THIRD QUARTER 2023
EARNINGS CONFERENCE CALL
October 26, 2023
FORWARD LOOKING STATEMENTS
The information contained in this presentation includes statements based on management's current expectations, estimates and projections that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the company's anticipated financial and operating performance, relate to future events and expectations and involve known and unknown risks and uncertainties, including but not limited to (i) effectiveness of management's strategies and decisions, including strategic investments, countermeasures to address operational and supply chain challenges and the execution of those strategies, (ii) the successful integration of the acquired operations and technologies, and (iii) the impact of extraordinary external events, such as the COVID-19 pandemic and supply chain disruptions, and their collateral consequences. The company cautions that such forward-looking statements are not guarantees of future
performance or events and involve significant risks and uncertainties and actual events may vary materially from those
expressed or implied in the forward-looking statements as a result of various factors. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the company's reports filed with the Securities and Exchange Commission, including the company's most recent Forms 10-Q and 10-K. All information in this presentation is as of the date of the presentation. 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 except as may be required by law.
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NON-RUN-RATE ITEMS
Non-run-rate items to us are items that, while they may recur from period to period, (1) are particularly material to results, (2) impact costs as a result of external market factors and (3) may not recur in future periods if the same level of underlying performance were to occur. These are part of our business and operating environment but are worthy of being highlighted for the benefit of the users of our financial statements.
Further, presentations including such terms as net income, operating income, or earnings before interest, tax, depreciation and amortization ("EBITDA") "before non-run-rate", "after adjustments" or "adjusted", are not intended to be (and should not be relied on) in lieu of the comparable caption under generally accepted accounting principles ("GAAP") to which it is reconciled. Such presentations are solely intended to provide greater clarity of the impact of certain material items on the GAAP measure and are not intended to imply such items should be excluded.
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NON-GAAP FINANCIAL MEASURES
This information contains certain non-GAAP financial measures. A "non-GAAP financial measure" is defined as a numerical measure of a company's financial performance that excludes or includes amounts so as to be different than the most directly comparable measure calculated and presented in accordance with GAAP in the statements of income, balance sheets or statements of cash flow of the company. Pursuant to the requirements of Regulation G, the Company has provided a
reconciliation of non-GAAP financial measures to the most directly comparable financial measure in the accompanying tables.
The non-GAAP financial measures used within this presentation are conversion revenue, EBITDA, Adjusted EBITDA, operating income excluding non-run-rate items, adjusted net income and earnings per diluted share, excluding non-run-rate items and ratios related thereto. These measures are presented because management uses this information to monitor and evaluate financial results and trends and believes this information to also be useful for investors. Reconciliations of certain forward looking non-GAAP financial measures to comparable GAAP measures are not provided because certain items required for such
reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable effort.
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COMMONLY USED OR DEFINED TERMS AND MEASURES
Term/Measure | Description |
Adjusted EPS | Reported net income per diluted share (calculated using the treasury stock method) excluding non-run-rate items. |
Adjusted Net Income | Reported net income excluding non-run-rate items. |
Annualized Quarterly Average | Calculated as the four-quarter average for prior years and YTD average for current year. |
Conversion Revenue | Net sales less the Hedged Cost of Alloyed Metal. |
Conversion Revenue ($/lb.) | Calculated as Conversion Revenue divided by total shipment pounds. |
EBITDA or Adjusted EBITDA | Consolidated Operating Income before non-run-rate plus Depreciation and Amortization. |
EBITDA Margin or Adjusted EBITDA Margin | EBITDA or Adjusted EBITDA as a percentage of Conversion Revenue. |
EPS | Reported net income per diluted share (calculated using the treasury stock method). |
Hedged Cost of Alloyed Metal | Calculated as the Midwest transaction price of aluminum plus the price of alloying elements plus any realized gains and/or losses on settled hedges related to metal sold in the |
referenced period. | |
LTM | Last twelve months ended September 30, 2023. |
Net Leverage | Calculated as Long-term debt less Cash and cash equivalents, divided by the LTM Adjusted EBITDA. |
Non-Operating NRR Items | Represents the non-service-cost component of the net periodic benefit cost relating to the Salaried VEBA and Debt refinancing charges. These items are excluded from reported |
Operating income (loss) as they do not contribute to our on-going operational results. | |
NRR | Represents non-run-rate items relating to on-going operations. NRR items are presented on a pre-tax basis. |
Other Applications | Includes custom industrial products and billet. |
Additional Notes
Totals in the attached presentation may not sum due to rounding.
