improved the interrupted joining a our with as million which combination sales level we actions the second-half everyone $X our second-half approximately improving the planned experience for that cost the prior under Welcome quarter the successfully restored us similar value-added driver XXXX, strong conditions. rebuilds.

supply has Turning ramping to month Boeing reduction in of industry XX XXX the September chain rate. the this production. supply has the other the focus during In higher of at pace producing words, production to before slide month up regarding on Boeing Boeing is per six and the of the XX a products. XX period temporary per current our build a health to introduced than for indicated reduced business demand chain from uncertainty environment,

Super The uncertain the grow Joint are super and aircraft some rates chain supply for low de-stocking. are impact it build fighter timing and until level While the is XXX-MAX modernized to Meanwhile, Hornet. demand restocking XXX supply that eventually Fighter continues is and the F-XX this Strike of likely while for F-XX F/A-XX to could recertified. chain military lead

strong. demand underlying For our applications, remains automotive

numerous a a launches. number and of new is As transition reminder, year programs program off XXXX end-of-life with a rolling

year. and XXXX, automotive We growth strong programs XXXX this in the of expect shipments following transition

early general our for engineering address general non-contract contrasts of relatively to strong shift products. remained XXXX demand aerospace demand. enabled our quarter toward and aerospace capacity we the This when products non-contract with to a allocated capacity strong, XXXX engineering in portion soft Although demand

continue the Department by and the specific previously we month $X pending request cost. tariff to approximately per month tariff costs $XXX,XXX of recover on $XXX,XXX to of while approval eliminate requests. encourage for per We receive remained current expect of we decisions the million Commerce paid exclusion exclusion If costs approximately

some facing and the continue to seven recent demand aerospace Trentwood Moving from this transition the automotive full of XXXX position programs. year to on expected XXXX to as for capture and capacity XXXX, our efficiency and the focus executing strong slide shipments outlook new from a growth uncertainty summary to strategic initiatives while to for we investments in old in and and company benefits extrusion automotive we our

a As sales. in one-time million $XX downtime for we quarter quarter EBITDA and from costs approximately the second Trentwood we of previously production related significant maintenance planned discussed, estimate casting, We activity impact the and stretcher. operating line loss maintenance the equipment in and the plate at inefficiencies second large and hot

to to first value-added I'll in now situation the of turn full-year XXXX our in this regarding any Neal? no for time outlook for results. warrant digit percent to year-over-year Neal revenue. monitor increase at both XX%, details shipments have the low-to-mid-single margin additional change While we continue and EBITDA we XXX-Max quarter and specific above information

Neal West

Jack. Thanks,

increased nine, shipments prior quarter. a the slide value-added revenue and million million to to to for X% the as first decline X% $XXX year quarter Turning $XX or compared in of XXXX

approximately our a revenue increased underlying chain X% XX% from XXXX. supply strong a of applications end value-added a in and extrusions automotive The first increase Value-added approximately winding in at approximately markets, year XX% trend down and lower declined aerospace programs and to prior reflecting wire shipments demand quarter that lower for a X$% in and first reflects our moderating to quarter, of quarter revenue revenue shipments. the Value-added and compared general end-of-life aerospace value-added decrease aerospace decline applications shipments the for of in decline the de-stocking. increased our automotive the XX% reflects - Looking the XX% for XXXX mix. engineering from shipments

unplanned the While early strong of treat we to price $XX of value plate margin quarter previously increased in $X increases meet heat a higher reallocated in Jack EBITDA demand. revenue capacity EBITDA to quarter. XX% our prior approximately quarter XXXX first the or the higher fully increased sales of from comments. compared in a offset non-contract associated mentioned and a your the in to in to increase in Trentwood XXXX the basis by mentioned EBITDA from XX.X% points implemented costs The the compared reflect aerospace and partially as quarter. XXXX, XXXX it XXX prior earlier plate of and general pricing portion downtime his purchasing as to with of aerospace XX.X% benefiting engineering for first the add in million year million

