Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Constellium SE (CSTM, Financial) reported a lower recordable case rate, indicating improved safety performance.
- The company successfully started up its new recycling and casting center in Neuf-Brisach ahead of schedule and below budget.
- Constellium SE (CSTM) continued its share buyback program, repurchasing 1.2 million shares for USD 21 million in the quarter.
- The company maintained strong liquidity with EUR778 million at the end of the third quarter.
- Constellium SE (CSTM) successfully refinanced its senior notes and extended the maturity of its Pan-U.S. ABL, enhancing financial flexibility.
Negative Points
- Shipments decreased by 5% compared to the third quarter of 2023, impacting revenue.
- Net income dropped significantly to EUR3 million from EUR64 million in the same quarter last year.
- The flood in Valais had a substantial negative impact on financial results, affecting adjusted EBITDA and free cash flow.
- Demand weakened across several end markets, including automotive and industrial sectors, leading to a challenging quarter.
- The company's leverage increased to 2.8x, slightly above its target range, due to market conditions and financial impacts.
Q & A Highlights
Q: Can you remind us how much the non-market related EBITDA drivers could add to EBITDA when combined?
A: Jean-Marc Germain, CEO: The recycling center in Neuf-Brisach is expected to add EUR35 million to EUR40 million next year. Vision '25 should contribute over EUR25 million in savings. Repricing of aerospace contracts will also add to EBITDA, though the exact number isn't specified. Improvements at Muscle Shoals are expected to provide further EBITDA lift, despite tighter scrap spreads. Overall, these drivers should add over EUR100 million to EBITDA.
Q: Does the Vision '25 cost reduction of EUR25 million include any incremental cost reductions?
A: Jack Guo, CFO: The EUR25 million is incremental to the prior Vision '25 target. We are accelerating efforts beyond the initial EUR50 million savings target over three years, focusing on labor cost reductions and cutting nonessential categories.
Q: Can you walk us through the market drivers and quantify the impacts that are worse than expected?
A: Jean-Marc Germain, CEO: Industrial markets in North America saw a sharp decline, particularly in TID products. Automotive demand is down 5%, especially in electric and luxury segments. Aerospace demand is lower due to supply chain issues. Scrap spreads in North America are tighter, contributing to an EUR80 million to EUR100 million negative EBITDA impact compared to last year.
Q: Are there any signs of recovery in the market, particularly in aerospace?
A: Jean-Marc Germain, CEO: No signs of recovery yet in automotive and industrial markets. Aerospace demand is temporarily affected by supply chain issues, but the long-term need for aircraft remains. The current mix shift in aerospace is causing margin compression, but margins are still attractive historically.
Q: How does the flooding impact split between AS&I and A&T segments, and what is the expected impact on free cash flow?
A: Jack Guo, CFO: The flood impact is roughly 2/3 on AS&I and 1/3 on A&T. The free cash flow impact is offset by insurance proceeds, with EUR20 million expected next year. We are not providing specific free cash flow guidance for 2024 due to timing uncertainties in working capital release.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
