Q4 2024 Kaiser Aluminum Corp Earnings Call

Speaker Change: Greetings and welcome to the Kaiser Aluminum Corporation 4th Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation.

Speaker Change: If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando with Addo Investor Relations. Please go ahead.

Speaker Change: Thank you. Hello, everyone, and welcome to Kaiser Aluminum's fourth quarter and full year 2024 earnings conference call. If you have not seen a copy of our earnings release, please visit the investor relations page of our website at kaiseraluminum.com.

Speaker Change: We have also posted a PDF version of the slide presentation for this call.

Speaker Change: Joining me on the call today are Chairman, President, and Chief Executive Officer Keith Harvey and Executive Vice President and Chief Financial Officer Neal West.

Speaker Change: for a summary of specific risk factors that could cause results to differ materially from the forward-looking statements.

Speaker Change: Please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2023.

Speaker Change: In addition, we have included non-GAAP financial information in our discussion.

Speaker Change: Reconciliations to the most comparable gap financial measures are included in the earnings release and in the appendix of the presentation.

Speaker Change: Reconciliations of certain forward-looking, non-GAAP financial measures to comparable GAAP financial measures are not provided because certain items required for such reconciliations are outside of our control and or cannot be reasonably predicted or provided without unreasonable effort.

Speaker Change: Any reference to EBITDA in our discussion today means adjusted EBITDA, which excludes non-run rate items for which we have provided reconciliations in the appendix.

Speaker Change: Further, slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation.

Speaker Change: At the conclusion of the company's presentations, we will open up the call for questions.

Keith Harvey: I would now like to turn the call over to Keith Harvey.

Keith Harvey: Thanks, Kim, and thank you all for joining us for review of our fourth quarter and full year 2024 results.

Turning to slide 7.

Keith Harvey: Our results for the year met our expectations for both conversion revenue and margin expansion.

Keith Harvey: This was our second consecutive year of EBITDA margin expansion, increasing by approximately 60 basis points year-over-year.

Keith Harvey: More notably, it has expanded by 460 basis points since the low established during the pandemic in 2022.

Keith Harvey: In 2025, we expect to continue our progress towards achieving our EBITDA margin goals in the mid-20% range, which I will describe later.

Keith Harvey: The market backdrop in 2024, really since the start of the pandemic, has been complex and rapidly changing.

Keith Harvey: I'm extremely proud of the work our team has done to position the company for an inflection in our performance while maintaining our unwavering focus on the execution on our long-standing commitment to meet our customers' needs, a foundational element of our business.

Keith Harvey: There were challenges in each of our end markets in 2024, particularly in packaging, as we worked hard to meet the strong demand of our customers.

Keith Harvey: As a result, we are bringing significant investments online this year to meet this growing demand, along with other investments across our portfolio, of which I'll have more details to discuss later in the call.

Keith Harvey: We expect market conditions to stabilize and become more favorable as we move through 2025 and believe the momentum we have been building over the last several years puts Kaiser in a very strong position for the future.

Keith Harvey: Now, let me turn the call over to Neal for more details on our 2024 results. Neal?

Neal West: Thank You Keith and good morning everyone. I'll begin on slide 9 with an overview of our 2024 full-year shipments and conversion revenue.

Neal West: Our full year total net sales were just over $3 billion.

Neal West: Looking at each of our end market applications in detail, Arrow and High Strength conversion revenue totaled $530 million, down $4 million or approximately 1%, reflecting a 4% decline in shipments over last year.

The strength of our customer contracts.

high-quality products and superior customer service.

Neal West: along with our diverse portfolio of products used in business defense, space, and commercial and market applications help to offset short-term disruptions within the commercial aircraft OEM order patterns which have impacted the entire commercial aircraft production supply chain.

Neal West: From an industry perspective, underlying demand remains strong, with our shipments continuing to sequentially increase for the fifth consecutive quarter.

Neal West: General engineering conversion revenue for 2024 was 313 million dollars, up 3% year over year, due to a 6% increase in shipments, despite operating in a very complex market.

