Q2 2025 Kaiser Aluminum Corp Earnings Call

Operator: Congratulations, second quarter, 2025. All participants are in a listen-only mode.

Greetings and welcome to the Kaiser. Aluminum Corporation second quarter 2025 earnings conference call.

Operator: Any brief question and answer session will follow the formal presentation. if anyone should require operator assistance during the call. star zero on your telephone. As a reminder, this conference is being recorded.

At this time, all participants are in a listen-only mode.

A brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Kimberly Orlando: It is now my pleasure to introduce your host, Kim Orlando with Addo Investor Relations. Thank you. You may begin. Thank you.

As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Kim Orlando with Ado, investor relations, thank you. You may begin.

Kimberly Orlando: Hello, everyone, and welcome to Kaiser Aluminum's second quarter 2025 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. We have also posted a PDF version of the slide presentation for this call.

Speaker Change: Thank you. Hello everyone and welcome to Kaiser aluminum's. Second quarter 2025 earnings conference call. If you have not seen a copy of our earnings release, please visit the investor relations page of our website at Kaiser aluminum.com.

Kimberly Orlando: 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. Before we begin, I'd like to refer you to the first four slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management's current expectations. For a summary of specific risk factors that could cause results to differ materially from the forward-looking statement, please refer to the company's earnings release and report filed with the Securities and Exchange Commission, including the company's annual report on Form 10-K for the full year ended December 31, 2024.

We have also posted a pdf version of the slide presentation for this call.

Neil West: Joining me on the call today are chairman president and chief executive officer. Keith Harvey, and Executive Vice President, and Chief Financial Officer. Neil West

Neil West: Before we begin, I'd like to refer you to the first 4 slides of our presentation and remind you that the statements made by management. And the information contained in this presentation, that constitute forward-looking statements are based on Management's, current expectations.

Kimberly Orlando: The company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our Reconciliations to the Most Comparable Gap financial measures are included in the earnings release and in the appendix of the presentation. 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 evidence. 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.

For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements. 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, 10K for the full year. Ended December 31st 2024

Neil West: The company undertakes, no duty to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations.

Neil West: in addition, we have included non-gaap financial information in our discussion

Neil West: Reconciliations to the most comparable. Gaap Financial measures are included in the earnings release and in the appendix of the presentation.

Neil West: 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.

Kimberly Orlando: Further, slide five contains definitions of terms and measures that we will be commonly used throughout today's presentation.

Neil West: Any reference to Eva in our discussion today means adjusted Evita, which excludes non-right items for which we have provided reconciliations in the appendix.

Kimberly Orlando: At the conclusion of the company's presentation, we will open the call.

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

Keith Harvey: I would now like to turn the call over to Keith Harvey. Thanks, Kim. And thank you all for joining us today.

Neil West: At the conclusion of the company's presentation, we will open the call for questions.

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

Keith Harvey: Turning to slide seven for our second quarter of I'm pleased to report that Kaiser delivered second quarter results that exceeded our expectations, leading us to increase our full year EBITDA outlook. While favorable metal pricing provided a positive tailwind, our performance reflects deeper strength in our underlying business fundamentals, which continue to improve across the board. Importantly, our performance in our key end markets remained in line with our projections, and we sustained margin levels above 19% in the first half of 2025. roughly 180 basis points stronger than in the prior year or same period. Continued strong pricing and an improving product mix were the primary drivers of strength, along with our persistent emphasis on enhancing operating efficiencies and cost management.

Keith Harvey: Thanks Cam, and thank you all for joining us today.

Keith Harvey: Turning to slide 7 for our second quarter update.

Keith Harvey: I'm pleased to report that Kaiser delivered second quarter results that exceeded our expectations, leading us to increase our full year Eva Outlook

Keith Harvey: While favorable Metal pricing provided a positive Tailwind, our performance, reflects deeper strength in our underlying business fundamentals, which continue to improve across the board.

Keith Harvey: Importantly, our performance and our key in markets remained in line with our projections. And we sustained margin levels of 19% in the first half of 2025 roughly 180 basis points stronger than in the prior year. Same period.

Keith Harvey: We remain focused on our long-term goal for our consolidated businesses to deliver mid to high 20% EBITDA margins. And we expect continued progress towards that goal to become increasingly evident as we advance through demand cycles and bring our investments fully online over the next several quarters.

Keith Harvey: Continued strong pricing and an improving product mix where the primary drivers of strength. Along with our persistent emphasis on enhancing operating efficiencies and cost management.

Keith Harvey: We remain focused on our long-term goal for our Consolidated, businesses to deliver mid to high 20% ibida margins.

Keith Harvey: It's important to note that our working capital requirements, especially those tied to metal pricing, came in above what we anticipated when we originally provided guidance in February. Neal will speak in more detail shortly, but based on current projections, we now expect free cash flow for full year 2025 to be between $50 and $70 million. Meanwhile, customer sentiment was impacted by tariff-related uncertainty during the quarter, particularly in our automotive sector. That said, conditions moderated late in second quarter, and we saw improvements in overall demand. We do recognize, however, that the broader policy and geopolitical landscape remains fluid and continues to introduce pockets of volatility in ordering patterns throughout the business.

Li evident as we advance through demand cycles and bring our investments fully online over the next several quarters.

Keith Harvey: It's important to note that our working capital requirements, especially those tied to Metal pricing, came in above what we anticipated. When we originally provided guidance in February,

Neil will speak in more detail shortly, but based on current projections, we now expect free cash flow for full year 2025 to be between 50 and 70 million.

Keith Harvey: Meanwhile, customer sentiment was impacted by tariff related uncertainty during the quarter, particularly in our Automotive segment.

Keith Harvey: That said, conditions. Moderated late in second quarter and we saw improvements in overall demand.

Keith Harvey: Given this uncertainty, especially as it relates to tariffs, we continue to believe the impact of projected tariff levels will continue to have a neutral to slightly favorable impact on our earnings.

We do recognize however that the broader policy and geopolitical Landscape remains fluid and continues to introduce pockets of volatility and ordering patterns to our business.

Keith Harvey: Given this uncertainty, especially as it relates to tariffs, we continue to believe the impact of projected tariff levels. Will continue to have a neutral to slightly favorable impact on our earnings.

Keith Harvey: Let's now turn to our growth strategy. As we look ahead, we continue to make meaningful progress on our strategic initiatives at our Trentwood and Warwick rolling mills. These two platforms represent a significant portion of our total conversion revenue dollars and the outlook across our aerospace packaging and general engineering in markets continues to be strong. Each investment is foundational to the next phase of Kaiser's margin expansion, which we anticipate will continue to improve in 2026. starting with the Trent Wood Phase 7 investment. The project is advancing on schedule, on budget, and its completion remains closely aligned with supporting the growing demand for both aerospace and general engineering plate products in 2026 and beyond.

