Kaiser Aluminum Corporation

Greetings and welcome to the Kaiser Aluminum Corporation second 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 your host, Kim Orlando with Addo Investor Relations. Thank you, Kim. You may begin.

Thank you. Good morning, everyone, and welcome to Kaiser Aluminum's second quarter 2023 earnings conference call. If you have 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, and Executive Vice President and Chief Financial Officer, Neil West. 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 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 effort. 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 will open the call for questions. I would now like to turn the call over to Keith Harvey. Keith?

Thanks, Kim, and thank you all for joining us for a review of our second quarter 2023 results. Turning to slide six. Our relentless focus on operational execution, along with the stabilization of our business as demand in key markets continues to rebound, fueled stronger than expected second quarter results. Our second quarter adjusted EBITDA increased 36% over the first quarter of 2023 to approximately $64 million, due mainly to our strong focus on reducing costs across our platform through lower spending, favorable energy costs in the quarter, improved efficiencies across all plants, and rising aerospace demand. As a result, our EBITDA margin improved 410 basis points sequentially over the first quarter 2023, results to 16.8%. Now turning to slide seven. The demand environment for the second quarter was mixed, but was overall within our expectations. Aerospace demand continued its strong, steady recovery towards pre-pandemic levels with both shipments and conversion revenue exceeding our outlook. As a reminder, we benefited from a strong mix of products and the accompanying pricing during the first quarter. Our momentum continued into the second quarter. facilitated by our ability to flex our available capacity due to softening general engineering demand to satisfy strengthening aerospace demand. We remain well-positioned to service the aerospace market with strong customer relationships and multi-year pricing in place for the majority of our associated products. In packaging, we experience ongoing destocking with beverage customers during the second quarter. as higher costs continue to impact consumer purchasing behavior ahead of the highly anticipated summer promotional activity. That said, shipments in the quarter exceeded our expectations as our operations continued to stabilize with conversion revenue slightly down due to a mixed shift in products shipped. Turning to slide eight, In general engineering, the slowdown in semiconductor plate and other general engineering long products persisted into the second quarter with shipments and conversion revenue flat with first quarter as distributor inventories began to normalize and align with current demand. Importantly, pricing has remained elevated by historical standards. reflecting the recognition our customers place on the value we provide them for our unique Kaiser Select products and superior customer service standards. And finally, automotive demand continues its slow, steady upward trajectory as the industry recovers from various supply chain related challenges. Shipments were relatively flat versus the prior quarter, in line with our expectations. with conversion revenue down slightly as pricing reflected a slightly lower price mix shift in the quarter. Turning to slide nine, I'd now like to turn to a brief update on our packaging business at the WART facility as our operations continue to stabilize and recover from the various challenges we faced in 2022. Importantly, we successfully negotiated a new mutually beneficial four-year labor agreement effective May 15th with approximately 850 United Steelworkers represented employees at Warwick. We believe the contributions from our Warwick employees will be instrumental in the achievement of our longer-term growth objectives for the packaging business as we continue to execute on our strategic plans. Our roll-code capacity expansion project, which is expected to convert roughly 25 percent of our current output to higher margin-coded products, remains on track to be fully operational by mid to late 2024. As we've stated previously, we expect to enhance our margins significantly as this new investment comes online, and we have already secured substantial new commitments in anticipation of its qualification and production commencement. Additionally, increasing our use of recycled materials as a percentage of raw materials at Warwick remains a longer-term focus as we seek to increase the inherent sustainability of our packaging products. We are continuing to evaluate methods to enhance the recyclable content of our products and are very pleased with our progress on this front so far. As evidenced by our efforts in 2023, our long-term view on our packaging business remains optimistic, given our ability to effectively compete in a niche market guided by our focus on coded packaging products, the significant investments we are making in the business, our inventory normalization strategy, and the continued secular shift to aluminum as a substrate of choice in the North American beverage and food industry. In summary, The conclusion of the second quarter marked a strong first half in 2023 as we worked diligently to stabilize our operations following the significant challenges we navigated last year. I'd like to commend our strong team at Kaiser for their unwavering dedication to executing our strategic plan and working safely. Underlying demand and pricing have been holding up well aside from short-term destocking trends, continued macroeconomic uncertainty in the current inflationary environment, and looming recessionary concerns. Nevertheless, our niche position in the markets we serve, coupled with strong secular growth prospects, helps ensure we are well-positioned to grow longer term. We remain very bullish on the aero and high-strength market in particular, with the recovery outpacing our initial expectations, and remain intently focused on cost reduction efforts, efficiency improvements, and continued commercial actions to improve our margins for the company as a whole. I'll now turn the call over to Neil for a more detailed analysis on the quarter. Neil?