Hello and welcome to today's Constellium Second Quarter 2022 Results. My name is Elliot and I'll be coordinating your calls today. [Operator Instructions] I would now like to hand over to Jason Hershiser from Director of Investor Relations. The floor is yours, please go ahead.

Thank you Elliot. I would like to welcome everyone to our second quarter 2022 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; and our Chief Financial Officer, Peter Matt. After the presentation, we will have a Q&A session. A copy of the slide presentation for today’s call is available on our website at constellium.com, and today’s call is being recorded. Before we begin, I’d like to encourage everyone to visit the company’s website and take a look at our recent filings. Today’s call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the company’s anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements, please refer to the factors presented under the heading Risk Factors in our Annual Report on Form 20-F. All information in this presentation is as of the date of the presentation. We undertake no obligation to update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. In addition, today’s presentation includes information regarding certain non-GAAP financial measures. Please see the reconciliations of non-GAAP financial measures attached in today’s slide presentation, which supplement our IFRS disclosures. I would now like to hand the call over to Jean-Marc.

Thank you, Jason. Good morning, good afternoon everyone, and thank you for your interest in Constellium. Let's turn to slide 5 and discuss the highlights from our second quarter results. I would like to start with safety our number one priority. After a strong first quarter performance, our recordable case rate climb in a second quarter leading to rate of 2.2 per million hours worked for the first half of the year. This is a humbling reminder that while we always strive to deliver best-in-class safety performance, we need to constantly maintain our focus on safety to achieve the ambitious targets we have set. It is a never-ending task for our company and one that we take very seriously. Turning to our financial results. Shipments were 424,000 tons, up 4% compared to the second quarter of 2021 due to higher shipments in each of our segments. Revenue increased 50% to €2.3 billion as a result of higher metal prices, improved price and mix and increased volumes. As we have said previously, while our revenues are affected by changes in metal prices we operate a pass-through business model, which minimizes our exposure to metal price risk. Our value-added revenue, which reflects our sales excluding the cost of metal was €704 million, up 22% compared to the second quarter last year. Our net loss of €32 million in the quarter compares to a net income of €108 million in the second quarter of 2021. The decrease in net income is primarily related to a €158 million unfavorable change in unrealized gains and losses on derivatives, mostly related to our metal hedging position. As you can see in the bridge on the top right, adjusted EBITDA was €198 million, 17% above the second quarter of 2021. This is a new record for the…

Thank you, Jean-Marc and thank you everyone for joining the call today. Please turn now to slide 8. Value-added revenue or VAR was €704 million in the second quarter of 2022, up 22% compared to the same quarter of last year. €34 million of this increase was due to higher volumes in each of our segments. €81 million of this increase was due to improved price and mix also in each of our segments. Metal impact for a headwind of €21 million, as inflation on inputs such as hardeners and alloying elements more than offset our scrap performance in the quarter. Finally, €35 million of the increase was due to favorable FX translation tied to a stronger U.S. dollar. There are three important takeaways from this page. First as Jean-Marc noted, the top line dynamics in our business remained favorable in the quarter. Second, with adjusted EBITDA of €198 million in the quarter our margin on value-added revenue was 28.1%. And third, to put our performance in context, compared to the first half of 2019 VAR in the first half of this year was up 11% and our adjusted EBITDA margin on VAR was up approximately 200 basis points. Now turn to Slide 9 and let's focus on the PARP segment performance. Adjusted EBITDA of €95 million a new record for PARP increased 2% to the second -- compared to the second quarter of 2021. Volume was a tailwind of €5 million with higher shipments in packaging and automotive. Packaging shipments increased 4% versus last year on continued strong demand. Automotive shipments increased 3% in the quarter versus last year as new platforms began to ramp up, but overall demand continues to be well below pre-COVID levels due to the semiconductor shortage and other supply chain challenges. Price and mix…