Neal West: We are encouraged that pricing remains relatively stable regardless of uneven demand and import pressures. We continue to believe we earn a premium for our products driven by our Kaiser Select product portfolio and industry-leading service and quality.

Neal West: And finally, automotive conversion revenue was $120 million, up 3% over 2023, and a 3% decline in shipments, primarily due to an improved product mix of higher value-added products.

Neal West: Additional details and conversion revenue and shipments by end market application can be found in the appendix of this presentation.

Neal West: Now moving to slide 10. Reported operating income for 2024 was $88 million.

Neal West: In addition, 2024 operating income included a $9 million increase in depreciation expense as we commissioned our growth in quality-driven capital investments during the year.

Neal West: Our effective tax rate for the full year 2024 was 26% compared to 16% in 2023 due primarily to an increase in valuation allowance on certain state operating losses and credits.

Neal West: For the full year 2025, we expect our effective tax rate before discrete items to be in the low to mid 20% range under current tax regulations.

Neal West: We anticipate that our 2025 cash taxes for federal, state, and foreign taxes will be in the $5 to $7 million range.

Neal West: Reported net income for 2024 was $47 million, or an income of $2.87 per diluted share, which was relatively consistent with the 2023 reported net income, an income of $2.92 per diluted share.

Neal West: After adjusting for pre-tax non-run rate net gain of approximately seven million dollars, which primarily included non-strategic land sales and insurance settlements related prior year claims, partially offset by restructuring and legacy environmental charges,

Neal West: Adjusted net income for 2024 was $41 million, or income of $2.51 per adjusted diluted share, compared to an adjusted net income of $44 million, or income of $2.74 per adjusted diluted share in 2023.

Now turning to slide 11.

Neal West: Adjusted EBITDA for 2024 was $217 million, up approximately $7 million from 2023.

Neal West: Adjusted EBITDA as a percentage of conversion revenue improved by approximately 60 basis points from 2023 to 14.9 percent.

Neal West: The improvement in adjusted EBITDA was driven primarily by improved product mix, partially offset by higher personnel and energy costs.

Neal West: We remain focused on improving operating efficiencies, executing on our recent capital investments, implementing our metal sourcing strategy, and reducing costs in our business.

Neal West: Now turning to a discussion of our balance sheet and cash flow.

Neal West: At the end of December 2024, total cash of approximately $18 million and approximately $553 million in net borrowing availability in our revolving credit facility provided total liquidity of $572 million.

Neal West: There were no outstanding borrowings under our revolving credit facility during and as of the quarter end December 31st.

Our total liquidity position remains strong.

Neal West: As a reminder, our senior annual interest costs have fixed at $48 million annually and we have no debt maturing until 2028.

Neal West: As of year-end, our net debt leverage ratio is 4.8 times against our target leverage ratio of 2 to 2.5 times.

Turning to capital allocation.

Neal West: Our full year 2024 capital expenditures came in at $181 million.

Neal West: With the fourth coding line investment work largely done at our Warwick facility, we expect our 2025 capital expenditures to be closer to our expected run rate at approximately $125 million.

Neal West: including some remaining costs for the fourth coding line project at Warwick and our phase 7 expansion at Shruntwood.

Neal West: As a result, we currently estimate greater than $100 million of free cash flow for a full year of 2025, which we define as cash flow from operation plus capital expenditures, driven by the lower capital expenditures and reduced working capital demands across the portfolio.

Neal West: Additionally, in 2024, we returned approximately $51 million to our shareholders through dividend payments, marking our 18th consecutive year of dividend payments to our shareholders.

Neal West: On January 14th, we announced that our board of directors declared a quarterly dividend of 77 cents per common share, which underscores the continuing confidence our board and management team have in our long-term strategy to improve our profitability and increase stockholder value.

Neal West: Finally, we have begun to assess alternative inventory accounting methods other than LIFO. We expect to provide an update on the assessment prior to the release of our First Quarter 2025 results.

Neal West: And now I'll turn the call back over to Keith to discuss our 2025 Outlook. Keith?

Keith Harvey: Thanks, Neal. Before I share our outlook for 2025, I'd like to take a step back and talk for a moment about the business approach that has served us well for decades and how it's setting us up for success in the future.