Keith Harvey: Let's now turn to our growth strategy.

As we look ahead, we continue to make meaningful progress on our strategic initiatives at our Trentwood and War rolling Mills

Keith Harvey: These 2 platforms represent, a significant portion of our total conversion Revenue dollars, and the Outlook across our Aerospace, packaging and general Engineering in markets continues to be strong.

Keith Harvey: Each investment is foundational to the next phase of Kaiser's, margin expansion, which we anticipate will continue to improve in 2026.

Keith Harvey: Starting with the Trentwood phase 7 investment.

Keith Harvey: We expect the additional production capacity to come online early in the fourth quarter of this year.

Keith Harvey: The project is advancing on schedule on budget and its completion remains closely aligned with supporting the growing demand for both Aerospace and general engineering plate, products and 2026 and Beyond

Keith Harvey: We expect the additional production capacity to come online early in the fourth quarter of this year.

Keith Harvey: Next, I'll turn to an update on our new coating line investment at our Warwick Rolling Mill. We have moved to the material qualifications phase of the startup process. albeit later than initially planned. And while the line is not yet running at full slated capacity, we expect continued improvement in line speeds and customer qualifications throughout the remainder of the year.

Keith Harvey: Next, I'll turn to an update on our new coding line investment at our war Rolling Mill.

Keith Harvey: We have moved to the material qualifications phase of the startup process.

Keith Harvey: Albeit later than initially planned.

Keith Harvey: Accordingly, we now anticipate reaching our full run rate in late fourth quarter of this year and expect the revised timing of qualifications to have a slightly negative impact on our second half 2025 packaging shipments and conversion revenue dollars outlook, which I will discuss later in the call. Above all, I want to reaffirm our unwavering commitment to quality and being a best-in-class supplier for coated products. The equipment we've deployed at our Warwick operations is instrumental to maintaining our position as North America's leading coated supplier for aluminum packaging solutions. While we are all anxious for the new capacity to become fully available, we will not compromise on our standards or bypass any critical steps during the qualification phase with customers.

Keith Harvey: And while the line is not yet running at full slated capacity, we expect continued Improvement in line speeds and customer qualifications throughout the remainder of the year.

Keith Harvey: Accordingly. We now anticipate reaching our full run rate in late, fourth quarter of this year and expect the revised timing of qualifications to have a slightly negative impact on our second half 2025, packaging shipments and conversion Revenue dollars Outlook, which I will discuss later in the call.

Above all.

Keith Harvey: I want to reaffirm our unwavering commitment to Quality and being a best-in-class supplier for coded products.

Keith Harvey: The equipment we've deployed at our war operations is instrumental to maintaining our position as North America's leading coded supplier for aluminum packaging Solutions.

Keith Harvey: Finally, I'm proud to share that we finalized one of our key outstanding multi-year packaging customer contracts for coated products. This agreement reflects not only the confidence our customers place in us, but also the strength of the underlying market and our leadership position within it.

Keith Harvey: While we are all anxious for the new capacity to become fully available, we will not compromise on our standards or bypass any critical steps during the qualification phase with customers.

Keith Harvey: Finally, I'm proud to share that. We finalized 1 of our key outstanding. Multi-year, packaging customer contracts for coded products.

Keith Harvey: In summary, operations continue to improve, we are strengthening our position in our key markets, and we continue to invest for long-term value creation.

Keith Harvey: This agreement reflects not only the confidence, our customers place in us, but also the strength of the underlying market and our leadership position within it.

Neal West: With that, let me hand the call over to Neal for further detail on our second quarter results. Thank you, Keith.

Keith Harvey: In summary operations continue to improve. We are strengthening our position in our key markets and we continue to invest for long-term value creation.

Keith Harvey: With that, let me hand the call over to Neil for further detail. On our second quarter results. Neil

Neal West: Good morning, everyone.

Neal West: I'll now turn to slide nine for an overview of our shipments and conversion revenue. Conversion revenue for the second quarter was $374 million, an increase of approximately $5 million, or 1% compared to the prior year period. Looking at each of our end markets in detail, aerospace and high strength conversion revenue totaled $127 million, down $6 million or approximately 5%, primarily due to a 4% decline in shipments over last year. As previously discussed, prior year disruptions in commercial aircraft OEM production patterns have impacted the aluminum supply chain, which is now moving through a destocking period. Importantly, demand for our other aerospace and high-strength applications, including business jet, defense, and space, has remained strong.

Thank you, Keith. Good morning, everyone. I'll now turn to slide 9 for an overview of our shipments and conversion Revenue.

Conversion revenue for the second quarter was 374 million, an increase of approximately 5 million or 1% compared to the prior year period.

Keith Harvey: Aerospace and high strength conversion Revenue totaled, 127 million down 6 million are approximately 5% primarily due to a 4% decline in shipments over last year.

Neal West: Packaging conversion revenue totaled $130 million, up $11 million or approximately 9% year-over-year on an improved mix of higher value-added products. Shipments for the quarter, while up 8% sequentially, declined 3% over the prior year, primarily due to the mixed shift in product deliveries as we continue to ramp the new roll coat line and qualify products for customers. As discussed, the underlying demand for our products remains strong, and we are working closely with our customers as we move through this transition. General Engineering conversion revenue for the second quarter was $86 million, up $3 million, or 3% year-over-year, on a 5% increase in shipment.

Keith Harvey: As previously discussed prior year, disruptions in commercial aircraft OEM production patterns have impacted the aluminum supply chain which is now moving through these stocking period. Importantly demand for our other Aerospace and high strength application, including Business, Jet defense and space has remained strong.

Keith Harvey: Packaging conversion Revenue totaled, 130 million up 11 million, or approximately 9% year-over-year on improved mix of higher value, added products.

Shipments for the quarter. While up 8% sequentially declined 3% over the prior year, primarily due to the mixed shift in product of deliveries, as we continue to ramp the new row coat line and qualify products for customers.

Keith Harvey: As discussed the, underlying demand for our products remains strong, and we are working closely with our customers as we move through this transition.

Neal West: Broader market factors, including reshoring opportunities, continue to create a favorable operating environment in the general engineering end market, driving higher demand and solid pricing for both our long and plate products. And finally, automotive conversion revenue of $32 million declined 4% year-over-year and a 15% decrease in shipments, primarily due to tariff-related customer uncertainties affecting the automotive industry. The lower demand has been partially offset by improved pricing and product mix. Additional details and conversion revenue shipments by end market applications can be found in the appendix of this presentation.

