FOOTHILL RANCH - Kaiser Aluminum Corporation (NASDAQ: KALU), a leading producer of semi-fabricated specialty aluminum products, serving customers worldwide with highly-engineered solutions for aerospace and high-strength, packaging, general engineering, custom automotive and other industrial applications, today announced third quarter and nine months 2021 results.

Third Quarter 2021 Management Summary

'Results for the third quarter 2021 reflected both strong end market demand and the impact of supply chain disruptions, labor constraints and inflationary cost pressures,' said Keith A. Harvey, President and Chief Executive Officer. 'The integration of the Warrick packaging operation is proceeding as planned and continues to demonstrate strong strategic growth opportunities as demand for our applications continues to increase. Demand for our general engineering end market applications remains robust due to restocking in the service center supply chain, reshoring and strength of our KaiserSelect products. Recovery in demand for our commercial aerospace applications is progressing as anticipated and demand for our defense related applications remains strong. However, the ongoing shortage of semiconductor chips has significantly impacted North American light vehicle production, further delaying the anticipated recovery of our automotive business.

'Although we had noted some inflationary costs pressures from rising freight, labor and material costs in the second quarter, during the third quarter conditions became increasingly challenging. In particular, continued constraints on labor availability, rapidly rising material and inflationary costs and supply chain challenges reduced the efficiency in our facilities and shipments resulting in an approximately $13 million impact to adjusted EBITDA. These costs partially offset by approximately $5 million of lower corporate overhead, incentive, and other costs led to further compression on adjusted EBITDA margin of approximately 200 basis points compared to the second quarter 2021.

'Our operations and commercial teams have been working on mitigating the impact of these factors, and we are aggressively passing through additional costs in our transactional business through price increases and to our contract customers through provisions included in our supply agreements. Where our agreements provide a pathway to address certain higher costs through price increases, there is often a lag affect that can impact the timing of when these price increases become effective. With respect to labor, we have significantly improved our headcount, enabling an increase in output and efficiencies in our operations by late in the third quarter. We continue to work with our vendors and customers to minimize disruptions in our supply channels to stabilize costs and ensure supply,' stated Mr. Harvey.

Outlook

'Value added revenue for the fourth quarter 2021 is anticipated to be up low single digits from the third quarter with adjusted EBITDA margin to remain similar to the third quarter. While our end market demand remains positive, we anticipate cost issues and supply chain disruptions will continue during the quarter. In addition, the most recent industry wide disruptions in the magnesium and silicon markets and resulting supply demand imbalances are continuing to evolve and remain uncertain at this time. Although our outlook contemplates the anticipated impact to our costs and operations, the situation is fluid and could further impact our fourth quarter results,' said Mr. Harvey.

'Longer-term, our strategy remains unchanged, and we are well positioned for continued long-term growth with a diversified portfolio and strong secular growth trends in each of our served end markets. Notwithstanding near-term challenges, the fundamentals of our aerospace, automotive and general engineering end markets are solid and we are increasingly optimistic in our ability to deliver significant margin expansion and long-term profitability for our packaging business where we have a significant market position. We remain confident around the timing of the recovery in commercial aerospace and we are optimistic that as semiconductor chip shortages are alleviated, automotive production will ramp back up and our program launches will resume.

'Our capital investment plans remain focused on supporting demand growth. As noted during our second quarter earnings call, the $150 million investment in a new roll coat line at our Warrick packaging facility is proceeding as planned, which by early 2024 will provide additional capacity to support further growth in our higher margin coated products. We will continue to deploy our capital thoughtfully to ensure that our investment decisions are well-aligned with our demand expectations in order to maximize the earnings potential of our business. It's a strategy that has allowed us to create value and maintain our financial strength and flexibility over time, and we will continue to manage our business with a long-term focus,' concluded Mr. Harvey.

Third Quarter 2021

Net sales for the third quarter 2021 increased to $751 million compared to $256 million in the prior year period, reflecting a 189% increase in shipments and a 1% increase in average selling price per pound. The increase in average selling price reflected an approximately 32% decrease in value added revenue per pound and a 52% increase in underlying contained metal costs.

