Kaiser Aluminum Corporation (NASDAQ:KALU) Q1 2018 Earnings Conference Call - Final Transcript

Apr 26, 2018 • 01:00 pm ET


Kaiser Aluminum Corporation (NASDAQ:KALU) Q1 2018 Earnings Conference Call - Final Transcript


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Good day, ladies and gentlemen and welcome to the Kaiser Aluminum First Quarter 2018 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Melinda Ellsworth, Vice President of Investor Relations and Corporate Communications. Ma'am, you may begin.

Melinda Ellsworth

Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum's First Quarter 2018 Earnings Conference Call. If you have not seen a copy of our earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chief Executive Officer and Chairman, Jack Hockema; President and Chief Operating Officer, Keith Harvey; Executive Vice President and Chief Financial Officer, Dan Rinkenberger; and Vice President and Chief Accounting Officer, Neal West.

Before we begin, I'd like to refer you to the first 2 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. 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 company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form

10-K for the full year ended December 31, 2017. The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA, which excludes non-run rate items, for which we've provided reconciliations in the appendix. At the conclusion of the company's presentation, we will open the call for questions.

I would now like to turn the call over to Jack Hockema. Jack?

Jack Hockema

Thanks, Melinda. Our first quarter results were driven by margin compression due to escalating metal and freight costs. Growing aluminum -- growing automotive and industrial demand and continued improvement in manufacturing cost efficiency provided some benefit, cushioning the margin squeeze. Higher year-over-year shipments reflected continued demand growth for our general engineering applications and continued growth in automotive extrusions, which more than offset the impact from continued destocking in the commercial aerospace supply chain. Despite

The higher shipments, value-added revenue declined slightly due to a lower value-added product mix as well as a significant increase in contained metal costs that squeezed value-added prices on certain noncontract shipments.

Overall market conditions are improving as aerospace supply chain destocking begins to moderate, and we have initiated pricing actions to mitigate the margin squeeze from rising freight and metal costs. We will continue to pursue additional actions as required to address these rising costs. During the quarter, we benefited from the additional capacity and improving cost efficiencies from our recent