Kaiser Aluminum Corporation · NASDAQ:KALU
Kaiser Aluminum — Investor Day (March 2008)
82 slides from Kaiser Aluminum's investor day presentation, Mar 12, 2008
Slide 1: Investors Day New York City March 12, 2008
Investors Day New York City March 12, 2008 Investors Day ^ New York City ^ March 12, 2008
Slide 2: Forward-Looking Statements
This presentation contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements reflect our current expectations and projections and involve known and unknown risks. We encourage you to read our reports filed with the Securities an
Slide 3: Introductions
Introductions Carolyn Bartholomew Carl Frankel Jack Hockema Bill Murdy Tom Van Leeuwen Brett Wilcox Management Directors Joe Bellino Peter Bunin Martin Carter John Donnan Keith Harvey Jack Hockema Jim McAuliffe Dan Rinkenberger
Slide 4: Company Overview
Company Overview Jack Hockema Chairman, President and Chief Executive Officer
Slide 5: Kaiser Aluminum Overview
Richmond, VA Kaiser Aluminum Overview Los Angeles, CA Kalamazoo, MI (2009) Leading North American fabricated products company Broad offering of aluminum alloys and product forms Headquarters Drawn Products Forgings Extrusions Sheet & Plate Primary Products Foothill Ranch, CA Trentwood, WA Richland,
Slide 6: Fabricated Products Portfolio Transition
Offering included non-strategic products Can stock Common alloy sheet & plate Castings Non-automotive forgings Forged truck wheels Expanded position in strategic applications Aerospace & Defense General Engineering Ground Transportation Exited non-strategic products 1996 2007 Continuing 357 548 Disc
Slide 7: Investment Highlights
Investment Highlights Leading Position in Target Markets Focus on demanding applications where Kaiser has competitive strength Differentiation: supplier of choice, broad product offering Well-Positioned Growth Platform $244 million organic growth program Excellent platform for acquisition growth Fin
Slide 8: Strong & Experienced Management
Strong & Experienced Management Strong & Experienced Management Corporate Staff
Slide 9: Fabricated Products Operations Strong & Experienced Management
Fabricated Products Operations Strong & Experienced Management
Slide 10: Agenda
Agenda Financial Overview Products, Markets and Applications Kaiser Production System Kaiser Select(r) Heat Treat Products Common Alloy Products
Slide 11: Financial Review
Financial Review Joe Bellino Executive Vice President and Chief Financial Officer
Slide 12: Financial Strategy
Financial Strategy Ensure metal price neutrality Maintain financial strength and flexibility Pursue organic growth Employ EVA-based investment criteria
Slide 13: Financial Strength and Flexibility
1 EBITDA is defined as Operating Income plus Depreciation and Amortization excluding 'other operating gains' 2 Refer to our 2007 10-K for additional detail on our tax attributes Financial Strength and Flexibility Strong operating cash flow (2007 EBITDA1 $180M) Financial capacity to fund additional g
Slide 14: Consolidated Operating Income
Consolidated Operating Income 2005 2006 2007 59.8 100.7 182 Operating Income Trend Strong results from both Fabricated Products and Primary Products Strong Earnings Growth
Slide 15: Fabricated Products Operating Income
Fabricated Products Operating Income 2005 2006 2007 87 122 169 Operating Income Trend Step Change in Earnings Very strong growth in heat treat plate shipments Favorable product mix and value-added pricing
Slide 16: Primary Products Operating Income
Primary Products Operating Income 2005 2006 2007 16 23 46 Operating Income Trend Step Change in Earnings 2007 results were exceptional Anglesey power contract expires in late 2009
Slide 17: Significant Investments in Organic Growth
2000 2001 2002 2003 2004 2005 2006 2007 2008F 2009F TRN 31 58 61.8 80 60 10 10 Maintenance: $12-16 million Significant Investments in Organic Growth Growth Platform - Capital Spending
Slide 18: Products & Markets
Products & Markets Keith Harvey Vice President Sales & Marketing Aerospace & General Engineering Products
Slide 19: Products, Markets and Applications Overview
Products, Markets and Applications Overview Aerospace & High Strength General Engineering Custom Products
Slide 20: Sources for Profitable Growth
Sources for Profitable Growth Growing Markets Growing heat treat plate market Commercial aircraft builds, larger airframes and monolithic structures Growing automotive extrusion market Light-weighting and new CAFE standards Competitive Position Best-in-Class customer satisfaction Quality, delivery,
Slide 21: Served Markets
Served Markets Can Stock Other S&P Foil HT S&P East 9.94 7.78 2.8 1.08 Global Flat Rolled Product North American Extrusion Heat Treat Sheet & Plate GE TBT LV Industrial - Served Industrial Unserved B&C East 902 615 396 536 200 1851 Industrial Unserved Building & Construction Car & Light Truck Genera
Slide 22: Fabricated Mill Products
Fabricated Mill Products Sheet Plate Pipe & Tube Rod & Bar Custom Extrusions Forgings
Slide 23: Applications
Applications
Slide 24: Applications Mix - Fabricated Products
Applications Mix - Fabricated Products Aerospace/High Strength General Engineering Custom Products Revenue 39 40 21 % of 2007 Sales 1 Sheet, plate, rod, bar, pipe and tube products 2 Extruded profiles and forged products Focused On Demanding Applications Where We Have Competitive Strength
