Jean-Marc Germain: And finally, just one note, again. On the volume side, if you look at our shipments in tons, most, the vast majority of the decline is due to the sale of the German extrusion business, which we had in the first quarter. I mean, we had it for the first three quarters of last year and we sold it. So when you look at the volume level, it looks like a dramatic decline, but it’s really because we sold the business.
Bill Peterson: Okay. Thanks a lot, Jean-Marc and Jack, for the insights.
Jack Guo: Thank you, Bill.
Jean-Marc Germain: Thank you, Bill.
Operator: The next question comes from Timna Tanners of Wolfe Research. Your line is open. Please go ahead.
Timna Tanners: Yes. Hi, good morning. Thanks for the detail. Wanted to ask first off on Muscle Shoals, if you could. If I missed them, I apologize, but did you quantify the impact of the heavy snow in the first quarter? And can you discuss a bit more the lingering challenges that you referred to?
Jack Guo: So maybe I’ll start. Timna? I think in terms of the impact, we did not quantify it. But one way to think about it is if we didn’t have the unusual event, weather event in the first quarter in January at Muscle Shoals, P&ARP would have achieved a better performance relative to the first quarter of last year.
Timna Tanners: Okay, thanks. And the lingering challenges you mentioned.
Jean-Marc Germain: Yes. So we have expectations for growth. So I’ll backtrack a bit. The markets in North America for can sheet and for automotive are growing. So over the course of the next several years and even in past few years, we’ve been raising our expectations of output from Muscle Shoals, and we are constantly running a little bit behind. We’re making progress, but we’re constantly running a bit behind our own expectations. That’s reflected in our guidance, by the way. And that’s really what we’re talking about. Right? So making some progress, but not at the rate at which we were hoping. And we continue to be very focused on improving both the seniority and the knowledge of our teams and then the reliability of our equipment. It’s a daily grind in industrial operations that we continue to be very focused on.
Timna Tanners: Okay, got it. And then my other question was just really a higher level question about the recent announcement by President Biden to vow to add to aluminum tariffs. Obviously, we also know that if Trump is reelected, you would also add to tariffs broadly. So can you remind us how you feel position vis-a-vis those potential increase in import tariffs?
Jean-Marc Germain: Yes. Thank you. Timna. It’s a broad question, and tariffs can take all kinds of shapes and forms, and they have different impacts depending on how they’re implemented. So with that said, anti-dumping tariffs essentially are good because they focus on players that don’t play by the rules and they level the playing field. So that’s good because it’s focused and specific. At the other end of the spectrum, you get the 232 tariffs, for instance, that impose a blanket tariff on anything from certain geographies. What it does is essentially raise the price domestically. But if you start granting exemptions to different players, well, then essentially you’ve created some competitive advantage for some of these imports.
So some imports are at a penalty. Some imports are at a competitive disadvantage — advantage and that becomes very murky to interpret how it’s going to impact the industry. I think the discussion on the 301 tariffs that I think you’re alluding to are in the category of the blanket tariffs. So we’ll have to see how they’re effectively implemented, what’s their convention or exemptions there may be before we can assess how much of a positive impact it will have. It should have some positive impacts, but I’m kind of doubtful it will have a massive impact. I think the other thing that was in the news very recently, I guess was just, yes – tariffs in Mexico. And that has a potential to be a nice positive for the industry because Mexico has been used as a gateway, a circumvention route for imports into North America.
So that hall is being closed apparently. So I think that will have more impact than the 301 announcement of President Biden. But we’ll see. These things take developing unsuspected ways at times, but it won’t be a negative, but how much of a positive we’ll have to see.
Timna Tanners: Got it. Okay. Thanks for the help. I’ll leave it there.
Operator: The next question comes from the line of Josh Sullivan of The Benchmark Company. Your line is now open. Please go ahead.
Josh Sullivan: Hi, good morning,
Jean-Marc Germain: Morning, Josh.
Josh Sullivan: With one of your OEM aerospace customers here announcing a change in narrow body production, have you seen any change in demand for aerospace plate leading into that announcement? You mentioned plate inventory is still recovering, still strong. There’s a thought that suppliers that are delivering at build rates will be paced and those that are catching up, will continue to see some good growth. Can we infer from your comments you’re in that second bucket?
Jean-Marc Germain: Yes. So we have not seen any impact. Remind you that we are much less exposed to this OEM than to the other one or ones. So our exposure is very limited that we are not seeing, nor are we anticipating any decrease in demand for our products as a result of this reduction in rate.
