Hello, everyone, and welcome to the Constellium Third Quarter 2023 Results. My name is Nadia, and I'll be coordinating the call today. [Operator Instructions] I will now hand over to your host, Jason Hershiser, Director of Investor Relations to begin. Jason, please go ahead.

Thank you, Nadia. I would like to welcome everyone to our third quarter 2023 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; and our Chief Financial Officer, Jack Guo. 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 statement 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 begin on Slide 5 and discuss the highlights from our third quarter results. I'd like to start with safety, our number one priority. Our recordable case rate was higher in the third quarter, leading to a rate of 2.1 per million hours worked for the first nine months of the year. While the safety performance puts us among the best in manufacturing, the rate is higher than where we want it to be, and we have done better in the past. This is a humbling reminder that while always we strive to deliver best-in-class safety performance, we need to constantly maintain our focus on safety to achieve the ambitious target we have set. It is a never-ending task for our company and one we take very seriously. Turning to our financial results. Shipments were 369,000 tons, down 5% compared to the third quarter of 2022 due to lower shipments in each of our segments. Revenue of €1.7 billion decreased 15% compared to last year as improved price and mix was more than offset by lower shipments and lower metal prices. Remember, 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 5% compared to the same period last year. Our net income of €64 million in the quarter compares to net income of €131 million in the third quarter last year. As a reminder, the third quarter of last year included €142 million related to the recognition of deferred tax assets that were previously unrecognized. As you can see in the bridge on…

Thank you, Jean-Marc, and thank you, everyone, for joining the call today. Please turn now to Slide 7. Value-added revenue was €704 million in the third quarter of 2023, up 5% compared to the same quarter last year. Looking at the third quarter, €102 million of this increase was due to improved price and mix in each of our segments. Volume was a headwind of €30 million due to lower shipments in each of our segments. Metal impacts were a headwind of €17 million compared to the same period last year. The balance of the change was largely due to unfavorable FX translation of €24 million due to the weakening of the U.S. dollar. There are two important takeaways from this slide. First, we grew our value-added revenue by 5% compared to last year. And second, we continue to have pricing power. Price and mix and price specifically continues to be the biggest increment of our year-over-year variance and helped us offset significant inflationary pressures. Now turn to Slide 8, and let's focus on P&ARP segment performance. Adjusted EBITDA of €67 million decreased 14% compared to the third quarter of last year. Volume was a headwind of €4 million with higher shipments in automotive, more than offset by lower shipments in packaging and specialty rolled products. Automotive shipments increased 6% in the quarter versus last year as we continue to benefit from higher build rates and penetration of aluminum in automotive. Packaging shipments decreased 5% in the quarter versus last year due to inventory adjustments across the supply chain in both North America and Europe and lower demand at the consumer level Price and mix was a tailwind of €40 million, primarily on improved contract pricing, including inflation-related pass-throughs. Costs were a headwind of €43 million as a result of…

Thank you, Jack. Let's turn to Slide 15 and discuss our current end market outlook. The majority of our portfolio today is serving end markets currently benefiting from durable sustainability-driven secular growth. The important takeaway here is that aluminum is a catalyst behind this secular growth, given its sustainable attributes. Aluminum is infinitely recyclable and does not lose its properties when recycled. As a result, aluminum will play a critical role in the circular economy and will be a driver of growth in lightweighting, electrification and sustainable packaging. Turning first to packaging. Inventory adjustments continued across the supply chain in both North America and Europe early in the quarter, but now appear largely behind us and can stock demand has stabilized. We are still seeing demand weakness in both regions as a result of the current inflationary environment, the lack of promotional activity and following a multiyear period of rapid growth during COVID. Even in today's environment, where we are seeing weaker demand in packaging markets, aluminum cans continue to outperform and win share against other substrates like plastic and glass. We are confident in the long-term outlook for this end market, given capacity growth plans from both can makers in both regions, the greenfield investments ongoing here in North America and a growing consumer preference for the sustainable aluminum beverage can. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe. We will participate in its growth in both regions as announced at our Analyst Day last year. We are encouraged by the improved performance we have seen recently at Muscle Shoals, and we remain confident in our ability to restore the plant's profitability heading into next year. I'm also pleased to report that the recycling center we are…

[Operator Instructions] And our first question today goes to Katja Jancic of BMO Capital Markets. Katja, please go ahead, your line is open.

