Constellium SE (NYSE:CSTM) Q1 2024 Earnings Call Transcript

Constellium SE (NYSE:CSTM) Q1 2024 Earnings Call Transcript April 24, 2024

Constellium SE misses on earnings expectations. Reported EPS is $0.12 EPS, expectations were $0.27. Constellium SE isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Constellium First Quarter 2024 Results Call. [Operator Instructions] I would now like to turn this conference call over to our host, Jason Hershiser, Director of Investor Relations. Please go ahead.

Jason Hershiser: Thank you, Candice. I would like to welcome everyone to our first quarter 2024 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; 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 those expressed in the forward-looking statements, please refer to the factors presented under the heading Risk Factors in our Annual Report on Form 20-F. 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 IFRS disclosures. Before turning the call over to Jean-Marc, I wanted to remind everyone that beginning this quarter, we have revised the definition of adjusted EBITDA at the consolidated level based on discussions with the SEC.

The new definition will no longer exclude the noncash impact of metal price lag. We will continue to provide investors and other stakeholders with the noncash metal price lag impact as it is necessary to get a true assessment of the economic performance of the business. Our segment adjusted EBITDA will continue to exclude the impact and we will continue to provide guidance for adjusted EBITDA that excludes the impact. And with that, I would now like to hand the call over to Jean-Marc.

Jean-Marc Germain: Thank you, Jason. Good morning. Good afternoon, everyone, and thank you for your interest in Constellium. Let’s begin on Slide 5 and discuss the highlights from our first quarter results. I would like to start with Safety, our number one priority. While we delivered strong safety performance in the first quarter, our recordable case rate of 2.2 per million hours worked is higher than our target performance. This is a humbling reminder that while we always strive to deliver best-in-class safety performance, we all need to constantly maintain our focus on safety to achieve the ambitious targets we have set. It is a never-ending task for our company and one we take very seriously. Turning to our financial results.

Shipments were 380,000 tons, down 2% compared to the first quarter of 2023, mainly due to lower shipments in AS&I, partially offset by higher shipments in P&ARP. The lower shipments in AS&I were largely a result of the German extrusion business we sold last year. Revenue of €1.7 billion decreased 12% compared to last year, primarily due to lower metal prices and lower shipments. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model which minimizes our exposure to metal price risk. Our net income of €17 million in the quarter compares to net income of €22 million in the first quarter last year. Adjusted EBITDA was €137 million in the quarter, though this includes a negative noncash impact from metal price lag of €13 million.

If you exclude this impact of metal price lag, as Jason mentioned earlier, which you must if you want to have the real economic performance of the business, the adjusted EBITDA reflects €150 million in the quarter compared to €166 million last year. Looking at segment adjusted EBITDA, A&T delivered record first quarter performance and was up €7 million compared to last year. P&ARP decreased €12 million in the quarter and AS&I was down €10 million. As we mentioned on our earnings call back in February, the P&ARP segment was impacted in the quarter as a result of the extreme snow and cold weather event at our Muscle Shoals facility in January. The weather event caused a full week of closure at the facility and then a difficult rent backup once employees were able to return to work.

Looking across our end markets, aerospace demand continued to grow in the quarter. Packaging shipments were also up in the quarter, including Canstock. Automotive demand remained healthy in North America while softer demand continued in Europe. Demand in most industrial and other specialty markets remained weak in both regions during the quarter. Moving now to free cash flow. Our free cash flow in the quarter was negative €8 million. We continue to expect to generate positive free cash flow this year of greater than €130 million. I am pleased to report that we launched our share repurchase program in March and repurchased 330,000 shares for around $7 million. Our leverage at the end of the quarter was 2.5 — 2.4 times and remains within our target leverage range.

Overall, I am quite happy with our first quarter performance. With that, I will now hand the call over to Jack for further details on our financial performance. Jack?

Jack Guo: Thank you, Jean-Marc, and thank you, everyone, for joining our call today. Please turn now to Slide 7 and let’s focus on our P&ARP segment performance. In the first quarter of 2024, P&ARP generated segment adjusted EBITDA of €43 million, which was down 21% compared to the first quarter last year. As Jean-Marc mentioned earlier, P&ARP experienced a significant weather related impacts during the quarter. Despite these impacts, as well as continued operational challenges at Muscle Shoals, P&ARP volume was a tailwind of €4 million, with higher shipments in packaging and automotive rolled products. Packaging shipments increased 2% in the quarter versus last year. Within packaging, Canstock shipments were up in the quarter versus last year, partially offset by lower shipments of specialty packaging in Europe.

