Constellium SE

Good morning, ladies and gentlemen, and welcome to the Constellium First Quarter 2020 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If you require any further assistance during the conference, please press star zero on your touchtone telephone. As a reminder, this call is being recorded. I would now like to turn the call over to your host, Mr. Ryan Whitley, Head of Investor Relations.

Thank you, Operator. I would like to welcome everyone to our first quarter 2020 earnings call. On the call today are our Chief Executive Officer, Jean-Marc Germain, and our Chief Financial Officer, Peter Matt. After the presentation, we will have a Q&A session. A copy of the slide presentation for today's call is available on our website at Concelium.com, and today's call is being recorded. Before we begin, I'd like to encourage everyone to visit the company's website and take a look at our recent filings. Today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the company's anticipated financial and operating performance, future events, and expectations, and may involve known and unknown risks and uncertainties. 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 factors presented under the heading Risk Factors in our annual report on Form 20F. All information in this presentation is as of the date of the presentation. We undertake no obligation to update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law. In addition, today's presentation includes information regarding certain non-GAAP financial measures. Please see the reconciliations of non-GAAP financial measures attached in today's slide presentation, which supplement our IFRS disclosures. I would now like to hand the call to Joe Mark.

Thanks, Ryan. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. At Constellium, the health and safety of our employees is our first priority. We have implemented many initiatives to protect our employees in response to the COVID-19 pandemic. We have increased cleaning and sanitation, enforced social distancing, and provided our personnel with personal protective equipment. We have also implemented strict visitor policies, banned business travel, and enforced a work-from-home policy where possible. Posterium is a key part of the supply chain of many critical industries. To that end, in the U.S., our plants have received the distinction of an essential industry, which allows us to continue to operate despite state stay-at-home orders. All of our plants, with the exception of our automotive-specific plants, have continued to produce to meet demand for these critical industries, such as beverage, food, health care, national defense, and transportation. I am very proud that despite challenging conditions, the Constellium team has stepped up to meet the challenge. I would also like to highlight our strong financial position. The finance team, led by Peter Maas, has worked extremely hard over the past 3-4 years to improve our cash flow profile, increase our liquidity, and push out our debt maturities. These actions will help us tremendously in successfully navigating this crisis. Now turn to slide six, and I would like to highlight some of the decisive actions Costellium has taken to limit the financial impact of the pandemic. Rest assured, this is not a complete list. I think it is important to lead from the top. Therefore, the board, the executive committee, and myself have all taken a temporary reduction in our compensation. we have aggressively reduced spending to match the challenging conditions that we are currently facing. This includes flexing variable costs to better match production levels. A reduction in our workforce was necessary to reflect current operating conditions. Nearly 5,000 of our 13,000 employees, or 40% of our workforce, are on some type of partial unemployment or temporary layoff scheme. To build momentum around reducing our spend, we have established spending committees that must approve all spending over preset thresholds at plant and corporate levels. For example, any corporate spend above 1,000 euros is required to be approved by the corporate controller. For instance, again, at our Issoir plant in France, Any spend over 5,000 euros requires approval by the plant manager. On capital spending, we are reducing our 2020 target to 175 million euros, a 96 million euro of 35% reduction from 2019, and 75 million euros lower than the target provided in February. We are, for the most part, limiting our capital spending to essential maintenance or spending to ensure orderly restarts of capacity when demand returns. We are very serious about reducing spending and have already identified the specific cuts needed to achieve our revised target. Any new capsule project requires executive committee level approval. We are also utilizing governmental aid programs, where available, to help weather the crisis. This includes utilizing partial employment programs in Europe that reduce our costs during this period of reduced operating rates. In addition, we are deferring social contributions in Europe and deferring certain payroll taxes and pension payments in the U.S. We are also extremely focused on optimizing working capital We are reducing our mail purchases to be in line with our production rates and have shipped out of finished goods inventory where possible. Lastly, we have moved aggressively to augment our liquidity position. Our strong free cash flow generation in the first quarter brought our liquidity balance to 616 million euros. We signed a new $166 million delayed draw term loan that will add to our liquidity in April. We are also pursuing low interest rate loans through European government-sponsored borrowing programs in France, Germany, and Switzerland. Now let's move to slide 7 and discuss our very strong first quarter performance. Shipments were 393,000 metric tons, a decrease of 5% compared to the first quarter of 2019. Revenue decreased 6% to 1.4 billion euros. This was primarily driven by lower shipments and lower metal prices. It is important to remember that we substantially passed through metal prices. Net loss of 31 million euros compared to net income of 24 million euros in the first quarter of 2019. The change in net income was largely due to a non-cash, unfavorable change in unrealized gains and losses on derivatives related to our commodity hedging position. Adjusted EBITDA increased 9% to 147 million euros in the first quarter of 2020. PARP and ANT continued to deliver strong results, while AS&I delivered much improved year-over-year results. I am exceptionally proud of the AS&I team and believe this was a great first step in the right direction. Our very strong first quarter results came despite headwinds from the COVID-19 pandemic in March. which we estimate to have been a headwind to adjusted EBITDA of between 10 and 20 million euros across the three segments. Our free cash flow was very strong at 87 million euros. This performance underscores our objective of being consistent generators of free cash flow. Our first quarter of free cash flow did benefit from some working capital release due to the slowdown in activity at the end of the quarter. De-leveraging remains our top priority for free cash flow generation. As a result of a strong adjusted EBITDA and free cash flow performance in the first quarter of 2020, we reduced our leverage to 3.7 times. Our liquidity position at the end of the quarter was strong at €660 million. Now, I will hand over to Peter to provide more details on our financial performance. Peter?