Slide 25: Blue Chip Customer Base
Service Centers Blue Chip Customer Base OEMs
Slide 26: Outline: Products, Markets and Applications
Overview Aerospace & High Strength General Engineering Custom Products Outline: Products, Markets and Applications
Slide 27: Well-Positioned in Growing Aerospace Market
Well-Positioned in Growing Aerospace Market Growing global market with high barriers to entry Strong market position Best-in-Class customer satisfaction Broad product offering Multiple long-term contracts with leading aerospace customers
Slide 28: Aero/High Strength Products
Aero/High Strength Products Major Products 2/7 Plate 2/7 Sheet Cold Finish Rod & Bar Seamless Extruded Tube Drawn Tube Redraw Rod Forge Stock Broad Product Offering Selected Applications SABOT (MUNITIONS) AIRBUS A380 ALUMINUM BAT ECLIPSE VLJ
Slide 29: Kaiser Applications in Commercial Aircraft
Kaiser Applications in Commercial Aircraft
Slide 30: Growing But Cyclic Global Commercial Aircraft Builds
Growing But Cyclic Global Commercial Aircraft Builds Strong Aerospace Outlook Several factors driving strong demand growth for aerospace plate Source: Kaiser estimates Source: Airline Monitor Jan/Feb 2008 Forecast 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1
Slide 31: Trend To Larger Aircraft
Trend To Larger Aircraft Trend toward larger aircraft in nearly all product segments driven by: Globalization Economic Growth in Asia-Pacific Economies of Scale Airport Congestion Source: Airbus
Slide 32: Monolithic Design Impact
Monolithic Design Impact Monolithic design machines away up to 90% of the plate to achieve final part Drives Step Change In Plate Consumption
Slide 33: Boeing 747-8 Wing Redesign
Boeing 747-8 Wing Redesign Aluminum Is Being Re-Engineered Back Into Aircraft Applications Source: Boeing website Reference: Curtiss-Wright press release dated January 14, 2008
Slide 34: Secured Significant Multi-Year Plate Supply Agreements
Secured Significant Multi-Year Plate Supply Agreements Major Aerospace Sales Contracts Commercial Aircraft Military Aircraft Commercial Aircraft Very Light Jet Regional Jets F-35 Joint Strike Fighter Business Aircraft
Slide 35: Aero/High Strength Channels to Market
Aero/High Strength Channels to Market Typical Kaiser Aero/HS shipment mix Virtually All Aerospace is Contract Business OEM Through Service Providers OEM Direct Distributor Non-Contract Distributor Contract (backed by OEM) East 34 10 10 46 OEM (through service providers) OEM (direct) Distributor (non
Slide 36: Well-Positioned in Growing Aerospace Market
Well-Positioned in Growing Aerospace Market Growing global market with high barriers to entry Strong market position Best-In-Class customer satisfaction Broad product offering Multiple long-term contracts with leading aerospace customers
Slide 37: Outline: Products, Markets and Applications
Outline: Products, Markets and Applications Overview Aerospace & High Strength General Engineering Custom Products
Slide 38: General Engineering Products/Applications
General Engineering Products/Applications Major Products 6x Plate 6x Sheet 6x Rod & Bar 6x Pipe & Tube Selected Applications Broad Product Offering SEMICONDUCTOR VACUUM CHAMBERS ARMORED VEHICLES TOOLING PLATE PARTS FROM SELECT(r) PRECISION ROD HYDRAULIC VALVE BODIES AIR CYLINDER TUBES
Slide 39: General Engineering Channels to Market
General Engineering Channels to Market Aligned with the Major Industry Leaders Virtually All General Engineering is Non-Contract Business Sold to Service Centers
Slide 40: Unique Position in the GE Served Market
Unique Position in the GE Served Market Best-in-Class Customer Satisfaction Kaiser Select(r) Broadest Product Offering for Service Centers Long-Term Customer Relationships #1 or #2 Position in Served Market Segments
Slide 41: Products & Markets Overview
Products & Markets Overview Aerospace & High Strength General Engineering Custom Products
Slide 42: Automotive & Light Truck Customers
Automotive & Light Truck Customers Blue Chip Customers Engineered Automotive Solutions
Slide 43: Automotive & Light Truck Applications
Automotive & Light Truck Applications Drive Shafts Focused On Demanding Applications Where We Have Competitive Strength Bumper Systems ABS Antilock Braking Systems
Slide 44: Growing Automotive Extrusion Market
Growing Automotive Extrusion Market 5.5% CAGR1 of aluminum extrusions in light vehicles since 1995 CAFE legislation expected to accelerate demand growth Mandates a 40% improvement in fleet-wide fuel efficiency by 2020 1 Aluminum Association, Kaiser Aluminum estimates Driven by Light-Weighting for Fu
Slide 45: Well-Positioned in Automotive Extrusions
Well-Positioned in Automotive Extrusions Technical Strength Application engineering Metallurgical technology Research, development and engineering World-Class Automotive Manufacturing Capability Focused facilities Advanced manufacturing technologies Automotive culture Focused On Demanding Applicatio
Slide 46: Kaiser Fabricated Products Sales & Marketing Summary
Kaiser Fabricated Products Sales & Marketing Summary
Slide 47: Summary: Sales & Marketing
Summary: Sales & Marketing Growing Markets Demanding Applications Blue Chip Customers Competitive Differentiation
Slide 48: Kaiser Production System
Kaiser Production System Peter Bunin Vice President & General Manager Heat Treat Products
Slide 49: What Is The Kaiser Production System?
