Constellium(US:CSTM)2020-10-27 19:31Financial Data and Key Metrics Changes - Shipments were 354,000 metric tons, a decrease of 11% compared to Q3 2019 [10] - Revenue decreased 20% to €1.2 billion, with approximately two-thirds of the decline related to lower shipments and one-third to lower metal prices [10] - Net income was €20 million compared to €1 million in Q3 2019 [11] - Adjusted EBITDA of €126 million decreased 9% year-over-year [11] - Free cash flow was €75 million in Q3 2020, bringing the total for the first nine months to €129 million [12][26] - Leverage was 4.3 times at the end of Q3 [12][25] Business Line Data and Key Metrics Changes - P&ARP adjusted EBITDA of €85 million increased by 20% compared to last year [13] - A&T adjusted EBITDA of €10 million decreased by 77% compared to Q3 2019 [13] - AS&I adjusted EBITDA of €33 million increased by €7 million compared to last year [13] - P&ARP segment saw packaging shipments fall by 9% due to COVID-19 impacts [15] - A&T segment experienced a 48% decline in aerospace shipments [18] - AS&I segment's automotive shipments increased 7% compared to last year [20] Market Data and Key Metrics Changes - Packaging represents 39% of LTM revenue, with shipments running at 95% or more of last year's levels [29] - Automotive market remains a secular growth market for aluminum, with OEMs running at or near last year's levels [31] - Aerospace represented 14% of LTM revenues, with operations at approximately 50% of last year's level [32] Company Strategy and Development Direction - The company is focused on cost reduction and operational execution, with a goal of €75 million in savings from the Horizon 2022 initiative [23] - The company aims to maintain a balanced portfolio across end markets and geographies to leverage growth opportunities [28] - The company is committed to deleveraging and maintaining capital discipline, with a reduced CapEx target of approximately €175 million for 2020 [25][26] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in automotive demand and stable to positive trends in the automotive market [37] - The aerospace sector remains uncertain, with expectations of continued destocking through early 2021 [46] - Management highlighted the importance of maintaining strategic relationships with customers during challenging times [60] Other Important Information - The company has no bond maturities until 2024 and liquidity was over €1 billion at the end of Q3 [27] - The company is experiencing a significant improvement in cost control, with a cost flex of 96% in Q3 [21][22] Q&A Session Summary Question: Utilization rates in aerospace - Management indicated that it is difficult to predict future utilization rates in aerospace, expecting to remain around 50% for the next six to nine months [36] Question: Momentum in the auto market - Management noted stable to positive momentum in the auto market, with uncertainty around shutdowns at the end of the year [37] Question: Packaging contract renewals - Management confirmed that most contracts are due for renewal in 2021 and 2022, expressing optimism about the renewals [38] Question: Future growth in packaging - Management discussed plans to improve throughput and capture additional demand in the packaging market [42] Question: Aerospace contracts and destocking - Management explained that contracts are requirement-based and they are working with customers to avoid forcing them to take volumes they do not need [59] Question: Cost reduction opportunities - Management stated that there are still opportunities for cost reductions and emphasized the importance of running operations efficiently [66] Question: Opportunities from a greener agenda - Management acknowledged potential opportunities from changes in policy but emphasized the balanced portfolio allows for adaptability [69]