KALU - Earnings call transcript Q2 2019 | Kaiser Aluminum Corporation

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Operator

Good day, ladies and gentlemen, and welcome to the Kaiser Aluminum Second 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 be given at that time. [Operator Instructions] As a reminder, today's program may we recorded.

I would now like to introduce your host for today's program, Melinda Ellsworth, Vice President, Investor Relations. ahead. go Please

Melinda Ellsworth

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

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

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

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

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

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

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

over turn I the Hockema. to now Jack? would to Jack like call

Jack Hockema

to everyone the Melinda, today. joining Thanks, call on us

and million impact Excellent by the maintenance and planning quarter impact. $XX the line onetime from execution inefficiencies a on hot casting and approximately less Trentwood anticipated EBITDA lost despite maintenance production substantially in planned second results impact were large $XX outage the plate shipments, million operating and of previously our solid largest resulted of team complex, Trentwood Our our cost, stretcher. the than

continue as shipments of allocation treat meet reflect prioritized first book. of order engineering constrained plate were quarter, the the aerospace to Aerospace general we capacity shipments heat our commitments. Similar customer strength to to

shipments Auto the second transition from new in quarter to the reflect programs. old

in expect momentum the we second XXXX. strong and very content We optimistic remain programs to in XXXX new half, automotive for and gather

quarter, excluding million the and million drag margins second approximately results. first run further reflects reinforcing $XX in the half a impact in from high a the per $XX Trentwood combination of approximately quarter for downtime, Trentwood outage second rate the half XXs, of While implied unplanned quarter an EBITDA our results negative expectation and in from downtime EBITDA the the planned strong include the of first half first

Moving aerospace and well product to the maintenance normal very We with a up. in Slide strong X are with industrial in positioned we major and a anticipate ramping seasonality half, and order summary of second automotive our new book demand outlook.

unchanged, both is anticipate mid-single-digit increase as value-added year-over-year we percent shipments year low Our full in continue EBITDA outlook with for the XX%. above revenue, to margin and to

XXX-MAX uncertain, our half for order Boeing is of is book Although second resolution aerospace timing the robust.

of all aerospace book in with we strong a communications extensive expect order and very had have We our XXXX. strategic customers

automotive in content extrusions XXXX. XXXX we addition, In expect in and significant growth

additional call to to the on provide Neal? detail second Neal over I'll quarter. now turn the

Neal West

year lower by slightly good and the quarter Jack, than quarter second offset prior partially in lower improved Thanks, pricing. shipments, revenue and Value-added morning. was

increase demand value-added driven shipments, products. in a by second improved from and Aerospace strong was year's our revenue X% quarter the aerospace year-over-year for prior which X%

value-added shipments and mix. the on a a Automotive lower XX% to last of shift quarter compared revenue in second value-added decreased reduction year to XX% a

of call, in year off The often automotive by the new and is old and are noted as OEMs. visibility because driven transitional previous ramp-up. are As programs timing XXXX launch roll earnings and transitions for programs uncertain a they

up shipments, in year-over-year shipments the revenue reflecting plate commitments. a capacity aerospace and XX% X% The value-added to meet related reallocation reduction engineering decline portion our pricing. in heat a improved engineering is the general to was from treat to of plate strong General of customer primarily aerospace

overall, capacity Trentwood planned constrained outage. In temporarily plate by the addition, was

lower pricing months shipments and XXXX, non-contract X total sales, of for higher engineering on shipments shipments, first applications. revenue X% lower for the improved X% value-added improved and For general a aerospace reflecting automotive

to XXXX Trentwood second outage. of Turning quarter automotive by compared X. other in non-contract approximate from the Improved for was $XX Slide inefficiencies. million the quarter, primarily impact planned declined $XX on million offset pricing reflecting lower partially million EBITDA sales $XX the and cost shipments to the EBITDA year prior

$XX of prior the to a comparable margin compared was first $XXX XX% million EBITDA strength second prior EBITDA for quarter. to the XX% reflecting year continued was approximately for in the approximately non-contract our automotive quarter in XXXX demand impact year to lower aerospace half period, due the program to shipments the and planned improved of for negative downtime, related the on that and transitioning. million approximately offset Trentwood pricing products sales, and unplanned

period, XXXX at year to unplanned the the from EBITDA in as by decreased to in prior downtime drag first margin approximately XX% compared the driven the and of Trentwood. planned half XX%

and operating Turning previously increase quarter $X for the in second XXXX to $X in income was of non-run expense. year-over-year the our $XX was losses, an the prior million non-cash Adjusting quarter of depreciation $XX second quarter, million approximate XXXX $XX million. income to XX. million year Operating for rate, million items compared mentioned, for Slide reflecting

was Trentwood. the million quarter, quarter Adjusting share, reflecting XX%. XXXX compared per net effective Reported million downtime to rate tax for income of second million diluted the prior an the non-run items, again, $XX second due the or planned $XX net rate to was in income for $XX year quarter primarily $X.XX for at

second to quarter declined period. prior the $X.XX in from the share in diluted per earnings $X.XX Adjusted year

million. $XX million income, million in $XX non-run primarily was operating million, XXXX noncash million $X an year of from first slightly operating $XX as Adjusting decline depreciation first was expense. reported, approximate the half losses, prior reflects income down rate, in period. The increase $X for half For the XXXX,

