Ladies and gentlemen, thank you for standing by. Welcome to the Constellium First Quarter 2024 Results Call. [Operator Instructions] I would now like to turn this conference call over to our host, Jason Hershiser, Director of Investor Relations. Please go ahead.

Thank you, Candice. I would like to welcome everyone to our first quarter 2024 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. 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 filing. 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 to today's slide presentation, which supplement our IFRS disclosures. Before turning the call over to Jean-Marc, I wanted to remind everyone that beginning this quarter, we have revised the definition of adjusted EBITDA at the consolidated level, based on discussions with the SEC. The new definition will no longer exclude the non-cash impact of metal price lag. We will continue to provide investors and other stakeholders with the non-cash metal price lag impact as it is necessary to get a true assessment of the economic performance of the business. Our segment adjusted EBITDA will continue to exclude the impact, and we will continue to provide guidance for adjusted EBITDA that excludes the impact. And with that, 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 first quarter results. I would like to start with Safety, our #1 priority. While we delivered strong safety performance in the first quarter, our recordable case rate of 2.2 per million hours worked is higher than our target performance. This is a humbling reminder that while we always strive to deliver best-in-class safety performance, we all 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 380,000 tonnes, down 2% compared to the first quarter of 2023, mainly due to lower shipments in AS&I, partially offset by higher shipments in P&ARP. The lower shipments in AS&I were largely a result of the German extrusion business we sold last year. Revenue of EUR 1.7 billion, decreased 12% compared to last year, primarily due to lower metal prices and lower shipments. 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 net income of EUR 17 million in the quarter compares to net income of EUR 22 million in the first quarter last year. Adjusted EBITDA was EUR 137 million in the quarter, though this includes a negative non-cash impact from metal price lag of EUR 13 million. If you exclude this impact of metal price lag, as Jason mentioned earlier, which you must if you want to have the real economic performance of the business, the adjusted EBITDA reflects EUR 150 million in the quarter, compared to EUR 166 million last…

Thank you, Jean-Marc. And thank you, everyone, for joining our call today. Please turn now to Slide 7, and let's focus on our P&ARP segment performance. In the first quarter of 2024, P&ARP generated segment adjusted EBITDA of EUR 43 million, which was down 21% compared to the first quarter last year. As Jean-Marc mentioned earlier, P&ARP experienced significant weather-related impacts during the quarter. Despite these impacts, as well as continued operational challenges at Muscle Shoals, P&ARP volume was a tailwind of EUR 4 million, with higher shipments in packaging and automotive rolled products. Packaging shipments increased 2% in the quarter versus last year. Within packaging, Canstock shipments were up in the quarter versus last year, partially offset by lower shipments of specialty packaging in Europe. Automotive shipments increased 1% in the quarter, with healthy demand in North America, mostly offset by softness in Europe. Price and mix was a headwind of EUR 9 million, mainly as a result of weaker mix in the quarter. Costs were a headwind of EUR 7 million as a result of unfavorable metal costs, partially offset by lower operating costs. Now turn to Slide 8, and let's focus on the A&T segment. Adjusted EBITDA of EUR 80 million, increased 10% compared to the first quarter last year, and is a new first quarter record for A&T. Volume was a headwind of EUR 4 million, as higher aerospace shipments were offset by lower TID shipments in the quarter. Aerospace shipments were up 6% versus last year as the recovery in aerospace markets continues. Shipments in TID were down 8% versus last year, reflecting a slowdown in most industrial markets. Price and mix was a tailwind of EUR 8 million, mainly as a result of mixing the quarter with more aerospace. Costs were a tailwind of…

Thank you, Jack. Let's turn to Slide 13, 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 in which aluminum, a light and infinitely recyclable material, plays a critical role. Turning first to packaging. Inventory adjustments in Canstock appear behind us in both North America and Europe. Canstock shipments have increased in the last few quarters, though demand is still relatively low in the current environment. The long-term outlook for this end market continues to be favorable, as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from can makers in both regions, and the greenfield investments ongoing here in North America. We are expecting growth in Canstock in 2024. Longer term, we continue to expect packaging markets to grow low to mid-single-digits in both North America and Europe. I am pleased to report that the recycling and casting center we are building at our Neuf-Brisach facility is well underway and both on time and on budget as Jack mentioned earlier. The project is still expected to start up in the fourth quarter this year and ramp up quickly in 2025. As I mentioned before, Muscle Shoals was impacted in the quarter by the extreme cold weather. In addition, the plant continues to face some ongoing operational challenges. We are encouraged by the improved performance we have seen there recently, and we expect operations to continue to improve as the year progresses. Turning now to Automotive. Automotive OEM sales and production numbers globally have increased in the last few years, but remain below pre-COVID levels. Demand remains healthy in North America today, though the weaker demand in Europe that we experienced in the fourth quarter last year has continued…

[Operator Instructions] Our first question comes from the line of Curt Woodworth of UBS.

