Constellium(CSTM) - 2022 Q3 - Quarterly Report

Executive Summary & Business Outlook Constellium reported strong Q3 and YTD 2022 results, driven by robust segment performances and resilient demand, while acknowledging macroeconomic risks and providing a refined 2022 outlook Third Quarter 2022 Highlights Constellium reported strong third-quarter 2022 results, with record Adjusted EBITDA driven by robust performances in its Aerospace & Transportation (A&T) and Automotive Structures & Industry (AS&I) segments. Despite a slight decrease in shipments due to operational challenges at Muscle Shoals, revenue and net income saw significant increases Q3 2022 Key Financial Highlights | Metric | Q3 2022 (€ millions) | Q3 2021 (€ millions) | Change (%) | | :---------------------- | :------------------- | :------------------- | :--------- | | Shipments (k metric tons) | 387 | 395 | (2)% | | Revenue | 2,000 | 1,587 | 27% | | Value-Added Revenue (VAR) | 673 | 558 | 21% | | Net income | 131 | 99 | n.m. | | Adjusted EBITDA | 160 | 143 | 12% | - Adjusted EBITDA of €160 million is a third-quarter record, with A&T and AS&I segments achieving record third-quarter performances[3] - Automotive shipments increased double digits year-over-year, driven by new platform launches, despite ongoing semiconductor shortages and supply chain issues[3] Nine Months Ended September 30, 2022 Highlights For the first nine months of 2022, Constellium demonstrated strong growth across key financial metrics, including shipments, revenue, VAR, net income, and Adjusted EBITDA, reflecting overall market recovery and operational improvements YTD Q3 2022 Key Financial Highlights | Metric | YTD 2022 (€ millions) | YTD 2021 (€ millions) | Change (%) | | :---------------------- | :-------------------- | :-------------------- | :--------- | | Shipments (k metric tons) | 1,200 | 1,186 | 2% | | Revenue | 6,300 | 4,446 | 41% | | VAR | 2,000 | 1,670 | 21% | | Net income | 278 | 255 | n.m. | | Adjusted EBITDA | 525 | 434 | 21% | | Cash from Operations | 323 | N/A | N/A | | Free Cash Flow | 160 | N/A | N/A | | Net debt / LTM Adjusted EBITDA | 3.0x | N/A | N/A | CEO Commentary & 2022 Outlook CEO Jean-Marc Germain highlighted strong Q3 performance, particularly in A&T and AS&I, and resilient packaging demand. He acknowledged macroeconomic and geopolitical risks, including inflationary pressures, but expressed confidence in the team's ability to manage challenges through execution and cost control. The company expects 2022 Adjusted EBITDA at the low end of its guidance range and Free Cash Flow exceeding €170 million - Packaging demand remains resilient, while aerospace demand is very strong with shipments up around 50% year-over-year for the second consecutive quarter[3] - The company anticipates continued macroeconomic and geopolitical risks, elevated inflationary pressures (especially for energy), and expects to manage these challenges through relentless focus on execution and cost control[4] 2022 Full-Year Outlook | Metric | 2022 Expectation | | :-------------- | :--------------------- | | Adjusted EBITDA | Low end of €670M - €690M range | | Free Cash Flow | In excess of €170M | Group Financial Performance Constellium's group performance in Q3 and YTD 2022 showed significant revenue and Adjusted EBITDA growth, driven by improved price, mix, and metal prices, despite slight shipment variations Q3 and YTD 2022 Group Summary Constellium's group performance in Q3 2022 saw a 27% increase in revenue and a 12% rise in Adjusted EBITDA, despite a 2% decrease in shipments. For the first nine months, revenue surged by 41% and Adjusted EBITDA by 21%, with shipments up 2%, primarily driven by improved price and mix, higher metal prices, and favorable foreign exchange translation Group Summary: Q3 and YTD 2022 vs. 2021 | Metric | 2022 Q3 | Q3 2021 | Var. | YTD 2022 | YTD 2021 | Var. | | :--------------------------- | :------ | :------ | :---- | :------- | :------- | :---- | | Shipments (k metric tons) | 387 | 395 | (2)% | 1,212 | 1,186 | 2% | | Revenue (€ millions) | 2,022 | 1,587 | 27% | 6,276 | 4,446 | 41% | | VAR (€ millions) | 673 | 558 | 21% | 2,029 | 1,670 | 21% | | Net income (€ millions) | 131 | 99 | n.m. | 278 | 255 | n.m. | | Adjusted EBITDA (€ millions) | 160 | 143 | 12% | 525 | 434 | 21% | | Adjusted EBITDA per metric ton (€) | 412 | 362 | 14% | 433 | 366 | 18% | - Q3 2022 shipments decreased 2% due to lower volumes in Packaging & Automotive Rolled Products, partially offset by growth