Good morning and thank you for attending today's Constellium Third Quarter 2022 Results Conference Call. My name is Austin and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to our host, Jason Hershiser, Director of Investor Relations. Jason, please go ahead.

Thank you Austin. I would like to welcome everyone to our third 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. Without further ado, I would now like to turn the call over to Jean-Marc.

Thank you Jason. And good morning, good afternoon everyone. Thank you for your interest in Constellium. Let’s turn to slide five and discuss the highlights from our third quarter results. I'd like to start with safety our number one priority and a key pillar of our sustainability strategy. I am pleased to report that we delivered best-in-class safety performance in the third quarter. We reducing our year-to-date recordable case rate to 1.8 million hours worked. In the third quarter, several of our sites achieved safety milestone. Our research center C-TEC in France, achieved the one year milestone without a recordable case. Nanjing, China achieved two years and both Vigo, Spain and Astrex in Canada, we achieved three years. I want to congratulate all of our employees on this excellent performance. But the safety journey is never complete. And we all need to remain focused on this critical priority every day. Turning to our financial results, shipments were 387,000 tons down 2% compared to the third quarter of 2021. As higher shipments in A&T and AS&I were more than offset by lower shipments in part. Revenue increased 27% to €2 billion as a result of higher metal prices and improved price and mix. 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 €673 million up 21% compared to the third quarter last year. Our net income of €131 million in the quarter compared to the net income of €99 million in the third quarter of 2021. The increase in net income is primarily related to the recognition of deferred tax assets that were previously unrecognized. As…

Thank you, Jean-Marc. And thank you everyone for joining the call today. Please turn now to slide eight. Value added revenue or VAR was €673 million in the third quarter of 2022, up 21% compared to the same quarter last year. €109 million of this increase was due to improve price and mix in each of our segments. €44 million euros of this increase was due to favorable FX translation tied to a stronger U.S. dollar. Volume was a headwind of €11 million, as higher shipments in A&T and AS&I were more than offset by lower shipments and in part. Finally, metal impacts were a headwind of €27 million as inflation on input costs such as hardeners and alloying elements more than offset our scrap performance in the quarter. There are three important takeaways from this slide. First, we grew our value added revenue by 21% in the quarter versus last year. Second, we continue to have pricing power. Pricing mix and price specifically, is the biggest increment of our year-over-year variance and is helping us combat inflationary pressures. And third, with adjusted EBITDA of €160 million in the quarter our margin on value added revenue in the quarter was 23.7% which is better than our 2019 VAR margin. Now, turn to slide nine and let's focus on our PARP segment performance. Adjusted EBITDA of €78 million decreased 17% compared to the third quarter of 2021. Volume was a headwind of €9 million, with higher shipments in automotive, more than offset by lower shipments and packaging and specialty road product. Automotive shipments increased 16% in the quarter versus last year, as new platforms began to ramp up. Though we continue to be impacted by the semiconductor shortage and other supply chain challenges. Packaging shipments decreased 9% versus last year, while…

Thank you, Peter. Let's turn to slide 16 please and discuss our current end market outlooks. The packaging market continues to be strong in both North America and Europe and domestic supply remains tight. In North America, we have seen some short term inventory adjustments at the can-makers, but we believe this will be short lived. The focus on sustainability is driving increased demand for infinitely recyclable aluminum cans and we are confident in the long term outlook for this end market. Even announced can-maker capacity additions in both regions, as well as recent announcements of Greenfield investments here in North America. We’ll participate in these growth in both North America and Europe through a series of projects to unlock 200,000 tons of capacity by 2025 as announced at our Analyst Day earlier this year. Turning to automotive, near term, the demand continues to be hindered by the semiconductor shortage and other supply chain challenges and the industry is already operating at a low utilization rate. However, we'll remain very positive on this market. Inventories are low, consumer demand remains high and vehicle electrification and sustainability trends will continue to increase the demand for light-weighting and low CO2 recycled content. Let's turn now to Aerospace. Aerospace shipments were up around 50% in the third quarter versus last year, but are still only back to approximately two thirds of pre-COVID levels. Major OEMs have announced field rate increases. We remain confident that the fundamentals driving aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel efficient aircraft. As a chart on the left side of the page highlights these three core end markets represent 76% of our ALTM [ph] revenue. We like the fundamentals in each and hence my consistent comments we like our hand even…

Thank you. [Operator Instructions] Our first question is with Emily Chieng from Goldman Sachs. Emily, your line is open.

