Constellium’s shipments, revenue decline in Q1

In the first quarter of 2024, Paris-based Constellium reports shipments decreased by 2 percent from the same quarter in 2023 to 380,000 metric tons, while its revenue decreased 12 percent to 1.7 billion euros, or $1.82 billion.

Its net income was 17 million euros ($18.2 million) compared with 22 million euros ($23.6 million) for the first quarter of 2023, while adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 137 million euros, or $146.8 million, with its aerospace and transportation (A&T) segment contributing 80 million euros ($85.7 million) in EBITDA, followed by packaging and automotive rolled products (P&ARP) at 43 million euros ($46.1 million), automotive structures and industry (AS&I) at 33 million euros ($35.4 million) and a loss of 6 million euros ($6.4 million) in the holdings and corporate segment.

In a statement accompanying its earnings report, CEO Jean-Marc Germain says the company’s first quarter was solid despite mixed end-market demand and significant weather-related impacts at its Muscle Shoals, Alabama, facility, which is a major aluminum sheet supplier to the packaging and automotive markets with five casting units, hot and cold rolling mills and a slitting and finishing center with the capacity to produce more than 1 billion pounds of finished aluminum coils annually.

"As we mentioned on our earnings call back in February, the P&ARP segment was impacted in the quarter as a result of the extreme snow and cold weather event at our Muscle Shoals facility in January," Germain said during the company's Q1 2024 earnings call. "The weather event caused a full week of closure at the facility and then a difficult ramp back up once employees were able to return to work."

Constellium's P&ARP segment EBITDA was down 21 percent compared to the first quarter of last year. Chief Financial Officer Jack Guo cited the weather-related difficulties at Muscle Schoals as a contributing factor, adding, "Despite these impacts, as well as continued operational challenges at Muscle Shoals, P&ARP volume was a tailwind of 4 million euros ($4.3 million), with higher shipments in packaging and automotive rolled products. Packaging shipments increased 2 percent in the quarter versus last year. Within packaging, canstock shipments were up in the quarter versus last year, partially offset by lower shipments of specialty packaging in Europe."

"Inventory adjustments in canstock appear behind us in both North America and Europe," Germain added. "Canstock shipments have increased in the last few quarters, though demand is still relatively low in the current environment."

He said the long-term outlook for canstock remains favorable with the growing consumer preference for aluminum beverage cans, can makers' capacity growth plans in both regions and greenfield investments that are ongoing in North America. "We are expecting growth in canstock in 2024. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe," Germain added. 

The company’s A&T segment delivered record first-quarter segment adjusted EBITDA with continued strength in aerospace, with Germain saying, “Packaging shipments, and can sheet specifically, were up in the quarter. Automotive demand remained healthy in the quarter in North America, with softer demand continuing in Europe. We continued to experience weakness in most industrial markets.”

Among the investments Constellium is making is the construction of a recycling and casting center at its Neuf-Brisach facility in France that Germain said is expected to start up in the fourth quarter of this year and ramp up in 2025.

The company also is investing in its aerospace assets to further strengthen its market leadership position, Germain said during the conference call. "As you all know by now, our first strategic focus is to grow our value add. The two investments I'm about to discuss do just that in the most exciting segment for us aerospace.

"First, as we announced in March, our aerospace and TID [ transportation, industry and defense] facility in Ravenswood, West Virginia, was recently selected by the U.S. Department of Energy to receive an investment of up to $75 million to deploy low to zero carbon technology. The total size of the project is expected to be around $150 million, inclusive of the U.S. Department of Energy Investment, and it is split 50-50 between maintenance capex and return-seeking capex," he said. 

He said the company wants to replace three legacy casting centers in Ravenswood with two new modern state-of-the-art casting centers dedicated to aerospace and TID products. "This investment will support the installation of low-emissions smart melt furnaces that can operate using a range of fuels, including clean hydrogen, paving the way towards a zero carbon casthouse.

"In addition to reducing carbon emissions, the project is expected to help maximize recycled scrap intake and equipment efficiency, reduce our reliance on external suppliers by increasing our internal slab casting capabilities, improve worker safety with the introduction of a hands-free casting process and contribute to local communities around Ravenswood," Germain said.

The first casting center is expected to ramp up in 2026, with a second casting center ramping up in 2028.

Gemain also announced the addition of a third casthouse at Constellium's facility in Issoire, France, dedicated to its Airware products. "The total size of this investment is close to 40 million euros ($42.9 million) of return-seeking capex plus working capital to get the casthouse up and running. The project is expected to significantly increase our capacity and production of Airware products, which will be critical to respond to increased demand in the years to come."

He added that Airware offers a unique combination of benefits. "It provides low-density strength, thermal stability, corrosion resistance, lightweighting and other attributes. Airware is already in use today across several major aircraft platforms and space programs, and we're excited about the future growth potential for this unique solution in these markets. In terms of timing, we expect to complete the casthouse by the end of 2025 and to ramp up the casthouse in 2026 and beyond."

In his statement accompanying the company's earnings, Germain says, "As expected, we are continuing to face uncertainties on the macroeconomic and geopolitical fronts, though we like our end market positioning and we remain optimistic about our prospects for this year and beyond.

"Based on our current outlook, we are maintaining our prior guidance and expect to achieve adjusted EBITDA, excluding the noncash impact of metal price lag, in the range of 740 million euros to 770 million euros ($793 million to $825.2 million) and free cash flow in excess of 130 million euros (139.3 million) in 2024. Beyond this year, we remain confident in our ability to deliver on our adjusted EBITDA target, excluding the noncash impact of metal price lag, of over 800 million euros ($857.5 million) in 2025. Our focus remains on executing our strategy and increasing shareholder value.”