Constellium SE

Hello and welcome to the Constellium fourth quarter and full year 2024 results conference call. My name is Alex and I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. I'll now hand it over to your host, Jason Hershiser, Director of Investor Relations. Please go ahead.

Thank you, Alex. I'd like to welcome everyone to our fourth quarter and full year 2024 earnings call. On the call today, we have our Chief Executive Officer, John Mark Germain, and our Chief Financial Officer, Jack Guo. After the presentation, we will have a Q&A session. As a reminder, and as we previously announced, we are now reporting in U.S. dollars and under U.S. GAAP, starting with our fourth quarter and full year 2024 results today. A copy of the slide presentation for today's call is available on our website at Constellium.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 AND IN FUTURE FILINGS UNDER FORM 10K. 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 GAAP disclosures. Before turning the call over to John Mark, I wanted to remind everyone that beginning early last year, we revised the definition of adjusted EBITDA at the consolidated level. based on our prior discussions with the SEC. The new definition will no longer exclude the non-cash impact of metal price lag. We will continue to provide investors and other stakeholders with a non-cash metal price lag impact that is necessary to get a true assessment of the economic performance of the business. Our segment adjusted EBITDA will continue to exclude this impact and any guidance we provide for adjusted EBITDA will also exclude the impact. And with that, I would now like to hand the call over to John Mark.

Thank you, Jason. Good morning. Good afternoon, everyone. And thank you for your interest in Constellium. Let's begin on slide five. I want to start with safety, our number one priority. Our recordable case rate for the year of 2.0 per million hours worked was slightly higher than the prior year, but I am pleased to report that we continue to deliver best-in-class safety performance. We are committed to achieving our safety target to reduce our recordable case rate to 1.5. Now let's turn to slide six and discuss the highlights from our fourth quarter performance. Shipments were 328,000 tons, down 2% compared to the fourth quarter of 2023, mainly due to lower shipments in ANT and ASNI. Revenue of $1.7 billion decreased 1% compared to the fourth quarter of 2023. primarily due to lower shipments and unfavorable price and mix, partially offset by higher metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model which minimizes our exposure to metal price risk. Our net loss of $47 million in a quarter compares to net income of $5 million in the fourth quarter of 2023. Adjusted EBITDA was $125 million in the quarter, though this includes a negative impact at valet of $15 million as a result of the flood. This also includes a positive non-cash impact from metal price lag of $27 million. If we exclude the impact of the flood and the impact of metal price lag, as Jason mentioned earlier, the real economic performance of the business reflects adjusted EBITDA of $113 million in the quarter compared to the $178 million we achieved in the fourth quarter of 2023. Cash from operations was $61 million in the quarter, and I am pleased to report that we continued our share buyback program. During the quarter, we returned $18 million to shareholders through the repurchase of 1.6 million shares. Before turning to our full year performance, I wanted to give you a quick update on the flooding situation in the Valley. As of today, the business is on track to complete production ramp up by the end of the first quarter this year, which is in line with our prior expectations. As we mentioned last quarter, we expect some cost impact in 2025 as production will continue to ramp up and we expect to receive the remaining portion of the insurance proceeds in 2025 as well. While the impact of the flood had a material impact on our business, I am pleased that the total damages from the event came in below our original insurance gross damage assessment and we will be able to put the event in the rearview mirror very soon. Now turn to slide 7 for our full year highlights. For the full year, shipments were 1.4 million tons or down 4% compared to 2023. Revenue of $7.3 billion decreased 6% compared to 2023, primarily due to lower shipments and unfavorable price and mix, partially offset by higher metal prices. Our net income of $60 million compares to net income of $157 million in 2023. Adjusted EBITDA was $623 million for the full year in 2024, though this includes a negative impact at valet of $33 million as a result of the flood. This also includes a positive non-cash impact for metal price lag of $55 million. Again, if we exclude the impact of the flood and the impact of metal price lag, the real economic performance of the business reflects adjusted EBITDA of $601 million for the year, compared to the record $754 million we achieved in 2023. Given a change in year-over-year performance during 2024, we accelerated our cost reduction efforts and took actions to reduce working capital to align to the current demand environment, which Jack and I will be discussing later on. Moving now to free cash flow. Our free cash flow for the year was negative $100 million in 2024. If you exclude the impact of the Valley Flood and include cash received for the collection of deferred purchase price receivables, Free cash flow would have been positive $30 million in 2024, which Jack will cover in more detail. Our leverage at the end of 2024 was 3.1 times. If we exclude the valley flood impact, leverage was 2.9 times at the end of 2024. Clearly, 2024 was a very challenging year for Constellium on many fronts. The year began with the extreme cold weather and snow impacting operations at Mussel Shoals in January. and we experienced severe flooding at our facilities in the valley region in Switzerland during the summer. In addition, we faced market-driven headwinds starting in the second quarter last year, and which became more pronounced in the second half, including demand weakness across most of our end markets and significant tightening of scrub spreads in North America. I want to thank each of our 12,000 employees for their commitment, resilience, and relentless focus on serving our customers during these difficult times. On a more positive note, I am pleased that we started up our new recycling and casting center in Neuf-Brisac in September, slightly ahead of schedule and below budget, and we returned $79 million to shareholders through the repurchase of 4.6 million shares of company stock during the year. I'm also excited to begin reporting our results in U.S. dollars under U.S. GAAP today, and soon we will file our first annual report on 410 . Now, please turn to slide eight. Before turning the call over to Jack, I wanted to give a quick update on the latest Section 232 tariffs and how we see the potential impact to Costellium. Before going into details on the slide, let me summarize a bit. The tariff situation is a fluid and multifaceted situation. We see both some positive and negative impacts on our business. And at this stage, we believe it presents us with various opportunities. The guidance we are giving today does not include any impacts from tariffs. Shifting to the details on the slide now, on the production side, we are mostly local for local in the regions where we operate. We have a joint venture in Canada that provides extrusions to our automotive structures business in the U.S., and these extrusions will become more expensive under Section 232 tariffs. In aerospace, we ship small quantities from Europe to the U.S. to serve global OEMs, though this has a pass-through today and it will not be impacted. On the metal supply side, we import some primary aluminum from Canada, given the lack of smelter capacity in the US, and some of these imports will become more expensive. Commercial negotiations will be necessary to mitigate tariffs, and there may be a lag in passing additional costs through. In terms of scrap now, aluminum scrap is excluded from the current scope of Section 232 tariffs. We purchase most of our scrap needs from dealers in the US. The impact on scrap from tariffs could be a net positive as it could increase the availability of scrap in the US and scrap spreads could improve with a rise in the US regional premium for aluminum. Now, in terms of commercial impacts, these two could be a net positive for Constellium. Today, around 1 million tons of flat rolled aluminum imports are coming into the US. Tariffs will make domestically produced products more competitive, and we should benefit from this. As an example, earlier this week, we announced a price increase for all flat rolled products shipped in the US. We have some business in the U.S. that is priced quarterly, and we should benefit as soon as the second quarter of this year from the new market dynamics. The overall impact on our end markets is way too early to estimate and will depend on the overall health of the U.S. economy, and it will also depend on the types of tariffs to be implemented in the future, including the originally announced and then paused blanket tariffs on Canada and Mexico. The same logic should apply in terms of impact on aluminum, though the overall impact at this time is unknown. To close out on tariffs, as I said before, the situation remains very fluid. We are continually monitoring and assessing the potential impact of current and future trade policies, though at this stage, we believe it presents us with some opportunities. With that, I will now hand the call over to Jack for further details on our financial performance.