Keith Harvey: General engineering conversion revenue for the second quarter was 86 million up, $0 million or 3% year-over-year on the 5% increase in shipments.

Keith Harvey: Broader Market factors including reshoring opportunities, continue to create a favorable operating environment in the general engineering and Market driving higher, demand, and solid pricing, for both our long and plate products.

Keith Harvey: And finally, Automotive conversion revenue of 32 million declined 4% year-over-year on a 15% decrease in shipments primarily due to tariff related, customer uncertainties affecting the automotive industry.

Keith Harvey: The lower demand has been partially offset by improved pricing and product, mix.

Neal West: Now moving to slide 10. Reported operating income for the second quarter was $38 million, an increase of approximately $2 million from the $36 million in the prior year quarter. As a reminder, the second quarter of 2024 included operating non-run rate charges of approximately $9 million, primarily associated with restructuring charges. After adjusting for the operating non-run rate charges, our second quarter 2025 adjusted operating income was down $7 million from the prior year quarter. Our effective tax rate for the second quarter was 22%, compared to 23% in the second quarter of 2024. For the full year 2025, we continue to expect our effective tax rate before discrete items to be in the low to mid 20% range before taking into account any impact related to the new tax bill recently signed into law.

Keith Harvey: Additional details and conversion Revenue. Shipments by End Market applications can be found in the appendix of this presentation.

Keith Harvey: Now, moving the slide 10.

Keith Harvey: Reported operating income for the second quarter was 38 million, an increase of approximately 2 million from the 36 million in the prior year quarter.

As a reminder, the second quarter of 2024 included operating non-un charges of approximately 9 million primarily associated with restructuring charges.

Keith Harvey: After adjusting for the operating non-un rate charges our second quarter 2025 adjusted operating income was down 7 million from the prior year quarter.

Keith Harvey: Our effective tax rate. For the second quarter was 22% compared to 23% in the second quarter 2024.

Keith Harvey: For the full year 2025 we continue to expect our effective tax rate before discrete items to be in a low to mid 20% range before taking into account any impact related to the new tax bill recently signed into law.

Neal West: Additionally, we anticipate that 2025 cash tax payments for federal, state, and foreign taxes will be in the $5 to $7 million range. reported net income for the second quarter was $23 million or $1.41 net income per diluted share compared to net income of $19 million or $1.15 net income per diluted share in a prior year quarter. After adjusting for non-operating, non-run rate benefit of approximately $3 million net of tax related to insurance settlements associated with prior year claims, adjusted net income for the second quarter of 2025 was $20 million, or $1.21 adjusted net income per due diluted share.

Keith Harvey: Additionally, we anticipate that 2025 cash tax payments for federal state and foreign taxes will be in the 5 to 7 million dollar range.

Keith Harvey: Reported net income for the second quarter was 23 million or a $14.41 net income, per diluted share compared to net income of 19 million or $1.15. Net income per little to share in a prior year quarter.

Neal West: This compares to adjusted net income of $27 million, or $1.63 adjusted net income per due diluted share in a prior year period.

Keith Harvey: After adjusting for non-operating non-runner rate benefits of approximately $3 million, net of tax related to insurance settlements associated with prior year claims adjusted net income. For the second quarter, 2025 was 20 million or 1.21 cents, adjusted net income per Duel of share this compares to just an income of 27 million dollars or a dollar 63 cents. A j.

Fascinate income per diluted share in the prior period.

Neal West: Now turning to slide 11. Adjusted EBITDA for the second quarter was $68 million, down approximately $6 million from the prior year period. Our second quarter 2025 results benefit from positive sales momentum, reflecting an increase in price and improved mix of higher value added products. This was offset by higher operating costs, primarily associated with startup expense on the fourth row coatline. and timing of certain major maintenance projects as compared to the second quarter of 2024. As we continue to move through the start of our new roll coat line at work and complete the Phase 7 investment at Trentwood, we expect operating costs to stabilize and improve.

Now, turning the slide 11.

Keith Harvey: Adjusted IBA for a second. Quarter was 68 million.

Keith Harvey: Down approximately 6 million dollars from the prior year, period.

Keith Harvey: Our second quarter, 2025 results benefit from positive sales, momentum reflecting an increase in price and improved mix of higher value, added products.

Keith Harvey: This was offset by higher operating costs primarily associated with startup expense, on the 4th row, coat line.

And timing of certain major maintenance projects, like compared to the second quarter of 2024.

Neal West: Now turning to the discussion of our balance sheet and cash flow, on June 30, 2025, total cash of approximately $13 million and approximately $525 million of borrowing availability in our revolving credit facility equated to a strong liquidity position of approximately $538 million. There were $33 million of borrowings under our revolving credit facility as of the quarter end. As a reminder, our senior notes interest costs are fixed at $48 million annually, and we have no notes maturing until 2028. As of the end of the second quarter, our net debt leverage ratio increased 30 basis points to 4.2 times from 3.9 times at the end of the first quarter.

As we continue to move through the start of our new rollout line at work and complete the phase 7 investment at Trentwood we expect operating costs to stabilize and improve.

Keith Harvey: And June 30th 2025 total cache of approximately $13 million and approximately 525 million of borrowing availability in our revolving. Credit facility, equated to a strong liquidity position of approximately 538 million.

Keith Harvey: There were 33 million of borrowings under our revolving credit facility, as of the quarter end,

Keith Harvey: As a reminder, our senior notes interest costs are fixed at 48 million annually. And we have no notes maturing until 2028.

Neal West: Turning to capital allocation and pre-cash flow, we generated cash flow from operations of $16 million during the second quarter, with our capital expenditures totaling $44 million. For the full year 2025, we expect, continue to expect, capital expenditures to be in a range of $120 million to $130 million, including some remaining costs for the fourth coding line project at ORC and completion of our Phase 7 expansion at Trentwood. As we enter the year, we anticipate a free cash flow for the full year 2025 of approximately $100 million. While we have successfully reduced the total pounds of inventory, which was a significant contributor to our projections, recent trade policy actions and the material impact it has had on our working capital utilization have led us to revise our expectations.

Keith Harvey: as of the end of the second quarter, our net debt leverage ratio, increase 30 basis points, to 4.2 times from 3.9 times, at the end of the first quarter,

Keith Harvey: Turning to Capital, allocation and free cash flow.

We generate a cash flow from operations of 16 million dollars during the second quarter with our Capital expenditures totaling 44 million.

Keith Harvey: For the full year. 2025, we expect continued to expect Capital expenditures to be in range of 120 million to 130 million, including some remaining costs for the fourth coding line project at org and completion of our phase 7 expansion at Trentwood.

