Kaiser Aluminum’s adjusted EBITDA up by $24 million in the second quarter of 2021

Kaiser Aluminum Corporation reported net sales of $741 million for the second quarter 2021 compared to $276 million in the prior year period, reflecting a 184% increase in shipments and a 5% decrease in average selling price per pound.

Adjusted EBITDA stood at $59 million, up $24 million year-on-year, reflecting the higher value added revenue offset by higher manufacturing and overhead costs.

“Solid second quarter value added revenue of $318 million and adjusted EBITDA of $59 million reflect the first full quarter results of our recently acquired Warrick Rolling Mill along with continued improvement in our end markets,” said Keith A. Harvey, President and Chief Executive Officer. “Our commercial aerospace end market is beginning to demonstrate positive momentum as air travel continues to recover and demand for our defense related applications remains strong. Demand for our packaging and general engineering applications is robust, and although our automotive business is temporarily dampened as ongoing shortages of semiconductor chips affects North American light vehicle production, we anticipate this issue will abate and volume will recover in the second half of 2021.

“Our integration of the Warrick Rolling Mill continues to proceed on track and our teams are working diligently to exit transition service agreements by the end of the year. Until that time, we will continue to incur transition costs and overhead redundancies. In addition, with increasing end market demand and a solid economy, we are experiencing inflationary cost pressures from rising freight, labor and materials costs and the challenge to efficiently meet demand. Our operations and commercial teams are working to mitigate the impact of these issues on our results.”

The company’s value added revenue increased by 82% to $318 million from $175 million in the prior year period driven primarily by the addition of the acquired packaging business and continued improvement in Kaiser’s general engineering and automotive applications.

Operating income was approximately $11 million in Q2. Net loss came in at $22 million, or $1.42 loss per diluted share, compared to a net loss and loss per diluted share of $7 million and $0.41.

“With a diversified portfolio and strong secular growth trends in each of our end markets, we plan to invest in several strategic growth initiatives,” said Mr. Harvey. “In packaging, we plan to meet the rapidly increasing needs of our customers with a series of strategic investments backed by strong, long-term contracts reflecting significant margin improvement facilitated by the current market environment, improved efficiencies and expected synergies. The initial investment of $150 million at our Warrick facility will be for an additional roll coat line that is expected to be qualified and operational by early 2024, with other investments to follow as we continue to evaluate customer demand requirements.

“In addition, as end market demand further improves we expect to proceed with the previously discussed $225 million, Phase VII expansion project at our Trentwood facility, which will increase capacity approximately 25% to meet the needs of our flat-rolled aerospace and general engineering customers well into the remainder of this decade, while further enhancing product quality and improving efficiencies. Finally, smaller capital investments of approximately $25 million will further enhance our ability to support growth in automotive and general engineering long products. We anticipate the total $400 million of growth focused capital spending will occur over the next several years, funded by a combination of our operations and strong balance sheet.

“As we look forward, with the expected recovery rates of our end markets and the planned strategic investments, we will be well-positioned over the longer-term to deliver value added revenue approaching $2.0 billion with a mid to high 20% adjusted EBITDA margin,” concluded Mr. Harvey.