Kaiser Aluminum(US:KALU)2021-10-21 23:15Financial Data and Key Metrics Changes - Value-added revenue for Q3 2021 was $305 million, an increase of $151 million or 98% compared to the prior year period, reflecting $126 million from the packaging business acquisition [31] - Adjusted EBITDA for Q3 2021 increased by $19 million compared to the prior year quarter, but EBITDA margins declined to 16.5% from 20.4% in the prior year due to higher unit costs and inefficiencies [36][37] - Reported net loss for Q3 2021 was approximately $2 million compared to net income of $400,000 in the prior year quarter, while adjusted net income was approximately $9 million compared to $6 million in the prior year [44] Business Line Data and Key Metrics Changes - Aerospace and high-strength shipments in the first half of 2021 were up 31% from the second half of 2020, but value-added revenue for aerospace is now expected to be down approximately 10% to 15% year-over-year [16][17] - Automotive value-added revenue is now projected to increase by 15% to 20% year-over-year, a decrease from the earlier forecast of 35% to 45% growth due to semiconductor chip shortages [22] - General engineering demand is strong, with value-added revenue expected to increase by more than 25% year-over-year, driven by heavy restocking and strong demand for KaiserSelect products [23] Market Data and Key Metrics Changes - The IHS industry forecast for North America vehicle builds has declined from 16.3 million vehicles to 13 million for the year due to the chip shortage [20] - Demand for packaging products is expected to grow at a faster pace of 5% to 7% through 2025, up from a previous outlook of 3% to 5% [61] Company Strategy and Development Direction - The company remains optimistic about long-term growth potential in aerospace, packaging, automotive, and general engineering sectors, with a focus on expanding capacity and improving margins [49][63] - The company plans to proceed with a $150 million investment in a new roll coat line to shift towards higher-margin coated products [63] Management's Comments on Operating Environment and Future Outlook - Management acknowledged challenges in labor markets, inflationary costs, and supply chain disruptions impacting operations, with expectations for these issues to persist through the end of the year [12][30] - The company anticipates a return to record 2019 demand levels for its products in the 2023 to 2024 timeframe, with military aerospace demand providing a solid foundation [52][54] Other Important Information - The company has lowered its planned capital spending for the full year of 2021 to approximately $70 million to $80 million due to supply chain challenges [47] - Cash as of September 30 was approximately $296 million, with total liquidity of approximately $663 million [47] Q&A Session Summary Question: Supply chain issues related to silicon and magnesium shortages - Management clarified that supply chain disruptions were primarily related to metal supply and power outages, not specifically magnesium or silicon shortages [69] Question: Details on aerospace declarations for 2022 - Management indicated that they have received clearer declarations for 2022, which are expected to significantly exceed 2021 levels [85] Question: Domestic magnesium supplier repair timeline - Management is currently assessing the situation with the domestic magnesium supplier and feels covered for Q4, but will monitor the situation closely for 2022 [89]