Kaiser Aluminum Corporation · NASDAQ:KALU
Kaiser Aluminum — Q2 2020 Earnings Presentation
35 slides from Kaiser Aluminum's earnings presentation, Jul 23, 2020
Slide 1: Second Quarter 2020 Earnings Conference Call
Second Quarter 2020 Earnings Conference Call July 23, 2020
Slide 2: Forward Looking Statements
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
Slide 3: Non-Run-Rate Items
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.
Slide 4: Non-GAAP Financial Measures
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 calculate
Slide 5: Jack A. Hockema, CEO and Chairman
Jack A. Hockema, CEO and Chairman 5
Slide 6: Business Cycle Financial Strategy
Business Cycle Financial Strategy Be well-prepared for economic adversity Liquidity Management Debt Leverage Provide sufficient liquidity to fund strategic Prudent leverage for our cyclic business is and sustaining investments, interest, taxes ~2.0x net debt to normalized Adj. EBITDA1 and regular di
Slide 7: Balanced Capital Allocation Priorities
Balanced Capital Allocation Priorities >$1.8B capital allocation 3 1. Organic Investment 2007 - 2020 Recession capex is less than typical ~75%1 of depreciation 2. Inorganic Growth Organic Investment Opportunistic investment for strategic value creation 47% 3. Regular Dividends Inorganic Growth Maint
Slide 8: Keith A. Harvey, President and COO
Keith A. Harvey, President and COO 8
Slide 9: 2020 Second Quarter and First Half
2020 Second Quarter and First Half 2Q20 VAR and shipments reflect COVID-19 impact on end market demand Aggressively flexed costs and capacity levels to align with demand Pricing environment continued to hold Completed $350M, 6.50% senior notes due 2025 to further strengthen liquidity safety
Slide 10: Second Quarter and First Half 2020 Financial Recap
Second Quarter and First Half 2020 Financial Recap Neal E. West, SVP & CFO 10
Slide 11: Value Added Revenue
Value Added Revenue Quarterly Value Added Revenue 1 6 Months Value Added Revenue 2 $millions $/pound $millions $/pound $415 $428 $428 $413 $391 $209 $215 $213 $217 $175 $1.47 $1.43 $1.39 $1.40 $1.39 $1.40 $1.34 $1.31 $1.34 $1.23 2Q19 3Q19 4Q19 1Q20 2Q20 1H18 2H18 1H19 2H19 1H20 2Q20 total VAR down 1
Slide 12: Adjusted EBITDA and EBITDA Margin
Adjusted EBITDA and EBITDA Margin1 Quarterly Adjusted EBITDA and EBITDA Margin2 6 Months Adjusted EBITDA and EBITDA Margin3 $millions EBITDA margin $millions EBITDA margin $59 $57 $109 $103 $102 $104 $52 $94 $48 $34 26.4% 27.4% 25.5% 24.5% 24.9% 24.6% 24.3% 24.0% 22.7% 19.7% 2Q19 3Q19 4Q19 1Q20 2Q20
Slide 13: Consolidated Financial Highlights
Consolidated Financial Highlights Quarterly Six Months (in $millions except Shipments & EPS) 2Q19 3Q19 4Q19 1Q20 2Q20 1H19 1H20 Shipments (in millions of lbs.) 156 154 153 156 119 318 274 Net Sales $375 $375 $369 $369 $276 $771 $645 1 Value Added Revenue $209 $215 $213 $217 $175 $428 $391 As Reporte
Slide 14: Outlook and Closing Remarks
Outlook and Closing Remarks Keith A. Harvey, President and COO 14
Slide 15: Outlook ‒ Aero/High Strength
