Q3 2023 Constellium SE Earnings Call

Hello, everyone and welcome to the company in the first quarter 2023 without my name is not yet and I'll be coordinating the call today.

If you would like to ask a question. Please press star followed by one on their Stefanki Pat.

I will now hand over to hoist, Jason Hershiser director of Investor Relations to begin Jason. Please go ahead.

Thank you <unk> I would like to welcome everyone to our third quarter of 2023 earnings call on the call today, we have our Chief Executive Officer, John Marc Germain and our Chief Financial Officer, Jack well after.

After the presentation, we will have a Q&A session.

Copy of the slide presentation for today's call is available on our website at <unk> Dot 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.

<unk> call May include forward looking statements within the meaning of the private Securities Litigation Reform Act of $19 95.

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 <unk> disclosures I would now like to hand, the call over to John Martin.

Jason Good morning, and good afternoon, everyone and thank you for your interest income stadium.

Let's begin on slide five and discuss the highlights from our sales culture results I'd like to start with safety our number one priority.

Recordable case rate was higher in the third quarter, leading to a rate of 2.1.

In hours worked for the first nine months of the year.

The safety performance puts us amongst the best in manufacturing the ratings high yield and where do we want it to be and we have done better in the past. This is a humbling reminder, that while always we strive to deliver best in class safety performance, we need to constantly maintain our focus on safety to achieve the ambitious targets.

It is a never ending task for our company and one we take very seriously.

Yeah.

Turning to our financial results shipments were 369000 tons down 5% compared to the third quarter of 2022 due to lower shipments in each of our segments.

Revenue of $1 7 billion euros decreased 15% compared to last year as improved price and mix was more than offset by lower shipments and lower metal prices.

Remember, we're now revenues are affected by changes in metal prices, we operate the best food business model, which minimizes our exposure to metal price risk.

Nadia: Hello everyone and welcome to the Concert William 3rd Quarter 2023 results. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star, fill it by one on the telephone keypad.

Value added revenue, which reflects all sales excluding the cost of metal was 704 million euros of 5% compared to the same period last year.

Nadia: I will now hand over to your host Jason Hershiser, Director of Investor Relations to begin. Jason, please go ahead. Thank you Nadia.

While net income of 64 million euros in the quarter compared to net income of 131 million euros into sales quarter last year. As a reminder, the third quarter of last year included 142 million euros related to the recognition of deferred tax assets that were previously and Rick.

Jason Hershiser: I would like to welcome everyone to our 3rd quarter 2023 earnings call. On the call today, we have our Chief Executive Officer, John Mark II. Mr. Maine and our Chief Financial Officer, Jack Guo. After the presentation, we will have a Q&A session.

Nice.

Jason Hershiser: A copy of the slide presentation for today's call is available on our website at Cancelium.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 violence. Today's call may include board looking statements within the meeting of the Private Security's 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.

As you can see in the bridge on the top right adjusted EBITDA of 168 million euros in the quarter was up 5% compared to last year and it is a new third quarter record for the company.

Jason Hershiser: For a summary of specific risk factors that could cause results to differ materially from those expressed in the Florida looking statements, please refer to the factors presented under the heading risk factors in our annual report. For 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.

<unk> adjusted EBITDA as a new sales quarter record as well and increased 34 million euros compared to last year.

<unk> adjusted EBITDA decreased 11 million euros, and <unk> adjusted EBITDA decreased 9 million euros in the quarter compared to last year holdings in culprits was a headwind of 6 million euros in the quarter.

Looking across our end markets aerospace demand remained very strong with shipments up over 20% compared to last year.

It's emotive demand decelerated slightly during the quarter, but remains above prior year levels.

<unk> shipments were down in the quarter, though can Stoke demand appears to have stabilized following the last several quarters of Destocking. We continued to experience weakness in most industrial markets, especially in Europe.

Jason Hershiser: Please see the reconciliations of non-GAAP financial measures attached in today's slide presentation, which supplement our IFRS disclosures.

We've continued to say significant inflationary pressures with which Jack will discuss in more detail.

Jason Hershiser: I would now like to hand the call over to John Mark. Thank you, Jason.

But thanks to our pricing power contractual protections improved mix and solid execution by our team we are managing the current environment well.

John Mark II: Good morning. Good afternoon, everyone. And thank you for your interest in Cancelium.

John Mark II: Let's begin on slide five and discuss the highlights from our third quarter results. I'd like to start with safety on number one priority. Our recallable case rate was higher in the third quarter, leading to a rate of 2.1 per million hours worked for the first nine months of the year. While the safety performance between us among the best in manufacturing, the rate is higher than where we want it to be, and we have done better in the past.

Moving now to free cash flow I'll.

Free cash flow in the quarter was strong at 78 million euros.

Does not include the proceeds which we received from the sale of our soft alloy extrusion business in Germany, which I am very pleased was closed at the end of September.

As you can see on the bottom right of the slide our leverage at the end of the quarter was two five times, which is an important milestone for the company are.

John Mark II: This is a humbling reminder that while always we strive to deliver best in class safety performance, we need to constantly maintain our focus and safety to achieve the ambitious target we have set. It is a never ending task for our company, and one we take very seriously.

While free cash flow generation and EBITDA growth allows us to naturally delever further over time and over the long term, we look to have a more balanced approach to capital allocation.

Overall, I'm very proud of our third quarter performance looking forward, we like our end market positioning and we are optimistic about our prospects for the remainder of this year and beyond.

John Mark II: Turning to our financial results, shipments were 369,000 tons down 5% compared to the third quarter of 2022 due to lower shipments in each of our segments. Revenue of 1.7 billion euros decreased 15% compared to last year, as improved price and makes was more than upset by lower shipments and lower metal prices. 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.

Looking at the balance of 2023 macro economy, and geopolitical risks remain elevated and we expect inflationary pressures to continue.

While we were not impacted by the UAW strike in the third quarter, we do expect some impact in the fourth quarter <unk>.

Despite these pressures as well as continued weakness across several of our end markets, while maintaining our prior guidance. We expect to finish 2023 was adjusted EBITDA in the range of 700 to 720 million euros, which would be a new record for the company and we continue to expect free cash flow in excess of <unk>.

John Mark II: Our value added revenue, which reflects our sales, excluding the cost of metal, was 700 and 4 million euros at 5% compared to the same period last year. Our net income of 64 million euros in the quarter compares to net income of 131 million euros in the third quarter last year. As a reminder, the third quarter of last year included 142 million euros related to the recognition of deferred tax assets that were previously unrecognized.

150 million euros in 2023.

We also remain confident in our ability to deliver our long term target of adjusted EBITDA of over 800 million euros in 2025.

With that I will now hand, the call over to Jack for further details on our financial performance Jack.

Thank you Mark and thank you everyone for joining our call today.

John Mark II: As you can see in the bridge on the top right, adjusted a bit of 168 million euros in the quarter was up 5% compared to last year, and it is a new third quarter record for the company. The entity adjusted a bit dies a new third quarter record as well and increased 34 million euros compared to last year. Pop adjusted a bit that decreased 11 million euros, an S&I adjusted a bit that decreased 9 million euros in the quarter compared to last year. Holdings and corporate were the headwind of 6 million euros in the quarter.

