Arconic Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the Arconic Corporation fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. It is now my pleasure to introduce Director of Investor Relations, Shane Rourke.

Thank you, Andrew. Good morning, and welcome to the Arconic Corporation fourth quarter 2021 earnings conference call. I'm joined today by Tim Myers, Chief Executive Officer, and Eric Asmussen, Executive Vice President and Chief Financial Officer. After comments by Tim and Eric, we will have a question and answer session. For those of you who would like to follow along with the presentation, the slides are posted under the Investors tab on our websites. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that may cause the company's actual results to differ materially from the projections presented in today's presentation and earnings press release in our most recent SEC filings. In addition, we've included some non-GAAP financial measures in our discussion, reconciliations to the most directly comparable GAAP financial measures can be found in today's earnings press release and in the appendix in today's presentation. With that, I'd like to turn the call over to Tim.

Thank you, Shane, and good morning, everyone. Thank you for joining us again. I'll start on slide four with some highlights from a very strong first year, despite the challenges of a variety of headwinds. In 2021, we grew adjusted EBITDA by 15% over 2020 and set the table for another year of double-digit growth in 2022. We won favorable long-term business in key end markets, and we deployed hundreds of millions of dollars to reduce liabilities and repurchase shares. Our EBITDA growth in 2021 was primarily driven by double-digit organic revenue increases in ground transportation, industrial, and packaging. This more than offset a 30% year-on-year decline in our organic aerospace sales. Throughout the year, We optimized our product mix to account for changes in automotive demand related to semiconductor shortages and changes in staffing availability due to the pandemic. Early in the year, we announced $2 billion in contract extensions with key aerospace customers and another $1.5 billion in agreement with can makers that secured our return to the North American packaging market. We also won content on 23 new automotive or light commercial programs, including seven full electric vehicles. And we executed on a capital allocation strategy that reduced our gross liabilities by roughly $2 billion and net liabilities by approximately $700 million through a combination of accelerated pension funding, exceptional management of our environmental liabilities, and a $1 billion pension annuitization. These actions significantly reduced our risk profile and positioned us for much higher cash generation moving forward. We also repurchased about $160 million of our stock and initiated two organic capital projects that will help drive EBITDA growth starting in 2023. All of these actions and wins in 2021 are setting us up for a second year of double-digit adjusted EBITDA growth in 2022, a big step up in free cash flow generation. and a continuation of our momentum into 2023 and beyond. Moving to slide five, I'll provide some details on the fourth quarter. Our fourth quarter 2021 adjusted EBITDA of $175 million increased $24 million or 16% year over year and was up 2% sequentially. Profitability increased despite labor shortages related to employee quarantine levels that reached new pandemic highs by the end of the year. We also had a brief equipment fire at one of our North American rolling facilities that reduced our total volumes for the quarter versus expectations. These challenges caused us to deliver fourth quarter results at the low end of the guided range. We continue to take action to offset inflation in alloying materials, energy prices, and freight costs. by increasing prices and driving productivity measures. Most importantly, the markets we serve remain strong. We had year-over-year organic growth across the business in the fourth quarter and continue to expect all of our markets to grow at a multiple of GDP over the next several years. Thanks to the actions that we took throughout 2021, we have significantly strengthened our balance sheet, and created a strong platform for capital allocation options heading into 2022. As an example, in the fourth quarter, we repurchased another 1.8 million shares for approximately $55 million, bringing our buyback total to nearly 5 million shares for approximately $160 million in the first eight months of our two-year $300 million authorization. And as Eric will soon share, just yesterday, we upsized our ABL by $400 million. As we've been saying for a while now, free cash flow is stepping up in a big way this year. That will open the door to more return-seeking capital allocation opportunities. That includes the organic investments we've already announced and the potential for additional share repurchases, as well as other capital allocation options. And as always, we'll continue to rank those opportunities by the rate of return and work our way down the list. Moving to slide six, I'll provide more detail on how we performed across our markets. Let's start in the bottom right corner of the slide. In the fourth quarter, we grew organic revenue year over year in every single end market. Ground transportation sales increased 12 percent organically from the fourth quarter of 2020 due to growth in both automotive and commercial transportation, despite the impact of the semiconductor chip shortage. Our share gain in this segment allowed us to grow our automotive sales, which swam against the current, growing 18% year-on-year, while automotive production builds were actually down 15%. I'll be coming back to this part of the business later in the call when we start to talk about the future. Led by our continued share gain outpacing vehicle builds, depleted inventory levels, and pent-up consumer demand, we expect to see continued growth in ground transportation for the next several years, Four-quarter sales in the industrial market increased 17% organically year-over-year. The industrial segment was strong for us all year, and we expect to see this momentum continue into 2022. In the building and construction market, our sales increased 9% organically year-over-year and 2% sequentially. Broader trends in the building and construction markets are solid, despite supply chain and labor challenges that our customers are facing in meeting that demand. Sales in our packaging segment surged 54% organically year-over-year in the fourth quarter due to the accelerating ramp-up of volumes at our Tennessee facility, as well as continued strength in Russia and China. And finally, aerospace sales were up 19% year-over-year on an organic basis and 11% sequentially. As we've stated previously, our aerospace sales reached a bottom in the fourth quarter of 2020 and we expect to see continued growth until our revenues reach pre-pandemic levels sometime in the 2024 timeframe. The 11% sequential improvement in the fourth quarter is an acceleration of the sales improvement that we saw in prior quarters, a clear sign that destocking the supply chain has improved significantly. The fourth quarter showed just how strong the markets are that we serve in the face of supply chain and labor constraints. And as those constraints ease, our profitability and our growth will continue to improve. I'm now going to turn it over to Eric to discuss the fourth quarter results in more detail.