Thank you, Jean-Marc, and thank you, everyone, for joining the call today. Turning now to slide 8, you will find the change in adjusted EBITDA by segment for the first quarter of 2020 compared to the same periods of last year. For the first quarter of 2020, Constellium achieved €147 million of adjusted EBITDA, an increase of €12 million, or 9% year-over-year. Park adjusted EBITDA of €66 million increased by €7 million, or 12% year-over-year. A&T adjusted EBITDA of 52 million euros was comparable to the first quarter of 2019. AS&I adjusted EBITDA of 34 million euros increased by 5 million euros or 17% compared to last year. Lastly, holding to corporate costs of 5 million euros were comparable to last year. Now turn to slide 10 and let's focus on the PARP segment. Adjusted EBITDA of 66 million euros increased 12% compared to the first quarter of last year. Volume was a 6 million euro headwind as shipments fell across packaging, automotive, and other rolled products, primarily due to reduced demand in Europe late in the quarter, resulting from the effects of COVID-19. Price and mix was a tailwind of 5 million euros as we benefited from improvements in pricing, and a better packaging and automotive mix. Costs were a tailwind of €7 million on solid cost control, primarily due to improved recovery at our plants and, to a lesser extent, favorable metal costs and reduced energy costs. While we no longer report Bowling Green results separately, I am proud to note that Bowling Green adjusted EBITDA was positive in the first quarter. Lastly, FX translation was a tailwind of €1 million in the quarter. Now, turn to slide 11 and let's focus on the A&T segment. Adjusted EBITDA of €52 million was comparable to last year. Volume was a headwind of €14 million on lower TID shipments due to weaker end-market demand tightened by the effects of COVID-19. Price and mix improved by 19 million euros in the first quarter due primarily to a very good mix in aerospace. Costs were a headwind of 6 million euros, primarily related to higher raw material costs. Lastly, FX translation was a 1 million euro tailwind in the quarter. Now turn to slide 12 and let's focus on the AS&I segment. Adjusted EBITDA of 34 million euros increased 17% compared to the first quarter of 2019. Volume was a 1 million euro headwind as continued growth in automotive structures was offset by lower other extruded product shipment, both of which were affected by COVID-19-related weakness in March. Price and mix was a tailwind of 6 million euros due to improved price and mix across both automotive structures and industry. Costs were comparable to the first quarter of last year. I want to echo Jean-Marc's comments, recognizing the good performance of ASI in the quarter. The business returned to a year-over-year adjusted EBITDA growth through solid execution and a focus on cost control. While we are not yet ready to declare victories, we remain confident that we are on the right track. Now let's turn to slide 13 and discuss our balance sheet and our liquidity position. At the end of the first quarter, our net debt was 2.1 billion euros, and we had no significant year-term maturity. Our leverage at the end of the first quarter was 3.7 times, We generated strong free cash flow of 87 million euros during the first quarter, supported by strong execution in each of our businesses. Our cash plus amounts available under committed facilities was 616 million euros at the end of the first quarter. During April, as Jean-Marc noted, we closed the $166 million delayed draw term loan to further improve our liquidity position. We are also pursuing approximately 200 million euros of low-interest loans through European government-sponsored borrowing programs. We are targeting 350 million euros of additional liquidity through these initiatives. In challenging times like these, reducing costs and preserving liquidity are paramount. We are well prepared to deliver on both. As Jean-Marc noted, we are aggressively cutting fixed costs and are flexing our variable costs to better match production levels. While our ability to cut costs depends on many variables, we believe that in the current environment, our cost structure is approximately 75% variable or semi-variable and 25% fixed. This split includes metal, which is largely a variable input. We will leave no stone unturned to further reduce costs, while also staying prepared for volumes to return. While we are unable to provide guidance at this time, we wanted to provide a scenario to demonstrate the strength of our business. In a case where our plants run at an average utilization of approximately 70% across the system, we would burn less than 100 million euros of free cash flow for the remainder of 2020. The majority of this cash burn would occur in the second quarter as we adjust to the lower operating rates. This scenario, when combined with our strong liquidity position, gives us confidence in our ability to navigate through the COVID-19 crisis and potentially challenging economic environments to follow. Our preference in the near term will be to preserve liquidity, so we are prepared for the unexpected. Once our visibility improves, we expect to continue deleveraging our balance sheets. I will now hand the call back to Jean-Marc.