Turn now to slide seven.

<unk> revenue was 704 million euros in the third quarter of 2023.

<unk>, 5% compared to the same quarter last year.

Looking at the third quarter of 102 million euros at this increase was due to improved price and mix in each of our segments.

Volume was a headwind of 30 million euros due to lower shipments in each of our segments.

That'll impacts were a headwind of 17 million euros compared to the same period last year.

Balance of the change was largely due to our favorable FX translation of 24 million euros due to the weakening of the U S dollar.

John Mark II: Looking across our end markets, aerospace demand remained very strong with shipments up over 20% compared to last year. Automotive demand decelerated slightly during the quarter, but remained above prior linear levels. Packaging shipments were down in the quarter, though can stock demand appears to have stabilized following the last several quarters of destocking. We continue to experience weakness in most industrial markets, especially in Europe.

There are two important takeaways from this slide first we grew our value added revenue by 5% compared to last year and second we continue to have pricing power.

Price and mix and price specifically continues to be the biggest increment of our year over year variance and helped us offset significant inflationary pressures.

John Mark II: We continue to face significant inflation repressures which Jack will discuss in more detail. But thanks to our pricing power, contractual protection, improved mix and solid execution by our team, we are managing the current environment well.

Now I'll turn to slide eight let's focus on a PARP segment performance.

Adjusted EBITDA of 67 million euros decreased 14% compared to the third quarter of last year.

Volume was a headwind of 4 million euros with higher shipments in automotive.

John Mark II: Moving now to free cash rule. Our free cash rule in the quarter was strong at 78 million euros. These does not include the proceeds which were received from the sale of our soft alloy exclusion business in Germany, which I am very pleased was closed at the end of September. As you can see on the bottom right of the slide, our leverage at the end of the quarter was 2.5 times, which is an important milestone for the company. Our free cash rule generation and EBITDA growth allows us to naturally deliver further over time, and over the long term, we look to have a more balanced approach to capital allocation.

More than offset by lower shipments in packaging and specialty products.

Automotive shipments increased 6% in the quarter versus last year as we continue to benefit from higher build rates and penetration of aluminum in automotive.

Packaging shipments decreased 5% in the quarter versus last year due to inventory adjustments across the supply chain in both North America, and Europe, and lower demand at the consumer level.

Price and mix was a tailwind of 40 million euros, primarily on improved contract pricing, including inflation related pass throughs.

John Mark II: Overall, I am very proud of our third quarter performance. Looking forward, we like our end market positioning and we are optimistic about our prospects or our remainder of this year and beyond. Looking at the balance of 2023, micro-economic and geopolitical risks remained elevated and we expect inflation repressures to continue. While we are not impacted by the UAW strike and sales offer, we do expect some impact in the false offer. Despite these pressures, as well as continued weakness across several of our end markets, we are maintaining our prior guidance.

Costs were a headwind of 43 million euros as a result of higher operating costs due to inflation operating challenges at muscle Shoals. The situation is continuing to improve and our favorable metal costs.

FX translation, which is noncash was a headwind of 4 million euros in the quarter due to a weaker U S dollar.

Now I'll turn to slide nine let's focus on the <unk> segment.

Adjusted EBITDA of 79 million euros increased 76% compared to the third quarter last year.

Volume was a headwind of 5 million euros at higher aerospace shipments were more than offset by lower tid shipments in the quarter.

John Mark II: We expect to finish 2023 is a just EBITDA in the range of 700 to 720 million euros, which would be a new record for the company. We continue to expect free cash rule in excess of 150 million euros in 2023. We also remain confident in our ability to deliver our long-term target of a just EBITDA of over 800 million euros in 2025.

Aerospace shipments were up 21% versus last year as the recovery Aerospace markets continues.

Shipments in Tid were down 17% versus last year, reflecting a slowdown in most industrial markets, particularly in Europe.

Price and mix was a tailwind of 58 million euros improved contract pricing, including inflation related pass throughs, and a stronger mix with more aerospace.

Jack Guo: With that, I would now hand the call over to Jack for further details on our financial performance. Jack, thank you, Jean-Marc, and thank you everyone for joining the call today. Please turn now to slide 7. Value out of revenue was 704 million euros in the third quarter of 2023, up 5% compared to the same quarter last year. Looking in the third quarter, 102 million euros of increase was due to improved price and mix in each of our segments.

Costs were a headwind of 15 million euros as a result of higher operating costs, mainly due to inflation.

FX translation was a headwind of 4 million gallons in the quarter.

Now, let's turn to slide 10, and focus on the F&I segment.

Adjusted EBITDA of 26 million euros decreased 27% compared to the third quarter last year.

Jack Guo: Volume was a headwind of 30 million euros due to lower shipments in each of our segments. Federal impacts were a headwind of 17 million euros compared to the same period last year. The balance of the change was largely due to unsavorable FX translation of 24 million euros due to the weakening of the US dollar.

Volume was up 13 million euro headwind with lower shipments in both automotive and industry.

Automotive shipments decreased slightly in the quarter versus last year due to the timing impact between certain programs switches and some short term supply chain disruptions tied to certain programs, which we serve but the overall demand remained healthy.

Jack Guo: There are two important takeaways from the slide. First, we grew our value out of revenue by 5% compared to last year, and second, we continue to have pricing powers. Price and mix and price specifically continues to be the biggest increment of our year over year variance and help us offset significant inflationary pressures.

Industry shipments were down 22% in the quarter versus last year as a result of weaker market conditions in Europe.

Price and mix was a 16 billion euro tailwind, primarily due to improved contract pricing, including inflation related past dues.

Costs were a headwind of 11 million euros are higher operating costs, mainly due to inflation.

Jack Guo: Now turn to slide 8, and let's focus on our part segment performance. Adjust the EBITDA of 67 million euros decreased 14% compared to the third quarter last year. Volume was a headwind of 4 million euros with higher shipments in automobiles, more than offset by lower shipments in packaging and specialty oil products. Automotive shipments increased 6% in a quarter versus last year as we continue to benefit from higher build rates and penetration of aluminum being automobiles.

It's not on the slide but I wanted to conclude with a quick comment our holdings and corporate in.

In the quarter holdings, and corporate was a headwind of 6 million euros as Jean Marc noted.

The negative result was related to a number of one off adjustments in the third quarter of last year that did not repeat this year.

Now I'll turn to slide 11, where I want to give an update on the current inflationary environment, we're facing and our focus on price pricing and cost control to offset these pressures.

Jack Guo: Packaging shipments decreased 5% in a quarter versus last year due to inventory adjustments across the supply chain in both North America and Europe and lower demand at the consumer level. Price and mix was a tailwind of 40 million euros primarily on improved contract pricing including inflation-related pastures. Costs were a headwind of 43 million euros as a result of higher operating costs due to inflation.

In the third quarter and as expected we continued to experience broad based on significant inflationary pressures across our business.

As you know we operate a pass through business model or a non materially exposed to the changes in the market price of aluminum our largest cost input.