What Is The Kaiser Production System? Continuous Improvement Doing things better tomorrow than we are doing them today Deployment of Appropriate Tools to Achieve Significant Value Tool Value Lean (velocity) Reduced cycle time and inventory Six sigma (reduced variability) Improved quality and yield T
Slide 50: Significant Improvement via KPS
Significant Improvement via KPS 1999 2004 2007 East 1 0.54 0.24 Plate Cycle Time Improvement (days) ~60% improvement Days, Indexed (1999=1.00) Sheet & Plate Claim Rate (%) ~75% improvement Customer Claim Rate, Indexed (1999=1.00) 1999 2004 2007 East 1 0.68 0.38
Slide 51: Kaiser Production System Typical Improvement
KAI: ISER (ALUMINUM Production System Typical Improvement Quality 3x Delivery 4x - 10x Flow Time 2x - 3x Cost Reduction >2% annually
Slide 52: Kaiser Select
Kaiser Select(r) Peter Bunin Vice President & General Manager Heat Treat Products
Slide 53: Kaiser Select - What Is It?
Kaiser Select(r) - What Is It? A Superior Product Engineered for specific applications Engineered to meet specific customer needs Resulting In Added Value to the Customer Improved customer end product Lower manufacturing costs
Slide 54: Kaiser Select - How Do We Do It?
A Unique, Multi-Disciplined Approach Kaiser Select(r) Process/Products Application Engineering Equipment Design New Product Development Process Development Metallurgical Engineering Voice of the Customer Voice of the Customer Kaiser Select(r) - How Do We Do It?
Slide 55: Examples of Kaiser Select Products
Multi-Void Hollow Automotive Bumper Beam High-Performance Automotive Alloy Precision Machining Plate Lead-Free Free Machining Rod & Bar Alloy Kaiser Select(r) Precision Rod Kaiser Select(r) Manifold Bar High-Performance Baseball Bat Alloy Kaiser T-Form(r) Aerospace Sheet Examples of Kaiser Select(r)
Slide 56: Example: Kaiser T-Form Aerospace Sheet
Example: Kaiser T-Form(r) Aerospace Sheet Proprietary Chemistry Proprietary Manufacturing Process Customer cost savings of up to 50% Customer Fabrication Process Kaiser Select(r) Developments
Slide 57: Heat Treat Products
Heat Treat Products Peter Bunin Vice President & General Manager Heat Treat Products
Slide 58: Heat Treat Products Introduction
Heat Treat Products Introduction - Heat Treat Products Investment Update
Slide 59: World Class Heat Treat Product Capabilities
World Class Heat Treat Product Capabilities Heat Treat Products - Facilities Drawn Products Extrusions Sheet & Plate Trentwood, WA Richland, WA Chandler, AZ Jackson, TN Newark, OH Heat Treat Rod & Bar Heat Treat Drawn Tube Heat Treat Sheet & Plate Casthouse
Slide 60: Heat Treat Products - 2007 Product Mix
Heat Treat Products - 2007 Product Mix Sheet & Plate RBT Revenue 60 40 Based on 2007 3rd Party Sales Broad Product Offering for Technically-Demanding Aerospace and General Engineering Applications
Slide 61: Heat Treat Products Investment Update
Heat Treat Products Introduction - Heat Treat Products Investment Update
Slide 62: $139 Million Heat Treat Plate Expansion
$139 Million Heat Treat Plate Expansion Expands product offering to include heavy-gauge plate More than doubles heat treat plate capacity KPS positions Kaiser to be industry leader for quality, cost and lead time Relative Heat Treat Plate Capacity 2005 2007 2008 2009 Baseline 1 1.6 2 2.2 ~1.6 1.0 ~1
Slide 63: Employing KPS in Heat Treat Plate Expansion
Employing KPS in Heat Treat Plate Expansion Eliminates over 50% of the process steps Reduces the distance product travels in-plant by almost 50% Replaces batch processing with cellular processing and 'one-piece flow' Replaces manual handling with automation Employs Kaiser Select(r) processing Positi
Slide 64: Horizontal Plate Heat Treat Furnace
Horizontal Plate Heat Treat Furnace
Slide 65: Large Stretcher
Large Stretcher
Slide 66: Automated Handling Equipment
Automated Handling Equipment