Keith Harvey: First, we are focused on niche areas in our served markets that have very demanding applications and present significant barriers to entry.

Keith Harvey: In those areas, we have built strong competitive positions through product differentiation and established longstanding relationships with blue chip customers in those markets.

Keith Harvey: In addition to ensuring quality, on-time delivery performance, and continued strong customer satisfaction levels, maintaining our long-term customer relationships comes down to a strong understanding of our customers' evolving needs.

Keith Harvey: The mutual commitments we have made with our customers help to prioritize our business decisions.

Keith Harvey: As demand for our products grows, our customers expect us to invest for additional capacities to meet their needs and, in turn, commit to us as a key long-term strategic supplier.

Keith Harvey: These commitments support the investments we are continuing to make, such as

Keith Harvey: Upgrading our RORC rolling mill to produce a greater mix of coated products to meet the needs of our packaging customers.

Keith Harvey: And, Expanding Capacity, our Trentwood Rolling Mill, which produces high-value-added flat-rolled products for aerospace, high-strength, and general engineering applications.

Keith Harvey: These are not small investments, so it has been crucial that we have a very good understanding of our customers' needs, backed with mutually beneficial long-term agreements to secure the investments and ensure we deliver solid returns to our shareholders.

Keith Harvey: Now, let me explain how our business approach has influenced our investment decisions for 2025 and provide our outlook by in-market application and on a consolidated basis.

Keith Harvey: Starting on slide 13, with aero and high strength, as I have mentioned in prior calls, commercial aircraft fundamentals remain very strong.

Keith Harvey: Airline passenger miles and freight traffic continue to increase, driving the demand for new aircraft.

Keith Harvey: Although our large airframe customers continue to work through supply chain challenges and recover from quality and labor issues that impacted deliveries in 2024,

Keith Harvey: Aircraft shipments are expected to increase in the high single digits year over year in 2025.

These OEMs hold years of aircraft backlog.

Keith Harvey: In fact, the backlog is as strong as it's ever been, with a high book-to-build ratio continuing into 2025.

Keith Harvey: At Kaiser, we're coming off a near-record year for conversion revenue in aerospace and high strength, even though we have been operating in a choppy environment which has resulted in higher inventories at the OEMs.

Keith Harvey: Despite strong demand, those inventories need to be worked through and will have a short-term impact on our shipments this year.

Keith Harvey: So while our offerings in business, jet, defense, and space remain steady.

Keith Harvey: We expect large commercial aircraft OEMs will enter a temporary phase of de-stocking that will lead to declines in our 2025 shipments and conversion revenue by approximately 5 to 7 percent year-over-year.

Keith Harvey: Looking further out, we expect large commercial aircraft production rates to increase materially in 2026.

Keith Harvey: This should align well with the additional 5% to 6% increase in capacity we expect to gain from our Phase VII expansion at our Trentwood Rolling Mill, one of the very few rolling mills in the world qualified to supply heat-treated plate products for aerospace and certain general engineering applications.

Keith Harvey: This investment is the start of our next major expansion at this facility, and we are excited about the value creation potential it offers to our shareholders.

Keith Harvey: This expansion is expected to be completed in the second half of 2025.

Keith Harvey: Overall, the aerospace and high-strength market will continue to provide a strong multi-year tailwind to our business.

Let's move on to packaging on slide 14.

Keith Harvey: Members of our audience who have followed our story closely over the last several years since we re-entered the packaging market are aware of the challenges we have faced along the way towards making our Warwick facility a major contributor to our business.

Keith Harvey: I am proud of the tremendous work that has gotten us to where we are today and which will lead to a material improvement in our performance in 2025 and beyond.

Keith Harvey: Our Warwick facility is one of a very select few domestic major aluminum rolling mills dedicated to the North American packaging industry.

Keith Harvey: It is uniquely positioned as a long-term supplier of coated-sheeted products into various beverage and food packaging applications, and we are investing to meet the increasing demand for these products.

Keith Harvey: We are following the same playbook we have successfully executed in our other in-market applications.