While we remain confident about the security of supply some of it does come at a higher cost.

In addition, labor and other nonmetal costs continue to be higher this year, particularly European energy.

Jack Guo: Operating challenges at muscle shows that the situation is continuing to improve and unfavorable metal costs. FX translation, which is non-tash, was a headwind of 4 million euros in a quarter due to a weaker US dollar.

As previously noted we purchase energy multi year rolling forward basis, which has helped us to mitigate some of the energy cost pressures and helped us to smooth out some of the steep increases in cost.

Jack Guo: Now turn to slide 9, and let's focus on the A and T segment. So just a bit of 79 million euros increased 76% compared to the third quarter last year. Volume with a headwind of 5 million euros as higher aerospace shipments were more than offset by lower TID shipments in the quarter. Aerospace shipments were up 21% versus last year as the recovering aerospace markets continues. Shipments in TID were down 17% versus last year reflecting a slowdown in most industrial markets, particularly in Europe.

As a reminder.

Our 2023 energy costs are largely secured but at higher average prices.

Both electricity and gas forward energy prices in Europe have come down from their 2022 peaks, but still remain well above historical averages.

Given these cost pressures, we continue to work across a number of fronts to mitigate their impact on our results.

We have demonstrated strong cost performance in the past years, and we will continue our relentless focus including continued execution of our previously announced <unk> 25 initiatives.

Jack Guo: Price and mix was a tailwind of 58 million euros on improved contract pricing including inflation-related pastures and a stronger mix with more aerospace, for a headwind of 17 million euros as a result of higher operating costs mainly due to inflation.

Across the company, we're working to increase our efficiency reduce our consumption of expensive inputs and lower our fixed costs.

That's where previously noted many of our existing contracts have inflationary protections such as PPI insulators or surcharge mechanisms and what they do not we are working with our customers to include them.

Jack Guo: FX translation was a headwind of 4 million euros in a quarter.

We have made very good progress across all of our end markets.

Jack Guo: Now let's turn to slide 10 and focus on the AS&I segment. Adjust the EBDA of 26 million euros decreased 27% compared to the third quarter last year. Volume was a 13 million euro headwind with lower shipments in both automotive and industry. Automotive shipments decreased slightly in a quarter versus last year due to the timing impact between certain program switches and some short-term supply chain disruptions tied to certain programs which we serve, but the overall demand remained healthy.

As you can see in the bridge on the right in the first nine months of this year, we were very successful with price and mix the largest incremental price in offsetting inflationary pressures.

As of today, we still expect inflationary pressures to remain significant.

We continue to believe that we'll be able to offset most of this cost pressure in 2023 and the rest in future periods with a combination of the tools, we noted and our relentless focus on cost control.

Jack Guo: Industry shipments were down 22% in a quarter versus last year as a result of weaker market conditions in Europe. Price and mix was a 16 million euro tailwind primarily due to improved contract pricing including inflation-related pastures. Cost for a headwind of 11 million euros a higher operating cost mainly due to inflation.

The net impact of inflation and other cost increases and the actions we're taking to offset them are included in our guidance for 2023.

Before turning to the next slide I also want to point out the FX impacting our results.

As you can see in the bridge FX was a headwind of 10 million euros in the first nine months of this year given the weaker U S dollar of which 9 million euros was in the third quarter.

Jack Guo: It's not on a slide, but I wanted to conclude with a quick comment of holdings and corporate. In the quarter holdings and corporate was a headwind of 6 million euros as Yomark noted. The negative result was related to a number of one-off adjustments in the third quarter of last year that did not repeat this year.

Now, let's turn to slide 12, and discuss our free cash flow.

We generated 78 million euros of free cash flow in the third quarter, bringing our year to date total to 112 million euros.

As you can see on the bottom left of the slide we continue to build our track record of generating consistent and strong free cash flow.

Jack Guo: Now turn to slide 11 where I want to give an update on the current inflationary environment we're facing and our focus on pricing and cost control to offset some pressures. In the third quarter and as expected we continued to experience broad based and significant inflationary pressures across our business. As you know we operate a pass-through business model so we're not materially exposed to the changes in the market price of aluminum our largest cost input.

Looking at 2023, we continue to expect to generate free cash flow in excess of 150 million euros for the full year, which is in line with our previous guidance.

Now, let's turn to slide 13, and discuss our balance sheet and liquidity position.

At the end of the third quarter, our net debt was $1 8 billion euros. This is down approximately 140 million euros compared to the end of 2022 and down 100 million euros compared to last quarter. As a result of strong free cash flow generation and the proceeds we received from the sale of our soft alloy.

Jack Guo: While we remain confident about the security supply some of it does come at a higher cost. In addition labor and other non-metal costs continue to be higher this year, particularly European energy. As previously noted we purchased energy multi-year rolling forward basis which has helped us to mitigate some of the energy cost pressures and helped us to smooth out some of the steep increases in cost. As a reminder our 2023 energy costs are largely secured but at higher average prices.

Extrusion business in Germany in the quarter.

During the quarter, we used our cash on the balance sheet to reduce our short term borrowings and to redeem $50 million of our five <unk>, 5% U S. Dollar bonds during 2026 further strengthening our balance sheet.

Our leverage reached a multiyear low of two five times at the end of the third quarter, which is down five times versus the end of the third quarter last year and now at the upper end of our target leverage range.

Jack Guo: Both electricity and gas forward energy prices in Europe have come down from their 2022 peaks but still remain well above historical averages. Given these cost pressures we continue to work across a number of fronts and mitigate their impact on our results. We have demonstrated strong cost performance in the past years and we will continue our relentless focus including continued execution our previously announced vision 25 initiatives. Across the company we're working to increase our efficiency reduce our consumption of expensive inputs and lower our fixed costs.

Remain committed to maintaining our target leverage range of one five to two times.

As you can see our debt summary, we have no bond maturities until 2026, and our liquidity remains strong at 746 million euros as of the end of the third quarter. We're extremely proud of the progress we have made our capital structure and have the financial flexibility. We are building I will now hand the call.

Jack Guo: As we previously noted many of our existing contracts have inflationary protections such as PPI inflators or surcharge mechanisms where they do not work with our customers to include them. We have made the very good progress across all of our markets. As you can see in the bridge on the right, in the first nine months of this year, we were very successful with price and mix, the largest increment being priced, being offsetting inflationary pressures.

Back to Jean Marc.

Thank you Jack let's turn to slide 15, 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.

Bolton takeaway ear is that aluminum is a catalyst behind this secular growth given the sustainable attributes of aluminum as infinity recyclable and does not lose its properties when recycled.

Jack Guo: As of today, we still expect inflationary pressures to remain significant. We continue to believe that we will be able to offset most of this cost pressure in 2023 and the resting future periods with the combination of the tools we noted and our relentless focus on cost control. The net impact of inflation and other cost increases and the actions we're taking to offset them are included in our guidance for 2023.

As a result of aluminum will play a critical role in the circular economy and it will be a driver of growth in light weighting electrification and sustainable packaging.