Good morning, Jean-Marc and Peter, and thank you for the update this morning. My first question is just around. I think the first question is just around the power hedging strategy that you have. And understandably that the 2023 outlook probably has a few moving pieces there. But wanted to understand that if you can share any color around how hedge book looks at 2023. And if you've been able to take advantage of some of the recent lowered European power prices right now?

Yes, thanks, Emily. So we had just we've set in the past on a multiyear rolling forward basis. And we layer in our hedges over time. And so if you take kind of a three year horizon, that's typically what we're working with. And we aim to be approximately, kind of 75% to 80% hedge before the beginning of the year. So without saying exactly kind of what our kind of hedge position is for 2023, you can kind of figure it out in rough order of magnitude from that. And then with respect to your second question. We are watching energy prices very closely. What you've seen in the spot market has not really translated itself fully into the forward market. But, but we are watching that carefully. And hopefully, it will create some opportunities for us.

Great, thanks, Peter. And then a second question, if I may. I know you mentioned those fairly tight metal supply landscape out there right now. And in the past, I believe you've mentioned that you're no longer consuming Russian metal across your portfolio as well. But to the extent that we do get announcement from either the White House or the LME around further sanctioning of Russian metal, how do you feel see that impacting your ability to purchase primary aluminum?

So we’ll purchase some Russian metal, just for the record, and we've got contracts, so which we honor, I mean as you know Rusal is not sanctioned. I think, it's very difficult to ascertain what would happen if there was the sanctions and what kind of sanctions there would be against Rusal and whether they would apply to Europe or to America both. But I think we went through that a little bit in 2018. And what happened was, obviously, secession of purchases from Rusal, and a big spike in NME and premiums, which means on one hand, it gets a little bit more difficult in the short term to find the metal we need, but on the other hand, our scrap profits are increasing because the LME goes up. So in terms of impact on EBITDA which ultimately is what matters I think you've got an upsetting mechanism here. And I think, we'll be monitoring the situation complying with all the laws, regulations or sanctions, obviously. And in terms of what it means we'll see when it happens. But I think from any business standpoint, that shouldn't be a catastrophe from it.

And just one thing to jump into enhance what Jean-Marc said, we buy less than 5% of our metal from Rusal.

As well, you will have noted that our inventories are quite high, and deliberately so. And we plan to continue to maintain some high inventories going into the end of the year. So that we are insulated from the vicissitudes of what may happen in terms of what we saw from there.

Great, that's very helpful. Thank you both.

Thank you.

Our next question is from Curt Woodworth from Credit Suisse. Curt, your line is open.

Yes, thank you. Good morning, Jean-Marc and Peter.

Good morning, Curt.

So I guess with respect to the guide for 2023. And if we look at year-to-date this year, based on your bridge, it seems like you're roughly €30 million ahead on price versus cost. And obviously, you're outlining materially higher energy and continued inflation next year. So, the 210 buckets year-to-date, can you kind of give us a little bit of idea that, if you're ahead this year, then are you kind of thinking that you're going to see a reversal of maybe the same magnitude. So theoretically, it's kind of like what you're saying the operating leverage is getting negated by price cost. So if you can give any more granularity on how should we should be thinking about that, that'd be helpful.

I mean, we're not giving guidance, gentlemen. We're trying to give you some color as to how we look in the future, given the pressures, we are feeling on the cost side on the with the inflation. And you're right, I mean if you look at page 12. We're ahead this year. We were able to improve our price on nickel products more than we suffer from the inflation. However, there is a lag in terms of what we can do, how we can push through the cost pressures, and we are seeing more inflation on energy in the second half of this year than we are than we have seen in the first half compared to 2021. So our judgment at this point in time is, if I look at the big bucket, from a volume standpoint, we've got 76% of our business as Peter was saying in markets that we like that we like very much our key strategic market packaging should continue to be a resilient arrow, there are no signs of weakening whatsoever. And it's going to continue to grow quite significantly next year. And then in, in automotive, and we've been down, in 20, in 21 in 22, kind of 20% below the trend rate in terms of auto build. So we think the fundamental on the volumes are quite good. And in our specialties, there's more than half of them which are going to be very good going into next year. So we think on the volume side, it's no, it's not too bad in this and with the weakness we're seeing may continue into next year. But overall, we, as I said in the prepared remarks, we like [Indiscernible]. In terms of pricing, we've been very strong and very good at pushing through…

