Constellium(CSTM) - 2023 Q3 - Quarterly Report

Performance Highlights Constellium achieved a record Q3 Adjusted EBITDA of €168 million, a 5% YoY increase, driven by the A&T segment, while reducing leverage to 2.5x despite market headwinds | Metric | Q3 2023 | Q3 2022 | Change | YTD 2023 | YTD 2022 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Shipments (k tons) | 369 | 387 | -5% | 1,156 | 1,212 | -5% | | Revenue (€M) | 1,720 | 2,022 | -15% | 5,626 | 6,276 | -10% | | VAR (€M) | 704 | 673 | +5% | 2,243 | 2,029 | +11% | | Net Income (€M) | 64 | 131 | -51% | 118 | 278 | -58% | | Adjusted EBITDA (€M) | 168 | 160 | +5% | 542 | 525 | +3% | | Free Cash Flow (€M) | 78 | 74 | +5% | 112 | 160 | -30% | - Market demand varied by segment: aerospace demand remains strong, automotive demand decelerated but is above prior year levels, packaging demand appears to have stabilized after destocking, and most industrial markets, especially in Europe, remain weak[4] - The company achieved a record third quarter Adjusted EBITDA of €168 million, which included a record performance by the A&T segment[4] - Leverage, measured as Net debt / LTM Adjusted EBITDA, was reduced to 2.5x as of September 30, 2023[4][5] Group Financial Performance Group shipments and revenue declined in Q3 2023, but Value-Added Revenue and Adjusted EBITDA each grew by 5% due to improved price and mix, with A&T offsetting other segments | Group Summary | Q3 2023 | Q3 2022 | Var. | YTD 2023 | YTD 2022 | Var. | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Shipments (k metric tons) | 369 | 387 | (5)% | 1,156 | 1,212 | (5)% | | Revenue (€ millions) | 1,720 | 2,022 | (15)% | 5,626 | 6,276 | (10)% | | VAR (€ millions) | 704 | 673 | 5% | 2,243 | 2,029 | 11% | | Net income (€ millions) | 64 | 131 | n.m. | 118 | 278 | n.m. | | Adjusted EBITDA (€ millions) | 168 | 160 | 5% | 542 | 525 | 3% | | Adjusted EBITDA per metric ton (€) | 453 | 412 | 10% | 469 | 433 | 8% | - The 15% decrease in Q3 revenue was primarily due to lower shipments and lower metal prices, partially offset by improved price and mix[8] - Q3 Adjusted EBITDA increased by 5% to €168 million, reflecting stronger A&T segment results partially offset by weaker P&ARP and AS&I segments[8] Results by Segment Q3 2023 segment performance was mixed, with A&T Adjusted EBITDA surging 76%, while P&ARP and AS&I segments experienced declines due to lower shipments and higher costs Packaging & Automotive Rolled Products (P&ARP) P&ARP segment Adjusted EBITDA decreased by 14% to €67 million in Q3 2023, driven by lower shipments, higher operating costs, and operational challenges | P&ARP | Q3 2023 | Q3 2022 | Var. | YTD 2023 | YTD 2022 | Var. | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Shipments (k tons) | 261 | 267 | (2)% | 792 | 835 | (5)% | | Revenue (€M) | 954 | 1,140 | (16)% | 3,033 | 3,656 | (17)% | | Adjusted EBITDA (€M) | 67 | 78 | (14)% | 201 | 255 | (21)% | - The decrease in Adjusted EBITDA was a result of lower shipments, higher operating costs (inflation), operating challenges at the Muscle Shoals facility, unfavorable metal costs, and unfavorable foreign exchange translation[11] Aerospace & Transportation (A&T) A&T segment Adjusted EBITDA surged 76% to €79 million in Q3 2023, primarily driven by improved price and mix, despite lower shipments and higher operating costs | A&T | Q3 2023 | Q3 2022 | Var. | YTD 2023 | YTD 2022 | Var. | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Shipments (k tons) | 53 | 55 | (3)% | 171 | 170 | 1% | | Revenue (€M) | 404 | 432 | (6)% | 1,320 | 1,278 | 3% | | Adjusted EBITDA (€M) | 79 | 45 | 76% | 248 | 161 | 55% | - The 76% increase in Adjusted EBITDA was primarily driven by improved price and mix, which offset lower shipments and higher operating costs[14] Automotive Structures & Industry (AS&I) AS&I segment Adjusted EBITDA fell 27% to €26 million in Q3 2023, primarily due to a 15% drop in shipments and higher operating costs from inflation | AS&I | Q3 2023 | Q3 