Slide 67: Summary: Providing Value To Our Customers & Ourselves
Summary Providing Value To Our Customers & Ourselves Kaiser Select(r) Kaiser Production System Heat Treat Products Broad offering of technically demanding products $139MM plate expansion Expands capacity and capability Positions Kaiser for industry leadership
Slide 68: Common Alloy Products
Common Alloy Products Martin Carter Vice President & General Manager Common Alloy Products
Slide 69: Market & Participation
Market & Participation Source: Aluminum Association, Kaiser estimates Ground Trans RBT Industrial Revenue 99 103 25 Focused on Market Segments with Demanding Applications North American Extrusion Market Kaiser Mix Common Alloy Shipments Car & Light Truck Industrial Served General Engineering (rod, b
Slide 70: Industry Strategy
Very limited capital investment Lack of talent and development Limited investment in processes and systems Little innovation "All things to all people" Features of Industry Strategy Low service levels Weak productivity Limited growth Few new products/markets Reduced profitability Result Industry Str
Slide 71: Our Strategy
Our Strategy Best in Vision Best in Class Service Kaiser Select(r) Low Cost Broad range of capabilities from focused operations
Slide 72: World Class Automotive Capabilities
World Class Automotive Capabilities Forgings Drawn Products Extrusions Casthouse London, Ontario Richmond, VA Tulsa, OK (2009) Sherman, TX Greenwood, SC Ground Transportation - Focused Facilities
Slide 73: World Class Rod, Bar and Tube Capabilities
World Class Rod, Bar and Tube Capabilities Extrusions Casthouse Richmond, VA General Engineering - Focused Facilities Los Angeles, CA Kalamazoo MI (2009)
Slide 74: Significant Value Stream Enhancements
Significant Value Stream Enhancements New Kalamazoo Kaiser Select(r) remelt / extrusion plant Tulsa conversion to Kaiser Select(r) automotive Los Angeles upgrade for Kaiser Select(r) and efficiency Sherman upgrade for Kaiser Select(r) and efficiency ~$100 Million Investment for Efficiency, Quality a
Slide 75: Current GE Rod/Bar Value Stream
Current GE Rod/Bar Value Stream Los Angeles Sherman Tulsa Bellwood London Significant Opportunity for Cost Reduction and Improved Service and Quality Plainfield
Slide 76: Future Rod/Bar Value Stream
Future Rod/Bar Value Stream Los Angeles Kalamazoo (2009) World Class KPS and Kaiser Select(r) Operations
Slide 77: Employing KPS in Rod/Bar Value Stream
Employing KPS in Rod/Bar Value Stream 153 Kalamazoo Industry Leadership through KPS and Kaiser Select(r) Recycled metal Reduced freight fuel consumption Energy efficiency Reduced CO2 emissions Environmental Impact Source: Kaiser estimates Productivity 250% Freight miles 75% Flow time 70% Capacity 25
Slide 78: Kaiser Select Developments
Competitor Kaiser Select(r) 7 10 30% Productivity Improvement Kaiser Select(r) Precision Rod Quality Improvement Better Hardness Better Consistency Better Surface Finish Better Anodizing Response Customer Benefits Proprietary Chemistry Proprietary Manufacturing Process Proprietary Equipment Design K
Slide 79: Summary - Common Alloy Products
Summary - Common Alloy Products Selective participation in markets with demanding applications Differentiated by Kaiser's technologies and broad product offering Repositioning rod, bar and tube manufacturing for industry leadership
Slide 80: Company Overview
Company Overview Jack Hockema Chairman, President and Chief Executive Officer
Slide 81: Investment Highlights
Investment Highlights Leading Position in Target Markets Focus on demanding applications where Kaiser has competitive strength Differentiation: supplier of choice, broad product offering Well-Positioned Growth Platform $244 million organic growth program Excellent platform for acquisition growth Fin
Slide 82: Kaiser Aluminum
KAISER ALUMINUM