American semi-fabricated aluminium firm Kaiser Aluminum announced second quarter and first half 2016 results late Wednesday.
The firm’s net income for the just-ended quarter was US$26 million, up US$6 million year-on-year. Adjusted net income (excluding non-run-rate items) was US$19 million in the quarter, down from US$23.1 million in Q2 2015. Both results include roughly US$11 million of additional pre-tax expenses related to the firm’s retiring of their 8.25% unsecured senior notes. Net sales for the quarter were US$335 million, down from last year’s sales of US$367 million.
Kaiser Aluminum netted US$52 million, a significant change over a net loss of US$272 million in the first half of 2015. Last year’s loss included a US$308 million after-tax, non-cash, non-run-rate charge involved removing certain costs related to union benefits. Adjusted net income (excluding non-run-rate items) for the half was US$46 million, which was a US$5 million improvement over the first half of 2015. Net sales for the half were US$678 million, down from US$739 million last year. The company chalks up the drop in sales for both the quarter and the half on substantially lower metal costs this year compared to last year.
“Our strong results for the second quarter and first half 2016 reflect solid demand and sales margins,” said CEO and Chairman Jack A. Hockema. “The improved sales margins reflect price increases implemented in the second half 2015 as well as benefits from low contained metal costs.”
“We also continued to benefit from improved underlying manufacturing cost efficiency during the period,” he continued. “Our Spokane, Washington (“Trentwood”) facility continues to derive greater efficiency and throughput from investments in the Phase 5 expansion and new casting complex, and we expect to extract additional benefit from these investments as we further enhance production processes. In addition, our automotive focused facilities are acclimating to the sales growth surge over the past two years while underlying cost efficiency continues to improve.”
“The $150 million multi-year capital investment program at our Trentwood facility is progressing as planned. We anticipate the first phase of incremental cost efficiency and capacity will come on line in early 2018,” he concluded.
Although aerospace demand is expected to rise slightly, and automotive demand is expected to drop slightly, Hockema indicated that the forecast for the remainder of the year would not change.
“As we look to the second half 2016, we anticipate normal seasonal demand weakness, and for general engineering plate, import pressure is expected to negatively impact sales prices and margins,” explained Hockema. “In addition, we have significant major maintenance expense planned for the third quarter which we anticipate to be approximately $5-$6 million higher than the first half 2016 run-rate.”
“For the full year, we are modifying our value added revenue outlook for aerospace and high strength applications to reflect slightly higher than 5% year-over-year growth based upon stronger than anticipated demand for our aerospace and high strength applications,” he continued. “In addition, we are reducing our outlook for year-over-year value added revenue growth in automotive extrusions from 10% to approximately 6% as one program terminated sooner than anticipated and another program is ramping up at a slower than expected pace. The revision to our 2016 outlook for automotive extrusions does not change our longer-term outlook for continued demand growth in aluminum extrusion content in vehicles for our served market segments.”
“Overall, our full year outlook remains unchanged,” he concluded. “We reiterate our outlook for value added revenue growth of 3%-5% year-over-year with improvement in adjusted EBITDA and EBITDA margin driven by sales growth and continued improvement in manufacturing efficiencies.”