2022 | Var. | YTD 2023 | YTD 2022 | Var. | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Shipments (k tons) | 55 | 65 | (15)% | 193 | 207 | (7)% | | Revenue (€M) | 370 | 473 | (22)% | 1,296 | 1,433 | (10)% | | Adjusted EBITDA (€M) | 26 | 35 | (27)% | 108 | 118 | (8)% | - The decrease in Adjusted EBITDA was primarily due to lower shipments and higher operating costs from inflation, partially offset by improved price and mix[16] Financial Position and Cash Flow Q3 2023 net income was €64 million, impacted by a prior-year deferred tax asset recognition, while the company generated strong Free Cash Flow and reduced net debt to €1.75 billion Net Income Q3 2023 net income was €64 million, a decrease from €131 million in Q3 2022, primarily due to a €142 million deferred tax asset recognition in the prior year - Q3 2023 net income was €64 million, compared to €131 million in Q3 2022; year-to-date net income was €118 million in 2023 versus €278 million in 2022[19][20] - The primary reason for the decrease in net income was the recognition of €142 million in previously unrecognized deferred tax assets in the prior year[19][20] Cash Flow Year-to-date Free Cash Flow decreased to €112 million due to higher capital expenditures and interest, despite stable cash from operations at €321 million - Free Cash Flow was €112 million in the first nine months of 2023, a decrease from €160 million in the prior year period, primarily due to increased capital expenditures and higher cash interest[21] - Cash flows from operating activities were stable at €321 million for the first nine months of 2023, compared to €323 million in the prior year[21] - Investing activities included €47 million of net proceeds from the sale of Constellium Extrusion Deutschland GmbH in September 2023[22] Liquidity and Net Debt As of September 30, 2023, total liquidity stood at €746 million, with net debt reduced to €1.75 billion from €1.891 billion at year-end 2022 - Total liquidity was €746 million, comprised of €159 million in cash and €587 million available under committed facilities[24] - Net debt stood at €1,750 million at September 30, 2023, a reduction from €1,891 million at December 31, 2022[25] Outlook Constellium reaffirmed its full-year 2023 guidance, projecting Adjusted EBITDA between €700 million and €720 million and Free Cash Flow exceeding €150 million, while targeting over €800 million Adjusted EBITDA by 2025 - The company expects full-year 2023 Adjusted EBITDA to be in the range of €700 million to €720 million[6][26] - Full-year 2023 Free Cash Flow is expected to be in excess of €150 million[6][26] - Constellium remains confident in its ability to deliver on its long-term target of Adjusted EBITDA over €800 million in 2025[6] - The company expects some impact from the United Auto Workers union strike in the fourth quarter, which is factored into the current guidance[26] Consolidated Financial Statements This section presents the unaudited consolidated financial statements for Q3 and year-to-date September 30, 2023, including the Income Statement, Financial Position, and Cash Flows Consolidated Income Statement Q3 2023 revenue was €1.72 billion and net income €64 million, with year-to-date figures at €5.63 billion revenue and €118 million net income, both down YoY | (in millions of Euros) | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,720 | 2,022 | 5,626 | 6,276 | | Gross profit | 158 | 133 | 532 | 565 | | Income from operations | 118 | 30 | 259 | 274 | | Net income | 64 | 131 | 118 | 278 | | Diluted EPS (€) | 0.43 | 0.88 | 0.77 | 1.86 | Consolidated Statement of Financial Position As of September 30, 2023, total assets were €4.80 billion, total liabilities €3.88 billion, and total equity €911 million, with assets and liabilities decreasing and equity increasing YoY | (in millions of Euros) | At Sep 30, 2023 | At Dec 31, 2022 | | :--- | :--- | :--- | | Total Assets | 4,795 | 4,941 | | Total Liabilities | 3,884 | 4,189 | | Total Equity | 911 | 752 | Consolidated Statement of Cash Flows For the nine months ended September 30, 2023, net cash from operating activities was €321 million, with net cash used in investing and financing activities leading to a €7 million net decrease in cash | (in millions of Euros) | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | | Net cash flows from operating activities | 321 | 323 | | Net cash flows used in investing activities | (161) | (163) | | Net cash flows used in financing activities | (167) | (141) | | Net (decrease) / increase in cash | (7) | 19 | Supplemental Data This section provides detailed breakdowns of Adjusted EBITDA by segment and shipments and revenue by product line, offering granular insights into performance metrics Segment Adjusted EBITDA In Q3 2023, A&T was the largest Adjusted EBITDA contributor at €79 million, followed by P&ARP at €67 million and AS&I at €26 million | (in millions of Euros) | Q3 2023 | Q3 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | P&ARP | 67 | 78 | 201 | 255 | | A&T | 79 | 45 | 248 | 161 | | AS&I | 26 | 35 | 108 | 118 | | Holdings and Corporate | (4) | 2 | (15) | (9) | | Total | 168 | 160 | 542 | 525 | Shipments and Revenue by Product Line Q3 2023 saw Packaging rolled products as the largest category by shipments (187k metric tons) and revenue (€630 million), with automotive rolled products shipments increasing YoY | Shipments (k metric tons) | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Packaging rolled products | 187 | 196 | | Automotive rolled products | 68 | 64 | | Aerospace rolled products | 23 | 19 | | Automotive extruded products | 27 | 29 | | Total shipments | 369 | 387 | | Revenue (in millions of Euros) | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Packaging rolled products | 630 | 792 | | Automotive rolled products | 286 | 308 | | Aerospace rolled products | 234 | 184 | | Automotive extruded products | 213 | 248 | | Total revenue | 1,720 | 2,022 | Non-GAAP Financial Measures This section reconciles and defines key non-GAAP measures like VAR, Adjusted EBITDA, Free Cash Flow, and Net Debt, used to clarify core operating performance by excluding non-operational items Reconciliation of Non-GAAP Measures This section details the reconciliation of IFRS figures to non-GAAP metrics, including Revenue to VAR, Net Income to Adjusted EBITDA, and cash flows to Free Cash Flow and Net Debt - Q3 2023 VAR of €704 million is reconciled from Revenue of €1,720 million by adjusting for hedged metal costs, incidental revenue, and metal price lag[39] - Q3 2023 Adjusted EBITDA of €168 million is reconciled from Net Income of €64 million by adding back taxes, finance costs, D&A, and other adjustments like metal price lag and unrealized derivative gains/losses[40] - Q3 2023 Free Cash Flow of €78 million is calculated by subtracting purchases of property, plant, and equipment (€76 million) from net cash from operating activities (€154 million)[42] Definitions of Non-GAAP Measures This section defines key non-GAAP measures: Value-Added Revenue (VAR) excludes metal costs, Adjusted EBITDA measures core profitability, Free Cash Flow indicates cash generation after capex, and Net Debt assesses indebtedness - Value-Added Revenue (VAR): Defined as revenue excluding incidental activities, minus the cost of metal, to eliminate the impact of metal price fluctuations not under the company's control[45] - Adjusted EBITDA: Defined as income before taxes, finance costs, D&A, adjusted for items like restructuring costs, unrealized derivative gains/losses, metal price lag, and share-based compensation, serving as a primary measure of profitability[46][48] - Free Cash Flow: Defined as net cash flow from operating activities less capital expenditures, considered a useful measure of net cash generated by the business[51] - Net debt: Defined as borrowings plus/minus fair value of certain derivatives, less cash and cash equivalents, used to measure the company's indebtedness[52]