rate drove operating prior in quarter. income approximately the million additional with operating Adjusted prior was slide $XX in improvement for to $X per addition as compare operating the noted million turning million first share $XX quarter income These $X.XX. favorably first the per was to the the $XX $X.XX. expense. $XX quarter in million, $X.XX consolidated non-cash, of million XX, increased $XX year-over-year for diluted adjusted compared net depreciation to reflecting net income million year million prior the the $XX and of in per million of first year This quarter diluted items, year Now to $X.XX share quarter to was million non-run of our compares per EBITDA that and Adjusted earnings of share income income to diluted net in earnings for earnings was earnings items XXXX and diluted $XX reported previously favorably income results share income were reported adjusted $XX and quarter. net

the tax Our in approximately our the anticipate capital XX.X% and mid-XX% approximately in in effective full-year blended rate discrete $XX mid-single we for reflected effective prior federal to range be low XXXX the of few and digits. million. first We effective Capital million a to cash $XX million an tax tax the quarter year spending to $XX state tax was anticipate rate benefits. compared which the rate our be full-year approximately tax rate quarter will investment XX% in was

quarter, returned through $XX dividends approximately share of million to we shareholders repurchases. cash During and the first

to maintain with million and $XXX liquidity financial availability which approximately totaled remains borrowing turn to quarter investments term We short flexibility. million strong Jack. continue and under At now un-drawn. $XXX the end, credit back of facility, cash call I revolving our

Jack Hockema

today, and demand summary a pricing. XX comments results our quarter delivered non-contract of improved the aerospace driven strong Neal. by value-added first we Thanks, and Through slide

improved we year-over-year to introduced Although max overall uncertainty the to situation our has continue XXX results. anticipate outlook for XXXX, additional

growth demand term, on As remain we and for aerospace applications. capitalize longer secular automotive well-positioned the our to we look

to expected drive manufacturing In improvement all our in steady underlying efficiency additional for value continued of addition, we cost shareholders.

flow capital our and provide support strong sustainability cycles. Our industry growth and cash balance generation and deployment sheet through priorities

will We for questions. the open call now

Operator

Instructions] first question [Operator Kliewer Deutsche from Jeremy from is our Bank. And

is line open. Your now

Jeremy Kliewer

Hey. Good morning.

Jack Hockema

morning. Good

Jeremy Kliewer

of year-over-year, - along a or don't pricing, you a color about more constraints different it something industries mix, some lines? supply it on off additional is that I a due side - that to your be industrial for Looking on is those little XX% talked know, to may switching product or

Jack Hockema

first non-contract we January prices but year. a No, most is where increases, year, last there's there, increases compressed of of in price this passed extremely additional the passed quarter in business some increases quarter, price through and year through we in on it ago just a price mix raw become had second in

covering sales for and our on so, in environment. year. kind We typical we territory And our including sales we commented additional costs have this margins of business freight back margins the that's now last this that have

Jeremy Kliewer

All right.

should anticipate we So continue? should those

Jack Hockema

Yes.

Jeremy Kliewer

unplanned if downtime headwind quarter, cost $XX on Trentwood All I your but about may, right. million for you And this kept XQ $X unchanged. the million is then at

$X a So spent that beyond? will be in XXXX CapEx like kind of release of ever or - there less million

Jack Hockema

a first have and again rolling while purchases casting in we furnace quarter of the ignite, third to unrelated first Roughly purchasing, $X was to related rebuilds casting quarter. the of was in that million the additional rebuilding were completely second rolling the ignite quarter outside we quarter. No, second furnaces,

and equipment So that it our production. we, get involved we in impact operations that major we operations overtime related then then to bigger of costs back handling as seized costs bigger by roughly that then the two-thirds significant then maintenance days impact of of last our impact, but made there was on and roughly there additional that several as had but online finishing the there's days for lot for there's was basically a absorption the cost that up So created lost downtime extraordinary to impact and

Jeremy Kliewer

for right. color. All you the Thank

Operator

you. Thank

Martin is question Jefferies. from next Englert from Our

open. line Your now is

Martin Englert

Hi, good morning everyone.