Keith Harvey: where we focus on a very demanding niche portion of the market, deliver industry-leading products and services, and provide customers with a highly differentiated offering.

Keith Harvey: all of which allow us to establish a strong market position and generate attractive returns for our investors.

Keith Harvey: The investments we have made in Warwick are poised to transform our packaging business and increase its margin profile.

Keith Harvey: Our new roll coat line investment is in its final stages, both in terms of capital expenditures, as well as its readiness to deliver additional coated product.

Keith Harvey: As we previously stated, the fourth rollcoat line is a highly strategic project that we expect to convert approximately 25% of our existing capacity to higher margin, value-added coated products.

Keith Harvey: We are presently commissioning the new rollcoat line and will begin customer qualifications shortly thereafter.

Keith Harvey: We expect to begin shipping coated product from this line in the second quarter of this year, with full production ramping through the remainder of the year.

Keith Harvey: We're also in the final stages of contract negotiations with customers for the remainder of the coding capacity this investment will generate. And we now expect those multi-year agreements to be in place by the end of the first quarter this year.

Keith Harvey: In anticipation of the completion of this project in late 2024, we began to shift product availability towards a more coded-centric mix.

Keith Harvey: This shift will result in total first half shipments being reduced temporarily as qualifications are completed and we begin shipments from the new line to customers.

Keith Harvey: We expect shipments in the resulting higher-value mix to ramp slowly in the second quarter and then reach higher run rates in the second half of the year.

Keith Harvey: As such, the benefit of our investment at Warwick will become more apparent in the second half of the year.

Keith Harvey: To add context to that comment, for the full year, we expect shipments and packaging to be up 3-5% year-over-year.

Keith Harvey: and expect conversion revenue to increase by 20-25% in 2025 with our numbers strongly skewed to the second half.

Keith Harvey: As I have said before, we expect our investment in Warwick to yield 300 to 400 basis points of EBITDA margin expansion to our consolidated business at full run rate.

Keith Harvey: While we won't guide quarter to quarter, we expect to see the full benefit run rate in the fourth quarter of this year, and we believe it to be sustainable.

Keith Harvey: We expect packaging to be a meaningful driver of our long-term performance. The dynamics in the industry are extremely compelling.

Keith Harvey: There is a solid long-term demand in both food and beverage packaging, a fair portion of which is being satisfied currently by imports.

Keith Harvey: North American production is not currently sufficient to meet future demand, let alone current demand, particularly since some capacity has been reallocated towards other end markets, including automotive and industrial.

Keith Harvey: And we, of course, occupy a unique space in the market with our sole focus on packaging at our Warwick facility.

Keith Harvey: With strong secular growth expected in the three to five percent range annually

Keith Harvey: Coupled with our long-standing customer relationships, with multi-year contracts, and a focus on higher margin value-added coated products, we are highly optimistic about our ability to drive strong results in our packaging and market applications.

Turning to General Engineering on slide 15.

Keith Harvey: De-stocking appears to be over in long products. In fact, service center inventories for a certain of our long products are at lows not seen in over a decade.

Keith Harvey: Shipments to start the year are encouraging, and the ISM Manufacturing Purchasing Managers Index moved into expansion territory in January for the first time since October of 2022, after 26 consecutive months of contraction.

Keith Harvey: Plate product inventories remain elevated, but we expect these will even out by mid-year.

Keith Harvey: Our initial outlook for 2025 is for volumes and conversion revenue to be up five to 10% year over year.

Keith Harvey: As noted, we expect Phase 7 to expand our capacity at Trentwood Rolling Mill and enable us to continue to meet the growing needs of our customers for general engineering heat treated plates.

Finally, turning to automotive on slide 16.

Keith Harvey: North American industry production is expected to be flat to down modestly in 2025 compared with last year.

Keith Harvey: While we have some exposure to a softer demand environment, we do have favorable resets on various contracts in 2025.

Keith Harvey: Also, although our shipments are likely to follow market production rates, we are skewed towards the SUV and light trucks segments, which should continue to outperform the general overall market.

