Kaiser Aluminum Corporation 2026 Q3 Earnings Call

Thank you. Hello, everyone, and welcome to Kaiser Aluminum's third quarter 2026 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 Chairman, President, and Chief Executive Officer, Keith Harvey, Executive Vice President and Chief Financial Officer, Neal West, and incoming President and Chief Executive Officer, Fred Stephan. Before we begin, I'd like to refer you to our first four 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 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, 2025. 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. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial measures are not provided because certain items required for such reconciliations are outside of our control and/or cannot be reasonably predicted or provided without unreasonable effort.

Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix. Further, slide five contains definitions of terms and measures that will be commonly used throughout today's presentation. 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 Keith Harvey.

Keith? Good morning, everyone, and thank you for joining us.

I will begin on slide 7. Third quarter results were largely in line with our expectations and reflected continued strength across the majority of our portfolio. More importantly, customer activity remained robust throughout the quarter, and in many cases, strengthened further from the levels we discussed in July. Demand across aerospace and high strength packaging and general engineering continues to exceed the expectations we established at the beginning of the year. Lead times remain extended, bookings continue to move further into 2027, and the investments we have made across the portfolio continue to position Kaiser as a preferred supplier across most of our end markets. As we continue to work through our planning process for 2027 and beyond, we are more optimistic about the opportunities across our markets today than at any point in recent years.

Over the last several quarters, we have spoken about the transition from recovery to growth. As we look at the business today, we believe many of our markets have moved beyond that discussion. Demand remains robust, customer investment activity is high, and increasingly, our conversations with customers are centered on how we partner together to support their future growth plans, secure long-term supply, and meet expanding capacity requirements. In many cases, the discussion is no longer whether demand will materialize, but rather how that demand will be supported in the years ahead. These conversations continue to strengthen our confidence in the long-term outlook for Kaiser. As customers evaluate growth opportunities and look for partners capable of supporting them, Kaiser is uniquely positioned given the breadth and quality of our product offering, our technical capabilities, our commitment to customer service, and our reputation as a trusted supplier across the markets we serve.

Neal will now provide additional details on our third quarter performance, after which I will return and provide a brief update on our markets and what we are seeing as we look ahead.

Neal? Thank you, Keith, and good morning, everyone.

I will now turn to slide 9 for an overview of our shipments and conversion revenue. Conversion revenue for the third quarter 2026 was $439 million, an increase of approximately $88 million or 25% compared to the prior year period. On a per-pound basis, conversion revenue increased 12% year-over-year to $1.46 a pound, driven by broad-based demand strength across our end markets, improved pricing realization, and a continued mix shift towards higher value-added packaging and general engineering products. Now let us look at each of our end markets in detail. Aerospace and high strength conversion revenue totaled $131 million, up approximately $31 million, or 31%, primarily due to a 42% increase in shipments over last year.

The year-over-year improvement in our third quarter performance was primarily driven by the recovery in plate production following our planned third quarter 2025 outage at our Trentwood facility for the Phase 7 capacity expansion. Based on conversations with our commercial aerospace customers, we now believe plate destocking is over as our commercial aerospace customers move towards their higher production targets. In addition, demand across business jet, defense, and space applications remains strong. Packaging conversion revenue totaled $180 million, up approximately $42 million or 31% year-over-year, driven by the continued mix shift toward higher-value coated products, which generate significantly higher conversion revenue per pound. Strong underlying demand across our customer base drove third-quarter shipments up approximately 6% compared to the prior year, reflecting continued success in qualifying additional coatings and our focus on delivering the quality, consistency, and service that customers have long associated with Kaiser.

General engineering conversion revenue for the third quarter was $99 million, up approximately $17 million or 21% year-over-year on a 12% increase in shipments. The year-over-year increases primarily reflect the recovery of 6XXX plate production at our Trentwood facility following the third quarter 2025 Phase 7 planned outage to add additional capacity. In addition to strong demand for our purpose-built plate for the semiconductor industry, ongoing restocking of multiyear low inventory levels at our service center partners, and favorable market conditions supported by Kaiser's longstanding reputation for quality, technical expertise, and reliable customer service, which continue to underpin our volume growth and improved pricing. Finally, automotive conversion revenue of $29 million was down slightly year-over-year on a 15% decrease in shipments, reflecting a planned outage at our Bellwood facility as we invest to improve operational efficiencies and expand capacity support strong demand for aluminum driveshaft.

Importantly, these investments are backed by contractual customer commitments and positions the business for continued growth. While the broader automotive market conditions remain mixed, with elevated consumer financing costs and ongoing tariff uncertainties, demand for light trucks and SUVs, which represents the core applications served by our products, continues to remain resilient. Additional details in conversion revenue and shipments by end-market applications can be found in the appendix of this presentation. Now moving to slide 10. Reported operating income for the third quarter was $55 million, an increase of approximately $6 million from $49 million in the prior year quarter. After adjusting for operating non-run rate charges of approximately $1 million, our third quarter 2026 adjusted operating income was $56 million, an increase of approximately $7 million from $49 million in the prior year quarter.

Reported net income for the third quarter was approximately $31 million, or $1.84 net income per diluted share, compared to net income of $40 million, or $2.38 net income per diluted share in the prior year quarter. As a reminder, our third quarter 2025 reported net income included a non-run rate gain of approximately $11 million related to legacy non-operating land sale and insurance settlements. After adjusting for a net operating and non-operating non-run rate pre-tax expense of approximately $1 million, adjusted net income for the third quarter 2026 was $32 million, or $1.89 adjusted net income per diluted share. This compares to adjusted net income of $31 million, or $1.86 adjusted net income per diluted share in the prior year period.