Warrick operations were acquired on March 31, 2021. As a result, our financial information reflects 9 months of Packaging operational results for 2021.
Annual Conversion Revenue for 2020 inclusive of ~$15 million related to modifications to 2020 customer declarations.
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THIRD QUARTER 2023 HIGHLIGHTS
KEITH A. HARVEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
THIRD QUARTER 2023 HIGHLIGHTS
RESULTS EXCEED OUTLOOK DRIVEN BY STRONG AEROSPACE DEMAND AND CONTINUED SOLID OPERATIONAL EXECUTION
- Commercial aerospace demand remained strong; on-track to meet or exceed prior peak levels achieved in 2019 by the end of this year
- Packaging beverage container and coated food can destocking persisted, leading to weaker product mix
- General engineering plate destocking continued along with increased imports; rod & bar destocking abating
- Automotive demand moderated due to supply chain issues and UAW strike
CHALLENGING OPERATING ENVIRONMENT PERSISTED
- 3Q Tailwinds: Ongoing cost reduction efforts and efficiency improvements across the platform; strengthening aerospace demand
- 3Q Headwinds: Continued destocking in packaging and general engineering; inflationary costs and lingering impact of high cost metal units
RESULTS ABOVE EXPECTATIONS IN MIXED DEMAND ENVIRONMENT
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END MARKET DEMAND TRENDS
ANNUALIZED QUARTERLY AVERAGE
Millions of Pounds
80
70
60
50
40
30
20
10
0
AEROSPACE
140
120
100
80 | Millions |
60 | $ |
40 | |
20 | |
0 |
2018 | 2019 | 2020 | 2021 | 2022 | 2023 YTD |
Shipments | Conversion Revenue | ||||
Millions of Pounds
PACKAGING | |||||||
200 | 150 | ||||||
190 | 145 | ||||||
180 | 140 | ||||||
170 | 135 | ||||||
160 | 130 | ||||||
150 | 125 | ||||||
140 | 120 | ||||||
130 | 115 | ||||||
120 | 110 | ||||||
110 | 105 | ||||||
100 | 100 | ||||||
2021 | 2022 | 2023 YTD | |||||
Shipments | Conversion Revenue | ||||||
$ Millions
STRONG MOMENTUM CONTINUED
WEAKER MIX; DESTOCKING IN FOOD
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END MARKET DEMAND TRENDS
ANNUALIZED QUARTERLY AVERAGE
GENERAL ENGINEERING
AUTOMOTIVE EXTRUSIONS |
Millions of Pounds
100
90
80
70
60
50
40
30
20
10
0
2018
100
90
80
70
60
50 Millions $
40
30
20
10
0
2019 | 2020 | 2021 | 2022 2023 YTD |
Shipments | Conversion Revenue | ||
40 | 40 | ||||||||||
35 | 35 | ||||||||||
Millions of Pounds | 30 | 30 | |||||||||
25 | 25 | $ Millions | |||||||||
20 | 20 | ||||||||||
15 | 15 | ||||||||||
10 | 10 | ||||||||||
5 | 5 | ||||||||||
0 | 0 | ||||||||||
2018 | 2019 | 2020 | 2021 | 2022 | 2023 YTD | ||||||
Shipments | Conversion Revenue | ||||||||||
RESILIENT PRICING DESPITE DESTOCKING
MIXED PERFORMANCE WITH CONTINUED
SUPPLY CHAIN ISSUES
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WARRICK PRIORITY LIST
REFINED STRATEGY TO ENHANCE LONGER-TERM GROWTH PROSPECTS
NEAR-TERM
EMBEDDED SEVERAL SEASONED KAISER LEADERSHIP MEMBERS AT WARRICK
RE-NEGOTIATING CONTRACTS WITH KEY CUSTOMERS TO HELP MITIGATE INFLATIONARY COSTS
DIVERSIFIED SUPPLY BASE TO ELIMINATE RELIANCE ON SINGLE SUPPLIER OR REGION
NORMALIZING INVENTORY POST FORCE MAJEURE
LONGER-TERM
CONTRACT RE-NEGOTIATIONS WITH KEY CUSTOMERS
ROLL COAT 4 INVESTMENT STRATEGY TO DRIVE GROWTH - MID-TO-LATE 2024
PHYSICAL SEPARATION FROM ALCOA SMELTER/POWER PLANT - EARLY 2024
UTILIZE MORE RECYCLED MATERIAL TO ENHANCE PROFITABILITY AND SUSTAINABILITY GOALS
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Kaiser Aluminum Corporation published this content on 25 October 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2023 21:04:38 UTC.