Keith Harvey: As we entered the year, we anticipate a free cash flow for the full year 2025 of approximately 100 million.

Neal West: As such, we are now projecting to generate approximately $50 million to $70 million of free cash flow for the full year of 2025.

Keith Harvey: While we have successfully reduced, the total pounds of inventory, which was a significant contributor to our projections, recent trade policy actions, and material impact that has had on our working capital yields utilization have led us to revise our expectation.

Neal West: Finally, on July 15, we announced that our Board of Directors declared a quarterly dividend of 77 cents per common share, reinforcing the confidence in our long-term strategy to drive increasingly profitable growth and maximizing shareholder value.

Keith Harvey: As such we are now projecting to generate a fractionally 50 million to 70 million dollars of free cash flow for the full year of 2025.

Keith Harvey: I'll now turn the call back over to Keith to discuss our outlook. Thanks, Neal. As we continue throughout the year, we're encouraged by the momentum we see across our business and the clarity we're gaining in our market. Let me now walk you through our outlook by NMARC. Starting on slide 13 with Aerospace and High Strength. The pace of commercial aircraft delivery stepped up again in the second quarter. We're seeing continued signs that the supply chain is recovering and while select areas such as engines and interiors are still experiencing disruption, those pockets are steadily moderating. Aluminum inventory at the customers remain elevated in the channel for now, but as build rates ramp, we expect that inventory to be absorbed rapidly.

Keith Harvey: Finally, on July 15th, we announced that our board of directors, declared a quarterly dividend of 77 cents per common, share reinforcing a confidence in our long-term strategy to drive, increasingly profitable, growth and maximizing shareholder value. I'll now turn the call back over to Keith to discuss our Outlook Keith

Keith Harvey: Thanks Neil.

Keith Harvey: as we continue through the throughout the year, we're encouraged by the momentum, we see across our business and the clarity, we're gaining in our markets

Keith Harvey: let me now, walk you through our Outlook by in Market,

Keith Harvey: Starting on slide 13 with Aerospace and high strength.

Keith Harvey: The pace of commercial aircraft delivery stepped up again in the second quarter.

Keith Harvey: We're seeing continued signs that the supply chain is recovering and while select areas such as engines and Interiors are still experiencing disruption, those pockets are steadily moderating.

Keith Harvey: Aluminum inventory at the customers, remain elevated in the channel for now, but is build rates ramp. We expect that inventory to be absorbed rapidly.

Keith Harvey: Demand and defense, space, and business jet remain consistently strong throughout the quarter. Longer term, we believe Kaiser's positioning remains highly advantaged as a leading global supplier of aluminum products to these end markets, and our capital investments support the durability of that leadership well into the future. Accordingly, our outlook for both shipments and conversion revenue remains unchanged from February for a projected decline of approximately 5-7% year-over-year, due mainly to inventory destocking underway in the large commercial jet supply chain. Let's move on to packaging on slide 14. We are refining our outlook for packaging conversion revenue to increase year over year by approximately 15% to 20%, while shipments are expected to decline approximately 3% to 5% year over year.

Keith Harvey: Demand and defense space and Business Jet remain consistently strong throughout the quarter.

Keith Harvey: Longer term, We Believe Kaiser's positioning remains, highly advantaged as a leading Global supplier of aluminum products to these end markets, and our Capital Investments support, the durability of that leadership well, into the future.

Keith Harvey: Accordingly, our outlook for both shipments and conversion Revenue remains unchanged from February for a projected, decline of approximately 5 to 7% year-over-year due. Mainly to inventory de stocking underway in the large commercial jet supply chain.

Keith Harvey: Let's move on to packaging on. Slide 14.

Keith Harvey: I want to be very clear. This adjustment is driven entirely by the commissioning timeline for our new coding equipment and underperformance from our coding converters who have struggled to meet their commitments to us through the first half of the year. We expect improved performance in all areas as we progress into the second half of the year. As previously discussed, North American demand far exceeds available supply and that dynamic is expected to continue well beyond 2025. Our team remains fully committed to accelerating increased capacity throughput from our value stream to meet the growing needs of our customers well into the future.

Keith Harvey: We are refining our outlook for packaging, conversion Revenue to increase year-over-year by approximately 15 to 20%. While shipments are expected to decline approximately 3 to 5% year-over-year.

Keith Harvey: Is driven entirely by the commissioning timeline, for our new coating equipment and underperformance from our coating converters who have struggled to meet their commitments, to us, through the first half of the year.

Keith Harvey: We expect improved performance in all areas as we progress into the second half of the year.

Keith Harvey: As previously discussed North American demand far exceeds available Supply and that Dynamic is expected to continue well beyond 2025.

Keith Harvey: Our team remains fully committed to accelerating increased capacity, throughput from our value stream, to meet the growing needs of our customers well into the future.

Keith Harvey: Turning now to general engineering on slide 15. Our performance continues to be strong. Shipments are up mid-single digits and pricing remains solid, supporting growth and conversion revenue. While tariffs are not directly impacting our volume, we are seeing some month-to-month variability in order patterns as customers adjust to the implications of a Midwest premium. Broadly speaking, both plate and long products have shown robust activity, making the first half of 2025 one of our strongest periods since 2018. aside from the unusual activity in the post-COVID environment in the 2021-2022 period. Looking ahead to the second half, we expect continued strength in shipments supported by a favorable mix shift toward plate products.

Keith Harvey: Our performance continues to be strong.

Keith Harvey: Shipments are up mid single digits and pricing remains solid supporting growth and conversion Revenue.

Keith Harvey: While tariffs are not directly impacting our volume, we are seeing some month-to-month variability in order patterns as customers adjust to the implications of the Midwest premium.

Keith Harvey: Broadly speaking both plate and long products have shown robust activity, making the first half of 2025 1 of our strongest periods since 2018.

Keith Harvey: Aside from the unusual activity in the postco environment and the 2021 2022 period.

Keith Harvey: which is a positive for conversion revenue. We continue to expect full-year shipments and conversion revenue to be up year-over-year by 5 to 10 percent.

Keith Harvey: Looking ahead to the second half. We expect continued strength in shipments supported by a favorable, mix shift toward plate products.

Keith Harvey: Which is a positive for conversion Revenue.

Keith Harvey: We continue to expect full year shipments and conversion Revenue to be up year-over-year by 5 to 10%.

Keith Harvey: Finally, turning to automotive on slide 16. Our outlook for the remainder of the year remains steady. Industry build rates have fluctuated with tariff developments, starting the year with expectations of about 15.7 million units. Current build rates are expected closer now to the mid-$14 million range. Despite the macro uncertainty, Kaiser's exposure is concentrated in key platforms, particularly SUVs and light trucks, where demand has remained healthy. As a result, we expect our second half shipments and conversion revenue to hold steady compared to the first half of 2025.