Outlook ‒ Aero/High Strength Kaiser’s Served Market Applications Aerospace / High Strength Value Added Revenue 2 $millions #millions $511 $498 Large $467 $455 Commercial $430 Airframes ~60% Industrial 243 249 274 257 233 ~12% Other Aero1 ~28% 3 2016 2017 2018 2019 LTM Large commercial aerospace an
Slide 16: Outlook ‒ Automotive Extrusions
Outlook ‒ Automotive Extrusions Kaiser’s Served Market Applications Automotive Extrusion Value Added Revenue 1 $millions #millions $118 $117 $112 Growing Applications Chassis, Structural, Safety 104 $93 ~65% 93 101 94 $79 80 Mature Applications ABS, Drivetrain ~35% 2 2016 2017 2018 2019 LTM 2H20 -
Slide 17: Outlook – General Engineering
Outlook – General Engineering U.S. Index of Industrial Production Mfg 1 General Engineering Value Added Revenue 2 $millions #millions 265 267 250 105.0 104.8 236 231 102.7 100.7 99.6 $233 $232 $232 $211 $215 3 3 2016 2017 2018 2019 LTM 2016 2017 2018 2019 LTM 2H20 anticipate seasonal demand weakne
Slide 18: Outlook – Other Applications
Outlook – Other Applications Other Applications Value Added Revenue 1 $millions #millions Continued planned exit of non-core applications 32 28 27 Anticipate VAR for other applications 21 $24 to decline to annual rate of $4 million $23 $23 $19 13 as capacity is allocated to more strategic extrus
Slide 19: 2H 2020 Summary Outlook
2H 2020 Summary Outlook Value Added Revenue1 mix Total VAR in 2H20 down ~10%-15% from 2Q20 pace • Aerospace/HS VAR heavily weighted to 1H20, expected to be down sharply in 2H20 • Expect strong 2H20 rebound in automotive to Commercial a pace similar to 1Q20 Aerospace / Defense • Expect 2H20 normal
Slide 20: Summary
Summary 2Q20 Results: VAR and EBITDA reflected impact of COVID-19 on demand across end markets Aggressively flexed costs and operating levels to align to lower demand; pricing environment remained stable 2H20 outlook: VAR down 10%-15% from 2Q20 with EBITDA margin in mid-teens Capital spend
Slide 21: KAISER
KAISER ALOUMINOUNKA
Slide 22: KAISER ALUMINUM
KAISER 22 ALUMINUM
Slide 23: Sales analysis by application - quarterly
Sales analysis by application - quarterly 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Shipments (lbs, mm) Aero & High Strength 57.4 60.2 62.7 68.5 67.0 64.0 67.1 75.5 66.4 48.2 General Engineering 74.3 72.2 62.7 57.8 63.0 62.7 57.7 52.9 62.4 58.2 Automotive Extrusions 26.7 28.8 24.1 24.7 25.6
Slide 24: Sales analysis by application - half
Sales analysis by application – half 1H18 2H18 1H19 2H19 1H20 Shipments (lbs, mm) Aero & High Strength 117.6 131.2 131.0 142.6 114.6 General Engineering 146.5 120.5 125.7 110.6 120.6 Automotive Extrusions 55.5 48.8 48.3 46.0 33.8 Other Applications 1 15.4 16.9 13.3 7.5 5.2 Total 335.0 317.4 318.3 30
Slide 25: Sales analysis by application - annual
Sales analysis by application - annual 4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM Shipments (lbs, mm) Aero & High Strength 124.9 141.7 155.0 158.0 144.8 158.9 192.0 223.9 224.3 236.9 243.5 243.2 233.0 248.8 273.6 257.2 General Engineering 206.8 226.6 246.0 258.4
Slide 26: Reconciliation of net sales to value added revenue – quarterly
