Constellium(CSTM)2024-10-23 19:55Financial Data and Key Metrics - Shipments were 352,000 tons, down 5% YoY, primarily due to lower shipments in A&T and AS&I segments [5] - Revenue decreased 5% YoY to EUR 1.6 billion, driven by lower shipments, partially offset by higher metal prices [5] - Net income was EUR 3 million, compared to EUR 64 million in Q3 2023, which included a EUR 36 million gain from the sale of the CED business [6] - Adjusted EBITDA was EUR 110 million, including a negative impact of EUR 17 million from the Valais flood and EUR 3 million from metal price lag [6] - Excluding the flood and metal price lag impacts, adjusted EBITDA was EUR 130 million, down from EUR 168 million in Q3 2023 [6] - Free cash flow was negative EUR 10 million, including a EUR 6 million negative impact from the Valais flood [8] - Leverage at the end of Q3 was 2.8x, slightly above the target range of 1.5x to 2.5x [14] Segment Performance PARP Segment - Adjusted EBITDA of EUR 61 million, down 9% YoY [9] - Packaging shipments increased 3% YoY, while automotive shipments decreased 6% due to weakening demand in North America and Europe [9] - Costs were a headwind of EUR 6 million due to unfavorable metal costs [9] A&T Segment - Adjusted EBITDA of EUR 47 million, down 41% YoY [10] - Volume was a EUR 10 million headwind due to lower TID shipments, impacted by the Valais flood [10] - Price and mix were a EUR 12 million headwind due to softer pricing in TID and weaker aerospace mix [10] AS&I Segment - Adjusted EBITDA of EUR 10 million, down 61% YoY [11] - Volume was a EUR 2 million headwind due to lower shipments in automotive and industrial extruded products [11] - Price and mix were a EUR 8 million headwind, primarily due to softer pricing in industrial markets [11] Market Performance - Packaging demand remained healthy, with promotional activity up YoY but below historical levels [18] - Aerospace demand slowed due to supply chain challenges, with demand shifting to the right [7][16] - Automotive demand softened in North America and weakened further in Europe, particularly in luxury and electric vehicle segments [7][17] - Industrial markets in North America and Europe saw sharp declines, with trailer builds down 25%-30% YoY [32][33] Strategic Direction and Industry Competition - The company is accelerating its Vision '25 Cost Improvement Program, targeting over EUR 25 million in cost savings for 2025 [12][30] - New investments in recycling and casting centers are expected to contribute EUR 35-40 million to EBITDA in 2025 [27] - The company remains confident in the long-term fundamentals of its markets, particularly in aerospace, automotive, and packaging [16][17][18] Management Commentary on Operating Environment and Future Outlook - The company expects adjusted EBITDA for 2024 to be in the range of EUR 580-600 million, excluding the impact of the Valais flood and metal price lag [24] - Market conditions deteriorated rapidly in Q3, with no signs of recovery in the near term [24][25] - The company is cautious heading into 2025, with adjusted EBITDA targets delayed pending market recovery [25] Other Important Information - The Valais flood had a significant impact on Q3 results, with an estimated full-year impact of EUR 30-40 million on adjusted EBITDA and EUR 60-70 million on free cash flow [21] - Operations in Valais are expected to fully resume by the end of November 2024, with production ramp-up completed by Q1 2025 [20][21] - The company repurchased 1.2 million shares for US 60 million [8][13] Q&A Session Summary Question: What are the non-market-related EBITDA drivers? - The Neuf-Brisach recycling center is expected to contribute EUR 35-40 million to EBITDA in 2025 [27] - Vision '25 cost savings are expected to exceed EUR 25 million in 2025 [27] - Aerospace contract re-pricing is expected to contribute between EUR 15-25 million [27] Question: What are the signs of recovery in key markets? - No signs of recovery in automotive and industrial markets, with further declines observed [38] - Aerospace demand is expected to recover as supply chain challenges are resolved, but timing remains uncertain [39][40] Question: What is the impact of the Valais flood on 2025? - The flood impact is expected to be split two-thirds to AS&I and one-third to A&T [53] - Some cash flow impact may extend into 2025, but insurance proceeds will offset these costs [54] Question: What is the free cash flow outlook for 2024? - The company is not providing specific free cash flow guidance due to uncertain market conditions and timing of working capital benefits [55]