Keith Harvey: Finally turning to Automotive on slide 16.

Keith Harvey: our outlook for the remainder of the Year remains steady,

Industry. Build rates, have fluctuated with tariff, developments starting the year, with expectations of about 15.7 million units.

Keith Harvey: Current build rates are expected closer. Now to the mid 14 million range

Keith Harvey: despite the macro uncertainty Kaiser's. Exposure is concentrated in key platforms, particularly SUVs and light trucks.

Keith Harvey: Where demand has remained healthy?

Keith Harvey: As a result, we expect our second half shipments and conversion Revenue to Hold Steady compared to the first half of 2025.

Keith Harvey: Now turning to our summary outlook on slide 17. In summary, the outlook for our end markets remained intact despite the uncertain operating environment. Based on first-half results, our total conversion revenue guidance for 2025 remains unchanged at a 5-10% year-over-year improvement. However, our margin performance is slightly better than we initially anticipated. And as a result, we're raising our full year EBITDA outlook by 5% versus our outlook in February to now reflect growth of 10 to 15% year over year. This marks a strong step forward and reflects both solid execution and a resilient market backdrop along with favorable tailwinds provided by sharply rising metal prices today.

Keith Harvey: now, turning to our summary outlook on slide 17,

Keith Harvey: In summary, the outlook for our end markets remains intact, despite the uncertain operating environment.

Keith Harvey: Based on first half results, our total conversion Revenue guidance for 2025 remains unchanged at a 5 to 10 percent year-over-year Improvement.

Keith Harvey: However, our margin performance is slightly better than we initially anticipated. And as a result, we're raising our full year ibida outlook by 5% versus our Outlook in February to now, reflect growth of 10 to 15% year-over-year.

Keith Harvey: Importantly, 2025 will be a turning point for Kaiser towards meeting our long-term conversion revenue and EBITDA margin goal. And this is without fully benefiting from the targeted investment and strategic positioning we've pursued over the past several years. with momentum accelerating for full deployment of our investments in 2026. Along with continued strength in our end markets, we look forward to showcasing the full potential of these businesses in the years ahead.

Keith Harvey: This marks a strong step forward and reflects both solid execution, and a resilient Market backdrop, along with favorable Tailwinds, provided by sharply Rising metal prices today.

Keith Harvey: Importantly, 2025 will be a turning point for Kaiser towards meeting our long-term conversion revenue and even down margin goals.

Keith Harvey: And this is without fully benefiting from the targeted Investments and strategic positioning. We pursued over the past several years.

Keith Harvey: With momentum accelerating for full deployment of our investments in 2026.

Keith Harvey: Along with continued strength. In our end markets, we look forward to showcasing the full potential of these businesses in the years ahead.

Operator: With that, I will now open the call to any questions you may have, operator. 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 key. Information tone will indicate your line is in the question You may press star 2 if you would like to remove your question.

Keith Harvey: With that, I will now open the call to any questions you may have.

Keith Harvey: Operator.

Speaker Change: Thank you. We will now be conducting a question and answer session.

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Bill Peterson: Our first question comes from the line of Bill Peterson with JPMorgan, please proceed with your question. Yeah. Hey, good morning, Keith, everyone.

Speaker Change: Thank you. Our first question comes from the line of Bill Peterson with JP Morgan. Please receive with your question.

Keith Harvey: I have a few questions here, maybe first starting with packaging. I guess, what's driving the delay in the commissioning and what's giving you confidence in the current target? I guess, is the sole driver of lower packaging? You mentioned, I think, some coding delays, and I'm just trying to get a sense for the shift. you know, new guidance you're providing.

Bill Peterson: Yeah. Hey hey. Good morning, Keith everyone. Uh, it has a few questions here. Maybe first starting with Packaging.

Bill Peterson: I guess, what's driving the delay in the commissioning and and what's giving you confidence in the current Target, I guess is the sole driver lower Packaging.

Bill Peterson: You know, guidance you mentioned, I I think some coding delays. I'm just trying to get a sense for the shipping. Uh, you know, new guidance, you're providing.

Keith Harvey: Yeah, Ed. Thanks, Bill. Good morning. What we're seeing is what you might imagine is typical startup issues on a on a fairly complex, large piece of equipment. We have got the equipment in line, we have begun the qualification periods, but qualifications are are quite important here. You know, they're they're typically a three phase type in process before you're fully qualified and you can open the lineup for regular runs. Of course, we got multiple different coatings that we're trying to qualify at the same time. And then you're debugging that equipment, which is, you know, we're just getting it up to rate.

Bill Peterson: Yeah, thanks Bill. Good morning, uh,

Bill Peterson: begun the qualification periods, but qualifications are are

Keith Harvey: So all of that has caused us to say, hey, we're, we're still looking for full outload here at the end of the year. But that that ramp up is taking a little longer than expected than what we discussed in February. You know, I'll come on the back end of that and say, look, demand continues to be very strong and and, you know, we're, we're moving through those processes. But, but we expect volume on packaging, you know, is going to be down about three and a half million pounds or percent on the volume piece and the conversion revenue is still going to be up 15 to 20.

quite, uh, important here. You know, there there are typically a 3-phase type, uh, in process before you're fully qualified and you can open the line up for regular runs. Of course, we got multiple different Coatings that we're trying to qualify at the same time and then your debugging that equipment, which is, you know, we're just getting it up to to rates. So, uh, all of that has, uh, caused us to say, hey, we're, we're still looking for full outlook here at the end of the year, but that that ramp up is taking a little longer than expected and what we discussed in February. Uh, you know, I'll come on the back end of that. And say, look the man continues to be very strong and, and uh, you know, we're, we're we're moving through those processes but, uh, but we expect, uh, volume on packaging. You know, there's going to be down about, uh, 3 and a half.

Keith Harvey: Now we've also I mentioned in my comments that we've had some underperformance by some of our converters, that their performance hasn't been as we expected. And so, therefore, that's added on to some of our misses and some of our revisioning of our re-outlooking of our of our volume output for the year. We have expected recovery coming on there. We need it. The market's strong and we expect all that, as I said, to improve in the second half of the year.

Bill Peterson: Uh, million pounds or percent on the volume piece and the conversion revenue is still going to be up 15 to 20. Now, we've also I mentioned in my comments that, uh, we've had some underperformance by some of our converters, uh, that their performance hasn't been as we expected. And, uh, so therefore that's

Bill Peterson: I've added on to some of our misses and and some of our revisioning of our outlooking of our of our volume output for the year, uh, we have expected recovery coming on there. Uh, we need it. The the Market's strong and uh, we expect all that as I said to improve in the second, half of the year.

