Constellium(US:CSTM)2021-10-27 19:12Financial Data and Key Metrics Changes - Shipments increased by 12% to 395,000 tons compared to Q3 2020 [10] - Revenue rose by 35% to €1.6 billion, driven by higher metal prices and increased shipments [10] - Net income was €19 million, slightly down from €20 million in Q3 2020 [11] - Adjusted EBITDA reached a record €143 million, up 14% from Q3 2020 and 3% above Q3 2019 [11][12] - Updated adjusted EBITDA guidance for 2021 is now between €550 million and €560 million [13] - Free cash flow for Q3 was €40 million, totaling €121 million for the first nine months of 2021 [13][25] - Leverage decreased to 3.6x, a multiyear low, with a commitment to reduce it to 2.5x [14][26] Business Line Data and Key Metrics Changes - PARP Segment: Adjusted EBITDA of €94 million, a 10% increase from Q3 2020; packaging shipments increased by 12% while automotive shipments decreased by 8% [15][17] - A&T Segment: Adjusted EBITDA of €20 million, a 91% increase from Q3 2020; TID shipments rose by 86% while aerospace shipments fell by 13% [15][19] - AS&I Segment: Adjusted EBITDA of €32 million, down €1 million from Q3 2020; industry shipments increased by 24% while automotive shipments decreased by 16% [15][20] Market Data and Key Metrics Changes - Strong demand in packaging and industrial markets, with expectations of mid-single digit growth in the medium term [28] - Automotive demand is hindered by semiconductor shortages, affecting production [30] - Aerospace demand remains low, but optimism is increasing for future growth [31] Company Strategy and Development Direction - Focus on expanding can sheet capacity to meet growing market demand through debottlenecking and investments [29] - Commitment to sustainability and recycling, with plans to increase recycling capacity by 130,000 tons [35][36] - Emphasis on managing inflationary pressures through cost control and pricing strategies [21][33] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating inflationary pressures and expects to offset costs through pricing strategies [23][33] - Anticipation of increased demand in aerospace and automotive sectors as supply chain issues resolve [31][75] - Continued focus on operational performance, cost control, and shareholder value creation [44] Other Important Information - The company has no bond maturities until 2026 and is actively reducing gross debt [26][27] - Strong liquidity position of €900 million as of the end of Q3 [27] - Sustainability efforts recognized with improved ESG risk rating [42] Q&A Session Summary Question: Recycling material usage and its applicability across end markets - Company uses about 600,000 tons of scrap, with potential for expansion; scrap can be used in various applications, but aerospace has tighter tolerances [46][48] Question: Magnesium cost inflation and pass-through ability - Company is in a good position for Q4 and Q1; ability to pass through costs varies by contract type, but overall confidence in offsetting costs exists [49][50] Question: Scrap market competitiveness and expansion - Recycling aluminum is a hedge against inflation; company aims to cut out middlemen to secure scrap directly [52][53] Question: Magnesium sourcing and mitigation efforts - Magnesium is sourced from China and other suppliers; mitigation strategies include diversifying suppliers and using secondary magnesium [60][61] Question: 2022 inflationary cost pressures - It is premature to frame 2022 cost pressures; management is focused on current year performance [65][66] Question: Can sheet pricing and capacity growth - All renegotiated contracts for can sheet are at higher prices; future growth will depend on visibility and solid contracts [68][70]