in Aerospace & Transportation and Automotive Structures & Industry[5] - YTD 2022 revenue increased 41% primarily due to higher metal prices, improved price and mix, and higher volumes across all segments[6] Segment Performance Analysis Segment performance varied, with A&T showing exceptional growth, AS&I solid growth, and P&ARP facing challenges from lower shipments and higher operating costs Packaging & Automotive Rolled Products (P&ARP) The P&ARP segment experienced a 17% decrease in Q3 2022 Adjusted EBITDA, primarily due to lower shipments and higher operating costs from inflation and operational challenges at the Muscle Shoals facility. Shipments were down 5% in Q3, though YTD shipments remained stable P&ARP Segment Performance: Q3 and YTD 2022 vs. 2021 | Metric | 2022 Q3 | Q3 2021 | Var. | YTD 2022 | YTD 2021 | Var. | | :--------------------------- | :------ | :------ | :---- | :------- | :------- | :---- | | Shipments (k metric tons) | 267 | 281 | (5)% | 835 | 832 | 0% | | Revenue (€ millions) | 1,140 | 988 | 15% | 3,656 | 2,661 | 37% | | Adjusted EBITDA (€ millions) | 78 | 94 | (17)% | 255 | 256 | (1)% | | Adjusted EBITDA per metric ton (€) | 291 | 335 | (13)% | 305 | 308 | (1)% | - Q3 2022 Adjusted EBITDA decreased 17% due to lower shipments of packaging and specialty rolled products, higher operating costs from inflation, and challenges at the Muscle Shoals facility[7] - YTD 2022 Adjusted EBITDA was relatively stable, with improved price and mix and favorable foreign exchange offsetting higher operating costs[7] Aerospace & Transportation (A&T) The A&T segment delivered exceptional growth, with Q3 2022 Adjusted EBITDA soaring by 136% and revenue by 50%, driven by significantly higher aerospace rolled product shipments, improved price and mix, and favorable foreign exchange. YTD Adjusted EBITDA nearly doubled A&T Segment Performance: Q3 and YTD 2022 vs. 2021 | Metric | 2022 Q3 | Q3 2021 | Var. | YTD 2022 | YTD 2021 | Var. | | :--------------------------- | :------ | :------ | :---- | :------- | :------- | :---- | | Shipments (k metric tons) | 55 | 52 | 6% | 170 | 153 | 11% | | Revenue (€ millions) | 432 | 289 | 50% | 1,278 | 821 | 56% | | Adjusted EBITDA (€ millions) | 45 | 20 | 136% | 161 | 81 | 99% | | Adjusted EBITDA per metric ton (€) | 807 | 362 | 123% | 944 | 525 | 80% | - Q3 2022 Adjusted EBITDA increased 136% due to higher shipments of aerospace rolled products, improved price and mix, and favorable foreign exchange, despite higher operating costs from inflation and production ramp-up[8] - YTD 2022 Adjusted EBITDA increased 99%, with shipments up 11% on higher aerospace rolled products[8] Automotive Structures & Industry (AS&I) The AS&I segment reported solid growth in Q3 2022, with Adjusted EBITDA up 7% and revenue up 45%, driven by increased shipments of automotive extruded products and improved price and mix. YTD performance also showed positive trends in shipments and revenue AS&I Segment Performance: Q3 and YTD 2022 vs. 2021 | Metric | 2022 Q3 | Q3 2021 | Var. | YTD 2022 | YTD 2021 | Var. | | :--------------------------- | :------ | :------ | :---- | :------- | :------- | :---- | | Shipments (k metric tons) | 65 | 62 | 4% | 207 | 201 | 3% | | Revenue (€ millions) | 473 | 326 | 45% | 1,433 | 1,021 | 40% | | Adjusted EBITDA (€ millions) | 35 | 32 | 7% | 118 | 111 | 6% | | Adjusted EBITDA per metric ton (€) | 544 | 528 | 3% | 570 | 553 | 3% | - Q3 2022 Adjusted EBITDA increased 7% due to higher shipments of automotive extruded products and improved price and mix, partially offset by higher operating costs from inflation[10] - YTD 2022 revenue increased 40% primarily due to higher metal prices and improved price and mix[10] Net Income Analysis Net income for Q3 and YTD 2022 increased, primarily driven by the recognition of deferred tax assets, higher gross profit, and lower finance costs, despite some offsetting factors Net Income Performance Constellium's net income increased to €131 million in Q3 2022 from €99 million in Q3 2021, primarily due to the recognition of previously unrecognized deferred tax assets, partially offset by realized losses on derivatives and lower gross profit. For the first nine months, net income rose to €278 million from €255 million, also benefiting from deferred tax asset recognition, higher gross profit, and lower finance costs Net Income: Q3 and YTD 2022 vs. 2021 | Metric | 2022 Q3 (€ millions) | Q3 2021 (€ millions) | YTD 2022 (€ millions) | YTD 2021 (€ millions) | | :----------------- | :------------------- | :------------------- | :-------------------- | :-------------------- | | Net income | 131 | 99 | 278 | 255 | - The increase in Q3 2022 net income was mainly driven by the recognition of deferred tax assets, partially offset by realized losses on derivatives and lower gross profit[11] - The YTD 2022 net income increase was primarily due to deferred tax asset recognition, higher gross profit, and lower finance costs, partially offset by derivative losses and higher selling and administrative expenses[11] Cash Flow Analysis Free Cash Flow and cash from operations significantly improved in YTD 2022, driven by stronger Adjusted EBITDA and debt management, despite increased capital expenditures Cash Flow Performance Constellium reported a significant increase in Free Cash Flow to €160 million for the first nine months of 2022, up from €121 million in the prior year, driven by stronger Adjusted EBITDA and lower cash interest. Cash from operations also improved, while cash used in investing activities increased due to higher capital expenditures. Financing activities saw a reduced outflow compared to the prior year, reflecting debt management actions Cash Flow Summary: YTD 2022 vs. 2021 | Metric | YTD 2022 (€ millions) | YTD 2021 (€ millions) | Change (€ millions) | | :----------------------------------- | :-------------------- | :-------------------- | :------------------ | | Free Cash Flow | 160 | 121 | 39 | | Cash flows from operating activities | 323 | 239 | 84 | | Cash flows used in investing activities | (163) | (118) | (45) | | Cash flows used in financing activities | (141) | (241) | 100 | - The increase in Free Cash Flow was primarily due to stronger Adjusted EBITDA and lower cash interest, partially offset by increased capital expenditures and higher cash taxes[12] - In the first nine months of 2022, Constellium repaid the €180 million PGE French Facility and CHF 15 million Swiss Facility using proceeds from the Pan-U.S. ABL and cash on hand[13] Liquidity & Capital Structure Constellium maintained strong liquidity of €819 million at September 30, 2022, with a slight increase in net debt compared to year-end 2021 Liquidity and Net Debt Position As of September 30, 2022, Constellium maintained strong liquidity of €819 million, comprising cash and cash equivalents and available committed lending facilities. Net debt saw a slight increase to €1,997 million compared to year-end 2021 Liquidity and Net Debt: As of September 30, 2022 | Metric | Amount (€ millions) | | :----------------------------------- | :------------------ | | Total Liquidity | 819 | | Cash and cash equivalents | 171 | | Available committed lending facilities | 648 | | Net debt (Sept 30, 2022) | 1,997 | | Net debt (Dec 31, 2021) | 1,981 | Outlook Constellium expects its full-year 2022 Adjusted EBITDA to be at the low end of its guidance range, acknowledging unpredictability in certain non-GAAP reconciliation items 2022 Adjusted EBITDA Outlook Constellium expects its full-year 2022 Adjusted EBITDA to be at the low end of its previously guided range of €670 million to €690 million, reflecting anticipated demand trends through the remainder of the year 2022 Adjusted EBITDA Outlook | Metric | 2022 Expectation | | :-------------- | :--------------------- | | Adjusted EBITDA | Low end of €670M - €690M range | - The company is unable to provide a reconciliation of Adjusted EBITDA guidance to net income due to the unpredictability of certain excluded items like derivative gains/losses, metal lag, and impairment charges[16] Company Information & Disclaimers This section provides disclaimers on forward-looking statements, highlighting inherent risks and uncertainties, and offers a brief overview of Constellium as a global leader in aluminum products Forward-looking Statements This section contains a standard disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties in the industry and business operations, such as market competition, economic downturns, supply disruptions, inflation, and geopolitical events like the war in Ukraine. It advises that actual results may differ materially from expectations and the company undertakes no obligation to update these statements - Forward-looking statements are subject to risks and uncertainties including market competition, economic downturn, business disruptions (e.g., COVID-19, war in Ukraine), supply chain issues, inflation, and hedging policy effectiveness[17] - Actual results may differ materially