Kaiser Aluminum Corporation · NASDAQ:KALU
Kaiser Aluminum — Q1 2020 Earnings Presentation
37 slides from Kaiser Aluminum's earnings presentation, Apr 20, 2020
Slide 1: First Quarter 2020 Earnings Conference Call
First Quarter 2020 Earnings Conference Call April 20, 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: Longstanding Business Cycle Strategy
Longstanding Business Cycle Strategy Always be prepared for economic adversity Establish and maintain a strong preferred supplier partnership position Flex costs in response to changes in business activity level Retain strong liquidity at all times to weather a deep recession Maintain conser
Slide 7: Business Cycle Financial Strategy
Business Cycle Financial Strategy 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 dividends through the ratio full business
Slide 8: Current Situation
Current Situation Health & safety of employees is, and continues to be, our top priority Recognized as an essential business in the Critical Manufacturing Sector as defined by the U.S. Department of Homeland Security Well-positioned with $0.7B liquidity1 and 0.7x leverage2 to navigate a recess
Slide 9: Current Actions, Investment Filters
Current Actions, Investment Filters Immediate actions to preserve liquidity Suspended share repurchases mid-March Flexing variable costs with changing business conditions Limiting capital spending to critical sustaining projects Sustaining capex is ~$35M per year, less at reduced activity
Slide 10: Record First Quarter Results
Record First Quarter Results Record 1Q 2020 Adjusted EBITDA and margin 1 2 3 VAR EBITDA Margin 1Q 2020 ($millions) $217 $59 27.4% B(W) than 1Q 2019 (1%) 6% 170 bps B(W) than 2H 2019 avg. qtr. 4 1% 9% 190 bps 1 Value Added Revenue (VAR) = Net Sales less hedged cost of alloyed metal; refer to slides 2
Slide 11: Keith A. Harvey, President & COO
Keith A. Harvey, President & COO 11
Slide 12: Health & Safety of Employees
Health & Safety of Employees Health & safety of employees is, and continues to be, our top priority Our facilities continue to operate - recognized as an essential businesses Initiated the following actions: Monitoring and implementing local, state and federal guidelines Following CDC guid
Slide 13: Current Business Conditions
Current Business Conditions Markets and Operations: Commercial Aerospace represents ~33% of total VAR; current outlook is for VAR to decline 20%-25% from record 2019 VAR for these applications Defense applications represents ~10%-15% of total VAR, current outlook is for stable and growing VAR
Slide 14: Neal E. West, SVP & CFO
Neal E. West, SVP & CFO KAISER ALUMINUM
Slide 15: Current Financial Condition
Current Financial Condition Total Liquidity $688M as of March 31 Cash and Short Term Securities - $346M Current availability under revolving credit facility - $342M Current leverage 0.7x net debt1: EBITDA2 as of March 31 Debt maturity $375M Revolving credit facility – October, 2024 $50
Slide 16: Record First Quarter 2020 Results
Record First Quarter 2020 Results Quarterly Value Added Revenue1 ($mm) Quarterly Adjusted EBITDA2 ($mm) Dollars Shipments (mm#) Adj. EBITDA Adj. EBITDA margin 3 $59 $218 $215 $213 $217 $56 $57 $209 $52 $48 163 156 154 153 156 27.4% 26.4% 25.7% 24.5% 22.7% 1Q19 2Q19 3Q19 4Q19 1Q20 1Q19 2Q19 3Q19 4Q19
Slide 17: Consolidated Financial Highlights
Consolidated Financial Highlights Quarterly (in $millions except Shipments & EPS) 1Q19 2Q19 3Q19 4Q19 1Q20 Shipments (in millions of lbs.) 163 156 154 153 156 Net Sales $395 $375 $375 $369 $369 Value Added Revenue 1 $218 $209 $215 $213 $217 As Reported: Operating Income $43 $32 $41 $10 $46 7 Net Inc
Slide 18: Jack A. Hockema, CEO and Chairman
Jack A. Hockema, CEO and Chairman 18
Slide 19: Air Passenger Traffic
Air Passenger Traffic Previous crises have temporarily slowed air traffic growth 6.0 Crises World Passenger Traffic Growth (Trillion Revenue Passenger Miles) 5.0 4.0 3.0 9/11 SARS Asian Crisis Financial 2.0 Crisis + Gulf Swine Flu Crisis Oil 1.0 Oil Crisis Crisis 0.0 '71 '93 '61 '63 '65 '67 '69 '73
Slide 20: Commercial Airframe Order Backlog
Commercial Airframe Order Backlog Current backlog could decline >50% and still exceed pre-2005 levels Boeing / Airbus order backlog 8-year backlog 12,000 3-year 8,000 backlog 4,000 0 2000 2005 2010 2015 20 Sources: Boeing, Airbus
Slide 21: Perspective From Great Recession
Perspective From Great Recession Kaiser’s total shipments1 declined 23% year-over-year during 2009 recession 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008 2009 vs. 2008 (8%) (27%) (28%) (37%) 300 Shipments (millions of pounds) 250 200 150 100 50 0 Aero/High Strength General Engineering Automotive Non-st
Slide 22: What Is Our Situation Now Compared to 2009?