I just wanted to drill down, and to some of the moving pieces affecting P&ARP. It seems like there's kind of a variety issues going on between some operational challenges at Muscle Shoals, as well as you highlighted negative mix in the quarter. But when we look at your unit profitability year-on-year or on a sequential basis, it's pretty significantly depressed relative to, I think, broader expectations for mixed benefits you would see in auto and obviously a lot of the efforts the company has made to reposition some of the contracts in the can sheet. So can you kind of just give us a sense for maybe what the Muscle Shoals kind of headwind was in this quarter? And then, as you think about 2Q and P&ARP, can you talk about what your margin expectations are, and how we should think about it going into the remainder of the year?

So I'll start and then Jean-Marc can help me. So when you look at the P&ARP results in the first quarter, mix was unfavorable, and that's because we've had more packaging volume in -- relative in the proportion of the mix. So that's one thing to keep in mind, as we kind of look forward. On the cost side, P&ARP actually had a substantial amount of impact on the cost side, from the Muscle Shoals' weather event in the first quarter. Obviously, that's an adverse result, compared to first quarter of last year. So now, if we kind of look forward in terms of margin assumption, I mean, this is something we also mentioned in the past that this business unit, with the recovery in packaging and strong automotive, it should see margin returning to over EUR 300 per tonne. We didn't see that in Q1. To get to the over EUR 300 per tonne level, we're looking at improved performance at Muscle Shoals. We're looking at more recycling benefits. And that will be coming -- that will be helped out by the FD6, where the Neuf-Brisach investment is there, which is wrapping up starting the fourth quarter this year. And also with the continued focus on pricing and cost discipline. But, if you look at those buckets, and look -- at what the results in the first quarter, 2024, will continue to be a year in transition from a margin perspective.

Okay. And then, I guess, with respect to some of the new Greenfield mills that are planning to come up until late '25 and '26. And obviously, there's been some delays at one of the mills, I'm just wondering, are you seeing any change in kind of your customers looking to come to you, to secure any more volume as a potential hedge, against delays in some of these projects? And then just given there's been a little slower ramp-up in the can sheet market, you talked about industrial. What's your confidence level that, this capacity can be absorbed? And do you have a strategy to try, to extend contract duration within your mix, to kind of hedge against potential oversupply?

Yes. So Curt, there's plenty in your question here. So on the can sheet side, as we communicated, we are sold out through '27, and nearly '28. So there is not a possibility, for us to increase our sales in this period. But we do see customers wanting some more, possibly as a hedge against a ramp-up, because the -- questioning the ramp-up of these new mills, we're trying hard to meet their needs. But it's extremely difficult because, again, we built a very solid position with long-term contracts, which we like, and that's where we are. So I think the capacity of the market to absorb the volumes, I think on a macro basis, we've always said there needs to be more capacity in North America. So those 2 Greenfields are needed, to meet the needs of the market in can and in auto, and also specialties, which is more cyclical, but also in specialties where we don't participate ourselves. And we're seeing the evidence of it in our discussions with our customers, where we are sold out. And yes, they would like a bit more if we could make it. So I think that's how I would answer your question, Curt.

And then maybe just lastly on the guidance for 2Q to be down, would you expect that to be primarily functional around the P&ARP segment? And then can you give us any kind of magnitude of how much it could be down year-on-year? And I'll turn it over.

So we won't go into the specifics here, Curt, but just, when you look across the business unit, I mean, units, keep in mind, the second quarter for A&T last year was a record quarter. So that's a tough comp, #1. And then, when you look at volume expectations, we do expect the trends we've seen in the first quarter, to continue into the second quarter, at P&ARP and AS&I. And also keep in mind, in the second quarter this year, as we mentioned in the script, we do have some planned outages in preparation for a stronger back half of the year, and that will have some impact on volume in the second quarter.

The next question comes from the line of Katja Jancic.

I think you mentioned that you expect to use a large portion of your free cash flow for share buybacks in the second half. Can you talk a bit about what percent of free cash flow you would be comfortable in using for share buybacks?