Okay, that's helpful. Yes. I mean, I know that. I think I believe you had PPI escalators for a fair amount of your business as well. In Europe, I mean, German PPI was up at 45% in September. So I assume that that will be a meaningful help coupled with the fact that you're trying to implement surcharges. But it seems like what you're saying is just the contractual nature of these contracts, it just takes it takes time, potentially, to show the cost coming in, and then you can recoup price, or is it just the fact that energy is up so dramatically that the PPI is not going to be enough to help offset? And I know, it's still early to talk about next year as well? Because energy is around a lot.

Yes, but both factors come into play. I mean, it's, I mean, we're such in an extraordinary environment, that the PPI mechanism itself has not been tested with energy prices that good by 500% or 600% 700%. Right. So we have to see how it comes out. But then, also we were pushing through energy surcharges with success with some customers, but you're getting three months sooner or three months later, that does make a difference.

Okay, thank you very much. That's all I had.

Our next question is with Corinne Blanchard from Deutsche Bank. Corinne, your line is open.

Hey, good morning, Jean-Marc and Peter. Thank you for the time this morning. I have two questions. Maybe the first one. You mentioned, the operation or setback at the Muscle Shoal facility. Can you just provide a service commentary around are they going to transition into 4Q in 2023. And then I think the second question was trying to listen better the packaging market and the volume. I think volume went on 14% 15% this quarter. I understand there is some seasonality, but I think that was an effect most of the decline. So just trying to understand maybe what happened this quarter and how to think about the next six to nine months for packaging?

Yes. Good morning, Corrine. Thanks for the question. So in terms of the operational issues at Muscle Shoals, they essentially boil down to the key factor, which is the finding and retaining talents. I mean, I saw a stat recently that turnover staff turnover in the U.S. in manufacturing is around 40%. To another that level, we're in the 20s. But that's painful in terms of bringing in new people, training them, and we have jobs that need pretty solid qualification and experience. So if it takes one year, two years to bring somebody to the top of their game, obviously, as you have more new people, the multiannual people spend time training them that gets that has an impact on productivity. So that's really the key challenge we faced in Muscle Shoals. And that translates into less volume that we're able to produce. We still meet our contractual commitments, but there was always a band around them. So we tend to be at the lower end of the band right now. And in addition, there's been some inventory adjustments in the North American system, as the market is growing very fast. And, that's never linear when the market grows too fast. So that's on the volume side. I mean, the root cause, and also the cost side, the lack of experienced trained operators, engineers, is costing us a little bit in volume and a little bit in costs. We've got another factor too, which is with a decrease in LME and Midwest premium price. Our recycling operations are a little bit less profitable than we used to say that we had something around €5 million of benefit to scrub spreads in the past, they are not here anymore. So it's a combination of these two factors. I mean, training experienced people leading to higher cost and lower volumes and scrap spreads that are creating the situation. Now in terms of how that projects rollout will not make a prediction on scrap spreads. In percentage terms, it continues to be very favorable, it’s just that there is the LME is lower but I think getting the situation back to a target product which has Muscle Shoals we will take a few quarters We have stabilized the situation. We used to have 150 open positions we’re around 30, 40 now, so we're making progress, but it's going to take six months, nine months to, to get back on track. And in terms of the packaging market, I continue to see it as the free, strong and solid. And I've got a pretty good outlook for the rest of the year. And next year, you're right to point out that there is seasonality. And typically Q4 is going to be lower than Q3, which and the best quarter for balance [ph] sheet is three to two. So that's, that's kind of my answer to your question.

Thank you. So just to follow up portfolio in the sense, for this quarter when we see volume down like let's say 15% or so was it like purely like a seasonal move or whether anything is coming from them?

No, there is a there is a portion of it, which comes from the fact that lacking enough staff, trained staff, we have not been able to run at the rate of productivity that we wished we would have. So there is some of it, which is inventory adjustments in the market. And there is some of it, which is us not reaching the productivity levels we wish we would have in under normal circumstances.

Okay, great. Thank you.

Our next question is with Timna Tanners from Wolfe Research. Timna, your line is open.

