Kaiser Aluminum Corporation Q2 FY2025 earnings call

Key Points

• Second quarter results exceeded expectations, leading to an increase in full year EBITDA outlook. Margin above 19% in H1 2025, ~180 basis points stronger than prior year.
• Progress on Trentwood and Warrick rolling mills: Trentwood Phase VII on schedule, Warrick coating line in material qualifications phase. Finalized a key packaging contract.
• Neal discussed shipments and conversion revenue by end market, revised free cash flow to $50M-$70M for full year 2025, declared a quarterly dividend.

Conversion revenue for the second quarter was $374 million, a 1% increase from the prior year. Aerospace and high-strength conversion revenue was $127 million, down 5% y-o-y due to a 4% decline in shipments (impacted by commercial aircraft OEM destocking, but other aerospace applications strong). Packaging conversion revenue was $130 million, up 9% y-o-y on improved product mix, but shipments down 3% y-o-y due to roll coat line ramp. General engineering conversion revenue was $86 million, up 3% y-o-y with a 5% increase in shipments. Automotive conversion revenue was $32 million, down 4% y-o-y due to tariff-related customer uncertainties, but partially offset by improved pricing and mix.

Outlook

• Total conversion revenue guidance 2025 unchanged at 5%-10% y-o-y improvement. Full year EBITDA outlook raised to 10%-15% y-o-y.
• Aerospace: Outlook unchanged, projected 5%-7% y-o-y decline due to commercial jet inventory destocking.
• Packaging: Conversion revenue expected up 15%-20% y-o-y, shipments down 3%-5% y-o-y due to coating line commissioning delay.
• General engineering: Expected 5%-10% y-o-y growth in shipments and conversion revenue.
• Automotive: Outlook steady, half shipments and conversion revenue expected to hold steady.

• Tariff-related uncertainty impacting automotive segment demand. - Working capital requirements above expectations due to metal pricing. - Delays in Warrick coating line commissioning affecting packaging shipments and revenue.

Q: What's driving the delay in packaging commissioning and what gives confidence in the current target?

A: Start-up issues with complex equipment and multiple coating qualifications; demand is strong and expected to improve in H2 2025.

Q: Where is aerospace inventory currently held and when will destocking end?

A: Currently at OEMs; expected to dissipate by end of 2025 as OEMs continue ramping production.

Q: What's embedded in start-up costs related to Warrick and will they repeat?

A: Costs from Warrick roll coat 4 line start-up; not expected to reoccur for the balance of the year; not added back to adjusted EBITDA.