Jack Hockema

Hi, Martin.

Martin Englert

sales probably value-added Trentwood shipments, So, in change in a then as planned within the we you outlook well volumes this disruption could then the imagine which digit as includes outage noted lower to expect and saw the we due be of load should to slightly volumes year-on-year mid-single the growth lower release at Trentwood some I no some of XQ. due but

of in up to up assume catch you're right? the that some that back reasonable So to for year expecting make half the

Jack Hockema

if in up, I the it's the second-half expect of don't demand catch strong we very know but year.

current and sticks strong, really the year in where suffering that the the this returning of going expect to we're then to ramping engineering just have expect reduced of third expecting some of few of XX Neal before a So, the life but and to strong quarter, automotive to we early programs the mentioned as as is continues hitting build long begin part we're from XX us, a as be for to second-half. improve rate production in now to general months programs the of Boeing here in there in some demand, up end new some we're hit the second-half plan

the here So, million the past And first the here. in - we're repurchase demand we despite in or results from major really downtime we year. and the our get surprise had strong Trentwood, second quarter we're in this the didn't expecting the $X so strong that's outage quarter expecting and Trentwood of get once second-half first-half that the fact

second-half year. So here we're very still about we're the the - optimistic

Boeing this as long resolved promptly. relatively and So situation gets recertified

Martin Englert

be or some out the million XQ, like more there, EBITDA, But we million Thanks the add that But when should so $XX there rate given heading will know or adjusted and million that. for a so into provided XQ here headwind. And back for about and all $X so $XX the should helpful. the positive that's was so you there? the kind you thinking outage million very or implications, or EBITDA about then detail how we million a quarter so and be to partial of then $XX $XX think this about run rough guidance take pulling offsets

Jack Hockema

question That his forecast. has who from sounds on hard a like really analyst an worked

rationale not looking of So we're we're million but here, from a makes your on I normal outlook, $XX mean quarter comment we're kind all sense second your - - going saying our expecting basically to we're run operation. rate roughly

You the quarter, million saw in second-half of the had did really, in hiccup really, in we had year, the results what the with last strong quarter. first strong $X really, we second-half first and even really, we

So got it's clearly and have pretty the margin. really would obvious quarter high been our XXs here And $XX EBITDA a underlying that million-plus we've momentum strong first business. in pace

forward. this in stay as the get long we're second outage So, we going and really market conditions through quarter, expecting the results strong same

Martin Englert

you'd far XQ to But call expect that Okay. else in co-offsets as positive right? partial there, nothing as

Jack Hockema

it's mean current with we really out go outage. One situation. which there. lose I - strong good that to at the the second us. sales But here accident under It's be quarter turned least and Boeing situation, just now we production second-half forward, could say the an going no. was for basically, demand as timing the through No, it in the is

Martin Englert

Okay, for good all excellent. there luck. added the color Thanks and

Jack Hockema

you. Thank

Operator

[Operator Woodworth Credit you. our Thank question Curt Suisse. Instructions] is And from next from

is Your now line open.

Curt Woodworth

Thanks. Jack, Good Melinda. afternoon,

Jack Hockema

Curt. Hi,

Melinda Ellsworth

Hey, Curt.

Curt Woodworth

you the aerospace just all sort question event settle maybe on dynamic, nominations your the have change build any you of OEM Boeing spot when I you result in to rate airspace first your talk to, volume of pre times the lead last And as quarter. So, Boeing the can looked guess a had first in year year? seen this relative How of cut? nominations

Jack Hockema

given morning they're would from the last to The here. up build nomination patterns situation. the their reiterated which anticipate year, chain. We've this the that in for health the just you order work this change this is increases supply no period on Boeing on year seen rate announced that time with of using they've of call

view here. and XX, we the cutback the on we really pressure got with here we've that on and on it plants to despite books As have the what's our we deliver see orders orders happening still we've got really, strong to

endured for wasn't chain is meet that the the of for view and the Our the de-stocking rate long. that in it XX to rate. And half us we XX that year situation went certainly first-half appear a XXXX of XXXX that the on too all to a and supply would ready

