Kaiser Aluminum Corporation

Welcome to the Kaiser Aluminum Corporation first quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce our host, Kim Orlando with Edo Investor Relations. Please, ma'am, you may begin.

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's first quarter 2023 earnings conference call. If you have not seen a copy of our earnings press 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 result to differ materially from 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 31st, 2022. 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 financial 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 efforts. Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix. At the conclusion of the company's presentation, we'll open the call for questions. I would now like to turn the call over to Keith Sarvey. Keith?

Thanks, Kim, and thank you all for joining us for a review of our first quarter 2023 results. Turning to slide six, our focus on execution coupled with continued traction on pricing and favorable demand trends in certain of our markets drove better than expected first quarter results despite ongoing macroeconomic and specific business challenges. Our first quarter adjusted EBITDA increased 57% over the fourth quarter of 2022 to approximately $47 million, primarily reflecting continued strength in pricing, the mix of products sold across our portfolio of businesses, and our strong focus on reducing costs across our platform. Our EBITDA margin improved 430 basis points sequentially over the fourth quarter of 2022, despite higher planned major maintenance expenses and continued higher commodity and input cost in the quarter. As a reminder, in an effort to minimize the impact of 2022 supply disruptions on our packaging customers, we purchased higher cost metal units in the second half of last year. These purchases, along with reduced sales in the second half of 2022, led to a higher than anticipated metal inventory imbalance at the end of the year. We expect this inventory imbalance and the resulting higher cost associated with those purchases to normalize over the next several quarters. The demand environment for the first quarter was mixed, but overall met or exceeded our expectations. Aerospace demand continued to improve with both shipments and conversion revenue surpassing our expectations. With generally good multi-year pricing in place for most of these products, first quarter results reflected an exceptionally robust mix of products and customers served with strong accompanying pricing, which resulted in higher conversion revenue than anticipated. In many of our facilities, we were able to flex available capacity to satisfy strengthening aerospace demand as general engineering demand softened, which led to positive results for not only Kaiser, but for our valued customers. We remain well-positioned to service these customers moving forward. In packaging, destocking with beverage customers continued as consumer purchasing traits continued to adjust to the post-COVID environment with higher cost being passed on to the consumer. However, shipments met our expectations and conversion revenue was better than expected due to improved pricing and a better mix of products sold in the quarter. In general engineering, we continued to see a slowdown in semiconductor plate and other general engineering long products as distributor inventories continue to rebalance to match current demand. Prices were better than expected as our commercial teams continued to do an excellent job properly pricing the value of our market preferred Kaiser Select products where our quality and customer satisfaction focus continues to earn a premium in the marketplace. And finally, automotive demand modestly improved as the industry continued to recover from its semiconductor and other supply chain challenges. Shipments and conversion revenue in this market also came in significantly better than expectations, as improved pricing on existing and new programs was evident in the quarter. I'd now like to turn to a brief update on Warwick following the details we outlined on our February call to position this business for success. We have implemented a number of initiatives to normalize our operations at the Warwick Rolling Mill now that it has begun to stabilize and continues to recover from many of the challenges we faced last year. For example, we are making solid progress in our contract renegotiations with our packaging customers to improve the timing of contained metal and alloy price adjustments to facilitate the pass-through of higher commodity and input costs. We believe these necessary measures will help mitigate the quarterly impact of higher material and other inflationary costs on our business moving forward, and discussions remain ongoing. Additionally, our roll-coat capacity expansion project, which is expected to convert roughly 25% of our current output to higher margin coated products, remains on track. However, we are experiencing higher inflationary costs on the project due mainly to continued rising steel prices and other construction-related costs. Our target to be fully operational by mid to late 2024 remains intact. We remain optimistic on the long-term outlook for our packaging business given our niche market focus on coated packaging products the significant investments we are making in the business, and the continued secular shift to aluminum as the substrate of choice in the North American beverage and food industry. As we look ahead, we believe our refined strategy coupled with our strong customer relationships and multi-year contracts will support margin improvement and continued long-term growth. In summary, We had a better than expected start to the year following a highly challenging 2022. I'd like to thank our team for their continued commitment and dedication to strong operational execution and working safely. Our operations are stabilizing and both underlying demand and pricing have been holding up well. While broader macroeconomic uncertainty stemming from ongoing inflationary pressures, supply chain inconsistencies, and the threat of a slowing economy remain, the secular growth trends expected in our markets give us confidence that we are well positioned to benefit longer term. We look forward to continuing to yield positive results from focused execution against our strategic plan to reinvigorate profitable growth in 2023. I'll now turn the call over to Neil for more detail on the quarter.