Turning first to packaging inventory adjustments continued across the supply chain in both North America and Europe early in the quarter, but now appear largely behind us and Ken So demand as stabilized we are still seeing demand weakness in booths regions. As a result of the current inflationary environment the lack of <unk>.

Jack Guo: Before turning to the next slide, I also want to point out the effecting typing our results. As you can see in the bridge, effects was a headwind of 10 million euros in the first nine months of this year, given the weaker US dollar, of which 9 million euros was in the third quarter.

<unk> activity and following a multiyear period of rapid growth during COVID-19.

Even in today's environment, where we're seeing weaker demand in packaging markets aluminum cans continue to outperform and we can share against other substrates like plastic and glass.

Jack Guo: Now, let's turn to slide 12 and discuss our free cash flow. We generated 78 million euros of free cash flow in the third quarter, bringing our year to day total to 112 million euros. As you can see on the bottom left of the slide, we continue to build our track record of generating consistent and strong free cash flow.

We are confident in the long term outlook for this end market given the capacity growth plans from both can makers in both regions, New Greenfield investments ongoing here in North America, and the growing consumer preference for the sustainable aluminum beverage can longer term, we continue to expect tag.

Jack Guo: Looking at 2023, we continue to expect to generate free cash flow in excess of 150 million euros for the full year, which is in line with our previous guidance.

<unk> markets to grow low to mid single digits in both North America and Europe.

We will participate in these growth booths regions as announced at our analyst day last year.

Jack Guo: Now, let's turn to slide 13 and discuss our balance sheet on the liquidity position. At the end of the third quarter, our net debt was 1.8 billion euros. This is down approximately 140 million euros compared to the end of 2022 and down 100 million euros compared to last quarter, as a result of strong free cash flow generation and the proceeds we received from the sale of our self-alloying fusion business in Germany in a quarter.

We're encouraged by the improved performance, we have seen recently at muscle Shoals, and we remain confident in our ability to restore the plant's profitability heading into next year. I'm also pleased to report that the recycling center. We are building a <unk> facility in Europe is well underway and both on time and on budget.

Turning now to automotive.

Demand decelerated slightly during the quarter, but remains above prior year levels as I mentioned before we were not impacted by the UAW strike in the third quarter, but we do expect some impact in the fourth quarter.

Jack Guo: During the quarter, we used cash on the balance sheet to reduce our short-term borrowings and to redeem 50 million dollars of our 5.875 percent US dollar bonds due in 2026, further strengthening our balance sheet. Our leverage reached a multi-year low of 2.5 times at the end of the third quarter, which is down 0.5 times versus the end of the third quarter last year and now at the upper end of our target leverage range. We remain committed to maintaining our target leverage range of 1.5 to 2.5 times.

OEM sales and production numbers globally of increase the last several quarters, but remain well below pre COVID-19 levels.

With dilutive inventories are low consumer demand remains steady and vehicle electrification and sustainability trends will continue to drive the demand for light weighting and use of aluminum products. As a result, we remain very positive in these markets.

Jack Guo: As you can see our debt summary, we have no bond maturities until 2026, and our liquidity remains strong as 746 million euros as at the end of the third quarter. We're extremely proud of the progress we have made our capital structure and of the financial flexibility we're building.

Let's turn now to aerospace.

Recovery in aerospace continued in the quarter with shipments up over 20% versus last year boost steel well below pre COVID-19 levels.

A major Oems have announced build rate increases in the short term and the desire for further increases in the medium term.

John Mark II: I will now hand the call back to John Mark. Thank you, Jack.

John Mark II: Let's turn to site 15 and discuss our current end-market outlook. The majority of our portfolio today is serving end-market currently benefiting from durable sustainability-driven secular growth. The important takeaway here is that aluminum is a catalyst behind the secular growth, given its sustainable attributes. Aluminum is infinitely recyclable and does not lose its properties when recycled. As a result, aluminum will play a critical role in the circular economy and will be a driver of growth in lightweighty electrification and sustainable packaging.

We remain confident that the long term fundamentals driving aerospace demand remained intact, including growing passenger traffic and greater demand for new more fuel efficient aircraft.

<unk> remains strong and the business and regional jet markets and the defense and space markets.

In addition, we continued to experience strong demand for our <unk> family of products.

The chart on the left side of the page highlights. These three core end markets represent 77% of our last 12 months' revenue, we like the fundamentals in each of these markets and as I have said in the past, we like our hand in the auctions to folds us.

John Mark II: So, in first-up packaging, inventory adjustments continue to cross a supply chain in both North America and Europe, fairly in the quarter, but now appear largely behind us and can serve demand as stabilized. We are still seeing demand weakness in both regions as a result of the current inflationary environment, the lack of promotional activity and following a multi-year period of rapid growth during COVID. Even in today's environment where we are seeing weaker demand-impacting markets, aluminum cans continue to outperform and win share against other substrates like plastic and glass.

Turning lastly to other specialties, we expect weakness to continue in most industrial markets and in general These markets are dependent on the health of the industrial economies in each region overall demand has been more stable in North America and in Europe.

In Tid rolled products demand remains generally healthy markets like defense and North American transportation.

And industry extrusion.

Demand remains weak across industrial markets and growth.

Australia remains well positioned today with our diverse and balanced portfolio to capture the secular growth fueled by sustainability.

John Mark II: We are confident in a long-term outlook for this end market, given capacity growth plans from both can-makers in both regions, the Greenfield investments are going here in North America and the growing consumer preference for the sustainable aluminum beverage can. Long term, we continue to expect tackling markets to grow low to mid-single digits in both North America and Europe. We will participate in this growth in both regions as announced at our analyst day last year. We are encouraged by the improved performance we have seen recently at Marshall Sholes and we remain confident in our ability to restore the planned profitability heading into next year.

Summary, we continue to like the prospects for the end markets, we serve and we strongly believe that the diversification of our end markets is an asset for the company.

Turning to slide 16, we detail our key messages and financial guidance.

<unk> delivered strong performance again in the third quarter I am very proud of our entire team has achieved solid operational performance and strong cost control. Despite a number of challenges including significant inflationary pressures.

We generated strong free cash flow in the quarter and we reduced our leverage to two five times, which is an important milestone for the company.

John Mark II: I am also pleased to report that the recycling center we are building at our Netflix like the city in Europe is well underway and both on time and on budget. Turning now to automotive demand decelerated slightly during the quarter that remains above prior year levels. As I mentioned before, we are not impacted by the UAW strike in the third quarter but we do expect some impact in the fourth quarter. OEM cells and production numbers globally have increased the last several quarters but remain well below pre-COVID levels. Automotive inventories are low, consumer demand remains steady and vehicle electrification and sustainability trends will continue to drive the demand for lightweighting and use of aluminum products. As a result, we remain very positive in this market.

As we look ahead, we like our end market positioning and we are optimistic about our prospects for the remainder of this year and beyond looking at the balance of 2023 macro economy geopolitical risks remain elevated and we expect inflationary pressures to continue.

While we are not impacted by the UAW strike in the third quarter, we do expect some impact in the first quarter. Despite these pressures as well as continued weakness across several of our end markets. We are maintaining our prior guidance. We expect to finish 2023 was adjusted EBITDA in the range of 700 to 720 million euros.

