April 26, 2017

Kaiser Profitable Despite Headwinds

Kaiser Aluminum Corp., Foothill Ranch, Calif., reported net income of $36 million in its first quarter, an increase of 38.4 percent from the same quarter in 2016. Net sales for the quarter totaled $355 million, an increase of 4.0 percent. The sales increase was driven by a 3 percent gain in shipments and a 1 percent increase in the average selling price.

“Market-driven headwinds from lower sales margins and commercial aerospace supply chain destocking, combined with internal headwinds related to planned construction-related inefficiencies at our Trentwood rolling mill, negatively impacted our first-quarter results,” said Jack A. Hockema, chairman and CEO. “Despite these headwinds, our first-quarter adjusted EBITDA and adjusted EBITDA margin were comparable to the strong prior-year period driven by solid operating performance and improved costs.”

Kaiser attributes the 3 percent increase in shipments to improved demand from general engineering and supply chain restocking. Significantly improved manufacturing efficiency across the company’s extrusion/drawn facilities more than offset the temporary construction-related inefficiencies at Trentwood, executives added.

Value-added revenue in the first quarter declined by 3 percent to $204 million due to lower margins on non-contract sales and a leaner mix of shipments. Aerospace high-strength value-added revenue declined 9 percent to $112 million due to supply chain destocking, while value-added revenue for automotive extrusions increased 3 percent to $30 million, reflecting significantly higher bumper product shipments following program delays experienced in 2016, the company said.

The Trentwood modernization project is proceeding as planned, and the company anticipates more significant construction activity and equipment outages in the second quarter. The effects of that construction will “have a significant impact on our second-quarter results as we complete this next phase to expand capacity and improve our competitive cost position,” Hockema said


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Monday, December 11, 2017