Bill Peterson: Okay, thanks for that.

Bill Peterson: And then it was mentioned that the Aero inventories are beginning to right size, but, you know, yet inventories are still elevated.

Keith Harvey: I guess at this stage, what visibility do you have here? I guess, when do you I can see the destocking coming to an end. We're hearing obviously kind of positive news flow from the commercial aerospace. for their own ramps, but wanted to get a sense for. documenting Yeah, well on that on that front, Bill, we you know, we continue to to welcome the good news that comes from the large jet manufacturers, obviously, they're continuing to ramp, that ramp is consistent and holding. We're hopeful for another ramp increase announcement toward the end of the year. Obviously, the faster we ramp up, the more healthier the supply chain will be and, and that inventory bubble can dissipate.

Speaker Change: Okay, um thanks for that. And then as mentioned at the arrow inventories are are beginning to right size. But you know, yet in towards your still elevated, I guess at this stage, what visibility do you have here? I guess, when do you see or foresee that these stocking coming to an end? We're here in obviously kind of positive news flow from the commercial Aerospace side in terms of

Speaker Change: You know, their own ramps but wanted to get a sense for for when you think to see stocking thing will run its course.

Keith Harvey: Right now, we're on track for what we expected. For the year, I expect 2026 to be in much better shape. And I think we'll have some more visibility on that. That won't be necessarily reflective in our third quarter outlook bill. You know, Trent wood is going down for the for the bulk of the quarter. And a good bit of that impact could be shipment. So it won't necessarily be reflective that that's happening. But but with us delivering less than the third quarter, you know, that's going to help that bubble as well. So at this point, I think that bubble is going to dissipate by the end of this year, as expected.

Speaker Change: Yeah. Well on that, on that front, the we, you know, we continue to to, uh, welcome the good news that comes from, uh, uh, the large jet manufacturers, obviously they're continuing to ramp that ramp is consistent and holding. Uh, we're hopeful for another ramp increase, uh, announcement toward the end of the year. Obviously, the faster we ramp up the, the more healthier the supply chain will be and and and that uh, inventory bubble can dissipate. Uh, right now we're on track for what we

Keith Harvey: And and if demand is as we expect in 2026, at this point, we should be well through that and the supply chain should be ramping up pretty rapidly to meet the increased demand.

Speaker Change: Expected, uh, for the year, I expect 2026 to be in much better shape and, uh, I think we'll have some more visibility on that. That won't be necessarily reflective in our third quarter Outlook built. Uh, you know, Trentwood is going down for the, for the bulk of the quarter. Uh, and a good bit of that impact could be shipment. So it it won't necessarily be uh reflective uh, that that's happening but but with us delivering Less in the third quarter and you know, that's going to help that bubble as well. So at this point, I think that bubble is going to dissipate by the end of this year uh, as expected. And, and if demand is as we expect in 2026 at this point, uh, we should be well through that and the supply chain should be uh, ramping up pretty rapidly to meet the increased demand.

Bill Peterson: Thanks for that. And maybe before jumping back in the queue, kind of tying in some of your previous comments, how should we think about the cadence of EBITDA in the back half of the year? Will the third quarter be a trough based off, you know, what you mentioned about Trent Wood and your prior comments around packing? Well, quite frankly, we're seeing we're seeing aerospace will be down slightly in the third quarter compared to the second quarter and even the first half run rate. It'll be down slightly. period to period, but we're going to see that ramp come up on packaging to offset that.

Speaker Change: Yeah, thanks for that. Let me uh, before jumping back in the queue, kind of tying in some of your previous comments. How should we think about the Cadence that even, uh, in the back half of the year? We'll, we'll the third quarter. Be a trough based off, you know what you mentioned about Trentwood and your prior comments around Packaging.

Speaker Change: well, quite frankly, we're seeing we're seeing Aerospace, will be down slightly in the third quarter, uh, compared to the the second quarter and even the first half run rate, uh, it'll be down slightly, uh,

Keith Harvey: The conversion revenue will start to offset any of that. So I expected the trough in the second quarter, and our performance, and we mentioned the tailwinds from metal, and then really the performance we had was better than we expected. So I believe the second half is going to look pretty much as we predicted when we talked about it in February. So we're reiterating what the second half looks like, Bill, in this quarter. Okay, great, Keith. Thanks for that.

Bill Peterson: Performance. We had, was, was better than we expected. Uh, so, I, I believe, the second half is going to look pretty much as we predicted when we talked about it in February. So, we're reiterating what the second half looks like Bill, uh, in this quarter.

Bill Peterson: I'll pass the Thanks, Bill.

Bill Peterson: Okay. Great Keith. Uh thanks for that. I'll pass uh pass along.

Bill Peterson: Thanks Bill. Thanks.

Josh Sullivan: Our next question comes from the line of Josh Sullivan with the Benchmark Company. Please proceed with your question. Hey, good morning. and Josh. A question on the aerospace inventory levels, you know, at this point, is that inventory being held at the distributor customers or is it at the OEM? Well, I think earlier in the year, late last year, it was in both parts of the supply chain. But I think what we've seen through the first half of the year is that the service center side has been getting their balance sheet, I mean, not balance sheet, excuse me, but their supply base and it's been more in line.

Speaker Change: Our next question comes from the line of Josh Sullivan with the Benchmark Company. Please receive with your question.

Josh Sullivan: Hey, good morning.

Speaker Change: Hi Josh.

Speaker Change: A question on the Aerospace inventory levels, you know, at this point, is that inventory being held at the distributor customers, or is it at the oems?

Speaker Change: Well, I think the uh it earlier in the year late last year, it was in.

Speaker Change: Both parts of the, of the supply chain.

Keith Harvey: So we've seen that reduction and that's been some of the impact we've been talking about. I think it currently resides at the OEMs. And the OEMs, as you recall, had been ramping up last year, and it ran into a couple of headwinds themselves. So a good bit of that metal right now resides at the OEMs. And that's why we keep getting a more favorable outlook here as they continue those ramp rates. We know that they're consuming more and more of that metal. And so that's where we're getting healthier, at least in the second half of the year.

Speaker Change: Uh but I think what we've seen through the first half of the year is that the the service center side has been getting their their uh balance sheet. I mean not balance sheet, excuse me. But they're they're Supply base and they're uh it's been more in line so that there's been. We've seen that reduction and that's been some of the impact we've been talking about

Speaker Change: I think it currently resides at the oems.

