Constellium SE, the aluminum products company that is headquartered in Paris, has reported results for its first quarter, ended March 31, indicating that its shipments declined by 5 percent to 393,000 metric tons compared with the first quarter of 2019 and revenue declined 6 percent to 1.4 billion euros. The company reports a net loss of 31 million euros for the first quarter of this year compared with net income of 24 million euros Q1 2019. Its adjusted earnings before interest, taxes, depreciation and amortization was 147 million euros for the recently completed quarter, a 9 percent increase compared with Q1 2019.
Jean-Marc Germain, the company’s chief executive officer, says, “The COVID-19 pandemic has introduced a new set of challenges for Constellium, but we remain confident in our ability to navigate through the crisis. Our first priority is the health and safety of our employees and their families. To this end, we have implemented a number of initiatives at our manufacturing sites to protect our employees. We also remain highly focused on meeting the demand of our customers in critical industries, such as beverage, food, health care, national defense and transportation."
Germain says Constellium’s increase in adjusted EBITDA was driven by strong performance in its Packaging and Automotive Rolled Products (P&ARP) and Aerospace and Transportation (A&T) segments as well as improved performance in Automotive Structures and Industry (AS&I).
"Constellium took swift actions in response to the COVID-19 pandemic,” he says. “We are aggressively reducing costs, optimizing our working capital, further reducing our capital spending and significantly augmenting our liquidity position. I am confident that we are well-positioned to weather this storm and emerge as a stronger company. Given the uncertainty around the extent and duration of the effects of the pandemic, we are withdrawing our guidance until our visibility improves."
The company says it has increased cleaning, sanitation, workspace protection and social distancing at its manufacturing sites and other facilities as well as enacting business travel bans, strict policies for visitors and suppliers and a work-from-home policy for employees, where possible.
Constellium says its shipments were down in during the first quarter across all three segments of its business. Revenue also decreased because of lower shipments and lower metal prices, though they were partially offset by improved price and mix across all three segments. Its net loss of 31 million euros primarily was related to a noncash unfavorable change in unrealized gains and losses on derivatives related to Constellium’s commodity hedging positions. The company attributes its increase in adjusted EBITDA relative to the first quarter of last year to improved results in the P&ARP and AS&I segments.
In its P&ARP segment, adjusted EBITDA increased 12 percent for the quarter compared with the first quarter of 2019 owing to good cost control and improved price and mix, partially offset by lower shipments from its European plants because of COVID-19-related weakness late in the quarter, Constellium says.
For the first quarter of 2020, shipments of 269,000 metric tons decreased 4 percent compared with the first quarter of last year because of lower shipments across automotive, packaging and specialty products. Revenue of 752 million euros decreased 9 percent compared with the first quarter of 2019 primarily because of lower metal prices and lower shipments.
In its A&T segment, first-quarter adjusted EBITDA was comparable to the first quarter of 2019 as improved price and mix were offset by lower shipments and higher raw material costs, the company says. For the first quarter of 2020, shipments of 59,000 metric tons decreased 10 percent compared with the first quarter of 2019 on lower transportation, industry and other rolled product shipments owning to continued demand weakness in Europe and North America. Revenue of 359 million euros decreased 5 percent compared with the first quarter of 2019 on lower shipments and lower metal prices, partially offset by improved price and mix, Constellium says.
In its AS&I segment, first-quarter adjusted EBITDA increased 17 percent compared with the first quarter of 2019 on improved price and mix and solid cost control, the company reports. Shipments of 65,000 metric tons were down slightly compared with the first quarter of last year. Revenue of 342 million euros was comparable to the first quarter of 2019 as improved price and mix were offset by lower metal prices.
COVID-19 operations update
The outbreak of COVID-19 and measures to prevent its spread began to impact customer demand in Europe and in North America during March and continued into April, Constellium says. Automotive original equipment manufacturers (OEMs) began curtailing operations in mid-March, and such operations remain largely curtailed in North America and Europe. The company reports that it is preparing for restarts in May at its automotive plants.
Aerospace OEMs also have announced reductions or curtailments to their operations, the company notes.
However, demand from Constellium’s packaging customers has remained strong.
The company says it has adjusted operating levels at the relevant manufacturing sites in line with changes in its customers’ operations. “With the exception of our automotive-specific plants, all of our plants continue to operate and produce for critical end-markets, such as beverage, food, health care, national defense and transportation,” Constellium says.
While the situation remains fluid, the company says it will continue to monitor the impact of the pandemic and anticipate continued temporary reductions in operating levels at many of its manufacturing facilities.
Constellium says it has taken a number of actions to offset the financial impacts of the COVID-19 pandemic. This includes reducing input purchases, all discretionary spending and labor costs; managing trade working capital; targeting capital spending of 175 million euros in 2020 (down 96 million euros compared with 2019); and building liquidity, including through the delayed draw term loan; potentially loans under government-sponsored borrowing programs in France, Germany and Switzerland; and other available governmental aid programs.
Outlook
Given the continuously evolving nature of the COVID-19 pandemic, Constellium says it cannot forecast with reasonable accuracy the implications of the crisis or the environment that will follow, making it prudent to withdraw all financial guidance until visibility improves.