Automotive shipments increased 1% in the quarter, with healthy demand in North America mostly offset by softness in Europe. Price and mix was a headwind of €9 million, mainly as a result of weaker mix in the quarter. Costs were a headwind of €7 million as a result of unfavorable metal costs partially offset by lower operating costs. Now turn to Slide 8 and let’s focus on the A&T segment. Adjusted EBITDA of €80 million increased 10% compared to the first quarter last year and is a new first quarter record for A&T. Volume was a headwind of €4 million as higher aerospace shipments were offset by lower TID shipments in the quarter. Aerospace shipments were up 6% versus last year as the recovery in aerospace markets continues. Shipments in TID were down 8% versus last year, reflecting a slowdown in most industrial markets.

Price and mix was a tailwind of €8 million, mainly as a result of mixing the quarter with more aerospace. Costs were a tailwind of €3 million, primarily as a result of lower operating costs. Now turn to Slide 9 and let’s focus on the as AS&I segment. Adjusted EBITDA of €33 million decreased 23% compared to the first quarter last year. Volume was a €6 million headwind as a result of lower shipments in automotive and industry extruded products. Automotive shipments were down 9% in the quarter versus last year as a result of softness in Europe and the timing impact between certain program switches. Industry shipments were down 28% in the quarter versus last year, primarily as a result of the sale of our German extrusion business, while the market conditions across industry extrusions in Europe remained weak.

Price and mix was a €10 million headwind, primarily due to a softer pricing environment in industry and weaker mix in the quarter. Costs were a tailwind of €8 million on lower operating costs. FX and other was a headwind of €2 million in the quarter. It is not on the slide here, but I wanted to make some quick comments on holdings and corporate. In the first quarter, our holdings and corporate expense was €6 million. We continue to expect holdings and corporate expense to run at approximately €40 million in 2024, with the increase primarily driven by additional IT spending with the upgrade of our ERP system. 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 aluminum, our largest cost input.

Throughout 2022 and most of 2023, we were faced with broad-based and significant inflationary pressures. Although the pressure began to ease in some categories in the fourth quarter last year. Labor and other nonmetal costs continue to be higher this year. As for energy, our 2020 forecasts are secured at moderately more favorable levels compared to 2023 although energy prices remain well above historical averages. We remain confident in our ability to offset any future inflationary pressures with top-line actions and our relentless focus on cost control, as we’ve demonstrated in the past. Now let’s turn to Slide 10 and discuss our free cash flow. Our free cash flow was negative €8 million in the first quarter, which was in line with our expectations and better than last year.

The year-over-year change is a result of less cash used for working capital and lower capital expenditures partially offset by lower adjusted EBITDA. Looking at 2024, we expect to generate free cash flow in excess of €130 million for the full year, which we expect to be weighted more towards the second half. As we noted last quarter, we expect CapEx to be around €370 million this year, which includes higher spending on return-seeking projects such as our recycling and casting center in Neuf-Brisach. The facility is expected to start up on time and on budget in the fourth quarter this year. We expect cash interest of approximately €125 million, which includes the impact from higher interest rates. We expect cash taxes of approximately €55 million and we expect working capital and other to be a modest use of cash for the full year.

With the expected free cash flow generation of over €130 million, we intend to use a large proportion of the free cash flow this year for our share repurchase program. As Jean-Marc mentioned previously, we launched the share repurchase program in March and repurchased 330,000 shares for $6.9 million. We have approximately $293 million remaining on our existing share repurchase program. Now let’s turn to Slide 11 and discuss our balance sheet and liquidity position. At the end of the first quarter, our net debt of €1.7 billion increased slightly compared to the end of 2023, mainly as a result of unfavorable U.S. dollar translation impact. Our leverage was 2.4 times at the end of the quarter or down 0.4 times versus the end of the first quarter of 2023 and within our target leverage range.

We remain committed to maintaining our target leverage range of 1.5 to 2.5 times. As you can see in our debt summary, we have no bond maturities until 2026 and our liquidity remains strong at €789 million as of the end of the first quarter. I’m also pleased to report that Moody’s upgraded our credit rating earlier this month to BA3 with a stable outlook. As a reminder, we received an upgrade from S&P in November last year to BB minus with a stable outlook. We’re extremely proud of the progress we have made on our capital structure and of the financial flexibility we’re building, including the ability to begin returning capital to our shareholders. I will now hand the call back to Jean-Marc.