Speaker Change: And in the oems as you as you recall had been ramping up last year and had ran into a couple of headwinds themselves. So, so a good bit of that that metal right now resides at the oems and that's why we keep getting uh, more favorable outlook here as they continue, those Ramp rates. Uh, we we know that they're, they're consuming more and more of that metal. And so that's, that's where we're getting healthier in the, at least in the second half of the year.

Keith Harvey: And then just if we think about past cycles, you know, destock to restock with arrows. You know, is that signaling that you're getting, is that similar to previous cycles, or is there anything different, you know, necessarily about this, this cycle that we might want to think about as we ramp up? You know, I think it's all around build rates, Josh, and as these things really start to ramp, we know they have the backlog. We know they've been ramping up their entire supplies chains and their own productivity to meet higher levels. So it's really, in our mind, as we're looking forward, we see it ramping 2026 through the balance of the decade.

Got it. And and then just as if we think about past Cycles, you know, destock to to restock with Aerospace. You know, is, is that signaling that you're getting? Is that similar to previous Cycles or is there anything different? You know necessarily about this this cycle that we might want to think about is as we ramp up.

Keith Harvey: You know, it was the big reason for us to launch the next phase investment at Trentwood. And you know, we think that's going to come out at a very good time. Now if we get some tailwinds from semiconductor or continue GE, that's just going to put, you know, that capacity in even a better position for us. So I think we're in for, we've had a reset here in the last 12 to 18 months, and I think the next three to four years are going to be very strong in taxing on the supply chain in the aerospace industry.

Speaker Change: No, I, you know, I think it's it's all around build rates, Josh, and and as these things really start to ramp, we know they have the backlog. We know they've been ramping up their entire supplies chains and their own productivity to to meet higher levels. So it's, it's really in our mind, as we're looking forward, we see it ramping 2026 through the balance of the decade.

Speaker Change: You know, it was the big reason for us to launch the next phase investment at Trentwood and you know, we think that's going to come out at a very good time. Now if we get some Tailwinds, uh, from semiconductor or continue GE, that's just going to put you know, that that that capacity in a even a better position for us. So I I think we're in for we've had a reset here in the last 12 to 18 months. And I and I think the next 3 to 4 years are going to be very strong and taxing on the supply chain uh, in the Aerospace.

Keith Harvey: And then just one last question on defense. You know, the F-35, as far as the domestic rates, you know, there's some questions around that, obviously strong on the international side, and then, you know, the overall question about drones and, you know, new programs coming in. You know, how exposed are you to one program versus the other versus kind of the general trend in rising defense spending? Well, you know, first of all, we think the F-35, it takes a breather. This isn't the first time to take a little breather. But with all the NATO allies and foreign build rates that have come online, they tend to just backfill, just like Boeing did when China said that they weren't going to take shipments for a while.

Speaker Change: and just 1 last question on defense, you know, the F-35, um, as far as the domestic, uh, rates, you know there, there's some questions around that obviously strong on the international side and then, you know, the overall question about drones and, you know, new programs coming in, you know, how how exposed are you to 1 program versus the other versus kind of the general Trend in Rising defense spending

Keith Harvey: They very quickly pivoted and filled the backlog with other demand. We see that going on with the F-35. And now, you know, whatever happens in the future always remains to be seen. We thought the F-22 was going to be much bigger than it turned out to be. What will be the F-47? You know, who knows. But one of the things that we've continually discussed from a Kaiser perspective, our positioning in that market has kept us in all the available platforms, whether they were rotary or fixed wing. And so we're still supplying metal toward F-16 builds that were supposed to be over 10 years ago.

Speaker Change: Well, you know, I I first of all, we think the F-35 is it takes a breather. This isn't the first time to take a little breather, but with all the NATO, ally allies and foreign, uh, build rates that have come online. They, they tend to just backfill just like Boeing did when China said that, they weren't going to take shipments for a while, they very quickly, pivoted and filled the back.

Keith Harvey: And we're still seeing a nice, healthy build rate. We're seeing that on the F-15, you know, and we still see long runway here for the F-35. So, you know, and there's actually even been some discussion about bringing not just cargo, but military cargo back at some rate. So we're pretty well positioned throughout that chain. And what I do like about our positioning there, our capacity is also shared with strong general engineering for like semiconductor or space, which continues to build. So we have many offsets that can replace any short-term transitional type things that happen. And that's why when you look at our performance on aerospace, you see a very consistent quarter to quarter type run, and we can bring those continued growth investments we're making to bear pretty quickly.

Builds that were supposed to be over 10 years ago.

Josh Sullivan: Got it.

And, and we're still seeing a nice healthy build rate. We're seeing that on the F-15, you know? And, and we still see long run weight here for the F-35. So, um, you know, we're and there was actually even been some discussion about bringing, uh, not just cargo, but military cargo back at some rate. So, we're pretty well positioned throughout that chain. And what I do like about our positioning their, our capacity is also shared with strong, General engineering for like, semiconductor or space which is, is continues to build. So we have many offsets that can replace any short-term transitional type things that happen and that's why when you look at our, our really our performance on Aerospace, you see a very consistent quarter to quarter type run and we can bring those those continued growth Investments. We're making to Bear pretty quickly.

Josh Sullivan: Yeah, I bet a C-17 would have some nice aluminum content on the cargo side. Thank you.

Got it. Yeah. That that a 27 would have some nice aluminum content on the cargo side. Uh, thank you but there thanks.

Josh Sullivan: Thank you, Josh.

Abe Landa: As a reminder, if you would like to ask a question, press star 1 on your telephone key Our next question comes from the line of Abe Landa with Bank of America. Good morning. Thank you for... Good morning. Thank you. Um, let me start off, you called, uh, you called out some, uh, costs. related to startup charges, I think you said $17 million. I guess what's embedded in there, are those going to... and the second half of next year, and if so, what should we expect? Is that number added back to EBITDA or no? Oh, it was added in the quarter, but we called that out because we think those are associated with, one, the startup at Warwick related to the Roll Coat 4 line.

As a reminder, if you would like to ask a question press star 1 on your telephone keypad,

Our next question comes from line of Abe. Linda with Bank of America, please receive with your question.

Linda: Uh, good morning. Thank you for good morning. Thank you for taking my questions. Um, maybe start off you called, uh, you called out some uh costs. Uh, I believe related to Startup charges, I think you said 17 million. I guess what's embedded in there are? Are those going to repeat in the second half of at next year? And if so what should we expect and is is that number added back to ebar or or no?

Neal West: So we expect those to continue to dissipate as we bring that line up. And then there was a timeliness issue. We had a number of furnace rebuilds that weren't necessarily planned, but we had an opportune time to deliver those, and we did. So we went ahead and did those repairs while we continued to have some major maintenance throughout every quarter through the year. We felt the need to call that out because we did have a spike in those costs for the quarter. But again, we wouldn't expect those particular costs to reoccur for the balance of the year.