Hi, thank you for taking my questions. Maybe starting off with, your leverage now is at 2.5x. Can you talk a bit about how you're thinking about potential shareholder return policy?

Yes, absolutely, Katja. So well, first of all, we're extremely proud of our focus on deleveraging, having achieved a very important milestone, as you know. I think at this point, the focus is kind of pivoting more towards a balanced capital allocation program, which includes still a focus on the leverage but also shareholder returns. So in terms of the status, we are in active discussions with our Board, although a decision hasn't been made yet, you can count on us working extremely hard on what and how that could look like, and we'll make a decision on that in the not-too-distant future.

Okay. And then looking to 2024, and I understand that it's still early and you haven't provided any guidance. But can you discuss some of the puts and takes we should be thinking about?

Yes. Katja, it's Jean-Marc here. So I think it's useful to look at our guidance for '23, our guidance for 25% and obviously '24 in the middle. So we think we're going to finish the year strong, and we feel very comfortable about our more than €800 million in 2025. What gets us there is we see a continued strength in aerospace. We see automotive being solid to even. The UAW strike would have an impact in Q4, but shouldn't last long into 2024, I would hope. And we see continued adoption of aluminum in automotive. So automotive, the trend should be still positive. We're getting close to full capacity in rolled products. And as you can see in our results now, AS&I still has a bit of room to grow further. So that should help us in 2024 and 2025. Cansheet has been a difficult year. I mean it's been 12 months of difficulty, but we are seeing the demand for Cansheet stabilizing and resuming some growth. So that should help us going into 2025, and therefore, a good - some upside in 2024. And finally - so that's a different market. Finally, the specialty markets, we are not expecting any recovery anytime soon. But we feel that the main markets were in automotive, aerospace, Cansheet, and the very strong actions we've taken on pricing as well as cost control are going to position us well to reach our more than €800 million in 2025, and therefore, we expect to see some progress towards that goal in 2024.

Perfect, thank you so much.

You're welcome.

And the next question goes to Bill Peterson of JPMorgan. Bill, please go ahead. Your line is open.

Yes, hi, thanks for taking my questions. Nice to see good execution amid a tough - mixed and tough demand environment. My first question is on auto.

Thank you, Bill.

So I was hoping if you could help - I was hoping you could help quantify some of the impacts related to the UAW strike. I guess with the context, it seems like half of your auto exposure is in the U.S. and maybe presumably less is to the Detroit Big 3. But I guess, how should we think about volume impacts with that and maybe even beyond typical seasonality, which I believe is around the 5% decline Q-on-Q in fourth quarter? And then is there any difference between auto body sheet versus extrusions?

Yes, Bill, yes, so to your question, as you pointed out, so automotive is less than 30% of our sales. We have more exposure in Europe than we do in North America. And within North America, we sell to about every OEM. So the Detroit 3 are a portion, but not that big in the totality and GM, specifically, I think we've commented on this in the past, is - GM and Stellantis are smaller, much smaller than Ford is. So in that context, the sheer amount of volume that risk is quite limited. Now obviously, we'd rather the UAW strike not take place, but it is not a material impact to us going forward. But it will have - we're calling it out because we'll have some impact in Q4. And you're right that there is a seasonality as well in automotive. Actually, Q3 is impacted by seasonality. I mean you have shutdowns in July or August depending on the continent. And you have also some reduced operations in the fourth quarter. So did I answer your question?

Yes. And is there any difference between sheet versus extrusions?

Oh, yes. So we are a little bit more quickly exposed to extrusion than we are to sheet because the sheet - when the extrusions products, typically, most of them go directly on the car as it is assembled and so the delivery point to the assembly line, whilst the sheet goes through a stamping and other - and/or other processes before it gets on the car. So there's a little bit of a lag here.