Yes. Hey, guys, thanks a lot. I wanted to just touch again, on the inventory situation with lower prices. We've been kind of watchful, of inventory and work down. And I know, you mentioned that there's a reason to keep strategic inventories of certain alloys and so on. But there's still been a pretty sticky inventory level. So I guess to ask the question a different way. What do you think it takes to see an unwind there and an improvement in working capital release there?

Yes, thanks, Timna. I think, well, first of all, remember that we, we hedge our inventory. So from a kind of a metal price variability, there might be some translation impacts, but there shouldn't be material cash impacts on us. But in terms of the, what we're seeing, we still see a decent amount of uncertainty in the market, in terms of metal supply, in terms of, end market demand and so forth. And all that's leading us to make sure that we want to be sure that we have the materials to kind of serve our customers. So as we see more stability and I think more stability would probably mean that, just to paint the picture, that we've got a little bit clearer guide on the direction of the economy, that number two, we have a little bit clearer guide on kind of where energy prices are going. And therefore, kind of the output from various smelters on metals and alloys is clear, then we'd be prepared to, to bring that down. But it's a, it's definitely an opportunity for us. And I'll remind everyone on the call that it's a significant source of cash for us when we do eventually unwind it. So.

Right. Okay. And that's why we're so watchful of it. I guess, the along the same lines, this quarter, you talked about and with your leverage on the call, you said at three times, and then the prior earnings. Last quarter, you had said below 33 times and of your leverage expectation. So is that purely the slower inventory release and the low end of the EBITDA guide? Or is there anything else there? And is there is this just a question of timing and greater visibility that you can get to the targets you've laid out? Thanks.

Yes, sure. So I guess there are a couple of things. Number one, moving to the low end of the EBTIDA guide definitely impacts it. But the big headwind that we have had is on FX, right. So we're generating all this, this free cash flow, but the FX is offsetting it. And if you kind of do the math on this, the incremental EBITDA that we get from kind of FX tailwind is not does not offset the negative that we get from the FX translation on the dollar debt. Right. So as a consequence, we are, our leverage ends up being a little bit higher than what we expected it to be. But of course, when FX moderates then this will go the other way.

Got it. Okay, that makes sense. Thanks very much.

Yes, maybe just one other point. Given some of the uncertainties in the market we've probably been a little bit more conservative with our capital structure than we might have otherwise been. For example, our debts trading at a pretty significant discount. And so some might say, why don't you kind of buy back some debt. But we want to make sure we know what we're heading for or heading through before we start making those decisions.

Thank you.

Our next question is with Josh Sullivan from The Benchmark Company. Josh, your line is open.

Hey good morning.

Morning, Josh.

Is there any arbitrage you're able to coordinate between the European and North American operations or inventories? How fungible is the production in Europe? Can you ship anything in North America? Or the friction cost is too high?

I think we can do it on a very marginal basis. But typically we like to avoid it. And the markets are still good for us in Europe. I mean, we're running at a free high utilization, rate. So there's not that much, even if they were economical advantages which they are really not so much. We are pre booked in Europe.

And in the U.S. right? We don't have the capacity to do that in a big way.

Okay. And then just on the aerospace side, what are you seeing relative to OEM inventory stocking ahead of upcoming production increases, historically we would see policy in the line to prepare for these increases, clearly unique cycle. Do you think that the current demand that you're seeing, reflects any policy on the inventory? Or do you think there's been any long term structural changes to more, kind of adjust in time environment going forward?

I think it's too early to tell. Everybody is scrambling to rebuild inventories. Because they were really depleted. As I think I’m mentioned them for two years, markets were down by 30%, we were shipping at 50% of what we used to be shipping. So I think everybody's trying to rebuild. And now that settles, I think it's too early to tell.

Okay. Thank you for the time.

Thank you.

Our next question is with Karl Blunden from Goldman Sachs. Karl, your line is open.

Thanks so much for the time. Peter, you kind of pre-empted one of my questions there as to why not buy back some debt, given where it's trading. Now, I guess the just to build on that comment that you were making the prior question, when you think about the market, maybe normalizing are becoming more just visibility improving? Is the next step on the balance sheet to pay down debt or is it to extend the maturity runway? In other words, would the world need to be really, really unclear as to where it was heading for you to look to extend versus just to pay down and get towards that leverage target that you're looking to get to by 2025?