Reconciliation of net sales to value added revenue – quarterly 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Net Sales ($mm) Aero & High Strength $ 170.2 $ 185.0 $ 185.7 $ 198.5 $ 198.5 $ 189.4 $ 198.9 $ 216.4 $ 196.0 $ 144.6 General Engineering 143.3 147.9 133.9 120.9 130.0 128.2 117.1 104.8 12
Slide 27: Reconciliation of net sales to value added revenue – half
Reconciliation of net sales to value added revenue – half 1H18 2H18 1H19 2H19 1H20 Net Sales ($mm) Aero & High Strength $ 355.2 $ 384.2 $ 387.9 $ 415.3 $ 340.6 General Engineering 291.2 254.8 258.2 221.9 232.5 Automotive Extrusions 127.8 111.5 98.5 92.0 64.1 Other Applications 1 29.2 32.0 25.9 14.4
Slide 28: Reconciliation of net sales to value added revenue – annual
Reconciliation of net sales to value added revenue – annual 4 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM Net Sales ($mm) Aero & High Strength $ 419.3 $ 523.6 $ 603.5 $ 643.6 $ 485.8 $ 467.3 $ 596.3 $ 695.1 $ 677.0 $ 686.3 $ 695.5 $ 675.4 $ 653.7 $ 739.4 $ 803.2 $
Slide 29: Reconciliation of reported net income to adjusted EBITDA - quarterly
Reconciliation of reported net income to adjusted EBITDA - quarterly (in $ millions) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Consolidated - Reported Net Income (Loss) $25.7 $20.7 $21.7 $23.6 $28.0 $19.2 $25.4 ($10.6) $29.1 ($6.6) Interest Expense 5.6 5.7 5.7 5.7 5.7 5.8 5.8 7.3 6.1 10.5 Ot
Slide 30: Reconciliation of reported net income to adjusted EBITDA - half
Reconciliation of reported net income to adjusted EBITDA - half (in $ millions) 6 Months 1H18 2H18 1H19 2H19 1H20 Consolidated - Reported Net Income $46.4 $45.3 $47.2 $14.8 $22.5 Interest Expense 11.3 11.4 11.5 13.1 16.6 Other Expense 0.4 0.5 (0.4) 21.1 0.3 Income Tax Provision 13.7 14.6 17.1 1.3 10
Slide 31: Reconciliation of reported net income to adjusted EBITDA - annual
Reconciliation of reported net income to adjusted EBITDA - annual (in $ millions) Annual 5 2014 2015 2016 2017 2018 2019 LTM Consolidated - Reported Net (Loss) Income $71.8 ($236.6) $91.7 $45.4 $91.7 $62.0 $37.3 Interest Expense 37.5 24.1 20.3 22.2 22.7 24.6 29.7 Other Expense (6.7) 1.8 13.6 - 0.9 2
Slide 32: Adjusted net income and EPS - quarterly
Adjusted net income and EPS - quarterly (in $ millions except EPS) 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 Reported Net Income (Loss) $ 25.7 $ 20.7 $ 21.7 $ 23.6 $ 28.0 $ 19.2 $ 25.4 $ (10.6) $ 29.1 $ (6.6) Operating NRR1 Items 0.6 9.0 1.5 6.2 1.3 3.0 3.7 29.9 0.6 16.7 Non-Operating NRR It
Slide 33: Adjusted Net Income and EPS by half
Adjusted Net Income and EPS by half (in $ millions except EPS) 6 Months 1H18 2H18 1H19 2H19 1H20 Reported Net Income $ 46.4 $ 45.3 $47.2 $14.8 $22.5 1 Operating NRR Items 9.6 7.7 4.3 33.6 17.3 2 Non-Operating NRR Items 3.0 3.1 3.3 23.6 2.4 Tax impact of above NRR items (3.3) (2.5) (1.8) (14.0) (6.1)
Slide 34: Adjusted net income and EPS - annual
Adjusted net income and EPS - annual (in $ millions except EPS) Annual 5 2015 2016 2017 2018 2019 LTM Reported Net (Loss) Income $ (236.6) $ 91.7 $ 45.4 $ 91.7 $ 62.0 $ 37.3 1,2 Operating NRR Items 496.4 (10.6) 3.9 17.3 37.9 50.9 2,3 Non-Operating NRR Items 2.5 14.4 4.5 6.1 26.9 26.0 Tax impact of a
Slide 35: KAISER ALUMINUM
KAISER ALOUMINOUNKA