Thank you, Peter. Now let's turn to slide 15 and provide an end market update. We believe our balanced portfolio of end market exposures is a competitive advantage during challenging times like these. I'll start with the packaging market. Packaging represents 37% of our LTM revenue. We continue to see strong market demand in both North America and Europe. Further evidence that this market is both recession resilient and secular growth. We believe the packaging market has long-term secular growth tailwinds driven by customer preference for aluminum cans. Aluminum cans are infinitely recyclable and clearly the most sustainable beverage packaging container. Our customers continue to move forward with investments in new can lines, which should drive incremental demand for can sheets in the coming years. The consumer preference trend is only one of the tailwinds for can sheets. In Europe, the demand for can sheets continues to grow based on substitution of aluminum or steel. In the U.S., we continue to expect the growth of auto body sheets to tighten supply to the packaging market over the medium to long term. Clearly, we are constructive on the can-sheet market in the near, medium and long term. Now, let's turn to automotive. As I mentioned earlier, automotive OEMs began curtailing production in March and their facilities remained largely idle. Most OEMs are expected to restart production in May. The demand for our products will be dependent upon the speed and trajectory of the recovery once our customers resume production. However, over the medium to long term, we believe automotive remains a secular growth market for aluminum. Customers continue to prefer larger vehicles, while regulations are aimed at increasing fuel efficiency or reducing emissions. The automotive market will need to continue to lightweight. In addition, we expect hybrid and electric vehicles to continue to gain share of the fleet. These vehicles are aluminum intensive due to their need for range. Nostelium is well positioned to realize the benefits of this secular shift to aluminum in automotive and the electrification of the fleet. Let's turn now to aerospace. Aerospace represents 15% of our LTM revenues. The near-term outlook for aerospace is uncertain due to the effects from COVID-19 and the 737 MAX. Aerospace OEMs announced temporary stoppages in March and April. Operations have largely restarted, but at lower build rates. We expect these reduced build rates to continue through 2020 and potentially longer. In the long term, we believe that the fundamentals driving aerospace demand growth remain intact. Past demand shocks suggest that passenger traffic should recover over the medium term. In TID, we expect to continue to expand in niche products in a diversified range of markets over the long term. In the near term, the defense and rail markets remain strong, but most industrial and transportation markets are weak. It is unclear when these markets will rebound. In closing, I again want to thank the Consilium team for their tireless efforts during this trying time. Given the uncertainty around the extent and duration of the effects of the pandemic, we are withdrawing our financial guidance until our visibility improves. Again, our first priority remains the health and safety of our employees and their families. We are committed to working with our suppliers and our customers to weather the current storm together. As always, we remain committed to operational execution, harvesting the benefits of our investment, discipline capital deployment, debt reduction, and shareholder value creation. With that, operator, we will now open the Q&A session.