Keith Harvey: Again, we are focused on niche product categories with few competitors and a solid mix of higher value-added products.

Keith Harvey: Due to these factors, we expect conversion revenue to be up 3-5% on 5-7% lower shipments over 2024, consistent with expected industry production.

Turning to our summary outlook for 2025 on slide 17.

Keith Harvey: We expect our full-year consolidated conversion revenue to increase 5-10% and EBITDA margin to be up 50-100 basis points year-over-year.

Keith Harvey: In line with the expected ramp of our new investments, we anticipate that we will see meaningful EBITDA and EBITDA margin uplift in the second half of the year, with around 60% of full-year EBITDA expected to come in in the second half.

Keith Harvey: prior to any changes we may make on accounting inventory valuations.

Keith Harvey: Our assumptions include the market conditions and outlook described, the timing of our investments being brought online, and current market considerations on pricing and availability of scrap.

Keith Harvey: Notably, our assumptions do not include potential impacts from recently announced tariffs, which we are evaluating across all of our businesses.

Keith Harvey: Our balance sheet will also continue to strengthen as we move through the year, as will our steady pace of deleveraging, and our shareholders will reap the additional benefits from the largest capital investment cycle in Kaiser's recent history.

Keith Harvey: Finally, I'm pleased to announce that we reached early agreement with our United Steelworkers represented employees at our newer cart alloy plant and Trentwood Rolling Mill, taking us to the end of the decade.

Keith Harvey: Our existing contract expires in September, but as we have done many times in the past, our teams came together early on and worked on a mutually beneficial contract to ensure uninterrupted service to our customers.

Keith Harvey: I'm extremely proud of the relationship we share with United Steelworkers and I want to thank everyone involved on another successful outcome for our employees, our company, and for our customers.

Keith Harvey: In summary, we expect to exit 2025 with strong tailwinds resulting from our strategic investments and strong market positions.

Keith Harvey: As I said on our prior call, we expect 2025 to be a transformational year for the company, and that expectation remains unchanged.

Keith Harvey: I look forward to sharing our continued progress with you throughout the year.

Keith Harvey: With that, I'll now open the call to any questions you may have. Operator?

Speaker Change: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad.

Speaker Change: You may press star 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Your first question comes from Bill Peterson with JP Morgan. Please go ahead.

Bill Peterson: Within the Consolidated 2025 EBITDA guide, you have some key assumptions, you say recovery and scrap availability, potential tariff. You just spoke to that none of these include any tariff update, but what are you assuming in terms of scrap spreads, the impact to EBITDA, I guess particularly probably in packaging, but what are your assumptions at this stage? Is there a way to quantify the current impact from the tightness and scrap spreads?

Well, what we used, Bill, uh,

Bill Peterson: We basically used how we ended up last year, so we had talked about last year that the efforts we had focused on for improving spreads for us on EBITDA and EBITDA margin expansion, we felt that our position was going to bring 150 to 200 basis points of improvement.

Bill Peterson: And as we spoke to the third quarter of last year, we said we're at the lower end of that range.

Bill Peterson: And that's pretty much what we've modeled for the remainder of 2025. If scraps improve, the spreads improve, we'll have a tailwind from that. But we're certainly not rolling in that there's going to be a big uplift at this point.

Bill Peterson: And if you take a look at the tariff component bill, while we didn't include any in that, you know, we're still assessing through all of our businesses what currently has been laid out.

the February 1 announcement that came out.

Bill Peterson: We really think that this is a neutral to a positive thing for Kaiser Aluminum overall.

Bill Peterson: And, you know, we may have some areas that we need to refocus on some of our supplying of billet or so forth.

Bill Peterson: something we can meaningfully take care of. On the positive side, we've seen some good pricing position. I mean, as far as, you know, we were having, we were facing some.

Bill Peterson: Some headwinds with imports. I think that's immediately slowed that down and and so that's a positive for us. And then on the other side of it, we're beginning to see customers talk about more domestic shipments.

So that always blends well for Kaiser Aluminum moving forward.

Bill Peterson: The one area that we remain, you know, waiting to see what takes place is on these reciprocal tariff impacts, which could play out, but again, our overall assessment at this time is that it's a neutral to a positive for Kaiser.

