Kaiser Aluminum Corporation

Greetings, and welcome to the Kaiser Aluminums Corporation's first quarter 2024 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. You may begin. Thank you. Good morning, everyone, and welcome to Kaiser Aluminum's first quarter 2024 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 four 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, 2023. 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 reconciliation 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. Further, slide five contains definitions of terms and measures that will be commonly used throughout today's presentation. 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 our review of our first quarter 2024 results. Turning to slide seven, the year is off to a good start as our first quarter adjusted EBITDA of $62 million surpassed our internal expectations, business conditions continued to normalize, and operating efficiencies improved across all platforms. Both the general engineering and automotive end markets are off to a faster start than expected at the beginning of the year. Aerospace and high strength, while stronger year over year, was softer than our original expectations. Our efforts to control cost and implement our metal sourcing strategy gained traction in the quarter. As we move through the balance of 2024, we expect to continue to make progress on these initiatives positioning the business for the next phase of our strategy with the full commissioning of the roll code number four investment at our Warwick packaging facility in 2025. I'll now turn the call over to Neil to discuss the quarter in more detail, and then I'll be back to discuss our outlook. Neil?

Thanks, Keith. Good morning, everyone. I'll begin on slide nine with an overview of our shipments and conversion revenues. Conversion revenue for the first quarter was $367 million, a decrease of $2 million, or 1%, compared to the prior year period. Looking at each of our end markets in detail, Arrow and High Strength conversion revenue totaled $137 million in the first quarter of 2024, reflecting a 12% improvement on an 8% increase in shipments over the prior year quarter. The improvement in conversion revenue reflects a mix of higher-priced products along with growth in shipments. Packaging conversion revenue was $118 million, a decrease of 11% year-over-year due primarily to a 7% reduction in shipments of higher-priced coated food products driven by the expected first quarter 2024 destocking. General engineering products conversion revenue was $80 million, up slightly year-over-year at a 2% increase in shipments, partially offset by a lower value mix. And finally, automotive conversion revenue was $31 million, which was relatively flat compared to the first quarter of 2023, driven by a 4% reduction in shipments, offset by improved pricing. Additional details and conversion revenue in shipments by end market applications can be found in the appendix of this presentation. Now moving to slide 10, reported operating income for the first quarter of 2024 was $33 million. After adjusting for operating non-run rate items of approximately $1 million, adjusted operating income was $34 million, up 70% year-over-year on approved operating results, offset by a $2.5 million increase in depreciation. Our effective tax rate continues to be in a low to mid 20% range under current tax regulations. We anticipate that our 2024 cash taxes for foreign and state taxes will be in the $3 to $4 million range with no U.S. federal cash tax until we consume our federal NOLs, which as of year end 2023 were $101 million. Reported net income for the first quarter of 2024 was $25 million. or $1.51 net income per diluted share compared to net income of $16 million or $0.99 net income per diluted share of the prior quarter. After adjusting for approximately $1 million of operating non-run rate items previously mentioned and other non-run rate income of $11 million primarily related to insurance settlements from prior year claims, Adjusted net income for the first quarter of 2024 was $17 million, or $1.02 adjusted net income per diluted share, compared to adjusted net income of $7 million, or $0.42 adjusted net income per diluted share in the prior year quarter. Now turning to slide 11. Adjusted EBITDA for the first quarter of 2024 was $62 million, up approximately $16 million at 34% from the prior year period. Adjusted EBITDA as a percentage of conversion revenue improved approximately 430 basis points from the first quarter of 2023 to 17%. The improvement in adjusted EBITDA was primarily the results of improved operating efficiencies and cost controls in a business, as well as timing of certain annual planned maintenance events and lower freight costs. which was partially offset by higher employee benefit and incentive costs. Now turning to a discussion of our balance sheet and cash flow, on March 31, 2024, total cash of approximately $102 million and approximately $517 million of borrowing availability on our revolving credit facility provided total liquidity of approximately $619 million. There were no borrowings on our revolving credit facility during and as of the quarter end, and it remains undrawn. On March 31, 2024, our net debt leverage ratio continued to improve to 4.2 times as we continue to make progress towards our target leverage ratio of 2 to 2.5 times. Turning to capital allocation, capital expenditures for the first quarter total $30 million. This is lighter than anticipated, attributed primarily to the timing of payments of invoices related to our Road Code 4 project, which remains on track for commissioning later this year. Our full year 2024 capital expenditures are still forecasted to be in a range of $170 to $190 million. On April 15th, we announced that our Board of Directors declared a quarterly dividend of 77 cents per common share, Underscoring the continued confidence our board and management team have in our long-term strategy to improve our profitability and increase stockholder value. And now I'll turn the call back over to Keith to discuss our outlook. Keith?