Okay. Okay. Makes sense.

So it's a matter of weeks, not months. Yeah, go ahead.

Okay. Okay. Great. Yes. And the next question on aerospace. You pointed out the demand outlook remains strong. I'm thinking you guys typically have a good line of sight in the commercial production rates in advance. But we also heard from Boeing this morning that they plan to increase 737 production by year-end as well as 787 production. Would you say that - would you say this is already anticipated? Or would you say that you could even see acceleration in your business or demand pull-through and potentially margin benefit as a result of increased production.

No. I think typically, this is not new news for us. We - the parts we make takes between six months and two years during the time we ship them and the time they are on an aircraft that's going to fly. So we've got quite a bit of visibility, as you said, and we - this is not new news to us. So we feel very comfortable about the strength of the business in this year and going into next year and even 2025. If anything, we see a little bit of hiccups in the supply chain, but there's plenty of parts that go into making an aircraft and some of these parts, not our aluminum, but are a little bit challenged in terms of the suppliers being able to ramp up the desired levels that the OEMs are communicating to the supply chain. So if anything, we see maybe a little bit of a holdback in some pent-up demand building up for '24 and '25.

Okay. Thanks for the color. Let's hope that Q3 marks the trough for especially packaging shipments, but look forward to watching the progress.

Thank you.

And the next question goes to Corinne Blanchard of Deutsche Bank. Corinne, please go ahead, your line is open.

Hi, good morning, Jean-Marc and Jack. Maybe the first question, could you - so you maintained the EBITDA guidance. Could you walk us through maybe the key take and put to see a downside risk to the guidance, meaning like what would it take to see a mid or like a very low end of the guidance range for 4Q?

We - Corinne. Good morning. We do not see a risk to our guidance. I mean we are 10 months into the year. We've got pretty good line of sight. There is this UAW uncertainty, but it's not, as I said earlier, such a big amount. So no, we feel like our balance is - our guidance is quite balanced. Jack, anything you want to add?

Yes. So, good morning, Corinne. So I think we're confident about meeting our full year guidance. And if you kind of just think about some of the drivers, if you look at the end market, aerospace will continue to outperform. For automotive, there will be some impact from the UAW strike in North America and a little bit slower growth in Europe. But still, the market is generally healthy and doesn't change the fundamentals in the automotive market. For Can, so can stock actually has been running at a pretty stable level. Our overall packaging business was adversely impacted by the specialty packaging mix within the packaging portfolio, but can stock has been more stable, and we're cautiously optimistic there. And then, obviously, industrial specialties business, we'll continue to see some weaknesses, especially in Europe. But when you kind of step outside of the end market expectations, we'll continue to focus on operational excellence and cost control. And we'll continue to benefit from a price mix benefit being a bigger offset than the cost increase, similar to kind of what we've seen in the second quarter and the third quarter. So hopefully, that gives you a little bit of color.

All right. Thank you, that's helpful. And then maybe the follow-up question on Muscle Shoals. You're still having some operational challenges. When do you expect that to turn around?

Yes, Corinne. So we talked about - we've been talking about it for a year, and we said it would take a good year and that's where we are. So we are pleased with some progress we've made. We still have more to do, but we think we're going to see improved performance and improved financials going into 2024.

All right. Thank you.

And specifically, one of the big issues we have was labor and the labor situation has greatly improved in terms of our ability to attract and retain talent and be able to train them so that their - the performance of our workforce overall, this experience gets better. So I look at 2024 with quite a bit of optimism.

Great. Thank you. That's it for me.

Thank you, Corinne.

And the next question goes to Josh Sullivan of The Benchmark Company. Josh, please go ahead, your line is open.

Hi, good morning.

Good morning, Josh.

Just on the aerospace side, I know you talked - on the aerospace side, you talked about 9 months to 2-year lead times. Any sense of building aluminum inventories ahead of rate increases. Historically, we'd see aerospace OEMs build the supply chain and look to the build rate. You did mention some comments there about the supply chain in '24. But any inventory dynamics around aerospace, we should think about heading into '24?