Speaker Change: Okay, thanks for that. Maybe trying to double-click or get a little bit more color on the end mark. It's maybe first on aerospace.

Speaker Change: recognizing, you know, you're still kind of an inventory correction environment, but what are you hearing from your customers in terms of inventory in the system? When do you expect buyers move off the sidelines? And I guess as we think about progressing through the year, do you see the potential for the year on year shipment and conversion revenue declines to abate or maybe even turn to positive growth by year end or is that just too early to tell?

Bill Peterson: Well, you know, we took a hard look at this last year a couple of times, Bill, if you recall. We said in June and then again in the September call that we felt there was going to be some depression on shipments and inventory concerns. And then, of course, we had some labor issues coming in.

Bill Peterson: When you look at our fourth quarter results, we actually did very well.

Bill Peterson: And I really push that to the strength of our contracts that we have in place. And I'm happy to communicate the strength of those contracts will continue into 2025.

Now

Bill Peterson: The second part of your question, what do we think, how does the year look, I think the build rates are going to continue to increase with the large OEM airframers, Bill, and I think as those production rates will increase throughout the year.

Bill Peterson: I think that destocking component or that demand could pick up noticeably, especially in the second half of the year.

I also, we talked in our comments about general engineering.

Bill Peterson: And we talked about this last year, we think that semiconductor stands a good chance of getting back some strength in the second half of the year.

Bill Peterson: working in that Phase 7, that 5-6% increase that's coming in. And quite frankly, I think we're going to get very lucky here in that the demand should allow us to put that in with minimal impact to any of our customers' shipments.

Bill Peterson: And so we're going to probably get a good timing on this investment.

Bill Peterson: We expect to be done probably in the middle of the second half of the year and then we'll be ideally positioned to take advantage of any return on demand that we expect to see in the second half of the year.

Speaker Change: Yeah, thanks for those insights. And then, you know, you mentioned general insurance, but maybe shifting to packaging.

Speaker Change: first the fourth quarter sort of pricing was down was that was that a mixed impact and then

Speaker Change: I guess maybe, can you remind us of how many, you know, remaining legacy packaging contracts are expected to be renewed and what this could, what kind of impacts you could have on pricing maybe absent of tariffs that could even be a further positive tailwind?

Speaker Change: Yeah, and again, Bill, good point on that. Nothing on tariffs is rolled into what our outlay of what our expectations will be on margin expansion as we move to higher value added products.

Speaker Change: You could see in that we led that shipments will be up only three to five percent. And by the way, you are correct. It was just mix in the fourth quarter. We're seeing really...

Speaker Change: really strong demand. I have to pay it that way. We're very anxious ourself to get the new capacity on because our customers are screaming.

Speaker Change: for more metal and we're going to be in a great position to start delivering that in the second quarter sometime.

Speaker Change: This change to higher value added revenue is indicative of what we're saying, so the second half of the year

Speaker Change: We'll begin to move up to full run rates, and we're talking about up to a 25% improvement on our conversion revenue. And so that's just indicative on very few more pounds shipped.

Speaker Change: So that's just a little insight as to what's to come.

Speaker Change: that we think with this vision, and I reflect back to that 300 to 400 basis points overall to the consolidated business when we get this thing at full run rate.

Speaker Change: It'll begin in the second half of this year, but purely, clearly 2026, we'll be able to really let this thing go.

Bill Peterson: Thanks for sharing the insights, Keith. I'll pass along. Thanks, Bill.

Next question, Tina Tanners with Wolf Research. Please go ahead.

Tina Tanners: Thanks for that great detail. I wanted to ask a few more. It's high level. We've seen the Midwest premium double since last year. So any timing issues with passing that through to customers or applications for working capital?

Tina Tanners: Yeah, thanks for the question. Hey, good morning, Tim. You know, our business model has really been set up to pass these through almost immediately.

Tina Tanners: We have very few segments in our businesses where there's a lag effect.

Tina Tanners: And if those exist, they're no more than 20 or 30 days. But the majority of our businesses are set up to pass through metal.