Jean-Marc Germain: Thank you, Jack. Let’s turn to Slide 13 and discuss our current end market outlook. The majority of our portfolio today is serving end markets currently benefiting from durable, sustainability-driven secular growth in which aluminum, a light and infinitely recyclable material, plays a critical role. Turning first to packaging. Inventory adjustments in Canstock appear behind us in both North America and Europe. Canstock shipments have increased in the last few quarters, though demand is still relatively low in the current environment. The long term outlook for this end market continues to be favorable, as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from can makers in both regions, and the greenfield investments ongoing here in North America.

We are expecting growth in Canstock in 2024. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe. I am pleased to report that the recycling and casting center we are building at our Neuf-Brisach facility is well underway and both on time and on budget as Jack mentioned earlier. The project is still expected to start up in the fourth quarter this year and ramp up quickly in 2025. As I mentioned before, Muscle Shoals was impacted in the quarter by the extreme cold weather. In addition, the plant continues to face some ongoing operational challenges. We are encouraged by the improved performance we have seen there recently, and we expect operations to continue to improve as the year progresses.

Turning now to Automotive. Automotive OEM sales and production numbers globally have increased the last few years but remain below pre-COVID levels. Demand remains healthy in North America today, though the weaker demand in Europe that we experienced in the fourth quarter last year has continued into the first quarter and will likely persist into the second quarter. In both regions. Demand for EVs is continuing to grow, albeit at a slower pace than expected in the past. Consumer demand for luxury cars, light trucks, and SUVs remains steady. Vehicle electrification and sustainability trends will continue to drive the demand for light weighting and use of aluminum products in the long term. As a result, we remain positive in this market longer term.

Let’s turn now to Aerospace. The recovery in aerospace continued in the quarter, though demand in this market also remains below pre-COVID levels. Major aero OEMs remain focused on increasing build rates for both narrow and wide body aircrafts, despite ongoing supply chain issues and recent safety concerns. Commercial aircraft backlogs are healthy today, and we remain confident that the long term fundamentals driving aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel-efficient aircraft. Demand remains strong in the business and regional Jet markets and the defense and the space markets. In addition, we continue to experience strong demand for our Airware family of products. We’re excited about the future opportunities to continue our growth in aerospace and related markets, which I will touch on more in a minute.

As a chart on the left side of the page highlights, these three core end markets represent 80% of our last 12 months revenue. Turning lastly to other specialties, we have experienced weakness across most markets for several quarters in a row now. These markets are typically dependent upon the health of the industrial economies in each region. While the U.S. economy remains healthy today, the economy in Europe continues to be weaker. More specifically, our expectations of recovery in European industrial and automotive markets are somewhat tempered versus last quarter as we are seeing little improvement in economic indicators in this region. In summary, we like the fundamentals in each of the markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company over the longer term.

Let’s turn now to Slide 14. I want to spend a few minutes on two exciting investments we’re making in our aerospace assets in order to further strengthen our market leadership position. As you all know by now, our first strategic focus is to grow our value add. The two investments I’m about to discuss do just that in the most exciting segment for us aerospace. First, as we announced in March, our aerospace and TID facility in Ravenswood, West Virginia, was recently selected by the U.S. Department of Energy to receive an investment of up to $75 million to deploy low to zero carbon technology. The total size of the project is expected to be around $150 million, inclusive of the U.S. Department of Energy Investment, and it is split 50-50 between maintenance CapEx and return seeking CapEx. In terms of project details, we are looking to replace three legacy casting centers in Ravenswood with two new modern state-of-the-art casting centers dedicated for aerospace and TID products.

This investment will support the installation of low emissions smart melt furnaces that can operate using a range of fuels, including clean hydrogen, paving the way towards a zero carbon cast house. In addition to reducing carbon emissions, the project is expected to help maximize recycled scrap intake and equipment efficiency, reduce our reliance on external suppliers by increasing our internal slab casting capabilities, improve worker safety with the introduction of a hands-free casting process, and contribute to local communities around Ravenswood. In terms of timing, the project will be staged and we expect the first casting center to ramp up in 2026, with a second casting center ramping up in 2028. We’re extremely honored and proud to have been selected for this investment and we express our gratitude to the Department of Energy for the support of Constellium and the aluminum industry.