Which would be a new record for the company and we continue to expect free cash flow in excess of 150 million euros 2023.

I also want to reiterate our long term guidance logistics EBITDA in excess of 800 million euros.

John Mark II: Let's turn now to aerospace. The recovery in aerospace continued in the quarter with shipments up over 20% versus last year, those still well below pre-COVID levels. Major OEMs have announced build rate increases in the short term and the desire for further increases in the medium term.

25, and our commitment to maintain our target leverage range of one five to two five times.

To conclude let me say again that I am very proud of our results and very excited about our future. We have demonstrated over and over again that we have the right strategy the right teams and the right products in the right markets.

John Mark II: We remain confident that the long term fundamentals driving aerospace demand remained intact including growing passenger traffic and greater demand for new more future efficient aircraft. Demand remains strong in the business and regional jet markets and a defense and space market, in addition, we continue to experience strong demand for our airwear family of products. As a child from the left side of the page highlights, these three core end markets represent 77% of our last 12 months revenue. We like the fundamentals in each of these markets, and as I have said in the past, we like our hand and the options it informs us.

Our business model is flexible and resilient our diversified portfolio allows us to always have options in a very different market conditions.

<unk> built the balance sheet, we need to both whether prices and seasonal <unk> and our high value recyclable and sustainable products respond to the growing needs of our codes of our customers and society.

We're extremely well positioned for long term success, and we will remain focused on shareholder value creation.

We will now open the Q&A session. Please.

Thank you if you would like to ask a question today. Please press star followed by one on your telephone keypad.

Richard Your question. Please press star one.

John Mark II: Turning lastly to other specialties, we expect weakness to continue in most industrial markets. And in general, these markets are dependent on the health of the industrial economies in each region. Overall, demand has been most stable in North America than in Europe. In TID, rolled products, demand remains generally healthy markets like defense and North American transportation.

On the pad to ask a question. Please ensure your plan is in nature lately.

And our first question today.

John.

BMO capital markets catch up. Please go ahead your line is open.

Hi, Thank you for taking my questions, maybe starting off with.

Your leverage now is at two five times Curt can you talk a bit about how you're thinking about potential shareholder return policy.

John Mark II: In industry exclusions, demand remains weak across industrial markets in Europe. Costarium is well positioned today without diverse and balanced portfolio to capture the secular growth fueled by sustainability.

Yes, absolutely. So first of all we're extremely proud of our focus on deleveraging having achieved a very important milestone as you know.

John Mark II: In summary, we continue to like the prospects for the end markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company.

I think at this point of focus is kind of pivoting more towards a balanced.

After allocation program, which includes still a focus on the leverage but also shareholder returns.

John Mark II: Turning to slide 16, we detail our key messages and financial guidance. Costarium is part of our entire team as it achieved solid operational performance and strong cost control, despite the number of challenges, including significant inflationary pressures. We generated strong free cash in the quarter, and we reduced our leverage to 2.5 times, which is an important milestone for the company. As we look ahead, we like our end market positioning, and we are optimistic about our prospects for the remainder of the year and beyond.

So in terms of.

The status we are in active discussions with our board.

Although a decision hasnt been made yet you can count on us working extremely hard on what and how that could look like and we'll make a decision on that in the not too distant future.

Okay, and then looking to 2024 and I understand that it's still early and you havent provided any guidance, but can you discuss some of the puts and takes we should be thinking about.

John Mark II: Looking at the balance of 2023, macroeconomic geopolitical risks remain elevated, and we expect inflation repressures to continue. While we are not impacted by the UAW strike in the third quarter, we do expect some impact in the fourth quarter. Despite these pressures, as well as continued weakness across several of our end markets, we are maintaining our prior guidance. We expect to finish 2023 with a justly bid die in the range of 700 to 720 million euros, which would be a new record for the company, and we continue to expect free cash flow in excess of 150 million euros 2023. I also want to reiterate our long-term guidance for justly bid die in excess of 800 million euros in 2025, and our commitment to maintain our target leverage range of 1.5 to 2.5 times.

Yes.

Markel so.

I think it's useful to look at our guidance for 'twenty three our guidance for 25, obviously 24 in the middle So we think we're going to finish the year strong.

And we feel very comfortable about our more than $800 million in 2025, what gets US. There is we see a continued strength in aerospace.

We see automotive being.

Solid two even.

The UAW strike would have an impact in Q4, but shouldn't last long into 2024 I would hope.

And we see continued adoption of aluminum you know to move teeth, so to move teeth.

<unk> should be still positive, we're getting close to full capacity in rolled products.

<unk> and as you can see in our results now and I still have a bit of room to grow further so that should help us in 2024 and 2025 can sheet has been a difficult year I mean, it's been 12 months.

John Mark II: To conclude, let me say again that I am very proud of our results and very excited about our future. We have demonstrated over and over again that we have the right strategy, the right teams, and the right products in the right markets. Our business model is flexible and resilient. Our diversified portfolio allows us to always have options in very different market conditions. We have built the balance sheet we need to both weather prices and seize opportunities. And our high-value, recyclable and sustainable products respond to the growing needs of our customers and society, for extremely well-positioned for long-term success and will remain focused on shoulder-value creation.

Okay.

Difficulty, but we are seeing the demand for can sheet stabilizing and resuming some growth so that should help us going into 2025 and therefore it would.

Some upside in 2024, and finally, so that's a different market finally, the specialty markets were not expecting any recovery.

Time soon but.

But we feel that.

The main markets, where in automotive aerospace can sheet.

Nadia: With that, Nadia, we will now open the Q&A session, please. Thank you. If you would like to ask a question today, please press star, fill it by one on your telephone keypad. If you choose to retract your question, please press star, fill it by two. When we're paying to ask a question, please enter your phone as unmuted locally.

The very strong actions, we've taken we've taken on pricing as well as.

Sorry cost control are going to position us well to reach our more than $800 million in 2025, and therefore, we expect to see some progress towards that goal in 2024.

Katja Jancic: And our first question today goes to Katja Jancic of BMO Capital Markets. Katja, please go ahead, line is open. Hi, thank you for taking my questions. Maybe starting off with, you know, your leverage now is a 2.5 times. Can you talk a bit about how you're thinking about potential shareholder return policy? Yeah, absolutely. Katja.

Perfect. Thank you so much.

Welcome.

Thank you and the next question got you Bill Peterson of Jpmorgan. Please go ahead. Your line is open.

Yes, hi, thanks for taking my questions.

Nice to see good execution in a tough.

Mixed mixed in tough demand environment.

My first question.

I was hoping you could help youre welcome I was hoping you could help quantify.

John Mark II: So, well, first of all, we're extremely proud of our focus on the leveraging, you know, having achieved a very important milestone, as you know, I think at this point, the focus is kind of pivoting more towards a balanced capital allocation program, which includes still, you know, a focus on the leverage, but also shareholder returns. So, in terms of the status, you know, we are in active discussions with our board, although a decision hasn't been made yet, you can count on us working extremely hard on what and how that could look like, and we'll make a decision on that in the in the not too distant future.