Go for right there.

Ladies and gentlemen, if you have a question at this time, please press star, then the number one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Your first question comes from the line of Chris Terry with Deutsche Bank.

Hi, Jean-Marc and Peter. I hope you're going well. I had a few questions I wanted to run through on the markets and then on cash flow. I just wanted, starting in the aerospace sector first, I think previously you talked about having decent visibility to the middle of the year and then more uncertain after that. Obviously, Boeing and Airbus have provided updates in the last 24 hours. I just want to whether you could give another update on what you actually know, how far out you know what orders might be, et cetera. If you could just talk through that specifically in the relationship with the customers on the aerospace side. Thank you.

Sure. Good morning, Chris. And we're doing well. Thank you. Or as well as can be in the circumstances. So on aerospace, we do have visibility typically three, six months out. in terms of order book. And we continue to see, even though there's a little bit of a reduction in order rates, pretty decent orders. But what that means when you combine it with the reduced rates that they have announced, at some point, demand will have to catch up with, demand for our products will have to catch up with demand for our aircraft. And I think that's what we meant in the prepared remarks. We think that demand will go down in the second half of the year, and should also continue to go down in 2021.

Okay, thanks, Jean-Marc. And then just a question for Peter. I appreciate the scenario you went through a little bit earlier. I just wanted to clarify a couple of points on that. Firstly, can you maybe just tie in On the overall year on working capital, you obviously had a very, very strong 1Q. Does that mean sort of you'd made a step change already in 1Q so the starting base is tougher from working capital from here or I just wondered if you could step through the opportunities and then just tying into that scenario, I was just a little bit confused about 2Q versus second half, if you could just talk through that. Thanks.

Sure. Okay, so first of all, I just want to emphasize the scenario is not meant to be guidance, right? So we're trying to just create a scenario that would construct what the business might look like under this average utilization rate. So in terms of trade work and capital, I think what you can expect is that as you slow down, as the business decelerates, There's going to be some trade working capital generation. And in the situation where we are now, we've got this combination of businesses that would be slowing down to that rate, so therefore cash flow generative. But we've also got some businesses that are shut down and would be ramping up, so therefore consuming trade working capital. So it's a – You know, as we kind of think about the model, there's some puts and takes on either side, and I would expect, you know, trade working capital in the model, trade working capital shows up as a, you know, kind of a modest positive for the course of the rest of the year.

Okay, thanks. Maybe just to follow up on that 70% guidepost, I mean, can you talk through what current utilization rates have been, just to sort of benchmark how that 70% is in context?

Sure. So, again, this is a case study, right? That's not what we're forecasting for the rest of the year. We don't know. But what we're seeing is, if you look at the different markets, right, aerospace, as I mentioned, has continued to be okay, but we believe it's going to go down at some point, like OEMs are at. at the same rate as what OEMs are reducing their bill rates, so probably 20, 30% down. We saw a sharp deceleration in TID, right, all the niches we're in. So if you're in that ANT segment, at the moment we've been running in the, you know, 70% range, roughly. If you look at, and sorry, I'm talking here about April, right, the current condition. If you look at, you know, packaging, it's pretty much been intact, right? So we've been running at close to 100%, with the exception that late in March and early April, we had to shut down our plants in Nassau Lake for a few days to have time to implement all the sanitation measures and the social distancing, rework, so forth. But we're back to that 95% kind of run rate. And then if you look at automotive, well, clearly at the moment we're running at less than 20%. And that's been the case in Europe since nearly the early period of March. So it's a mixed bag of all those different rates. And as you can tell, it's impossible to know how it's going to shape up because we don't know, for instance, how OEMs in automotive are going to restart. We don't know when exactly. give dates, but those dates get pushed out, and then we don't know the ramp-up either, and therefore it's very difficult to make any kind of prediction in the future. But I think the whole point about this case was to demonstrate how resilient we are to really what you would describe as dire market conditions, right? We've got about half of our business which is not really impacted by the crisis, and the other half which is quite impacted by the crisis. And And that's, you know, the fact that we will be burning less than $100 million of free cash flow running at 30% down and allowing for, you know, a decline and then a run back up in there is, I think, very good news. Okay.