Thank you, Peter. Let's turn to slide 16, and discuss our current end market outlook. As I mentioned before, demand generally remains very strong in the markets we serve. We are benefiting from sustainability-driven secular growth trends such as consumer preference for infinitely recyclable aluminum cans, light weighting in transportation and the electrification of the automotive fleet. Constellium is well positioned today with our diverse and balanced portfolio to capture this growth. The packaging market is strong in both North America and Europe, and domestic supply remains tight. We expect mid-single digit demand growth in the medium term, which is supported by already announced can-maker capacity additions in both regions, as well as recent announcements of greenfield investments here in the US to build new aluminum rolling mill. We recently announced a series of projects to unlock 200,000 tons of capacity by 2025 to serve this growing market. These brownfield projects will expand our capacity in both North America and Europe, and come with very attractive returns for our shareholders. Near-term automotive demand continues to be hindered by the semiconductor shortage and other supply chain challenges. OEMs experienced production stoppages, again, in the second quarter. We expect these to continue in the second half of this year. From an end market demand perspective, however, we remain very positive on this market, and in its growth potential given low inventories, high consumer demand, electrification trends, and continued penetration of aluminum. Let's turn now to aerospace. Aerospace treatments were up over 50% in the second quarter versus last year, and up 25% sequentially. Major OEMs have announced build rate increases. We remain confident that the fundamentals driving aerospace demand remains intact, including growing passenger traffic and greater demand for new more fuel-efficient aircraft. Turning lastly to specialties. In general, these markets are…

Thank you. [Operator Instructions]. Our first question today comes from Curt Woodworth from Credit Suisse. Your line is open. Please go ahead.

Yes. Thank you. Good morning Jean-Marc and Peter.

Good morning, Curt.

Good morning, Curt.

First question I just wanted to kind of get your thoughts on potential capital return going forward. I mean, when you look at kind of your net leverage and certainly going forward in the free cash flow outlook, it seems like your balance sheet is getting to be roughly speaking where you want it. So I was wondering if you could kind of address potential pivots and capital allocation priority as you move into next year.

Yes. Great question Curt. So, we're going to be consistent on this one. As we said in the past the number one priority is to kind of achieve our leverage target and that was 2.5. And once we're at 2.5 then we'll kind of reconsider our options. But absolutely as we get to 2.5 which we are rapidly approaching then shareholder distributions will become a more central focus for us. And we're kind of thinking about that and framing that right now.

Okay. And then I guess maybe -- I know you don't give kind of quarterly guidance, but as we think about sort of sequential progression into 3Q, it seems like momentum obviously in A&T is very good. Price and mix was obviously a big upside this quarter. So maybe I guess question would be on A&T. Did you feel like the mix and the progression will continue to scale up EBITDA per ton is obviously very strong. And then within automotive structures, it seems like automotive is maybe getting a little bit better, but can you comment on maybe what your automotive assumptions are for 3Q or the back half of the year? Thank you.

Yes. I'll get started and Peter will help me. So remember there is seasonality. And typically the second half of the year is not as strong as the first half of the year so thinking about it sequentially. We continue to see strong demand in A&T. So it's going to be a very solid second half. But when you look at the EBITDA per ton, you remember we've said historically €700 to €800. EBITDA per ton is a good number. Maybe we're drifting up towards the higher end of the range. Q2 was exceptionally strong I think over €1,000. So we don't expect the Q2 performance in EBITDA per ton to continue through the end of the year. Talking about auto, we don't anticipate much of a change in terms of all the supply chain issues that the OEM customers are going through. We expect a continuation of a social environment for them, but we are pleased with how we're doing in that environment. And yes year-over-year if you look at the first half of 2022, we're slightly up to overall automotive shipments and we think we'll stay around these levels seasonally adjusted for the second half.

Yes. The only thing I'd add -- I think that's great. The only thing I'd add is that when auto comes back, we're ready, right? I mean, our lines are running very well and so we're ready to absorb incremental demand.

Okay. Maybe just one quick one. I mean we've seen three new greenfield plants have being announced in two months' time. It's roughly 1.8 million tons. So it's a pretty significant step function change capacity coming into the market 2025, 2026. I would think a lot of those -- I know you can't speak to them, but clearly they've got commitments for some of that capacity beyond which suggests more growth ahead. I was just wondering can you kind of comment on your view of that? Do you feel like the market will be able to absorb that capacity? Thank you.