Well, again, if you think about what we said consistently, we want to lower growth debt. So that kind of points us in the direction of kind of paying down debt, as opposed to just extending. The other thing I'd say is that, despite some of these headwinds that we have, and as Jean-Marc said, we're kind of going through this blip of energy prices in Europe. But when we look at the overall kind of Horizon, we see a lot of opportunities for the company, internal opportunities that we can do, take advantage of to be better projects that we can do. So markets that really want our project. So our one our product, so that leads us to more forcefully direct ourselves towards getting that balance sheet to a place where, what regardless of what the environment is, we can pursue these because we really believe that there are some opportunities to really enhance the returns of the company by some of these initiatives.

And that's all for context.

Sorry, Karl. We really, we really do not feel any need to refinance anything at this stage. If you look at the quantum of what becomes due in 2026, and you compare it to the free cash flow generation of the company, and to the level of inventory we have now that we will not have by that time, we should be paying that down quite handsomely. So I think we're in a very good place from a capital structure standpoint. And we'll just be patient that chipping away at the process.

That's helpful. There were some comments earlier around forward purchases of energy and doing that on a rolling basis. Understand that exact details might be hard to disclose. But how much flexibility do you have there to do more in a given month versus another month? Or is it? Should we expect it to be fairly consistent over the course of the year?

Well, we, I think you should expect it to be fairly linear. I mean, we have a policy that we thought and we follow the policy, right. So however, within the context of the policy, we also have the ability to get the team together and decide there's a good opportunity here, or we should on the other hand, we should wait a little bit. So we have some flexibility within it. But generally speaking, we're following the policy.

Thanks for the time, appreciate it.

Our next question is with Sean Wondrack from Deutsche Bank. Sean, your line is open.

Hey, there, just a couple from me. So I guess just going back to the aerospace question. I think you said you're roughly two thirds of pre-COVID levels. Is that sort of where utilization? Should we assume utilization sort of in the two thirds level?

Yes, that's a fair statement.

Is it fair to think that you guys get greater economies of scale as that ramps up moving forward?

Somewhat, but at the same time, you got threshold effects, and we need to hire more staff and all that. So that's very some economies of scale. It's not like everything you read, the Shoal's done is pure gravy.

I mean, it's, it's definitely our best margin product, right. So you'll see it all fall through and you're seeing it fall through on the EBITDA line for A&T.

Right. Absolutely. And then I guess, just switching the CapEx a little bit, obviously, you haven't given guidance or respect that. But I think in the past, Peter, you've sort of talked about the flexibility to adjust CapEx and market conditions. I was curious if you can comment on that. And then also, can you just remind us what is sort of sustaining or maintenance versus growth?

Yes. So well, first, on the on the second question, maintenance was about 200. So that's a good number to use on that front. So we've been on this journey to improve our capital structure. And I think we're, the frustrating thing for us is that we're really almost there. And then, we're hitting this bit of a speed bump here. But the one thing is, is that when we look at this, and this goes a little bit to the response that we gave to Karl's question. We think we've gotten to a place where we need to run the company for the long term benefit of our stakeholders, right. And therefore, we think that we can continue with our CapEx plan the plan that we outlined in the in the analyst day, and put some of those projects in place to deliver returns, even though we might be a little bit lower on the adjusted EBITDA side. So, so for the time being, I mean, again, never say never, but for the time being, our plan is to is to stick to the CapEx plan that we had outlined at the analyst day and build the company for the future, taking advantage of the opportunities we see.

Fair enough, and just on the work…Sorry, go ahead.

Just wanted to compliment. And actually, on some of these projects that we have in the site that we I liked it that the April's analysts day their profitability, their returns are improving. I mean, the higher energy costs are making quite a few of these projects around the recycling and efficiencies very attractive to us. So yes, when the plan would be to plough ahead in 2023, and onwards, because we think these are very good projects in the long in the short and long run for shareholders.

Understood. Alright. Thank you very much. I appreciate all your help.

Thank you.

That concludes our Q&A session. So I will pass the conference back over to our host, Jean-Marc Germain CEO of Constellium.

Thank you, Austin. And thank you everyone for listening in today. As we said, we've got some challenges ahead. But we faced up to our worst challenges in the past and I'm sure the company will prevail again. I’m very optimistic about our future and our ability to make these temporary squeeze a very temporary one. Thank you so much.

That concludes today's call. Thank you for your participation. You may now disconnect your line.