Quantify some of the impacts.

Related to the UAW strike.

I guess in the context of it seems like half of your auto exposures in the us and maybe presumably losses to the Detroit three but I guess, how should we think about volume impacts.

With that and maybe even beyond typical seasonality, which I believe is around a 5% decline Q on Q in fourth quarter.

Is there any difference between auto body sheet versus excursions.

Yep.

Bill.

Yes, so to your question as you pointed out to automotive is less than 30% of our sales we have more exposure in Europe than we do in North America and within North America.

John Mark II: Okay, and then looking to 2024, and I understand that it's so early and you haven't provided any guidance, but can you discuss some of the puts and takes we should be thinking about? Yeah, Katja, it's your mark here. So, I think it's useful to look at our guidance for 23, our guidance for 25, and obviously 24 in the middle. So, we think we're going to finish the year strong, and we feel very comfortable about our more than 800 million in 2025.

We sell to about every OEM so the Detroit three are portion.

That big.

The strategy in GM, specifically I think we've commented on this in the past.

Jim instill MTS.

Smaller much smaller than <unk>, so in that context, the sheer amount of qdoba.

<unk> that's at risk is quite limited now obviously, we'd rather the UAW strike not take place, but it is not.

John Mark II: What gets us there is, we see a continued strength in aerospace, we see automotive being solid to even, the UAW strike would have an impact in Q4, but shouldn't last long into 2024, I would hope, and we see continued adoption of aluminum in automotive. So, automotive, the trend should be still positive, we're getting close to food capacity in raw products, and as you can see in our results now, yes, and I still have a bit of a room to grow further, so that should help us in 2024 and 2025.

Material impact to us.

Going forward, but it will have said, we're putting it out because some.

Some impact in Q4, and you are right that there is a seasonality as well.

Boots, and booties actually Q3 is impacted by seasonality and we do have shutdowns.

In July or August depending on the continent.

And you also.

<unk> reduced.

Operations.

The fourth quarter.

So.

Did I answer your question.

Yes, just any difference between sheet versus extrusion.

John Mark II: Can sheet has been a difficult year, I mean, it's been 12 months of difficulty, but we are seeing the demand for can sheet stabilizing and resuming some growth, so that should help us going into 2025, and therefore it could some upside in 2024. And finally, so that's a different market. Finally, the specialty markets will not expect any recovery anytime soon, but we feel that the main market for automotive aerospace can sheet and the very strong actions we've taken on pricing as well as. Sorry, cost control. I'll go into position as well to reach our more than 800 million in 2025 and therefore we expect to see some progress towards that going 2024.

Oh, yes, so we are a little bit more quickly exposed to.

Extrusion, and we ought to sheet because the sheet when the extrusion products typically most of them go directly on the car as it is assembled.

Peter the delivery point to the SMT line was to ship goes through a stamping and.

Katja Jancic: Perfect, thank you so much. Welcome.

And or and or other processes before it gets on the call. So theres a little bit of a lag here.

Okay. Okay. It makes sense to me.

Aerospace months.

Yes go ahead.

Okay. Okay, great. Yeah, and then next question on Aerospace you pointed out the demand outlook remains strong.

<unk>.

Taking you guys typically have good line of sight into commercial production rates in advance.

But we also heard from Boeing this morning that they plan to increase 737 production.

By year end as well as 787 production.

Bill Peterson: Thank you, and the next question goes to Bill Peterson of JP Morgan. Bill, please go ahead, as I pin. Yeah, hi. Thanks for taking my questions and nice to see, you know, good execution amid a tough, you know, mixed and mixed and tough demand environment. My first question is about those. So, hopefully, if you can help, you're welcome.

Would you say that would you say this is already anticipated or would you say that you could even see acceleration in your business or demand pull through and potential potentially margin benefit as a result of increased production.

No I think typically this is not new news for us.

<unk>.

We do.

The Bulks we make.

Bill Peterson: Let's hope and you can help quantify some of the impacts related to the UAW strike. I guess, you know, with the context, it seems like half your auto exposures in the US and maybe presumably less to the Detroit big three, but I guess how should we think about volume impacts with that and maybe even beyond typical seasonality, which I believe is around the five percent of clients, Q and Q and fourth quarter.

Between six months and two years due to the time, we ship them in the time. They are on an aircraft that's going to fly. So we've got quite a bit of visibility as you said.

This is not new news to us so we feel very comfortable about the strength of the business.

This year and going into next year and even 2025.

If anything we see a little bit of hiccups in the supply chain that has plenty of thoughts that go into making on aircraft and some of these stocks.

Bill Peterson: And then is there any difference between auto body sheet versus extrusion? Yeah, Bill, yeah, so to your question as you pointed out, so automotive is, you know, less than 30 percent of ourselves, we have more exposure in Europe than we do in North America, and within North America, we sell to about every OEM. So, the Detroit three are, you know, abortion, but not that big in the stality and GM, specifically, I think we've commented on this in the past is a, it's a, you know, GM and still and smaller than for this.

Our aluminum, but are a little bit challenged in terms of.

The suppliers being able to ramp up to the desired levels that the Oems are.

Are communicating to the supply chain. So if anything we see maybe a little bit of a hold back and some pent up demand building up for 'twenty, four and 'twenty five.

Okay. Thanks for the color and let's talk about that.

Q3 marks the troffer specialty packaging shipments, but I look forward to walk to watching the progress.

Thank you.

Bill Peterson: So, in that context, you know, the sheer amount of, you know, volume that's at risk is quite limited. Now, obviously, with rather the UAW strike not take place, but it is not a material impact to us going forward, but it will have, we're calling it out because we'll have some impact in Q4. And you're right that there is a seasonality as well in automotive, actually Q3 is impacted by seasonality. I mean, you have shutdowns in July or August, depending on the continent. And you have also some reduced, you know, operations in the false quarter. So, did I answer your question?

Thank you and the next question you guys had covenant gunshot of Deutsche Bank Goldman. Please go ahead. Your line is open.

Hey, good morning, gentlemen, Jack.

Maybe the first question could you try it so you maintain the EBITDA guidance.

Could you walk us through maybe the key taken.

To see downside to the guidance.

What would it take to CME all at a very low.

The guidance range call structure.

We Cory and good morning, we do not see a risk to our guidance. We are 10 months into the year.

We've got pretty good line of sight.

Bill Peterson: Yeah, it's just any difference between sheep versus extrusion. Oh, yes. So, we are a little bit more quickly exposed to extrusion and we are to sheet, because the sheet, when the extrusion products typically, most of them go directly on the car, as it is assembled. And so, the delivery point to the SMD line was the sheet goes through a stamping and all the processes before it gets on the car. So, there's a little bit of a lag here. Okay. Makes sense. Great.

There is the UAW uncertainty, but it's not as I said earlier, such a big amount.

So no we feel like our balance <unk> guidance is quite balanced Jack.

Jack anything you want to add yet so.

Good morning, <unk>. So I think we're confident about meeting our full year guidance.

The future kind of just think about some of the drivers you look at the market Aerospace will continue to outperform.