XX And the in of that's of in the health on They're still see supply why so hard ramp the we demand quarter. strong up the to plans terms order then XX rate to chain. given third back and working here

But is was at back XX think producing at. a equilibrium we that here to with to above clearly There rate building planes the that meet XX restocking demand. So pronounced. everything de-stocking supply getting chain that Boeing is that the be appears too into

be to ahead we if pretty the So the But ramp this should year. the and with and these up knows government what involved now all the because when going entities in implication everything future is later put get because up long here when happens here. do knows to they in go who sailing who for as clear the relatively get think XX full as we maybe recertification planned to promptly as they caution the hope primarily here recertified XX to going back ramp we're

Curt Woodworth

time helpful, spot stand business? exposed Okay, now where for then that's super your aerospace more and just lead your

Jack Hockema

rest customers of we We've stand have Just change we responded based our strategic and the rest still strong the for basically prior this and we've call aerospace to there. fully our seen Trentwood outlook allocated the commented a in are for on and your capacity stage booked booked. basically ago. year their I've and We're We requests on operations. the question fully remainder on the as really engineering our demand the very couple months at order of of year of prior at as general no throughout

Curt Woodworth

one impact That's bit the in the be max that, like because - I just Just, percent what investors it could investors demand of you of what to like, framing in understand the of of it's of understand little aero think helpful. issue, Okay. help how really would plane? that I can terms for of the exactly then magnitude the kind means. sense And a from be hard scope what guess

Jack Hockema

going It's the terms not number, I at total in of you aerospace a huge XX have the rate. to Airbus percent XX still of demand. mean, their

And military produced. lot well. we a have being we're the some mentioned in wide-bodies in of as growth seeing our nice applications You as comments,

But a stay not XX, bigger off it's for have will a back-off, XX have if to at hole a that from impact. long or they bigger back So, to big start there. obviously, and time

Curt Woodworth

Appreciate Okay, great. it.

Operator

you. Thank

question is next Josh Our from from Seaport Global. Sullivan

now Your line open. is

Josh Sullivan

Hey, good morning,

Jack Hockema

Josh. Hi,

Josh Sullivan

engineering marrying I you're It do de-stocking some essentially aerospace, like direction, general in about front, support of you on here, which the had reverse what engineering that? would demand sense. are up the communicated we like mean, I think but general makes sounds do work back you thoughts that Boeing it has capacity sounds given for side. that what some market the if from mean But how transitioning the the could XXX see

Jack Hockema

Yes, back bread how certainly between is strong. or big that non-contract and The general demand mean engineering to question box, at this is I move is forth there's but business. really stage between flexibility

ahead that what term must for then our that's are we long commitments commitments long declarations contracts. major to Our around customers. year can based first why to our priority, look we - our contractual so of a we And term our ask contractual fulfill on our time,

to outlook and shipments really you'll look similar chain. strong at demand the with if that in pretty we it there and did aerospace situation supply you of engineering situation general the significant with be XXXX go engineering that if and de-stocking see was in a first-half strong general XXXX, will a and change So what back entire is a

can long demand major and on So we're weaken reduction total over demand in term implications, anything it a period turn starts The would of like you a months, then longer it overall and No, shorten it's pricing from be - bigger be to a there impact flexibility you there's but but there. know could flexibility, then there's lead a dime? that. times way if

Josh Sullivan

transition the auto here. years mean Okay. just Got on I going penetration here. And couple content on it's of then a of Yes, it. extrusion the aluminum; automotive

any there that the have OEMs, duration just with been of in the changes platforms? know or You with of that newer contracts the some these terms the matures as

Jack Hockema

No, it's that years, as there's XX basically with on no pricing, tremendous it's there, so for pretty business and for mean every there's much business usual. last we've change as new been contract decades, usual the dealing I pressure but

Josh Sullivan

Okay, you. thank

Operator

Thank you.