Thanks very much and good luck.

Chris, sorry, just to pick up on what you also asked about Q2. trade working capital. So just to pick up on Q2, you know, the big thing that we have going in Q2 on the trade working capital side is we've got the restart of the auto business, right? So, you know, that will be a consumer of trade working capital. The other thing that I would note is, you know, as we said in the comments about the scenario, the bulk of the negative cash flow is in the second quarter because as we reconfigure the business for a lower operating rate, there's working capital consumption in that, and it's hard to – maybe just a better way to put it is it's hard to optimize trade working capital in that scenario. So we would expect Q2 to be a use of trade working capital.

Thanks, Peter. Appreciate it. Thank you.

Yep. Your next question comes from the line of David Gagliano with BMO Capital Markets.

Hi. Thanks for taking my question. Just picking up on the 2Q commentary just for a second. I appreciate the cash flow commentary. I was wondering, now that we're a third of the way through the quarter, if you could just give us a little more color on the actual operating expectations, both in terms of volumes and margins per ton in each of the three segments, I'm sure, given the timing here and the order books. you can probably provide more color on that to reset, level set, et cetera.

Yeah, David, that's a difficult question. I don't think anybody's got a real answer to it. I mean, we don't know. In some segments, we do know, right? In a can sheet, we have a decent ID. In aerospace, strictly aerospace, we've got a decent ID. In the other markets, we just don't know. So I think it would be completely not prudent from us to project anything for the second quarter. Our first priority, as we said, is making sure that we operate in a safe and healthy fashion for our employees. And the second priority is getting very close with our suppliers and our customers to be able to constantly adapt our system to changing market conditions. So when we went into the crisis, we got calls on Friday morning asking us, are you delivering next week's orders? And from the same customer on Friday afternoon, sorry, we're shutting down the plant. We're not taking any orders anymore, any deliveries anymore. And we have to turn back some trucks. And we are still in that same environment where there is complete uncertainty as to what's going to happen. And so what we're focused on is getting that very close connection, customers, suppliers, running the supply chain as efficiently as possible. And then the chips will fall where they fall. knowing that we've done a lot to make sure that we adapt our cost structure, we reduce our cost, and we reduce our working capital, reduce our capital expenditures, so that we protect cash, we protect liquidity, and we're able to respond to the market environment. Beyond that, I cannot tell you where we're going to land.

And, David, just to put it in perspective, as Jean-Marc said in his prepared remarks, just the impact on EBITDA in March was 10 to 20, right? So, you know, that's a significant impact that came quite quickly.

Right, and I appreciate that. And I was going to actually follow up on that. So the impact in March was 10 to 20, right? So is the expectation – we've got a couple of moving parts here. Seasonally, second quarter is historically anyway stronger than the first quarter. You know, is it reasonable to assume that, you know, that $10 million to $20 million impact on a monthly run rate basis is going to be higher in the second quarter than what we got in March, or at least in April?

So I think, you know, one thing that needs to be said about the impact in March is, It's an impact 10 to 20 versus what could have been, right? The other thing is the thing. We've got to remember that, you know, the crisis started in Europe sooner than in North America, and most of us are based in North America. They're in the U.S., so we've seen things happening to us, you know, two, three weeks later. It started earlier in Europe. But at the same time, you know, it started just really impacting us beginning of March. So essentially what you have is you've got a system that is, you know, in full ramp-up mode, getting ready for the busy season. You've got all the costs in. You've got all the orders. As I mentioned, you've got customers pounding the table saying, deliver, deliver. And then all of a sudden, we fall off a cliff. So you basically have all the costs, but you don't have the revenues. So obviously the impact of 10 to 20 is larger than what it could have been if it had happened, you know, in a more gradual fashion where you can adjust your cost structure. So we've done a lot to adjust the cost structure. We've done a lot to adjust all the elements of cash flow. So we're going into April in a different shape than we went into March. So I think it's difficult to extrapolate, you know, the 1020 into a monthly run rate or quarterly run rate.