Moving on to the second investment. I’m excited to announce today that we are adding a third casthouse at our facility in Issoire, France dedicated to our Airware products. The total size of this investment is close to €40 million of return seeking CapEx plus working capital to get the casthouse up and running. The project is expected to significantly increase our capacity and production of Airware products, which will be critical to respond to increased demand in the years to come. Developed through over 20 years of research and development, Airware brings together a unique combination of benefits. It provides low density strength, thermal stability, corrosion resistance, light weighting and other attributes. Airware is already in use today across several major aircraft platforms and space programs, and we’re excited about the future growth potential for this unique solution in these markets.

In terms of timing, we expect to complete the casthouse by the end of 2025 and to ramp up the casthouse in 2026 and beyond. As I mentioned, the investment in Ravenswood is split between maintenance and return seeking CapEx while the project in Issoire is return seeking CapEx. We expect the return seeking spending on aerospace investments to well exceed our target IRR of 15%. Also, we expect both projects to be funded without an increase to our overall CapEx levels. Our A&T segment is delivering record performance today and these investments will create new growth opportunities in 2026 and beyond. Turning now to Slide 15. We detail our key messages and financial guidance. Our team delivered solid performance in the first quarter of 2024 despite the mixed end market demand environment we faced and the significant weather-related impacts at our Muscle Shoals facility.

A&T delivered record first quarter segment adjusted EBITDA, and importantly, we also launched our share repurchase program in March. As we look ahead, like many others, we are continuing to face uncertainties on the macroeconomic and geopolitical fronts. At Constellium, we like our end market positioning and we are optimistic about our prospects. Based on our current outlook, we are maintaining our guidance for 2024. We are targeting adjusted EBITDA excluding the noncash impact of metal price lag in the range of €740 million to €770 million and free cash flow in excess of €130 million. To give some more color on earnings cadence for the year, our guidance assumes sequential improvements in adjusted EBITDA in the second quarter, though we do expect the second quarter of 2024 to be below the record quarter we achieved last year.

This is driven primarily by persisting weakness in European automotive, industrial, and specialties end markets, as well as scheduled maintenance outages planned in the second quarter this year. I also want to reiterate our long term guidance of adjusted EBITDA, excluding the noncash impact of metal price lag in excess of €800 million in 2025, and our commitment to maintain our target leverage range of 1.5 to 2.5 times. To conclude, let me say again that I’m proud of our results and very excited about our future. We are extremely well positioned for long term success, and we remain focused on executing our strategy and creating value for our shareholders. With that Candice, we will now open the Q&A session.

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Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Curt Woodworth of UBS. Your line is now open. Please go ahead.

Curt Woodworth: Yes. Thank you. Good morning, Jean-Marc, and Jack. I just wanted to drill down and some of the moving pieces affecting P&ARP. It seems like there’s kind of a variety issues going on between some operational challenges at Muscle Shoals as well as you highlighted negative mix in the quarter. But when we look at your unit profitability year on year or on a sequential basis, it’s pretty significantly depressed relative to, I think, broader expectations for mixed benefits you would see in auto and obviously, a lot of the efforts the company has made to reposition some of the contracts in the can sheet. So can you kind of just give us a sense for maybe what the Muscle Shoals kind of headwind was in this quarter? And then as you think about 2Q and P&ARP, can you talk about what your margin expectations are and how we should think about it going into the remainder of the year?

Jack Guo: Sure, Curt, good morning. So I’ll start and then Jean-Marc can help me. So when you look at the P&ARP results in the first quarter, mix was unfavorable, and that’s because we’ve had more packaging volume in — relative in the proportion of the mix. So that’s one thing to keep in mind as we kind of look forward. On the cost side, P&ARP actually had a substantial amount of impact on the cost side from the Muscle Shoals’ weather event in the first quarter. Obviously, that’s an adverse result compared to first quarter of last year. So now if we kind of look forward in terms of margin assumption, I mean, this is something we also mentioned in the past that this business unit, with the recovery in packaging and strong automotive, it should see margin returning to over €300 per ton.

We didn’t see that in Q1. To get to the over €300 per ton level, we’re looking at improved performance at Muscle Shoals. We’re looking at more recycling benefits. And that will be coming — that will be helped out by the FD6, where the Neuf-Brisach investment is there, which is wrapping up starting the fourth quarter this year, and also, with the continued focus on pricing and cost discipline. But, if you look at those buckets and look at what the results in the first quarter, 2024 will continue to be a year in transition from a margin perspective.

