Kaiser Aluminum Corporation

Welcome to the second quarter 2021 earnings conference call. My name is Jackie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press star, then 1 on your touchtone phone. I would now like to turn the call over to Ms. Melinda Ellsworth. Ms. Ellsworth, you may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's second quarter and first half 2021 earnings conference call. If you've not seen a copy of our earnings release, please visit the investor relations page on our website at kaiseraluminum.com. We've also posted a PDF version of the slide presentation for this call. Joining me on the call today are President and Chief Executive Officer Keith Harvey, Executive Vice President and Chief Financial Officer Neil West, and Vice President and Chief Accounting Officer Jennifer Huey. Before we begin, I'd like to refer you to the first three slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2020, and Forms 10-Q for the quarters ended March 31 and June 30, 2021. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such reconciliations are outside of our control and or cannot be reasonably predicted or provided without unreasonable effort. Any reference in our discussion today to EBITDA means adjusted EBITDA which excludes non-run rate items for which we provided reconciliations in the appendix. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvick. Keith?

Thanks, Melinda, and welcome to the second quarter 2021 Kaiser Aluminum Earnings Call. Turning to slide six, our second quarter results reflect the first time we have included the financial impact of our Warwick rolling mill acquisition. including revenue, operating expenses, and cost associated with integrating the business into Kaiser. We delivered strong value-added revenue of $318 million and adjusted EBITDA of $59 million for the quarter. We continue to see improving conditions in all of our end markets, with automotive sales being the exception for the quarter, as strong demand was offset by ongoing shortages of computer chips that once again impacted North American light vehicle production. In today's inflationary environment, our operations and commercial teams have been working diligently to identify and pass through rising costs associated with freight and materials. In addition, while our workforce has risen to the challenge of meeting increasing demand, we are facing the same challenges as other employers, including the ability to efficiently attract and add labor to meet that demand, which has led to slightly higher labor costs. Moving on to the current market conditions, airspace and high-strength sales continued to improve sequentially from the second half of last year. As barriers for normalized air travel continue to fall, the full recovery of this business back to the record 2019 levels remains on track. We expect better results in the third quarter and fourth quarter compared to the prior year quarters with steady gains continuing through the 2023-2024 time period. Demand for our general engineering products continues to be robust. Shipments in this category rose sequentially from the second half of 2020 and have offset slower commercial aerospace plate sales and automotive extruded production shortfalls. we see continued strong demand from our service center customers and the customers they serve through the balance of 2021 and into 2022. As I stated previously, we experienced slightly lower sales in second quarter as compared to the first quarter for automotive extrusion applications due mainly to chip shortages affecting the automotive industry, all while demand remained robust. We feel this supply change challenge will begin to abate in third quarter and sales should stabilize and recover, but the situation continues to be dynamic. Our projection of year-over-year value-added revenue increase of 35% to 45% for automotive sales in 2021 remains intact at this time. Our packaging business remains robust with multiple discussions underway with customers for future supply. We are evaluating volumes, price, and mix as we discuss our options at Warwick. These discussions regarding strategic long-term supply position support additional profitable growth in the food and beverage packaging markets in future years. I will have additional color commentary on our outlook for packaging in my later remarks. The full integration of Warwick into Kaiser continues to go well and our teams are working diligently to completely transfer support services from Alcoa to Kaiser by the end of the year. The seamless integration of the business combined with strong financial results to date further reinforces the Warwick transaction with the right long-term decision for Kaiser and its shareholders. Neil will now provide more detail on our second quarter results, and afterwards, I will provide an outlook of our major markets and actions we intend to take to maximize our short and long-term opportunities. Neil?