What Is Our Situation Now Compared to 2009? Current mix has <1% highly cyclic non-strategic applications Greater liquidity, access to diverse sources of capital Deeper and stronger strategic customer partnerships Similarly prepared for economic downturn; resulting actions in 2009: Flexed o
Slide 23: Summary
Summary Health & safety of employees is and continues to be our top priority Record 1Q20 results following record 2019 results 2020 outlook suspended pending more clarity regarding COVID-19 Well-positioned with strong liquidity safety net and financial flexibility Preserving liquidity to n
Slide 24: Kaiser Aluminum
KAISER ALUMINUM
Slide 25: Appendix
KAISER 25 ALUMINUM
Slide 26: History—Commercial Aircraft Builds
History—Commercial Aircraft Builds Drives Commercial Aerospace Demand ± Supply Chain Destocking/Restocking 2019 peak- to-valley (21%) 1750 2003 peak- to-valley 1500 1995 peak- (24%) to-valley (43%) Units >50 Seats 1250 1982 peak- to-valley 1000 (31%) 750 1977 peak- to-valley (40%) 500 250 0 1983 198
Slide 27: N.A. Light Vehicle Production
N.A. Light Vehicle Production Drives automotive extrusion demand + growing content per vehicle 1975 peak- 1982 peak- 1991 peak- 2001 peak- 2009 peak- to-valley to-valley to-valley to-valley to-valley (26%) (42%) (16%) (10%) (46%) 16 12 Units (millions) 8 4 - 1972 1994 2007 1970 1971 1973 1974 1975 1
Slide 28: Index of Industrial Production Manufacturing
Index of Industrial Production Manufacturing Drives General Engineering Demand ± Supply Chain Destocking/Restocking 2009 peak- 2001 peak- to-valley to-valley (18%) (4%) 120 110 100 1991 peak- 90 to-valley (2%) 80 1982 peak- to-valley 70 1975 peak- (13%) 60 to-valley (13%) 50 40 30 20 1981 1994 2007
Slide 29: Sales analysis by application - quarterly
Sales analysis by application - quarterly 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 Shipments (lbs, mm) Aero & High Strength 57.4 60.2 62.7 68.5 67.0 64.0 67.1 75.5 66.4 General Engineering 74.3 72.2 62.7 57.8 63.0 62.7 57.7 52.9 62.4 Automotive Extrusions 26.7 28.8 24.1 24.7 25.6 22.7 23.5 22.5
Slide 30: Sales analysis by application - annual
Sales analysis by application - annual 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM 4 Shipments (lbs, mm) Aero & High Strength 124.9 141.7 155.0 158.0 144.8 158.9 192.0 223.9 224.3 236.9 243.5 243.2 233.0 248.8 273.6 273.0 General Engineering 206.8 226.6 246.0 258.4
Slide 31: 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 Net Sales ($mm) Aero & High Strength $ 170.2 $ 185.0 $ 185.7 $ 198.5 $ 198.5 $ 189.4 $ 198.9 $ 216.4 $ 196.0 General Engineering 143.3 147.9 133.9 120.9 130.0 128.2 117.1 104.8 121.7 Automotiv
Slide 32: Reconciliation of net sales to value added revenue – annual
Reconciliation of net sales to value added revenue – annual 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 LTM 4 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 33: 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 Consolidated - Reported Net Income (Loss) $25.7 $20.7 $21.7 $23.6 $28.0 $19.2 $25.4 ($10.6) $29.1 Interest Expense 5.6 5.7 5.7 5.7 5.7 5.8 5.8 7.3 6.1 Other (Income) Expe
Slide 34: Reconciliation of reported net income to adjusted EBITDA - annual
Reconciliation of reported net income to adjusted EBITDA - annual (in $ millions) Annual 5 2015 2016 2017 2018 2019 LTM Consolidated - Reported Net (Loss) Income ($236.6) $91.7 $45.4 $91.7 $62.0 $63.1 Interest Expense 24.1 20.3 22.2 22.7 24.6 25.0 Other Expense 1.8 13.6 - 0.9 20.7 22.0 Income Tax (B
Slide 35: 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 Reported Net Income (Loss) $ 25.7 $ 20.7 $ 21.7 $ 23.6 $ 28.0 $ 19.2 $ 25.4 $ (10.6) $ 29.1 1 0.6 9.0 1.5 6.2 1.3 3.0 3.7 29.9 0.6 Operating NRR Items 2 1.5 1.5 1.5 1.6 1.7 1.6 1.6 22.0 1.
Slide 36: 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 $ 63.1 Operating NRR1,2 Items 496.4 (10.6) 3.9 17.3 37.9 37.2 Non-Operating NRR Items2,3 2.5 14.4 4.5 6.1 26.9 26.4 Tax impact of abo
Slide 37: Kaiser Aluminum
KAISER ALUMINUM