Our question Deutsche Jeremy Bank. is next from Kliewer from

Your line now is open.

Jeremy Kliewer

you on, or particular Yes, the a I seeing particular side. are of on follow-up weakness? areas guess areas Where of extrusions strength

Jack Hockema

in You're talking extrusions general?

Jeremy Kliewer

so extrusions, auto it… No,

Jack Hockema

Extrusions? Auto

Jeremy Kliewer

Yes. Yes.

Jack Hockema

Well, it's the situation. macro

shifting You've that the more made well as of they're vehicle of less going terms shift those two vehicles Ford larger have and got that from as the and continues that in production trend announcements to make even in sedan Chrysler building. and GM the OEMs obviously a production change that they're mix

that forward change it long-term there's So, that really to other continues from trend than accelerating. so go no

Jeremy Kliewer

that's down on not you're new you models you ramped out whack any the of there? but kind the I nothing up that's warned Right, but before first-half the there's weakness by of of ramp surprise. anything seeing caught model mean

Jack Hockema

this no surprise pan last idea out it's the no to going as have call because there's said how we we year. Yes, on

surprised. So we be can't

you they a to faster finally how down don't the dog they're they're just flip but we taking here question you little some the food know It's the came yes, they're bit service how So a they a of dog it sell a side going whether it's going introducing. just so. transition when out when into because happened, don't eat know ramp vehicle anticipated, normal here, of to have when just, than the model exactly is it's of again life they're to then and going new a

of reality out and go in there them. forecast hits going their when they they're they But sell then So have we, to many how to start terms sell.

Jeremy Kliewer

Thank All good right. you and luck.

Operator

you. Thank

question Our from from is next Stanley. Piyush Sood Morgan

now Your line open. is

Piyush Sood

normalize as through further economy around is guys. morning. The this your up likely Hey, Good work fall allocation into here holds Boeing's orders capital you assuming costs next the question will year.

will well. so year shipments pick-up, next pretty to Your shaping appears be automotive

you're going it returns this setting how capital for wondering Not allocation would for would just about forward. be year investor little some you beyond So looking growth? really be of but kind you increase up thinking a to or

Jack Hockema

here. allocation for a priorities more been consistent Our than have decade capital

said prior calls So million years on few we making this be as next for $XX expect investments we've here. the territory organic to plus in

growth understand and is We can only business look do to do attractive good And value. for thing, a if long-term regular the continue inorganic to we last and opportunities then we same that create share go dividends with our them we'll shareholder we repurchases.

So or there's nothing shift the would this horizon among really priorities the areas. stage at that change those on four

Piyush Sood

for Okay, thank per to [ph] historical one at it pound valve historical back more you. looking XQ the in level levels. like the X.XX brings looks aerospace those And

understand to finally is I climbing be Boeing think want the just some you point? there situation you where back and up more upside So level it or if wanted it it's the is do once itself that to this probably to resolves that to

Jack Hockema

of of per that that from products significant variety ranging revenue up got couple in products value-added pound contract a is but that then pound revenue the $X on component within dollars per there's pound. focuses of or a value-added we've everyone The aerospace business and to wide the have there a such $X a plate

many order has actually component there's there, we revenue our value-added I mix of it unfolds. but big too But there. the base there, it's the a mean there's with depends have predicting business There's happening what's what where per the forecast, variables pound in just non-contract in how a terms improved. is, in component also on So, pricing of really

Piyush Sood

best. Thanks so much the and right. All all

Operator

I would call for the like this Hockema further remarks. over questions. At to you. back to showing no time closing Thank Jack turn I'm

Jack Hockema

and everyone coming the July. in we the today us an quarter forward call on here for to look Thanks update second up joining on Thank you.

Operator

today's thank gentlemen, participation you for concludes and This Ladies conference. program. the in your

You disconnect. may now

Kaiser Aluminum (KALU) 24 Apr 192019 Q1 Earnings call transcript