We won't be too precise here, Katja, but thank you for the question. We are expected to generate over EUR 130 million of free cash flow. So when we say a large percentage, you can imagine it's more than half, but it's not 100%.

And maybe I missed this, but on the new -- yes, sorry?

No, Katja. It's Jean-Marc here. I just wanted to add that we want to stay within our target leverage range, even though we may not be specific as to any given quarter, but overall, we want to stay within our target leverage range.

And just one more point of clarification. You mentioned about second half. I don't think we'll be too -- we'll be quite hands-off, right? So I think -- and just leave it with the 10b5 program in terms of execution throughout the year.

And then on the new Airware casthouse, is there a volume increase that you can talk about? I might have missed that?

Yes, Katja, there is a volume increase. We are not going to talk about it because it's commercially extremely sensitive. It's a light material, so you will not see a big increase on the tonnes, but you will see a significant increase in value add, for Constellium over time. And that's what is very exciting for us.

Maybe if I can ask one more…

You can think -- yes, you can think of these 2 investments we're talking about. As you know, if you think of the CapEx dollars to the EBITDA return we're getting out of them, they are the same kind of ratio as what we're observing, with the upcoming FD6 in Neuf-Brisach. So really attractive investments for us.

And on the A&T segment, the EBITDA per tonne margin, is up year-over-year, but it was down sequentially. How should we think about it in the rest of the year?

So Katja, I wouldn't read too much into the quarterly margin, but I think for the business unit, we have momentum in this business unit with aerospace, right? So the margin will stay high, and it'll stay well above EUR 1,000 per tonne guidance that was provided before.

As a long-term.

As a long-term. Yes.

Your next question comes from the line of Bill Peterson of JPMorgan.

Kind of taking a higher-level view for the full year, you are reiterating your EBITDA guidance. However, given the weaker starting point, you talk about a quarterly improvement, but can you provide a bridge on how we should think about the EBITDA growth for the remainder of the year? Like what visibility do you have to support the reiteration of guidance? What's in your control and what needs to happen in the various end markets to achieve that, especially in the context of the macro headwinds you spoke to in the prepared remarks? I guess, what we're looking for is what's going to be driving the back half step up in profitability?

I'll start, and Jack will help me as well. So I think it's important to note that if you look at can sheet, it's growing again. If you look at automotive in the U.S., it's extremely strong. It's a little bit disappointing in Europe, but it's extremely strong in the U.S. And aerospace is exceptionally strong for us and continues to show strength. So that's 70% of our sales that are actually experiencing tailwinds. And we've got quite a bit of visibility, because of our long-term contracts. So we don't know for sure, what the second half of the year will be, but we've got pretty good visibility. So that's a #1 very important element in the backdrop for our guidance. Second element is the weather event. I hate to come back to it, that we experienced in January in Muscle Shoals was extremely significant. That's a significant drag on EBITDA and on costs and on volumes. And obviously, we're not forecasting that to happen again for the remainder of the year. So you take these 2 elements and you already have a good view -- into the projection, for the rest of the year. So it will mean that the second half, I mean, will be back and loaded. The second half will be quite strong under the current environment. We are not betting on an improvement in European industrial outlook, but the strengths in the other markets should carry us through the rest of the year. Jack, anything you want to add?

No. I think it was good.

Did I answer your question, Bill?

Yes. No, yes. Coming back to packaging, and I guess, on the multi-year view, I think you've talked about the need for additional North American capacity. You obviously see a lot of imports in the market. But I guess the question is, as we look out over a multi-year period, with this additional capacity coming online in the U.S., what happens to the volumes that are being imported? Do you see any potential for these imports, to compete with your European businesses in that side of the pond? Or how should we think about the competitive landscape universally within your packaging group, with this North American additions?

Yes. So you're right to point out. In the U.S. today, the imports are high, abnormally high. And as you've seen, there are some trade actions that are ongoing and developing. So beyond the fact that, they tend to not be very competitive delivered to customers, in addition, they're likely to face more duties. So where would they go in the future? Europe is a possible destination. But you have also to remember that can sheet is growing. Not only cans are growing, not only in America and Europe, but they're growing over the world. So there is more need for these products. Industrial economies in Asia are also recovering, even though China is a little bit weak these days. There's also significant dynamism in Asia, and other regions in the world. So there is a -- these exports will find other homes. And specifically for us, when it comes to Europe, I mean, it's still a fragmented market. It's difficult and more complicated to do business in Europe than it is in North America for somebody who comes in from far away. And we are seeing also some less naivety, let's say, from the Europeans about competitors dumping from overseas into the European market. So we don't feel like there is much of a risk. And finally, it is unclear to me how imports from faraway places can be competitive in Europe, given the logistics.