Linda: Oh, it was added in the, in the quarter but but uh, we called that out because we, we think those are associated with 1, the startup at uh, at at War on the related to the role Code 4 line. So, we expect those to continue to dissipate as we bring that line up and then it was a timeliness issue. We had a number of furnished rebuilds that weren't necessarily planned, but we had an opportunity time to deliver those and we did. So we went ahead and did those repairs. Uh, while we continue to have some major maintenance throughout the, you know, every quarter through the year, we felt the need to call that out because we did have a spike in those costs for the quarter. But again, we wouldn't expect

Those particular costs to reoccur for the balance of the year.

Abe Landa: It shouldn't reoccur, but it was added back to the adjusted EBITDA number, or it was not?

Neal West: Just to clarify, Neal will take that. It wasn't added back to the adjusted EBITDA at all. We just highlighted that was a cost that impacted the quarter as compared to the prior year quarter. Okay, that's clear.

Linda: Reoccur. But it was added back to the adjusted debit odd, number or it was not just to clarify the old, take that and it wasn't added back to the adjusted debit at all. If we those highlighted that was a cost that impacted the quarter as compared to the prior year quarter.

Abe Landa: And then I know you kind of were talking about this earlier just on pre-cash flow guidance lower while EBITDA is higher. and that working calf. Can you just describe maybe in more detail, like what's driving that? What are the elements there? I mean, is the tariff related or some other items in there? that'll lag effect, kind of more color. Yeah, so we planned this year and we anticipated in our outlook when we gave the outlook of a hundred million free cash flow, a significant reduction in some of our actions we were taking in inventory management.

Linda: That's, that's clear. Um, and then

Linda: I know you kind of were talking about this earlier, just on free cash, flow, guided slower while I was higher, I think you kind of mentioned that working capital. Can you just

Described maybe in more detail. Like what's, what's driving? That what are the elements there? I mean, is it tearful later? There's some other

Neal West: We did get our pounds of inventory down significantly, however, offsetting that since the first year has been the rapid increase in metal prices and that's basically kept our dollar amount of inventory consistent even though pounds are down. So that basically picked up additional usage of working capital due to the tariff increases in metal prices. Do you have a rule of thumb of like, per every hundred dollars of Midwest transaction price? X dollars of working capital, anything like that? Now, we could talk, but we don't have a rule of thumb because there's multiple items that go into that, receivables and payables and working capital.

Linda: Items in there. Is it metal lag effect? Um kind of more color on that would be helpful. Yeah. So we plan this year and then we anticipated in our Outlook when we gave the Outlook of 100 million free cash flow. Uh a significant reduction in some of our actions we were taking in Inventory management. We did get our pounds of inventory down significantly, however, offsetting that. And so, the first in years has been to Rapid increase in metal prices and that's basically, uh, kept our dollar amount of inventory consistent, even though pounds are down. So that basically picked up additional usage of working capitals, due to the Tariff, uh, increases in metal prices.

Speaker Change: Do you have a rule of thumb of like for every hundred dollars of Midwest transaction? Price equals?

Speaker Change: X dollars of working capital, anything like that.

Neal West: So it's not like one rule of thumb we can drop out there.

Speaker Change: No we we could talk um but we don't have a rule of thumb because there's multiple items that go into that receivables and payables and working capital. So it's not like 1 rule of thumb we can drop out there.

Abe Landa: Okay, and then I know there's a lot of investments going on. I know you have that going on, you have. metal sourcing strategy as well. If we kind of, a lot of these things are going to be complete this year, I guess, how do we exit the year? How do we think about building? next year when all these investment Right.

Speaker Change: Okay, um and then I know there's a lot of Investments going on. Um,

Speaker Change: I know you have that going on. You have kind of your metal, uh,

Speaker Change: Sourcing strategy as well, I guess.

Speaker Change: All these Investments are have, come through.

Neal West: I think we'll give a better outlook as we get into the third quarter. We'll give you a better outlook on how we're looking out to exit the year. But I think we've given enough guidance on that over the last or outlook over that over the last quarter with the three to four hundred basis point improvement on the margin that we expect as we exit with the roll coat line. And as operational efficiencies kick in, there's probably another 150, 200 basis points with that. So all of that, you know, we've laid that out and we haven't come off that guidance yet or that outlook.

Right. I think we'll give a better Outlook as we get into the third quarter. We'll give you a better Outlook of how we're looking out to exit the year. Um, but I think we've given enough guidance on that over the last

Outlook over that over the last uh 4 with the um 3 to 400 basis point Improvement on on the margin that we expect as we exit with the role coat line um and as operational efficiencies kick in there's probably another 150 200 basis points on with that.

So uh, all of that, you know, we've laid that out. Um, and I, we haven't come off that guidance yet or that Outlook

Neal West: And is terrorists impacting your metal sourcing strategy? I know you had some earlier. guidance or color on the potential impact on Tariffs are actually still neutral to positive for us. Again, we passed through that Midwest transaction price, so we're not being really impacted by the run-up as we move that through with our metal neutrality pass-through side. So that's not been a direct impact, and any other sourcing costs and that, we've been pretty well able to offset with other actions we're taking.

Speaker Change: And is terrorist, in fact, in your metal sourcing strategy. I know you had some earlier, kind of guidance or or color on potential impact on margins there. No tariffs are actually still neutral deposited for us. Um, again, uh, we passed through that Midwest transaction price. So we're not being really impacted by the run-up as we move that through uh, with our metal neutrality pass through side. So that's not been a direct impact. And any other sourcing costs and that we've been pretty well able to offset with other actions. We're taking

Abe Landa: That's it for me. Thank you.

Speaker Change: Okay. That's it for me. Thank you.

Speaker Change: Okay.

Operator: We have no further questions at this time.

Keith Harvey: Mr. Harvey, I'd like to turn the floor back over to you for closing Thank you, operator. Look, we're excited for the future at Kaiser and we're positioning the company for continued as we bring our new investments to bear. Thank you for your interest in the company, and I'll look forward to updating you on our progress when we report our third quarter results in October.

Speaker Change: Thank you. We have no further questions at this time. Mr. Harvey. I'd like to turn the floor back over to you for closing comments.

Thank you, operator. Uh, look we're excited for the future at Kaiser and we're positioning the company for continued improving.

Speaker Change: As we bring our new Investments to bear.

Operator: Have a good day.

Speaker Change: Thank you for your interest in the company and I'll look forward to updating you on our progress. When we report our third, quarter results in October, have a good day.

Operator: Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Speaker Change: Ladies and gentlemen.

Speaker Change: Conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.