Tina Tanners: you know, right away. So you shouldn't see any drag on our business as metal ramps. And a good way to go back and look at how that reacted, go back and look at our data when metal was up around $2 a pound.

Tina Tanners: And you can see that our spreads and margins maintain themselves through that period on the way up and on the way down.

Neal West: So I think we're pretty well insulated on that. Now one thing we intend to do this year, Neal mentioned about the greater than $100 million of free cash flow we expect for the year.

Neal West: We're obviously going to be very focused on discipline, on the use of working capital.

Neal West: And then again, we're past that large timing of that basically three years in a row where we had very high spending.

Neal West: to get these investments ready to start delivering revenue. So, that's going to be completed this year, and so all of that combining together is going to make a very positive effect on our cash generation and on our balance sheet.

Speaker Change: Okay, thanks. I was wondering why you were talking about converting your inventory methodology, so I wondered if that was because of a working capital issue. Is there something that we should think about for modeling purposes or is that imminent?

Speaker Change: Well, I think, Tim, if you recall all last year, we had to evoke the LIFO impact at least two or three times.

Speaker Change: And with that change that took place, we're taking a chance to re-evaluate how we're looking at. And you could look at, how are we going to evaluate? We're going to look at...

Speaker Change: FIFO, we're going to look at average cost metal, and we're going to evaluate that against LIFO. And, you know, we're going to say what best fits our business.

Speaker Change: moving forward and so that, you know, we don't all have to sit there and guess what that accounting, you know, scenario that we're in is going to impact earnings.

Speaker Change: So we're going to go with the one that we think best fits our business, and I think you'll hear more out of us on that issue very soon.

Speaker Change: Okay, great. And I think you've been really clear that there's a lot of factors that will drive a better second half than first half. I'm just wondering if you want to put a finer point on it, like percentage inhibitor that might be more second half than first half because it is a

Speaker Change: quite a confluence of factors between the aerospace cycle that we know of, between the ramp up at Warwick. I think I'm missing something, but there are several factors. I'm just wondering, is there any way that you could put a finer point on it for us?

Speaker Change: Yeah, you know in the comments that Tim and I was talking so fast and so much that you may have missed it but what we basically said we expect of the total EBITDA for the year

Speaker Change: to generate approximately 60% of that in the second half. And that's without any of those accounting changes that we make evoke and so forth. So you could probably look at it that perspective of 40-60.

Speaker Change: for the year. Yeah, thank you. Okay, so one more for me if I could. The NOLs are still supporting a pretty nice small cash tax position and I was wondering, you know, since we haven't seen the K yet, what that might look like if this might be the last year of that benefit. And then similarly, CAPEX in 2025. I think you still have some remaining, of course, from the investments, but what should we think about? Is that falling off around into

Thanks.

Neal West: Yeah, so I'll handle the CapEx and then Neal can talk about the NOLs.

Neal West: Yeah, basically what we're stating is that we'll be around that 125 million CapEx for 2025.

Neal West: We sort of alluded to that last year. We said 100 to 125, but the 125 is the general range we're looking at currently. And that is inclusive of finalizing the investment on the rollcoat line and the Phase 7.

expansion at Trentwood.

Neal West: and I'll turn the NOLs over to Neal. In regard to tax NOLs, we basically, as of the end of 2024, we have now utilized our NOLs. And as I know from my comments, we expect our cash tax payments

Neal West: In 2025, which will also cover federal, state, and foreign taxes, we'll be in that $5 to $7 million range in 2025, which is effectively cashed tax payments for 24 taxes.

Got it. Thank you very much.

Thanks, Tim.

Speaker Change: I would like to turn the floor over to Keith Harvey for closing remarks.

Speaker Change: Okay, well thank you for joining us today and thank you for your interest in Kaiser Aluminum.

Speaker Change: We're looking forward to an exciting year as we bring these new investments online and position the company for strong growth in 2025 and the years ahead.

Speaker Change: I look forward to speaking with you again in April when we discuss our first quarter results. I hope you have a good rest of your day. Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time and thank you for your participation.

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