Sure. So as we commented during the Analyst Day, we are sold out essentially through 2025-2026 and we've got significant contracts that go beyond those dates in the decade. But we are not sold out through 2030. That is for sure. We believe that given the growth in the market you do need this additional capacity over the -- by the end of the decade. So how fast they come up online and they ramp up and how quickly they ramp up, how successfully they ramp up may create either a very tight supply-demand balance or some excess supply if everything comes on stream quickly and ramps up very quickly in kind of 2026-2027 horizon. But ultimately that level of capacity is needed and yes beside remember that there's -- the equivalent of today there's the equivalent of one of these greenfield that is imported from overseas because we're lacking domestic capacity in the US. And these imports are certainly part of the equation that we need to think through as we think of the supply-demand balance in the US.

Great. Thank you.

Our next question from Emily Chieng from Goldman Sachs. Your line is open.

Good morning, Jean-Marc and Peter. And thanks for taking the time today. My first question is just around your comments earlier on the energy cost increases and potentially what you're expecting in the 2023. But perhaps could you share some color as to maybe what hedging you have in place or contracts that you have that do give you that confidence that the additional cost increase into 2023 remains manageable particularly as it relates to Europe?

Yes. Well so let me first comment on 2022 and say that vis-à-vis 2022 we're effectively -- we've purchased all of our energy. So we're effectively that on 2022. Moving into 2023, the way we think about this is that we do expect there to be significant increases. However as I said in the prepared remarks, we also think given the extraordinary increases that there is a need for some type of energy surcharge mechanism. And we're working with our customers on that right now. And so right now it's hard to give a lot of guidance on 2023 because we really need to see how effective we are in working through that aspect of it. So as that develops into kind of Q3 and Q4 and early next year we'll be able to give you a lot more color on 2023 in terms of energy cost.

Understood. And then a follow-up is just around the higher metal costs from sourcing new sources of high purity aluminum and similar on maybe domestic US MAG as well. But are those costs more one-off efficiencies, or do they ultimately get passed through on pricing as you walk through new supply sources?

Well so on high purity these are costs likely we will have to absorb and it will be absorbed in kind of through the different mechanisms that we have in place the PPI structure and so forth. Magnesium costs again as I said in the prepared remarks, we've put in place the kind of pass-through mechanisms on magnesium costs some of them with delay. So we will not necessarily get all of that in 2022. But by the time kind of 2023 comes along we should be fully protected. And it's in our guidance too.

Great. Thank you.

Our next question comes from Corinne Blanchard from Deutsche Bank. Your line is open. Please go ahead.

Hi. Good morning, Jean-Marc and Peter. Thank you for the time today. I just want to go back maybe on the packaging. And can you just remind us on the contract and the volume that we can expect to be renewed into 2023 and 2024?

Well, we have extended quite a few of our contracts. So the rule of thumb which was historically it's most of the time five years sometimes three years so you're kind of renewing every year 22%, 25% of the volume. Maybe it's a little bit less now.

Okay. And then maybe to just try on that as well I mean, how do you view pricing negotiation for those kind of contracts like on the medium term, let's say 2026, 2027 given the upcoming capacity in the market?

Yeah. So we don't have anything really much to negotiate anymore because most of our contracts are already agreed and locked in for the period 2023, 2024, 2025. So that's pretty much done extensions to current contracts. I mean, we have plenty of time to work on them. So today, we don't have a burning need ourselves to get to the market and sell our capacity for 2028, 2029. 2027.

Thank you. And maybe one last question if I can and maybe more for Peter. But I was looking interested into FX sensitivity like Euro, USD. Can you just provide some color about the impact that you see from this and what could be impacted or expected for the second half of the year?

Yeah. So the -- so maybe the best way to do this is in the context of the first half, right? So in the first half, in the first quarter on a year-over-year basis, we had about a €5 million impact and in the second quarter we had about a €10 million impact. So relative to last year, we're talking about a €15 million-ish tailwind from FX in the quarter and

EBITDA.

Sorry, on EBITDA excuse me. Thank you. So I think €15 million is the -- is probably the right order of magnitude for the first half of the year. And then, if you look at kind of -- I assume you want to know the impact on our balance sheet and our balance sheet, it really kind of flows into the translation impact on our net debt, which is negative, which is the strengthening of the US dollar, is really the reason why our debt balance is maintained persistently around €2 billion, despite the repayments that we've been making. But then on a cash flow basis, the FX it should be modestly positive to neutral because the benefit that we get on the EBITDA side gets absorbed in things like interest expense and CapEx and so forth. So it's a modest positive.

