Kaiser Aluminum Corporation

Hello, and welcome to the fourth quarter 2021 earnings conference call. My name is Brandon, and I'll be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, during which you may dial star 1 if you have a question. I will now turn the call over to Melinda Ellsworth, and Melinda, you may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's fourth quarter and full year 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 have 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 when filed the company's annual report on Form 10-K for the full year ended December 31, 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've 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've 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 Harvey. Keith?

Thanks, Melinda, and thank you for joining us in a review of our fourth quarter and full year 2021 results. Our fourth quarter and full year 2021 adjusted EBITDA earnings were $46 million and $193 million, respectfully, reflecting a strong demand environment for our packaging, general engineering, and automotive applications, and continued recovery in commercial aerospace while demand for our business jet and defense applications remained strong. With the backdrop of a strong demand environment, we faced a unique set of operational challenges as we continued to navigate supply chain issues, labor constraints, and higher input costs, which impacted our fourth quarter and full year results. As discussed in our October call, we expected a number of the supply chain issues primarily being experienced at our Warwick facility in the third quarter to continue through the balance of the year, along with an expected negative impact to our earnings as a result of higher magnesium costs incurred after one of our largest magnesium sources, US Mag, declared force majeure and significantly reduced our contracted magnesium supply as we moved into the fourth quarter. While these and other costs impacted our fourth quarter earnings, we made good progress addressing and mitigating the impact of most of these issues as we moved through the quarter. We believe the supply chain issues we experienced during most of 2021 have been mitigated, resolved, or addressed with the exception of challenges we're continuing to work through with the timely supply of metal at our Warwick facility and slower than expected recovery at USMAG. While the labor market remains a challenge at several of our smaller facilities, labor shortages, which hampered our ability to maximize the market opportunities during most of the year, have been addressed. And as we enter 2022, We are back to being fully staffed at most of our operations, including Trentwood and Warwick, our two largest facilities. Finally, our commercial teams have been very successful passing through price increases and instituting contained metal and alloy pass-throughs and commodity surcharges to offset the majority of the higher material and other inflationary costs going forward into 2022. Additionally, higher inflationary costs have also triggered producer and consumer price index price increase provisions contained in many of our long-term contracts. While 2021 was certainly a very challenging year, we achieved a number of major milestones which reflect the strength of our organization and demonstrated our ability to perform while operating in a very demanding environment. Our teams delivered record safety performance in 2021, even as we hired and trained hundreds of new employees. We also delivered record claim-free performance to our customers in 2021. My thanks to all our employees for continuing to perform very well as we work through yet another year of a COVID-impacted work environment. We completed a transformational acquisition purchasing the Warwick rolling mill and reentering the food and beverage packaging markets in North America. While we're becoming more excited about the acquisition, the people, and numerous business opportunities, the complexity of extracting the business from Alcoa, standing up separate systems and processes, decoupling the rolling mill, and positioning this business as a standalone entity have proven to be even more challenging than anticipated. However, we expect the integration process to be substantially complete by the end of the first quarter in 2022 as we continue to focus on the physical separation of the facility from the adjacent smelter and power plant. As I noted, the strong outlook for this business continues to exceed our expectations. As we exited 2021, operating efficiencies across all our plants began to improve, along with continued strong demand across all markets, setting the stage for a much improved outlook for 2022. I'll have more on the 2022 outlook following Neil's detailed discussion on fourth quarter and full year 2021 results. Neil?