Curt Woodworth: Okay. And then, I guess with respect to some of the new greenfield mills that are planning to come up until late ’25 and ’26, and obviously there’s been some delays at one of the mills, I’m just wondering, are you seeing any change in kind of your customers looking to come to you to secure any more volume as a potential hedge against delays in some of these projects? And then just given there’s been a little slower ramp-up in the can sheet market, you talked about industrial. What’s your confidence level that this capacity can be absorbed? And do you have a strategy to try to extend contract duration within your mix to kind of hedge against potential oversupply?

Jean-Marc Germain: Yes. So, Curt, there’s plenty in your question here. So on the can sheet side, as we communicated, we are sold out through ’27 and nearly ’28. So there is not a possibility for us to increase our sales in this period. But we do see customers wanting some more, possibly as a hedge against a ramp-up, because the — questioning the ramp-up of these new mills, we’re trying hard to meet their needs. But it’s extremely difficult because, again, we built a very solid position with long term contracts, which we like, and that’s where we are. So I think the capacity of the market to absorb the volumes, I think on a macro basis, we’ve always said there needs to be more capacity in North America. So those two greenfields are needed to meet the needs of the market in can and in auto, and also specialties, which is more cyclical, but also in specialties where we don’t participate ourselves.

And we’re seeing the evidence of this in our discussions with our customers where we are sold out. And, yes, they would like a bit more if we could make it. So I think that’s how I would answer your question, Curt.

Curt Woodworth: Okay. And then maybe just lastly on the guidance for 2Q to be down, would you expect that to be primarily functional around the P&ARP segment? And then can you give us any kind of magnitude of how much it could be down year on year? And I’ll turn it over. Thank you.

Jack Guo: So we won’t go into the specifics here, Curt, but just, when you look across the business unit, I mean, units, keep in mind. the second quarter for A&T last year was a record quarter. So that’s a tough comp, number one. And then when you look at volume expectations, we do expect the trends we’ve seen in the first quarter to continue into the second quarter at P&ARP and AS&I. And also keep in mind, in the second quarter this year, as we mentioned in the script, we do have some planned outages in preparation for a stronger back half of the year, and that will have some impact on volume.

Curt Woodworth: Okay, thank you.

Operator: The next question comes from the line of Katja Jancic. Your line is open. Please go ahead.

Katja Jancic: Hi. thank you for taking my questions. I think you mentioned that you expect to use a large portion of your free cash flow for share buybacks in the second half. Can you talk a bit about what percent of free cash flow you would be comfortable in using for share buybacks?

Jack Guo: We won’t be too precise here, Katja, but thank you for the question. We are expected to generate over €130 million of free cash flow. So when we say a large percentage, you can imagine it’s more than half, but it’s not 100%.

Katja Jancic: Okay. And maybe I missed this, but on the new — sorry.

Jean-Marc Germain: No, Katja, good morning. It’s Jean-Marc here. I just wanted to add that we want to stay within our target leverage range, even though we may not be specific as to any given quarter, but overall, we want to stay within our target leverage range.

Jack Guo: And just one more point of clarification. You mentioned about second half. We — I don’t think we’ll be too — we’ll be quite hands-off. Right? So, I think — and just leave it with the 10b5 program in terms of execution throughout the year.

Katja Jancic: Okay. And then on the new Airware casthouse, is there a volume increase that you can talk about? I might have missed that.

Jean-Marc Germain: Yes, Katja, there is a volume increase. We are not going to talk about it because it’s commercially extremely sensitive. It’s a light material, so you will not see a big increase on the tons, but you will see a significant increase in value add for Constellium over time. And that’s what is very exciting for us.

Katja Jancic: Maybe if I can ask one more…

Jean-Marc Germain: You can think — yes, you can think of these two investments we’re talking about. As you know, if you think of the CapEx dollars to the EBITDA return we’re getting out of them, they are the same kind of ratio as what we’re observing with the upcoming FD6 in Neuf-Brisach. So, really attractive investments for us.

Katja Jancic: Perfect. And on the A&T segment, the EBITDA per ton margin is up year-over-year, but it was down sequentially. How should we think about it in the rest of the year?

Jack Guo: So, Katja, I wouldn’t read too much into the quarterly margin, but I think for the business unit, we have momentum in this business unit with aerospace, right? So the margin will stay high and it’ll stay well above €1,000 per ton guidance that was provided before.

Jean-Marc Germain: As a long term.

Jack Guo: As a long term. Yes.

Katja Jancic: Okay. Thank you so much.