Great. Thank you. Very helpful.

You're welcome.

Our next question comes from Josh Sullivan from The Benchmark Company. Your line is open.

Hey, good morning.

Good morning, Josh.

Just within aerospace and congrats on the strong growth here, but curious, as engines remain a gating factor for OEM deliveries. And Airbus has built a couple of gliders already. Do you see any scenario where the engine supply chain needs to catch up and there's a related need to slow down demand for aluminum structure needs?

Yeah. So we're very much aware that the engine part of it is the most significant bottleneck at the moment in the aerospace industry that gets a lot of press. We don't see any of our customers telling us to slow down. If anything, I mean we're in [indiscernible] just earlier this month, everybody is asking for more metal than what we can produce. And so, there is a very strong need to replenish the supply chain. I mean remember Josh, for two years build rates were down by 30% and we are delivering at 50% less than what we were. And not only us, I guess the rest of the industry as well. So there's really pausity of aluminum in the supply chain and everybody is scrambling to get more aluminum and we see that continuing into 2023.

The only thing I might add

And just…

Sorry, go ahead.

No, go ahead please.

No, I was going to say, the only thing I might add to that is that once the aerospace companies start a build rate we don't think they're going to be quick to change it, right? So we don't see this as a -- we don't see there being a risk that this slows down in the kind of 2022, 2023 time frame

And then just given the impressive EBITDA per ton at A&T and then just thinking about the aluminum lithium product. I understand Airbus when they took over the A220 program might have reviewed that supply. But given order activity around the A220 and that -- the prospects for that program have you seen an uptick in aluminum lithium demand?

A little bit, but nothing different from the rest. I mean, it's heavily mix dependent. You know that quite a bit of our aluminum lithium alloys goes on A350, which is a wide-body aircraft, which is not experiencing -- wide-bodies are recovering a little bit more slowly than narrow-body. So there's plenty of factors in there, but we remain very optimistic about the prospects for hardware.

Thank you for the time.

Sure. Thank you.

Our next question comes from Karl Blunden from Goldman Sachs. Your line is open. Please go ahead.

Hi. Good morning. Thanks for the time. A lot of comments on energy costs and ability to pass that on. I wonder if you could comment a little bit more on energy supply, just given the volatility we've seen in natural gas supply to Europe and your thoughts around operating the business in that environment.

Sure. Well, Karl, the way I think of it is, I mean, two bookends and I'm not saying they are fixed and will never change. But one bookend is the current situation, where gas continues to flow, albeit at a much reduced level, right? But it's still available for us to operate and it operates at -- it's available at very high prices. So that's one bookend. The other bookend is, what the Commission has published, which is a 15% reduction in demand from Europe and which would trigger certainly even more expensive gas prices as part of a rationing scenario. I think, what's important to understand is, for us, a 15% reduction in natural gas availability translates into less than that in terms of peter-out [ph] production. But what would happen most likely that there's plenty of other factors in the environment around us that may change in unpredictable ways. So we cannot predict if there's a 15% reduction in natural gas usage, how would that impact our auto customers, our aerospace customers or our packaging customers, right? Maybe they're impacted more or less than the 15%. The same for our suppliers. So there's uncertainty. But if this is a widespread, kind of, share the pain equally across all segments and all geographies in Europe, then you're in a place where the reduction is, for us, is much less in terms of our activity level, much less than a 15% reduction. So that's one point. The other point is, different regions in Europe are exposed to different levels to a Russian gas supply. And it's important to note that, that 15% is an overall European number, it's not clear whether it would be different depending on the countries and depending on their level of exposure to Russian gas. We are operated, as I mentioned in the prepared remarks, mostly in countries where the dependency on the European -- on Russian gas, sorry, is less, so that would help us as well to some extent. But we'll see. Now what I'll finish by saying is, our teams are very reactive. We've already done desktop exercises as to what happens if gas is reduced by X, Y, Z, how do we run our operations, how do we engage with our customers. So we are getting ready. We hope we don't have to use our contingency plans, but we are ready and we are not looking at it in a panicky mode at all. And I think to the extent it's a 15% reduction, it's very manageable.