from forward-looking statements, and the company does not undertake to update them except as required by law[17] About Constellium Constellium SE (NYSE: CSTM) is a global leader in developing innovative, value-added aluminum products for diverse markets including packaging, automotive, and aerospace, with €6.2 billion in revenue in 2021 - Constellium is a global sector leader in innovative, value-added aluminum products for packaging, automotive, and aerospace markets[18] - The company generated €6.2 billion in revenue in 2021[18] Consolidated Financial Statements This section presents the consolidated financial statements, detailing income, comprehensive income, financial position, and cash flows for Q3 and YTD 2022, highlighting key changes in assets, liabilities, equity, and operational cash generation Consolidated Income Statement The consolidated income statement shows a significant increase in revenue for both Q3 and YTD 2022, but Q3 gross profit declined due to higher cost of sales. Net income improved in both periods, largely influenced by a substantial income tax benefit in Q3 2022 Consolidated Income Statement (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | 2,022 | 1,587 | 6,276 | 4,446 | | Cost of sales | (1,889) | (1,419) | (5,711) | (3,937) | | Gross profit | 133 | 168 | 565 | 509 | | Income from operations | 30 | 153 | 274 | 434 | | Finance costs - net | (36) | (34) | (98) | (126) | | (Loss) / income before tax | (6) | 119 | 176 | 308 | | Income tax benefit / (expense) | 137 | (20) | 102 | (53) | | Net income | 131 | 99 | 278 | 255 | | Basic EPS | 0.90 | 0.68 | 1.90 | 1.77 | | Diluted EPS | 0.88 | 0.65 | 1.86 | 1.69 | - Q3 2022 saw a significant income tax benefit of €137 million, contrasting with an expense of €20 million in Q3 2021, which was a primary driver for the net income increase despite a loss before tax[19] Consolidated Statement of Comprehensive Income The consolidated statement of comprehensive income shows total comprehensive income of €186 million for Q3 2022, up from €106 million in Q3 2021, and €489 million for YTD 2022, up from €346 million in YTD 2021. This increase was largely driven by significant remeasurement gains on post-employment benefit obligations and favorable currency translation differences Consolidated Statement of Comprehensive Income (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | 131 | 99 | 278 | 255 | | Remeasurement on post-employment benefit obligations | 26 | 5 | 181 | 94 | | Income tax on remeasurement on post-employment benefit obligations | (9) | (3) | (39) | (14) | | Cash flow hedges | (12) | (6) | (27) | (14) | | Income tax on cash flow hedges | 3 | 1 | 7 | 3 | | Currency translation differences | 47 | 10 | 89 | 22 | | Other comprehensive income | 55 | 7 | 211 | 91 | | Total comprehensive income | 186 | 106 | 489 | 346 | - Remeasurement on post-employment benefit obligations contributed significantly to other comprehensive income, with €181 million for YTD 2022 compared to €94 million for YTD 2021[20] - Favorable currency translation differences also boosted other comprehensive income, reaching €89 million for YTD 2022 compared to €22 million for YTD 2021[20] Consolidated Statement of Financial Position Constellium's total assets increased to €5,405 million at September 30, 2022, from €4,624 million at December 31, 2021, driven by growth in current assets (inventories, trade receivables) and non-current assets (property, plant and equipment, goodwill, deferred tax assets). Total equity significantly improved to €793 million from €291 million, reflecting retained earnings and other reserves Consolidated Statement of Financial Position (in millions of Euros) | Metric | At September 30, 2022 | At December 31, 2021 | | :----------------------------------- | :-------------------- | :------------------- | | Total Assets | 5,405 | 4,624 | | Current assets | 2,423 | 1,938 | | Cash and cash equivalents | 171 | 147 | | Inventories | 1,383 | 1,050 | | Non-current assets | 2,982 | 2,686 | | Property, plant and equipment | 2,057 | 1,948 | | Goodwill | 522 | 451 | | Deferred tax assets | 275 | 162 | | Total Liabilities | 4,612 | 4,333 | | Current liabilities | 1,977 | 1,714 | | Non-current liabilities | 2,635 | 2,619 | | Total Equity | 793 | 291 | | Equity attributable to equity holders of Constellium | 770 | 274 | - Deferred tax assets significantly increased to €275 million at September 30, 2022, from €162 million at December 31, 2021[21] - Retained earnings / (deficit) and other reserves shifted from a deficit of (€149) million at year-end 2021 to a positive €347 million at September 30, 2022, contributing to the substantial increase in total equity[21] Consolidated Statement of Cash Flows The consolidated statement of cash flows shows net cash flows from operating activities increased to €323 million for YTD 2022 from €239 million in YTD 2021. Net cash used in investing activities increased to €163 million, primarily due to higher capital expenditures. Net cash used in financing activities decreased significantly to €141 million from €241 million, reflecting changes in borrowing activities Consolidated Statement of Cash Flows (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | 154 | 91 | 323 | 239 | | Net cash flows used in investing activities | (80) | (51) | (163) | (118) | | Net cash flows used in financing activities | (62) | (9) | (141) | (241) | | Net increase / (decrease) in cash and cash equivalent | 12 | 31 | 19 | (120) | | Cash and cash equivalents - end of period | 171 | 323 | 171 | 323 | - Changes in working capital had a mixed impact, with inventories consuming cash (YTD: €238 million outflow) and trade payables providing cash (YTD: €206 million inflow)[23] - Purchases of property, plant and equipment increased to €164 million for YTD 2022, up from €128 million in YTD 2021[23] Non-GAAP Measures & Reconciliations This section provides reconciliations for non-GAAP measures, detailing segment Adjusted EBITDA, product line performance, and adjustments from GAAP to non-GAAP metrics like VAR, Adjusted EBITDA, Free Cash Flow, and Net Debt Segment Adjusted EBITDA The segment Adjusted EBITDA reconciliation shows that while P&ARP's contribution decreased in Q3 2022, A&T and AS&I segments significantly increased their Adjusted EBITDA, leading to a higher total group Adjusted EBITDA Segment Adjusted EBITDA (in millions of Euros) | Segment | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | | :------------------- | :------------------------------ | :------------------------------ | | P&ARP | 78 | 94 | | A&T | 45 | 20 | | AS&I | 35 | 32 | | Holdings and Corporate | 2 | (3) | | Total | 160 | 143 | - A&T segment's Adjusted EBITDA more than doubled from €20 million in Q3 2021 to €45 million in Q3 2022[24] Shipments and Revenue by Product Line Analysis by product line reveals varied performance: packaging rolled products saw a decrease in Q3 shipments but an increase in revenue, while automotive rolled products and aerospace rolled products showed growth in both shipments and revenue. Transportation, industry, defense, and other rolled products maintained stable shipments but increased revenue Shipments (in k metric tons) | Product Line | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Packaging rolled products | 196 | 215 | 623 | 622 | | Automotive rolled products | 64 | 55 | 184 | 177 | | Specialty and other thin-rolled products | 7 | 11 | 28 | 33 | | Aerospace rolled products | 19 | 13 | 55 | 39 | | Transportation, industry, defense and other rolled products | 36 | 39 | 115 | 114 | | Automotive extruded products | 29 | 26 | 89 | 89 | | Other extruded products | 36 | 36 | 118 | 112 | | Total shipments | 387 | 395 | 1,212 | 1,186 | Revenue (in millions of Euros) | Product Line | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Packaging rolled products | 792 | 730 | 2,629 | 1,897 | | Automotive rolled products | 308 | 216 | 879 | 637 | | Specialty and other thin-rolled products | 40 | 42 | 148 | 127 | | Aerospace rolled products | 184 | 92 | 510 | 279 | | Transportation, industry, defense and other rolled products | 248 | 197 | 768 | 542 | | Automotive extruded products | 248 | 167 | 721 | 544 | | Other extruded products | 225 | 159 | 712 | 477 | | Total revenue | 2,022 | 1,587 | 6,276 | 4,446 | - Aerospace rolled products revenue more than doubled in Q3 2022 (€184 million vs €92 million) and YTD 2022 (€510 million vs €279 million), reflecting strong demand[25] Reconciliation of Revenue to VAR The reconciliation shows that Value-Added Revenue (VAR) increased by 21% for both Q3 and YTD 2022, indicating strong performance in the value-added elements of the business, despite significant fluctuations in hedged cost of alloyed metal and metal time lag Reconciliation of Revenue to VAR (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Revenue | 2,022 | 1,587 | 6,276 | 4,446 | | Hedged cost of alloyed metal | (1,414) | (966) | (4,191) | (2,617) | | Revenue from incidental