For automotive there'll be some impact from the UAW strike in North America, and a little bit slower growth in Europe, but still the market is met.

Bill Peterson: It's a matter of time, aerospace, not that much. Yep. Go ahead. Okay. Great. Yeah. And the next question on aerospace, you point out the demand out, look, remains strong. I'm thinking you guys typically have good line of sight in the commercial production rates in advance, but we also heard from Boeing this morning that they plan to increase 737 production by year-end, as well as 787 production. I think typically this is not new news for us.

Generally healthy.

Change the fundamentals in the automotive market for Ken.

So Ken stock actually has been running at a pretty stable level. Our overall packaging business was adversely impacted by the specialty packaging mix within the packaging.

Portfolio about <unk> stock has been more stable and we're cautiously optimistic there.

And then obviously industrial specialties.

We will continue to see.

Some weaknesses, especially in Europe, but when you kind of step outside of the end market expectations.

We'll continue to focus on operational excellence and cost control.

Bill Peterson: We, you know, the parts we make, you know, takes between six months and two years. In the time we ship them in the time they are on an aircraft that's going to fly. So we've got quite a bit of visibility, as you said, and we, this is not new news to us. So we feel very comfortable about the strength of the business in this year and going into next year and even 2025.

And we will continue to benefit from.

Our price mix benefit being a bigger offset that cost increase similar to kind of what we've seen in the second quarter.

And the third quarter. So hopefully that gives you a little color.

Alright, Thank you, let's say efforts.

Maybe just a follow up question on the MSR showers.

Bill Peterson: If anything, we see a little bit of a hiccups in the supply chain, there's plenty of thoughts that go into making an aircraft and some of these thoughts that are aluminum, but are a little bit challenged in terms of the suppliers being able to ramp up the desired levels at the OEMs are communicating the supply chain. So if anything, we see maybe a little bit of a hold back and some pent up demand building up of 24 and 25.

Having some operational challenges when do you expect that to Tucano launch.

Yeah, Corey so we talked about we've been talking about it for a year and we said it would take a good year and that's where we also were pleased with some progress we've made.

We still have multi do.

But we.

We think we're going to see improved performance and improved financials going into 2024.

Bill Peterson: Okay, thanks for the collar. Let's hope that the Q3 marks the trough for especially packaging shipments, but look forward to watching the progress. Thank you.

Alright, Thank you quickly.

One of the big issues, we have.

With labor and the labor situation has greatly improved in terms of our ability to attract and retain talent and be able to train them.

Karen Blanchard: And the next question goes to Karen Blanchard of Glitchbank. Karen, please go ahead, your line is open. Okay, good morning, Jamaican Jack. Maybe the first question, could you try, so you maintain the EBDA guidance? Could you walk us to maybe the key take and put to see a downside rate to the guidance, meaning like, what would it take to see a need or like a very low end of the guidance range or fortune?

So that.

But the performance of our portfolio overall with experience gets better. So I look at 2024 was quite a bit over.

Alright. Thank you that's it for me.

Thank you Corey.

Thank you and the next question go to Josh Sullivan of the Benchmark Company. Josh. Please go ahead. Your line is open.

Hey, good morning.

Just wondering is there on the aerospace side.

Yes.

Karen Blanchard: We, Karen, good morning, we do not see the risk to our guidance. I mean, we are 10 months into the year. We've got pretty good line of sight. There's this UAW and certainty, but it's not, as I said earlier, such a big amount. So no, we, we feel like our balance is guidance is quite balanced. Jack, anything you want to add? Yep. So, good morning, Karen. So I think, you know, we're confident about meeting our full year guidance.

On the aerospace side, you talked about nine.

Nine months to two year lead times any sense of building aluminum inventories ahead of rate increases historically, we'd see aerospace Oems build a supply chain amongst of the build rate you did mentioned some comments there about the supply chain in 'twenty, four but any inventory dynamics around aerospace, we should think about heading into 'twenty four.

I don't think so Josh if you look at what happened in the downturn of <unk> <unk>.

Build rates went down maybe 30% and our shipments were down went down 50% on a quite sustainable.

Karen Blanchard: And if you kind of just think about some of the drivers, you look at the M market, you know, aerospace will continue to outperform for automotive. There'll be some impact from the UAW striking North American, a little bit slower growth in Europe, but still, you know, the market is met. It's generally healthy and doesn't, you know, change the fundamentals in the automotive market, you know, for can. So Kent stock actually has been running at a pretty stable level, you know, our overall packaging business was adversely impacted by the specialty packaging mix within the packaging portfolio.

So I think we'll just seeing the inventories being replenished in line with what is needed for the supply chain to operate so I wouldn't call. It.

It is restocking, but it is still restocking to levels that are.

Nuts comfortable enough for the supply chain overall.

That makes sense.

Yes.

Yes.

<unk>.

And then one on the automotive side.

The <unk> facility.

The F 150 product any reason to think that steel could make some inroads versus aluminum or what do you see a blue oval as it comes together that encourage you more aluminum donlin, it's going forward.

Karen Blanchard: But Kent stock has been more stable and we're cautiously optimistic there. And then, you know, obviously industrial specialties business will continue to see some weaknesses, especially in Europe. But, you know, when you kind of step outside of the M market expectations, you know, we'll continue to focus on operational excellence and cost control. And we'll continue to benefit from, you know, a price next benefit being a bigger offset than the cost increase, you know, similar to kind of what we've seen in the second quarter and the third quarter.

I don't want to comment on specific programs.

But we we.

We see that overall.

There is.

Still a need for light weighting and the bigger the vehicle is the more critically it is.

Lightweight that vehicle, that's where you get the <unk>.

Benefits, where you kind of fold the benefits of it because.

The price of the vehicle lease.

Karen Blanchard: So hopefully that gives you a little bit of color. Thank you.

Is such that you want to get too good a good overall performance for that vehicle.

Karen Blanchard: And then maybe the follow-up question on us are short. We still have in some operational challenges.

Got it and then just one last one on the European industrial outlook, any particular markets, which are weaker or stronger than others.

John Mark II: When do you say that too to turn around? Yeah, Corinne. So we talked about, we've been talking about it for a year and we said it would take a good year and that's where we are. So we're pleased with some progress we've made. We still have more to do but we think we're going to see improve the performance and improve the financials going into 2024. And particularly one of the big issues we have was labor and the labor situation has greatly improved in terms of our ability to attract and retain talent and be able to train them so that the performance of our workforce overall with experience gets set up.

Karen Blanchard: So I look at 2024 is quite a bit over. Sorry, thank you.

So they are quite weak all of them, except for the defense market.

<unk>.

And.

We will see building and construction is slowing down the greatly I mean, you've seen some of our competitive peers reporting.

Very significant declines in the European activity, Germany is not doing very well.

France is doing a bit better.

The overall sentiment is.

<unk> be gloomy.

<unk> factored in our guidance, we were expecting this anyway.

So it's not that it's getting worse and what do we thought early in the year would be great.

Quite prudent about it but and we are not forecasting an improvement in 2024 or 2025 right.

Renewed guidance doesn't.