Okay, that's helpful. And then just one last question for me on a bit of a clarification question. I appreciate the additional information regarding the you know, different capacity utilization rates in aero packaging and auto currently. Obviously, the way, you know, the results are reported, each of those end markets are kind of mixed into each segment. So I still think it's a little challenging to extrapolate, you know, where we are overall currently relative to that 70% figure that was flagged, you know, in the prepared remarks. Where are overall operating rates now?

They would be in that range, knowing that auto is basically at zero or less than 20%.

Okay, so roughly 70% currently. Is that what you're saying when you say in that range?

Yes.

Okay, thank you.

Our next question comes from the line of Gus Richard with Northland.

Yes, thanks for taking my question. Could you talk a little bit about you taking cost out of the system? How much has come out of cost of goods, SG&A and R&D at this point? And then of the remainder that's in cost of goods, how much is variable versus fixed?

So, okay, so as we made the comment before, in the prepared remarks, our fixed variable split is, you know, kind of 25% fixed, 75% variable, right? And that includes metal. So if you unpack that, you know, what you get to is you get to a excluding metal, we would say that we're kind of 40% variable and 60% fixed on the other costs. Just by looking at it, that's just the math of our metal. If you look at metal, it's 62%, 63% of our raw material, or of our total cost, excuse me.

Got it. That's very helpful. And then how much came out of SDNA and R&D?

Well, so what I would say is on SDNA, there's more – They're more – it's hard to give a precise number on that per se because, you know, we've lumped them in the other non-metal costs. I think it's fair to say that, you know, a lot of those costs are a little bit more sticky in the sense of slightly less variable, so maybe a slightly lower percentage than what I just provided. But I would say in general, you know, kind of that's a good rule of thumb to use.

Okay, thank you. And then the other one for me is, can you talk a little bit about closer-end markets? How much inventory is at your customers or what I would call the channel?

Well, I think if you look at the packaging, you've got normal inventories, if anything, You know, some of our customers have bought a bit more to make sure that they would insulate themselves from, you know, any supply disruption, but this is fast-moving inventory. In aerospace, as I mentioned, I think we're building up inventory in the supply chain. If you, you know, look at, you know, our sales compared to, you know, the build rates, where they're going, I think we're building up as an industry inventory in the supply chains. And in auto, there was such a sharp reduction in immediate, you know, stoppage to offtake that I don't think there is that much inventory in the supply chain. And so, you know, that's going to create some challenges when we restart because everybody, I guess, will, you know, the auto supply chain depends on many, many, many different suppliers. And the ability to have the right inventory in the right place to restart is going to be a challenge for many, many suppliers. And depending on how gradual or fast this restart will be, that may create some challenges.

Got it. Thank you. Excellent job in a bad environment. Thanks a lot.

Thank you. Thank you. We'll take it as an encouragement.

Your next question comes from the line of Matthew Fields with Bank of America.

Hey here, Marky, Peter, and Ryan. A couple questions on the balance sheet for me. The first was just wanted to confirm that that 166 million euro delayed drop term loan is secured and it's not gone yet?

That's correct.

Okay. And then you mentioned some other liquidity measures early in the call, you know, low-interest government loans in Europe, et cetera, for a total value of – I might have missed the number. Was it 330, or did I hear that wrong?

350. 350. Yeah, in that area, right?

Yeah.

Yeah, and that includes, yeah, sorry, to be clear, that includes the delayed draw term loan. So the total liquidity add would be in the area of 350. And we have very good line of sight on the piece that's not in place yet, the piece beyond the 166, but there are a couple of different pieces to it. That's why we're saying kind of in the area.

Are those mostly those government-sponsored loans?

Yes. Yep, they are.

Okay. Okay, great. And are those secured loans as well?

It depends on the country, but in most cases, yes.

