Constellium SE Class A Ordinary shares 2026 Q3 Earnings Call

I would like to welcome everyone to our third quarter 2026 earnings call. On the call today, we have our Chief Executive Officer, Ingrid Joerg, 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 these expressed in the forward-looking statements, please refer to the factors presented under the heading Risk Factors in our annual report on Form 10-K. 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 GAAP disclosures. With that, I would now like to hand the call over to Ingrid.

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. I wanted to start by saying we are very pleased with our performance. We delivered record third quarter Adjusted EBITDA following record performance in the first half of the year. Our strong execution and results this year have demonstrated our disciplined operational focus and cost control and our agility to take full advantage of favorable market conditions as they arise. Looking at safety, our number one priority, our recordable case rate in the third quarter was 2.1 per million hours worked. While this was up from last quarter, our year-to-date recordable case rate is 1.65 per million hours worked, versus 1.91 in 2025. Despite this strong achievement, our safety journey is never complete, and we remain focused on this critical priority every day.

During the third quarter, we benefited from favorable market dynamics, including aerospace and TID, automotive in North America, and can sheet in North America and Europe. We also achieved improved price and mix in the quarter and strong recycling performance in both North America and Europe. Our recycling center in Neuf-Brisach continues to ramp up. I am also pleased to say that our third Airware cast house in Issoire started up on budget, and customer qualifications are well underway. Given our record performance in the first 9 months this year and our current outlook for the remainder of the year, we are raising our outlook for the full year once again. As we said previously, 2026 is a record year for the company, both in terms of Adjusted EBITDA and free cash flow.

Before turning the call over to Jack, I wanted to make a few comments regarding the expected impact from the conflict in the Middle East. In terms of metal supply, we do source some metal from the Middle East today, both slabs and billets, but they represent a small percentage of our overall needs. As such, we believe the impact on metal supply for us is limited at this stage. On energy, a majority of our anticipated energy needs for 2027 are already locked in at reasonable prices. In other cost categories, we are seeing some inflationary pressures in freight, lubricants, and coatings, but we expect the net impact from this to be manageable. We currently do not expect any impacts on our supply chain from the lack of freight capacity.

In terms of other indirect impacts from the Middle East conflict, we have not seen much end market disruption at this stage, though we continue to monitor it closely. To wrap up on this topic, the overall impact from the conflict in the Middle East appears digestible at this point. The longer-term impacts remain uncertain and difficult to predict, but we are confident in our ability to manage our business in any environment. With that, I will now hand the call over to Jack for further details on our financial performance.

Jack? Thank you, Ingrid, and thank you everyone for joining the call today.

Please turn now to slide 7, and let us focus our third quarter financial performance. Our results this quarter were again ahead of our own expectations, despite ongoing macroeconomic and geopolitical uncertainties. Shipments were 368,000 tons in the third quarter, as higher shipments in A&T were offset by lower shipments in P&ARP and AS&I compared to last year. Revenue of $2.6 billion increased 22% compared to the third quarter of 2025 due to higher revenue per ton, including higher metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which reduces our exposure to metal price risk. Our net income was $119 million in the quarter, compared to net income of $88 million in the third quarter last year.

The main driver of the increase was higher gross profit in the quarter versus last year. Compared to the third quarter last year, Adjusted EBITDA increased 17% to $276 million in the third quarter this year, though this includes a negative non-cash impact from metal price lag of $4 million. If we exclude the impact of metal price lag, which as you know, is the way we view the real economic performance of our business, we achieved an Adjusted EBITDA of $280 million in the quarter. This represents a third quarter record for the company and is up 43% versus the $196 million in the third quarter last year. Our free cash flow was $128 million in the quarter. During the quarter, we returned $30 million to shareholders through the repurchase of 1 million shares. We ended the quarter with leverage at 1.6 times.

Now let's turn to slide 8 and focus on our A&T segment performance. Adjusted EBITDA of $102 million increased 13% compared to the third quarter last year and represents a new third-quarter record for A&T. Volume was a tailwind of $34 million due to higher shipments in both aerospace and TID. Aerospace shipments were up 10% in the quarter versus last year as a result of improved demand. TID shipments were up 24% versus last year due to an improved market environment, including increased demand from onshoring in the U.S. Price and mix was a tailwind of $20 million, mostly due to improved contractual and spot pricing in aerospace and TID. Costs were a headwind of $40 million, primarily as a result of higher operating and metal costs, given higher activity levels. FX and other was a headwind of $2 million in the quarter due to the stronger U.S. dollar.

Now turn to slide 9, and let's focus on our P&ARP segment performance. Adjusted EBITDA of $162 million increased 98% compared to the third quarter last year, and also represents a new third-quarter record for P&ARP. Volume was a headwind of $7 million in the quarter as higher automotive shipments were more than offset by lower packaging shipments. Packaging shipments decreased 7% in the quarter versus last year, though underlying can sheet demand remained healthy in both North America and Europe. Automotive shipments increased 9% in the quarter as we benefited from the supply shortages in North America of aluminum automotive body sheet, though to a lesser extent than in the first half of the year. Price and mix was a tailwind of $18 million as a result of improved pricing and favorable mixing in the quarter.

Costs were a tailwind of $70 million, which includes lower metal costs, given favorable scrap spreads, higher aluminum price environment, and higher throughput and improved productivity in our recycling operations. FX and other was a headwind of $1 million in the quarter. Now turn to slide 10, and let's focus on the AS&I segment. Adjusted EBITDA of $21 million decreased 36% compared to the third quarter last year. Volume was a headwind of $6 million on lower shipments of both automotive and industry products. Price and mix was a $23 million headwind in the quarter. As a reminder, the third quarter last year included a large net customer compensation for underperformance of an automotive program, which did not repeat this year. Costs were a tailwind of $18 million, primarily due to lower operating costs. FX and other was a headwind of $1 million in the quarter.

It is not on the slide here, but our H&C expense was $5 million in the quarter. H&C expense was down $4 million from last year, mainly due to timing of accrual of certain labor costs and favorable FX translation. For the full year in 2026, we still expect H&C expense to run at approximately $55 million. It is also not on the slide here, but I wanted to summarize the current cost environment we're facing. As you know, we operate a pass-through business model, so we're not materially exposed to changes in the market price of primary aluminum, our largest cost input. Our other metal costs, which includes our recycling profits, will continue to benefit from the current market dynamics in the third quarter, including the highly favorable scrap and metal pricing environment in the U.S.