That’s very helpful. Maybe, this one might be more for Peter. Just on the liquidity and net debt part of the business. You provided quite a few updates in your release there on optimizing the various credit facilities you have in place and you paid down substantial regional credit facilities. Is there more to come on this front in the second half of the year, or do you feel like you are where you need to be now on -- from a liquidity standpoint and flexibility?

I think, we're in a great position from a liquidity standpoint. Based on what we see right now, we don't think we need more liquidity. We kind of -- in a more stable environment, we candidly would reduce our liquidity. But I think, given some of the uncertainty around, we're going to be a little bit patient in that and see what comes. And then, we'll -- once we start to see more stability, we'll gradually bring that down.

Yes. Thanks Peter.

I think it's important to say that we've put ourselves in a position where we can be opportunistic.

[Operator Instructions]. Our next question comes from Sean Wondrack from Deutsche Bank. Your line is open. Please go ahead.

Hi, Jean-Marc and Peter, congrats on improved guidance some of its difficult environment.

Thanks, Sean.

I guess my first question, I was curious if there are any opportunities for you to build inventory, ahead of any potential curtailments, whether on the –– obviously, not on the energy side but on the metal side. And if you've seen any kind of willingness from your clients to allow you to secure inventory ahead of time.

Well, you will have noted Sean that our – we've raised our EBITDA guidance but we haven't retouched our free cash flow guidance and we want to maintain that flexibility to be able to increase inventory, if we believe it's the right business decision for us to make. We're looking at it and we certainly – again, our whole job is to put the company in a place where we can select the best options and we are not constrained by our financial situation or our operating performance. That's where we are. So we're quite happy we can make those choices if they make sense.

Right. No I appreciate I know a lot of this is game theory right now but it's very helpful to ask over here. And then my second question, I was just curious if – particularly around the auto segment, we had another issuer sort of commenting that SAR had been sort of depressed the past two years and they believe that there's a lot of pent-up auto demand out there. Do you also see that being the case?

We think that is, yes. And you just need to drive around in the US and look at the dealers' lots and they are empty, right? I mean it's visible that there is an issue there. So yes, we believe so. And again as Peter was saying earlier, we are ready for when it picks up but we have stopped hoping for it. We're just organizing ourselves for when it happens but we're not hoping for it anymore. We would wait for a pleasant surprise.

That makes a lot of sense. Thank you. And then just lastly, Peter you've outlined a number of things today. It's very helpful on the capital allocation side. We're curious, given that it's potentially an option out there some of your bonds are trading at a discount. Is there any willingness to use any of your free cash flow to go out there and repurchase the bonds?

Potentially and that kind of follows on to my comment that I made to Karl, absolutely it's an option for us and we're kind of monitoring that. We are also kind of cognizant of the fact that there's tremendous uncertainty in the market. And so as I said before, I think our bias for the short term is to kind of keep our liquidity strong. But yes, we're going to continue to be opportunistic. And as Jean-Marc said, I think one of the nice things that we've done as a company over the last several years is we've really put ourselves in a position, where we can be opportunistic. So we'll continue to evaluate that.

Great. And thanks again for highlighting on the energy side today. It’s very helpful. Good luck.

Thank you, Sean.

We have no further questions. I'll now hand back to Jean-Marc Germain, CEO of Constellium for final remarks.

Well, thank you Elliot and thank you everybody for participating in the call today. As you can see, there is plenty of uncertainties out there, but Constellium is very well positioned to make the most of the situation. We believe that most of our markets have very good long-term fundamentals. We're well positioned to reap the benefits of that. And in the interim should there be a further crisis, we are approaching this crisis with a very strong position on the balance sheet side, on the operating side. You would have noted as Peter mentioned in his remarks that our level of activity today as evidenced by the VAR is higher than it was pre-COVID, despite arguably quite a few of our segments being still in a recession. Our operating performance in terms of VAR margin or EBITDA margin is stronger than where you before COVID and I think that's a testament to a great job by everybody at Constellium to make sure that we work on what we can control, put the company in a good place, so that we can be opportunistic and make the most of whatever situation is being turned out. So we approach the future with a lot of confidence, excitement and optimism. Thank you very much and we look forward to talking to you again in October. Thank you.

Today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.