Reported share. for rate the million $XX XXXX the year Adjusting for $XX first net per prior was was half $X.XX compared first half or non-run million to million diluted items, income income $XX net in period.

to $X.XX XXXX. half XXXX. the earnings $XX Adjusted XXXX spending of second first share compared for half for per and for first diluted the half $XX of the the totaled million Capital first quarter was for million $X.XX

to full be $XX spending capital expect will year for We the million. $XX approximately million

half and returned $XX cash June significant financial share facility XX, and credit of of availability XXXX, flexibility. our revolving and totaled we $XXX million with providing the in to cash repurchases shareholders first approximately investments was During approximately on million, borrowing of the $XXX us form At dividends. short-term million,

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

Jack Hockema

Neal. Thanks,

a operations. the to to challenges XX despite by quarter, planned old of from Slide in the Trentwood and our today. team auto Trentwood outage Turning comments products we our excellent our and the transition second short-term new in execution the and delivered results at summary at of We had solid

our year-over-year half a is XXXX. strong year for the into Demand our unchanged, XXXX. XXXX order product - book to second results for remains to second half compared robust for continue remains outlook improved expected aerospace and strong, to we Our anticipate continue and and full very

from automotive transition in resulted driven half, resume XXXX, product the growth While strong growth new expiring first and second the in we XXXX our transition to the by with to ones. mix weak in content in expect half, shipments anticipated programs

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

addition, for stakeholders. manufacturing efficiency to we steady in improvement In cost continued expect additional drive value all underlying

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

open We call will questions. now the for

Operator

of Instructions] [Operator comes the line from from first Englert question Martin Our Jefferies.

Your question please?

Martin Englert

everyone. morning, Good Hi.

Jack Hockema

Martin. Hi,

Martin Englert

book noted case absorbed grounding, you've the a the inventory Max aero signs or activity is half order second associated the while program? -- strong other Or by adjustments or that order it's seeing is Max with it being any maybe channel you changes programs? are where in So despite

Jack Hockema

over lot No. need and others comment to the call couple months as that to past that think the appear the strategic lot in of begun part that destocking conversation and absorption more it convinced -- comments health the programs. our saw to But by to goes the all being chain. of of to in made certainly, Well, on our that it's other we've we view had customers, was case. And the that's And had XXXX Boeing of it prior XXXX made the by we about a supply with we're more restore it us I a a is and overdone.

have at we the So And book got XX so. stretched really very we book months had have think a and order very order in past about XXXX. thin. strengthening half why chain we now, very, very, for we're But that's strong very getting strong strong really indications a looking and the or supply second the

Martin Englert

and on your And the at will this headwinds? right. Do back embedded forward more All inventory little color that's underlying year you be the bit more that think of demand? a of fully going And can destocking you the half provide shipments point? reflective true in

Jack Hockema

underlying was because in it's our view. than overdone fact, destocking think, now, I in But right the more Yes. reflecting demand

and orders making So seeing really XXXX now the is strong order XXXX. insufficient book we're up for in

Martin Englert

program robust coupled think So some it demand, inventory a of with combination fair of restock? to as

Jack Hockema

how we That's Boeing Yes. growth all -- anticipation builds we to and it. And ramp-ups, the XXX up get continue on starts once see characterize the the XXX the would the forward really other with resolved strong I exactly of going ramping then here. with Boeing

Martin Englert

I all on And if another automotive. for color the Thanks one there. Okay. the could

any in volumes? I uncertainty changeovers, in how the or the you versus volumes on while to the sequential notable XQ do have understand might weakness on QX program compare trend due basis there a XQ, So is given visibility

Jack Hockema

give Yes. our substantially of shipments certainly Right quarter. in you year-over-year up. is now, terms we're third the won't up number, in is internal it I but forecast a --

Martin Englert

XQ to here? prior Or exceeding... Okay. before More comparable quarters

Jack Hockema

Yes.

out we this from now can programs to coming off. old the first you began And impact this really programs the when saw the really starting half think new of to we're big year, I see throw is ramp-up.

quarter. programs half of the quarter fourth fourth we last the is in some off a that to in see some flyer. was frankly, year, already begun had So the there first really running And

second XXXX. we're move the And And now strong XXXX pretty and into growth. we'll got other the confident curve as the about really that we've we're headed optimistic year-over-year So way. see half we

Martin Englert

Okay. to Thanks second execution looking on and for the congratulations forward the quarter there all half in and the color the here. results outage

Jack Hockema

Martin. Thanks,

Operator

Thank you.