If I can sneak in one more. Just -- you mentioned the AS&I there was some mix, some price and mix headwinds. But, I guess, can you elaborate on that? You spoke -- it sounds like you said the competition, I guess, wondering what's changing in this market? And I guess maybe more importantly, when can we think that some of the fundamentals will bottom in the industrial side?

Yes. So AS&I is the most exposed of our 3 segments to the European, because just of the geography, right, to the European economy, all our industry sales are in Europe, and production is in Europe. And a lot of our auto structures business is in Europe. So the geographic mix is weighing quite heavily on the AS&I performance. So that's really the main driver.

Yes. Bill, I would just add. When you look at the bridge for AS&I, the volume headwind and the price index, we -- that's as a result of lower automotive, for the most part in Europe. And that's -- our performance is consistent with the industry production bill rates in the first quarter, and into the second quarter. But that is expected to improve according to industry forecasting in the second half.

And finally, just one note, again. On the volume side, if you look at our shipments in tonnes, most, the vast majority of the decline is due to the sale of the German extrusion business, which we had in the first quarter. I mean, we had it for the first 3 quarters of last year and we sold it. So when you look at the volume level, it looks like a dramatic decline, but it's really, because we sold the business.

The next question comes from Timna Tanners of Wolfe Research.

Wanted to ask first off on Muscle Shoals, if you could. If I missed them, I apologize, but did you quantify the impact of the heavy snow in the first quarter? And can you discuss a bit more the lingering challenges that you referred to?

So maybe I'll start, Timna. I think in terms of the impact, we did not quantify it. But one way to think about it is, if we didn't have the unusual event, weather event in the first quarter in January at Muscle Shoals, P&ARP would have achieved a better performance, relative to the first quarter of last year.

And the lingering challenges you mentioned?

Yes. So we have expectations for growth. So I'll backtrack a bit. The markets in North America for can sheet and for automotive are growing. So over the course of the next several years and even in past few years, we've been raising our expectations of output from Muscle Shoals, and we are constantly running a little bit behind. We're making progress, but we're constantly running a bit behind our own expectations. That's reflected in our guidance, by the way. And that's really what we're talking about, right? So making some progress, but not at the rate at which we were hoping. And we continue to be very focused, on improving both the seniority and the knowledge of our teams. And then, the reliability of our equipment. It's a daily grind in industrial operations that we continue to be very focused on.

And then my other question was just really a higher-level question about the recent announcement by President Biden to vow to add to aluminum tariffs. Obviously, we also know that if Trump is reelected, he would also add to tariffs broadly. So can you remind us how you feel position vis-a-vis those potential increase in import tariffs?

Yes. It's a broad question, and tariffs can take all kinds of shapes and forms, and they have different impacts depending on how they're implemented. So with that said, anti-dumping tariffs essentially are good because they focus on players that don't play by the rules, and they level the playing field. So that's good because it's focused and specific. At the other end of the spectrum, you get the 232 tariffs, for instance, that impose a blanket tariff on anything, from certain geographies. What it does is essentially raise the price domestically. But if you start granting exemptions to different players, well, then essentially you've created some competitive advantage for some of these imports. So some imports are at a penalty. Some imports are at a competitive disadvantage -- and that becomes very murky, to interpret how it's going to impact the industry. I think the discussion on the 301 tariffs that I think you're alluding to, are in the category of the blanket tariffs. So we'll have to see how they're effectively implemented, what's their convention or exemptions there may be, before we can assess how much of a positive impact it will have. It should have some positive impacts, but I'm kind of doubtful it will have a massive impact. I think the other thing that was in the news very recently, I guess was just yesterday -- was tariffs in Mexico. And that has a potential to be a nice positive for the industry, because Mexico has been used as a gateway, a circumvention route for imports into North America. So that hole is being closed apparently. So I think that will have more impact than the 301 announcement of President Biden. But we'll see. These things take developing unsuspected ways at times. But it won't be a negative, but how much of a positive, we'll have to see.

The next question comes from the line of Josh Sullivan of The Benchmark Company.