Josh Sullivan: And then just kind of relatedly, given the negotiations with Boeing, Airbus, Spirit, on the European operations, would any potential change in ownership from Spirit for those Airbus-related assets fall under the Airbus contract? And could that mean any pickup or changing Constellium content there?
Jean-Marc Germain: I don’t think so, Josh. I don’t think this will have any impact, positive or negative, on us.
Josh Sullivan: Okay. And then just lastly on that third casting house for Airware, I think you mentioned some more value-added work you’re going to be doing there. What does that mean? Is that a new alloy or a vertical move or anything? Can you just expand on that?
Jean-Marc Germain: So Airware is now well-established alloy, specialty alloy in aerospace applications, and we are seeing increased demand for this alloy. And the products made out of it. Right? And these command very nice price because it’s very high value for our customers. Right? The properties that you achieve are extremely interesting in sophisticated applications, especially in space, where weight and the cryogenic resistance are super important. So we are seeing now, after many years of development — commercial development in the market, more and more aircraft and more and more platforms in space, adopting Airware. As a consequence, there is a need for more of that product, and that will be very positive for our A&T segment in ’26 and for the next ten years after that, if not more.
Josh Sullivan: Good to hear. Well, thank you for the time.
Jean-Marc Germain: We’re very excited about this investments. Thank you.
Operator: The next question comes from Sean Wondrack of Deutsche Bank. Your line is now open. Please go ahead.
Sean Wondrack: Hi, guys, congratulations on the ratings upgrade. Long overdue.
Jean-Marc Germain: Thank you.
Sean Wondrack: A couple — and I appreciate your guidance. Very thorough here. And when I think about some of your larger cost buckets, like energy costs and labor costs, I guess on the energy side, can you talk about sort of what your assumption is for this year? And just as it relates to labor, do you have any unions resettling our contracts this year? Is there anything there that could potentially push costs up a little bit? Thank you.
Jack Guo: Yes. So thank you for the question, Sean. So I think, no is the answer on the labor side. When you look at the cost pressure, we — on the energy more specifically, we’ve said that energy cost has rested in the second half, more in the fourth quarter of last year. And as we mentioned, our hedge cost is at more favorable levels compared to 2023, but still remain well above historical averages. But that could be a tailwind, continue to be a tailwind for us from a cost perspective into the rest of this year. On the other hand, though, labor cost has continued to be high. Remember, labor is the second largest category for costs behind metal, and the inflation there is really locked in for this future. So that can continue to be severe.
Sean Wondrack: Okay, great. And also, you’ve pursued a balanced strategy of growing EBITDA and reducing debt on an absolute basis. Clearly, you’re several innings into this. Should we expect any permanent debt reduction going forward, or do you think it’ll mostly be through EBITDA growth, to the extent you’re comfortable? Thank you.
Jack Guo: I think for the most part we will — I mean, we will naturally delever, and from a free cash flow perspective, a large portion will be going towards share buyback. But — then we’re keeping a little bit, to enhance our financial flexibility, if you will. But it’ll mostly come from natural deleveraging.
Sean Wondrack: Right. Appreciate that. And then the last one for me, as you think about your share repurchase program, and, it’s likely, you generate more your cash in back after year and you weigh it against sort of M&A opportunities. Is there anything out there, especially in Europe, now that we’ve had a depressed environment for a period of time that could be attractive to you either in the near to medium term or do you think you’re just going to continue along with your organic plan of repurchasing shares?
Jean-Marc Germain: Yes. So we’re very committed to the share buyback program. It’s number one. And we’re very committed to financial discipline. Then strategically on the M&A side, we — if that happens, we’ll be highly selective. It’s got to meet our internal rate of return. It’s got to be — allow us to stay within our target leverage or if there’s a change, it must be very quickly rectified and back to target leverage within a year. And it’s got to be synergistic. And finally, we talked about our priority being on recycling. We want to increase our recycling. We want to increase our autonomy vis-a-vis the primary producers. That’s why we’re doing the investment in France. That’s why we’re doing the investments in Ravenswood.
And we’ll continue to do that to increase our recycling capacity organically and potentially if there’s an attractive acquisition opportunity externally. But again, that’s just one tool in the toolbox, and it’s got to be employed strategically, selectively, and with respect of the target leverage range.
Sean Wondrack: That’s great. Great job this year and last. I appreciate it all. Thanks very much.
Jean-Marc Germain: Thank you, Sean.
Jack Guo: Thank you, Sean.
Operator: As there are no additional questions waiting at this time, I’d like to hand the conference call back over to Jean-Marc Germain, CEO of Constellium, for closing remarks.