Karen Blanchard: That's it for me. Thank you, Corinne. Thank you.

Risks on hope that the European market.

Josh Sullivan: And the next question goes to Josh Sullivan of the Benchmark Company. Josh, please go ahead, you're on his iPad. Hey, good morning. Just in the aerospace side. You know, you talked on the aerospace side. You talked about, you know, nine to nine months to two year lead times. At any sense of building an aluminum inventory is ahead of rate increases. You know, historically we'd see aerospace only on the field of supply chain and went through the build rate. You did mention some comments there about the supply chain and in 24. But any inventory dynamics around aerospace, we should think about heading into 24.

Great. Thank you for your time.

Thanks, Josh.

Thank you and as a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad.

And our next question is Sean.

Deutsche Bank Sean. Please go ahead your line is open.

Hi, John Marc and Jack and Matt Congratulations on hitting this leverage target I know you've been gunning for it for a while and it's great to see you guys had reached it now.

Thank you Sean we're very happy we have.

No.

John Mark II: I don't think so, Josh. If you look at what happened in the downturn of COVID, I mean, the build rates went down maybe 30% and our shipments were down when down 50% on a quite sustainable basis. So I think we're just seeing the inventory is being replenished in line with what is needed for the supply chain to operate. So I wouldn't call it, you know, it is restocking, but it is still restocking to levels that are not constantly enough for the supply chain overall.

So I guess just to that point right. When I look at your ratings relative to kind of your your leverage and your guide and Canadian your leverage target there seems to be a bit of a mismatch. There. So I was curious how your conversations have been that the rating agencies.

Any comments you could make there please.

Yes, so sean its a good comment and observation and thank you for that yes, I mean I think.

We the conversations have been quite constructive we do have positive outlooks from both S&P and Moody's if not mistaken.

John Mark II: That makes sense. Yeah, no, that's, and then one of the automotive side, you know, just the blue oval facility, you know, the new BVD F-150 product. Any reason to think that steel could mix and inroads versus aluminum, or what do you see of blue oval as it comes together that encourages, you know, more aluminum down when it's going forward? I don't want to comment on specific programs, but we see that overall there is still a need for lightweighting and the bigger the vehicle is, the more critical it is to lightweight that vehicle. That's where you get the benefits and where you can afford the benefits of it, because the price of the vehicle is such that you want to get good overall performance on that vehicle.

And we think there's some opportunities for an upgrade sometime next year.

That's good to hear and just in terms of the near term sort of outlook for capital allocation.

I realize.

Going forward at some point, it's going to become more balanced between debt and equity.

Alright, do you think it's possible we could see leverage continue to creep down from two five times right now.

Yes, Sean.

He said this company naturally de levers right, we generate free cash flow quite significantly free cash flow and we can have a very balanced okay.

Capital allocation policy that allows us to see a few more opportunities through capital expenditures organic growth and continue to reduce our net and gross debt and return money to shareholders. So we do see.

John Mark II: and just one last one on the European industrial outlook. Any particular markets which are weaker or stronger than others? So they're quite weak all of them except for the defense market. And Wilson building and construction is slowing down greatly. I mean, you've seen some of our competitors or peers reporting very significant declines in a European activity. Germany is not doing very well. France is doing a bit better but the overall sentiment is reasonably gloomy. It's all factored in our guidance. We were expecting this anyway. So it's not that it's getting worse than what we thought early in the year would be quite prudent about it but it.

A natural path to continued deleveraging and that's why we want to stay in a range of two 5% to one five right.

Yeah.

That's great. Thank you very much and good luck.

Thanks, Sean Thank you Sean.

Thank you we have no further questions I'll now hand back to John Marc Germain CEO for any closing comments.

Thank you Daniela and thank you everyone for attending the call in conclusion I just wanted to say if I step back and look at.

<unk> in our portfolio of markets. We have two markets that are clicking it's aerospace in mainland Europe, So to move T that mainly North America and.

Despite an environment, which is a little bit subdued in the market. So you can see that all companies, having its best year ever.

John Mark II: And we are not focusing on improvements in 2024 or 2025, right? So we knew guidance doesn't rest on hope that the European markets improve.

So its quarter ever.

Josh Sullivan: Great.

We're looking at.

Going forward that can sheet stabilizing and we are very proud of the performance we are.

Josh Sullivan: Thank you for the time. Thanks, Josh.

Third in Q3 and throughout this year and.

We look to the.

Future was great confidence and I look forward to update you on our progress in February and talk about a balanced capital allocation Bob. Thank you very much everyone have a good day bye bye.

Nadia: Thank you. And as a reminder, if you would like to ask a question, please press star, fill it by one on your telephone keypad.

Sean Wondrack: And our next question goes to Sean Wondrack of Deutsche Bank. Sean, please go ahead and find his open. Hi, John Mark and Jack. And congratulations on getting this leverage target. I know you've been coming for it for a while and it's great to see you guys have reached it now. Thank you, Sean. We're very happy we have.

Thank you. This now concludes today's call. Thank you all for joining you may now disconnect your lines.

[music].

John Mark II: So I guess just to that point, right when I look at your ratings relative to kind of your leverage and your guidance and even your leverage target, there seems to be a bit of a mismatch there. So it's curious how your conversations have been with the rating agencies and any comments you can make there please. Yeah, so Sean, it's a good comment and observation. And thank you for that. Yes. I mean, I think, you know, we, the conversations have been quite constructive. You know, we do have positive outlooks from both SMQ booties, if not mistaken. And, you know, we think there's some opportunities for an upgrade sometime next year. That's good to hear.

Yeah.

Yeah.

John Mark II: And just in terms of the near term sort of outlook for capital allocation, I realized, you know, going forward at some point is going to become more balanced between debt and equity. But do you think it's possible, you know, we could see leverage continue to creep down from two and a half terms right now. Yes, Sean, I mean, the as we said, this company naturally delivers, right, we generate free cash flow quite significantly free cash flow and we can have a very balanced capital allocation policy that allows us to see the few more opportunities in through capital expenditures for getting growth and continue to reduce on that and grows that and return money to shareholders. So we do see a natural path to continue de-leveraging and that's why we want to stay in our range of 2.5 to 1.5, right.

Sean Wondrack: Thank you very much and good luck. Thanks, Ron. Thank you, Sean. Thank you.

John Mark II: We have no further questions on our hand back to John Mark Domain, CEO for any closing comments. Thank you, Nadia. Thank you, everyone, for attending the call.

John Mark II: In conclusion, I just want to say, if I step back, I look at, you know, Costaiam and I'll put for your markets. We have two markets that are clicking its aerospace and many Europe. If so, Timothy, then mainly North America. And despite an environment, which is a little bit subdued on the market side, you can see that our company is having its best year ever, its best source culture ever. We're looking at, you know, going forward that can she stabilizing and we are very proud of the performance we are registered in Q3 and throughout this year. And we look to the future was great confidence.

Nadia: And I look forward to update you on our progress in February and talk about the balance capsule education model. Thank you very much, everyone. Have a good day. Bye bye.

Nadia: Thank you, this now from police days call. Thank you for joining. You may now disconnect your lines.