Global. question line Sullivan next the Seaport Josh of comes Our from from

question Your please?

Josh Sullivan

good Hey, morning.

Jack Hockema

Hey, Josh.

Josh Sullivan

is there. You it, could there any growth in hit content trend automotive for automotive the XXXX? this to but is on SUVs And following on contracts What are point? weighted XXXX, those trucks, you're the of time you or line whether way Just at another in-hand? say the kind category

Jack Hockema

to it yes, And is more weighted small. bird Well, it's hand. in large than vehicles yes, the heavily

significant portion However, there of both. is a

Josh Sullivan

Okay. think are Or above how And thinking talked then historically, versus the still penetration that of in I penetration aluminum automotive metric? story growth SAAR SAAR. being the forward? just Is about the X% you about about going you've

Jack Hockema

Yes.

to CAGR is outlook Our the in X% of still terms X.X% content growth.

Josh Sullivan

you're isolation for then How market outside some Okay. understand aerospace in engineering of the look demand. here? strong you've Got what the I And moved does around around it. general capacity moving

Jack Hockema

is distributor and growth are which we here: from canary slightly really the not one distributor industry and mine, are the than chain the negative, supply to in shipments metrics rather some is that's are bar. of there demand. really is coal that is we Also, think Well, but metrics year-over-year, down slowing. customers rod their real Actual it's see, industrial two slowing, components

that has to robust compared strong. a compared we makes in those the there the strong combination growth was just really demand our general last But relatively what It's it's growth really is So really had engineering previously. year. of flat demand to still slowed

Josh Sullivan

Okay. I’ll Thank queue. you. in jump the

Operator

you. Thank

line Woodworth question next comes Credit Suisse. from Curt Our from the of

Your question please?

Curt Woodworth

Hey. Good morning, Jack.

Jack Hockema

Hey, Curt.

Curt Woodworth

extrusion the wondering was -- the guess if about I market how looking. tight talk is you I can

translate you think you of pretty ahead obviously what do of will cycle also you. have has running into been in relative the platform to and that terms a higher of backlog, value-add revenue launch So compelling that off? But pricing

Jack Hockema

comparable it's sorry, No. -- I or auto, say, yes. automotive, yes, I'm in wouldn't I'd aerospace say it's higher pricing, in pricing

Curt Woodworth

Okay.

been guess, margin you've operating the -- be So to the should I leverage, what have basically you similar unit seeing? but

Jack Hockema

Correct. expansion on Yes, sales. automotive margin we're seeing not

Curt Woodworth

you what And just aero, capability you think on on Okay. then capacity is. us could update your

of very next there? if strong back your So you a you have then you volume the potential year, mix, as will kind environment looks it you view get and what like do into XXX-MAX

your about emergent just can of highest you sales, XX spot your seeing where a a terms or margin demand, talk trying quick get and on to then products view your allocating And you strategy formulate can big you of optimize little more mix are in to margin months. next bit basically

Jack Hockema

Sure.

at have opportunities to modernization the complete. we is million new expansion potential processing. Our in to over to we the processing as the the The the convert $XXX full of practices continue and old there installed, ground basically way Trentwood, equipment's from however, capture

we second next then compared this this the restricted outage component year in And unplanned to the quarter. is we here quarter, had first outage our year in planned had second the big capacity, and the year the that

is So to our actual compared this throughput our what has been capacity restricted year.

to stage, continue but than grow won't expect aerospace. this certainly we year. a I on opportunities this it number our have next yes, capacity more to at we put So to year have

we've longer hotline, investment a with we're of rolling we're And what well particularly from hot that out bodes on pleased lot the that seeing made capacity the the for that seen made, we investment term. term, long potential more we've

as a market have exactly know years. demands we future mix, it downstream add go capacity lot the We of need where but we to to in model

Curt Woodworth

very much. Appreciate Great. Thanks it.

Operator

hand conclude Hockema [Operator does I'd Jack further program. question-and-answer Instructions] to of to today's you. this the any program remarks. session And back like for Thank the

Jack Hockema

going the about in book the some XXXX. there. really we're and how major circumstances Trentwood the there up have here order Thanks, were about half we we're performed out -- they second with with had everyone. and under And quarter strong second really outage what optimistic pleased really, the hearing We well difficult

in think we Look in conference we to third forward. forward got sailing the and you. call some looking So clear you quarter we Thank October. as to results here, go strong updating forward

Operator

Thank This you, participation ladies does in conclude conference. today's and the program. gentlemen for you

day. disconnect. may now Good You

Kaiser Aluminum (KALU) 25 Jul 192019 Q2 Earnings call transcript