activities | (5) | (4) | (16) | (15) | | Metal time lag | 70 | (59) | (40) | (144) | | VAR | 673 | 558 | 2,029 | 1,670 | - Metal time lag had a positive impact of €70 million on VAR in Q3 2022, reversing a negative impact of (€59) million in Q3 2021[26] Reconciliation of Net Income to Adjusted EBITDA The reconciliation highlights the adjustments made to net income to arrive at Adjusted EBITDA. Key adjustments include adding back income tax, finance costs, depreciation and amortization, and adjusting for metal price lag and unrealized derivative gains/losses, which significantly impacted the reported EBITDA Reconciliation of Net Income to Adjusted EBITDA (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net income | 131 | 99 | 278 | 255 | | Income tax (benefit) / expense | (137) | 20 | (102) | 53 | | Finance costs - net | 36 | 34 | 98 | 126 | | Depreciation and amortization | 73 | 67 | 209 | 195 | | Unrealized (gains) / losses on derivatives | (19) | (23) | 65 | (67) | | Metal price lag (A) | 70 | (59) | (40) | (144) | | Adjusted EBITDA | 160 | 143 | 525 | 434 | - Metal price lag had a positive adjustment of €70 million in Q3 2022, contributing to the higher Adjusted EBITDA, compared to a negative adjustment of (€59) million in Q3 2021[26] - Unrealized gains on derivatives provided a positive adjustment of (€19) million in Q3 2022, compared to (€23) million in Q3 2021[26] Reconciliation of Net Cash Flows from Operating Activities to Free Cash Flow Free Cash Flow significantly increased to €74 million in Q3 2022 and €160 million for YTD 2022, primarily due to strong net cash flows from operating activities, partially offset by capital expenditures Reconciliation of Net Cash Flows from Operating Activities to Free Cash Flow (in millions of Euros) | Metric | Three months ended Sep 30, 2022 | Three months ended Sep 30, 2021 | Nine months ended Sep 30, 2022 | Nine months ended Sep 30, 2021 | | :----------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash flows from operating activities | 154 | 91 | 323 | 239 | | Purchases of property, plant and equipment | (80) | (54) | (164) | (128) | | Property, plant and equipment grants received | — | 3 | 1 | 10 | | Free Cash Flow | 74 | 40 | 160 | 121 | - Free Cash Flow for Q3 2022 more than doubled to €74 million from €40 million in Q3 2021[28] Reconciliation of Borrowings to Net Debt Net debt increased slightly to €1,997 million at September 30, 2022, from €1,981 million at December 31, 2021, reflecting the total borrowings adjusted for cash and cash equivalents and fair value of net debt derivatives Reconciliation of Borrowings to Net Debt (in millions of Euros) | Metric | At September 30, 2022 | At December 31, 2021 | | :----------------------------------- | :-------------------- | :------------------- | | Borrowings | 2,169 | 2,129 | | Fair value of net debt derivatives, net of margin calls | (1) | (1) | | Cash and cash equivalents | (171) | (147) | | Net debt | 1,997 | 1,981 | Non-GAAP Measures Definitions This section defines key non-GAAP financial measures, including VAR, Adjusted EBITDA, and Free Cash Flow, explaining their purpose in providing supplemental insights into core business performance Explanation of Non-GAAP Measures This section defines and explains the non-GAAP financial measures used by Constellium, including Value-Added Revenue (VAR), Adjusted EBITDA, Adjusted EBITDA per metric ton, Free Cash Flow, and Net debt. These measures are presented to provide investors with supplemental information on operating and financial performance, eliminating impacts of metal costs, non-cash charges, and other non-recurring items to better reflect core business activities - VAR is defined as revenue, excluding incidental activities, minus the cost of metal (adjusted for metal lag, alloying metals, freight out, and hedging gains/losses), used to reflect value-added elements and eliminate metal price fluctuations[29] - Adjusted EBITDA is defined as income/(loss) from continuing operations before income taxes, joint ventures, net finance costs, other expenses, depreciation, and amortization, further adjusted for restructuring, impairment, unrealized derivative gains/losses, metal price lag, and other non-recurring items[30] - Free Cash Flow is defined as net cash flow from operating activities less capital expenditure, equity contributions, and loans to joint ventures and other investing activities, providing insight into cash generated or used by the business after capital needs[30]