Okay, great. And then my follow-up to that is, you know, you guys do have a decent amount of secured capacity. I understand, you know, 350 goes a long way, but do you think with the, you know, strong rally your bonds have had over the last month that you might want to hit the markets to kind of turn out maturities, especially the 2021? I know it's not that big, but the market has rallied back a lot, and clearing out a good amount of years on the front end might go a long way.

Yep. So it's a great question, and it's something that we are looking at and we're obviously kind of thinking about all the time. One of the things we like about the liquidity structure we put in place is it gives us time to kind of observe and take stock on where the markets are and also kind of bridge some of the volatility that's been in the market. But it's something that we'll definitely look at.

All right. Thanks very much, everyone, and good luck.

Thank you.

Again, ladies and gentlemen, if you have a question at this time, please press star. then the number 1 on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, press the pound key. Your next question comes from the line of Sean Wondrak with Deutsche Bank.

Hello, Jean-Marc here, and I appreciate you taking my questions today. Just one quick clarification, and I hate to do this, but just on the 70% utilization rate, does that include? in the downside scenario, does that include Q1, or would that be the run rate for the rest of the year?

No, that's the run rate for the rest of the year.

Okay, understood. Thank you. And then when you think about the automotive market, I totally appreciate that visibility is really constrained here. Can you maybe talk about what you're seeing in Europe versus the U.S.? Are you seeing sort of more activity there from the OEMs a little bit more relative to the U.S.? Is there any difference you're kind of seeing there? I think that would be helpful.

Thank you. Not really. I think everybody is a little bit unsure about when they can restart, if they can restart. And I think those restarts are dependent on the – So many factors, right? As I mentioned earlier, you need the supply chain to be able to restart with you. Otherwise, you've got a problem. You need employees to want to come to work. And absenteeism can be a problem in some parts of Europe or the U.S. So you've got clusters or hot epidemic areas. You've got... issues around what demand will be. So I think it's very foggy, really.

Thank you for that. And then just my last one. When you think about the PARP segment, congratulations on getting to positive EBITDA there in Bowling Green. Do you still expect the mix shift here over time to auto-sheet to sort of help offset any kind of pricing weakness and maybe some of the absorption costs on EBIT upper-county assistance?

Yeah, so I think what's happening here is, so first, we're really super happy with the Bowling Green performance. We had to shut down Bowling Green for two weeks of that month, right? So, you know, being Ibiza positive with just, you know, two and a half months in a three-month period is a real difference from where we were two years ago or even last year. So we're really happy with it. And when it restarts, it will be a great factory and a great... Now, that said, yes, I do anticipate that over time, you know, auto-sheet will continue to grow, can-sheet will continue to be strong, and as a consequence, there will be a little bit of tightening. But in the medium term, if you look at any scenario in the past where, you know, automotive took a no-side, so if you look at 2008, 2009, it took some time before all the yield rates went back to pre-crisis levels. that will impact, you know, the supply-demand dynamics over the period when, you know, the build rates go back to, you know, normal quote-unquote levels. So if we've got a V-shaped recovery, if you've got a U-shaped recovery, an L-shaped, which I don't think is a recovery really, but it depends on your calligraphy, we'll have a different picture in terms of, you know, what the supply-demand dynamics will be and what the pricing power will be. So, again, but we are ready for any scenario. And I think it's what Peter was describing around all the steps we're taking about, you know, managing our cash flows to a working capital, capex, managing our cost structure, fixed end variables, managing our liquidity, and doing it prudently such that, you know, we want to have access to liquidity, but we want it to be cheap. Right? Doing all these things are giving us the runway to be able to weather whatever comes at us.

Thank you for that, Jean-Marc. Appreciate it.

Sure. I would now like to turn the conference back to Jean-Marc Jamin, CEO of Constellium.

Well, thank you very much, everyone, again, for your interest in CompStadium. As you can see, we're really focused on the health, safety of our employees first, staying very close to our suppliers and our customers to be able to operationally respond to the ever-changing market conditions. And as you saw, we are very cautious and aggressive about managing our cost structure so that we emerge from this crisis stronger We've got a great platform. I think the Q1 results are showing it. And we'll weather the storm and come out stronger. Thank you again.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. And have a wonderful day. You may all disconnect.