I don't think so, Josh. If you look at what happened in the downturn of COVID, I mean, the build rates went down maybe 30%, and our shipments were down - went down 50% on a quite sustainable basis. So I think we're just seeing the inventories being replenished in line with what is needed for the supply chain to operate. So I wouldn't call it is restocking, but it is still restocking to levels that are not comfortable enough for the supply chain overall, if that makes sense.

Yes, that does. And then one on the automotive side, just the BlueOval facility, the new EV F-150 product, any reason to think that steel could make some inroads versus aluminum? Or what do you see at BlueOval as it comes together that encourages more aluminum dominance going forward?

I don't want to comment on specific programs, but we see that overall, there is still a need for lightweighting and the bigger the vehicle is the more critical it is to lightweight that vehicle. That's where you get the benefits and where you can afford the benefits of it because the price of the vehicle is such that you want to get good overall performance for that vehicle.

Got it. And then just one last one, on the European industrial outlook. Any particular markets which are weaker or stronger than others?

So they're quite weak, all of them, except for the defense market. And we're seeing building and construction is slowing down greatly. I mean you have seen some of our competitors or peers reporting very significant declines in European activity. Germany is not doing very well. France is doing a bit better, but the overall sentiment is reasonably gloomy. It's all factored in our guidance. We were expecting this anyway. So it's not that it's getting worse than what we thought early in the year, we've been quite prudent about it, but it - and we are not forecasting an improvement in 2024 or 2025, right? So our renewed guidance doesn't rest on hope that the European markets improve.

Great. Thank you for the time.

Thanks, Josh.

[Operator Instructions] And our next question goes to Sean Wondrack of Deutsche Bank. Sean, please go ahead. Your line is open.

Hi, Jean-Marc and Jack, congratulations on hitting this leverage target. I know you've been gunning for it for a while, and it's great to see you guys have reached it now.

Thank you, Sean. We're very happy we have.

So I guess, just to that point, right, when I look at your ratings relative to kind of your leverage and your guidance and even your leverage target, there seems to be a bit of a mismatch there. So I was curious how your conversations have been with the rating agencies? And any comments you could make there, please?

Yes. So Sean, it's a good comment and observation, and thank you for that. Yes. I mean, I think we - the conversations have been quite constructive. We do have positive outlooks from both S&P and Moody's, if I'm not mistaken. And we think there are some opportunities for an upgrade sometime next year.

That's good to hear. And just in terms of the near-term sort of outlook for capital allocation, I realize going forward at some point, it's going to become more balanced between debt and equity. But do you think it's possible we could see leverage continue to creep down from 2.5 turns right now?

Yes, Sean. I mean as we said, this company naturally delevers, right? We generate free cash flow, quite significantly free cash flow, and we can have a very balanced capital allocation policy that allows us to seize a few more opportunities through capital expenditures for organic growth and continue to reduce our net and gross debt and return money to shareholders. So we do see a natural path to continue deleveraging. And that's why we want to stay in our range of 2.5 to 1.5, right?

That's great. Thank you very much. Good luck.

Thanks, Sean.

Thank you, Sean.

Thank you. We have no further questions. And I'll now hand back to Jean-Marc Germain, CEO, for any closing comments.

Thank you, Nadia, and thank you, everyone, for attending the call. In conclusion, I just want to say, if I step back, I look at Constellium and our portfolio of markets, we have two markets really that are clicking, it's aerospace and mainly in Europe, it's automotive and mainly in North America. And despite an environment which is a little bit subdued on the market side, you can see that our company is having its best year ever, its best third quarter ever. We are looking at going forward that Cansheet stabilizing and we are very proud of the performance we have registered in Q3 and throughout this year, and we look to the future with great confidence. And I look forward to update you on our progress in February and talk about a balanced capital allocation model. Thank you very much, everyone. Have a good day. Bye-bye.

Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.