Value added revenue for the third quarter 2021 increased 98% to $305 million from $154 million in the prior year period reflecting $126 million of value added revenue from the Company's recently acquired packaging business. Value added revenue for the Company's aerospace/high strength applications increased 11% to $82 million on a 54% increase in shipments compared to the prior year period, which included approximately $15 million of additional revenue recognized in the third quarter related to modifications to the 2020 customer declarations under multi-year contracts. The increase in shipments reflects continued strength in demand for defense applications, increasing demand for business jet and improving demand for commercial aerospace as airline travel recovers. Value added revenue for automotive extrusions decreased 13% to $21 million on a 21% decrease in shipments driven by the shortage of semiconductor chips that has impacted North American production levels. Value added revenue for general engineering applications increased approximately 36% to $75 million on a 39% increase in shipments reflecting continued strength in underlying demand and restocking in the service center supply chain.

Adjusted EBITDA of $50 million in the third quarter 2021 increased $19 million compared to the prior year period which included the $15 million as previously noted. Adjusted EBITDA in the third quarter 2021 reflected the addition of the Company's packaging business and improvement in aerospace/high strength and general engineering applications, partially offset by higher costs as previously noted. Adjusted EBITDA as a percentage of value added revenue was 16.5% in the third quarter 2021 as compared to 20.4% in the prior year period.

Reported operating income for the third quarter 2021 was approximately $20 million. Adjusting for approximately $6 million of non-run-rate charges, including $4 million of Warrick related integration costs, operating income for the third quarter 2021 was approximately $26 million, compared to $19 million in the prior year quarter. In addition, adjusted operating income in the third quarter 2021 reflected approximately $10 million of depreciation expense and $2 million of amortization expense resulting from purchase accounting adjustments related to the Warrick packaging operation.

Reported net loss for the third quarter 2021 was $2 million, or $0.14 loss per diluted share, compared to a net income and income per diluted share of $0.4 million and $0.02, respectively, for the prior year period. Excluding the impact of non-run-rate items, adjusted net income was $9 million or $0.57 per diluted share for the third quarter 2021, compared to adjusted net income of $6 million or $0.39 per diluted share for the third quarter 2020.

Forward-Looking Statements

This press release contains statements which constitute 'forward-looking statements' within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management based on information available to it at the time such statements are made. Kaiser Aluminum cautions that any forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may vary materially from those in the forward-looking statements as a result of various factors. These factors include: (a) the effectiveness of management's strategies and decisions, including strategic investments, capital spending strategies and the execution of those strategies; (b) general economic and business conditions, including the impact of the global outbreak of Coronavirus Disease 2019 and governmental and other actions taken in response, cyclicality, reshoring, supply interruptions, including the most recent disruptions resulting from the supply demand imbalances in the magnesium and silicon markets, and other conditions that impact demand drivers in the aerospace/high strength, automotive, general engineering, packaging and other end markets the Company serves; (c) the Company's ability to participate in mature and anticipated new automotive programs expected to launch in the future and successfully launch new automotive programs; (d) changes or shifts in defense spending due to competing national priorities; (e) pricing, market conditions and the Company's ability to effectively execute its commercial and labor strategies, pass through cost increases and flex costs in response to changing economic conditions; (f) developments in technology; (g) the impact of the Company's future earnings, cash flows, financial condition, capital requirements and other factors on its financial strength and flexibility; (h) new or modified statutory or regulatory requirements; (i) the successful integration of the acquired operations and technologies continue to drive innovative solutions and further advance its capabilities, (j) the completion of purchase price allocation and other adjustments in connection with the Warrick acquisition, and (k) other risk factors summarized in the Company's reports filed with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2020 and Form 10-Qs for the quarters ended March 31, 2021, June 30, 2021 and September 30, 2021. The Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

Contact:

Melinda C. Ellsworth

Tel: (949) 614-1757

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