Jack Guo: Thank you, Katja.

Operator: Your next question comes from the line of Bill Peterson of JPMorgan. Your line is now open. Please go ahead.

Bill Peterson: Yes, hi, good afternoon. Good morning, Jean-Marc, Jason, and Jack. Kind of taking a higher level view for the full year, you are reiterating your EBITDA guidance. However, given the weaker starting point, you talk about a quarterly improvement, but can you provide a bridge on how we should think about the EBITDA growth for the remainder of the year? Like what visibility do you have to support the reiteration of guidance? What’s in your control, and what needs to happen in the various end markets to achieve that, especially in the context of the macro headwinds you spoke to in the prepared remarks? I guess what we’re looking for is what’s going to be driving the back half step up in profitability.

Jean-Marc Germain: Good morning, Bill. I’ll start, and Jack will help me as well. So I think it’s important to note that if you look at can sheet, it’s growing again. If you look at automotive in the U.S., it’s extremely strong. It’s a little bit disappointing in Europe, but it’s extremely strong in the U.S.. And aerospace is exceptionally strong for us and continues to show strength. So that’s 70% of our sales that are actually experiencing tailwinds. And we’ve got quite a bit of visibility because of our long term contracts. So we don’t know for sure what the second half of the year will be, but we’ve got pretty good visibility. So that’s a number one very important element in the backdrop for our guidance. Second element is the weather event.

I hate to come back to it, that we experienced in January in Muscle Shoals was extremely significant. That’s a significant drag on EBITDA and on costs and on volumes. And obviously, we’re not forecasting that to happen again for the remainder of the year. So you take these two elements and you already have a good view into the projection for the rest of the year. So it will mean that the second half, I mean, will be back and loaded. The second half will be quite strong under the current environment. We are not betting on an improvement in European industrial outlook, but the strengths in the other markets should carry us through the rest of the year. Jack, anything you want to add?

Jack Guo: No. I think it was good.

Jean-Marc Germain: Did I answer your question, Bill?

Bill Peterson: Yes. No. Yes. Thanks for that color. Coming back to packaging, and I guess on the multi-year view, I think you’ve talked about the need for additional North American capacity. You obviously see a lot of imports in the market. But I guess the question is, as we look out over a multi-year period with this additional capacity coming online in the U.S., what happens to the volumes that are being imported? Do you see any potential for these imports to compete with your European businesses in that side of the pond? Or how should we think about the competitive landscape universally within your packaging group with this North American editions?

Jean-Marc Germain: Yes. So you’re right to point out. In the U.S. today, the imports are high, abnormally high. And as you’ve seen, there’s some trade actions that are ongoing and developing. So beyond the fact that they tend to not be very competitive delivered to customers, in addition, they’re likely to face more duties. So where would they go in the future? Europe is a possible destination. But you have also to remember that can sheet is growing. Not only cans are growing, not only in America and Europe, but they’re growing over the world. So there is more need for these products. Industrial economies in Asia are also recovering, even though China is a little bit weak these days. There’s also significant dynamism in Asia and other regions in the world.

So there is a — these exports. will find other homes. And specifically for us, when it comes to Europe, I mean, it’s still a fragmented market. It’s difficult and more complicated to do business in Europe than it is in North America for somebody who comes in from far away. And we are seeing also some less naivety, let’s say, from the Europeans about competitors dumping from overseas into the European market. So we don’t feel like there is much of a risk. And finally, it is unclear to me how imports from faraway places can be competitive in Europe, given the logistics.

Bill Peterson: Okay, fair enough. If I can sneak in one more. Just — you mentioned the AS&I some mix, some price and mix headwinds, but I guess, can you elaborate on that? You spoke — it sounds like you said the competition, I guess, wondering what’s changing this market. And I guess maybe more importantly, when can we think that some of the fundamentals will bottom in the industrial side?

Jean-Marc Germain: Yes. So AS&I is the most exposed of our three segments to the European because just of the geography, right, to the European economy, all our industry sales are in Europe, at production is in Europe. And a lot of our auto structures business is in Europe. So the geographic mix is weighing quite heavily on the AS&I performance. So that’s really the main driver.

Jack Guo: Yes. Bill, I would just add. When you look at the bridge for AS&I, the volume headwind and the price index, we — that’s — as a result of lower automotive for the most part in Europe. And that’s — our performance is consistent with the industry production bill rates in the first quarter and into the second quarter. But that is expected to improve according to industry forecasting in the second half.