With one of your OEM aerospace customers here announcing a change in narrow body production, have you seen any change in demand for aerospace plate leading into that announcement? You mentioned plate inventory is still recovering, still strong. There's a thought that suppliers that are delivering at build rates will be paced and those that are catching up will continue to see some good growth. Can we infer from your comments, you're in that second bucket?

Yes. So we have not seen any impact. I'll remind you that we are much less exposed to this OEM than to the other one or ones. So our exposure is very limited that we are not seeing, nor are we anticipating any decrease in demand for our products, as a result of this reduction in rate.

And then, just kind of relatedly, given the negotiations with Boeing, Airbus, Spirit, on the European operations, would any potential change in ownership from Spirit for those Airbus-related assets fall under the Airbus contract? And could that mean any pickup or changing Constellium content there?

I don't think so, Josh. I don't think this will have any impact, positive or negative, on us.

And then just lastly on that third casting house for Airware, I think you mentioned some more value-added work you're going to be doing there. What does that mean? Is that a new alloy or a vertical move or anything? Can you just expand on that?

So Airware is now well-established alloy, specialty alloy in aerospace applications, and we are seeing increased demand for this alloy. And the products made out of it, right? And these command very nice price, because it's very high value for our customers, right? The properties that you achieve are extremely interesting in sophisticated applications, especially in space, where weight and the cryogenic resistance are super important. So we are seeing now, after many years of development, commercial development in the market, more and more aircraft and more and more platforms in space adopting Airware. As a consequence, there is a need for more of that product, and that will be very positive for our A&T segment in '26 and for the next 10 years after that, if not more.

Good to hear.

We're very excited about this investment.

The next question comes from Sean Wondrack of Deutsche Bank.

Congratulations on the ratings upgrade. Long overdue. And I appreciate your guidance. Very thorough here. And when I think about some of your larger cost buckets, like energy costs and labor costs, I guess on the energy side, can you talk about sort of what your assumption is for this year? And just as it relates to labor, do you have any unions resettling our contracts this year? Is there anything there that could potentially push costs up a little bit?

Yes. So I think no is the answer on the labor side. When you look at the cost pressure, we -- on the energy more specifically, we've said that energy cost has crested in the second half, more in the fourth quarter of last year. And as we mentioned, our hedge cost is at more favorable levels, compared to 2023, but still remain well above historical averages. But that -- could be a tailwind, continue to be a tailwind for us, from a cost perspective into the rest of this year. On the other hand, though, labor cost has continued to be high. Remember, labor is the second largest category for costs behind metal, and the inflation there is really locked in for the future. So that can continue to be severe.

And also you've pursued a balanced strategy of growing EBITDA and reducing debt on an absolute basis. Clearly, you're several innings into this. Should we expect any permanent debt reduction going forward, or do you think it'll mostly be through EBITDA growth, to the extent you're comfortable?

I think for the most part we will -- I mean, we will naturally delever, and from a free cash flow perspective, a large portion will be going towards share buyback. But -- then we're keeping a little bit to enhance our financial flexibility, if you will. But it'll mostly come from natural deleveraging.

And then the last one from me. As you think about your share repurchase program and it's likely you generate more your cash in back after year, and you weigh it against sort of M&A opportunities. Is there anything out there, especially in Europe, now that we've had a depressed environment for a period of time that, could be attractive to you either in the near to medium term, or do you think you're just going to continue along, with your organic plan of repurchasing shares?

Yes. So we're very committed to the share buyback program, it's #1. And we're very committed to financial discipline. Then strategically on the M&A side, we -- if that happens, we'll be highly selective. It's got to meet our internal rate of return. It's got to be -- allow us to stay within our target leverage, or if there's a change, it must be very quickly rectified and back to target leverage within a year. And it's got to be synergistic. And finally, we talked about our priority being on recycling. We want to increase our recycling. We want to increase our autonomy vis-a-vis the primary producers. That's why we're doing the investment in France. That's why we're doing the investments in Ravenswood. And we'll continue to do that, to increase our recycling capacity organically, and potentially if there's an attractive acquisition opportunity externally. But again, that's just one tool in the toolbox, and it's got to be employed strategically, selectively, and with respect of the target leverage range.

As there are no additional questions waiting at this time, I'd like to hand the conference call back over to Jean-Marc Germain, CEO of Constellium, for closing remarks.

Thank you very much. Yes, thank you very much, everybody, for listening in today and for your questions. And we look forward to updating you on our progress in a few months. Have a good day. Bye-bye.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.