Q4 2025 Kaiser Aluminum Corp Earnings Call

February 19, 2026

Operator: Greetings, everyone, and welcome to the Kaiser Aluminum Corporation Q4 and Full Year 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. A 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando, Investor Relations. Thank you. You may begin.

Speaker #3: A 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.

Speaker #3: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kim Orlando, Investigations. Thank you. You may begin.

Speaker #2: Thank you. Hello, everyone, and welcome to Kaiser Aluminum's fourth quarter and full year 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.

Kim Orlando: Thank you. Hello, everyone, and welcome to Kaiser Aluminum's Fourth Quarter and Full Year 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. 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 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.

Speaker #2: We have also posted a PDF version of the slide presentation for this call. 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 #2: 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.

Speaker #2: 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 10-K for the full year ended December 31, 2024.

Kim Orlando: 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 10-K for the full year ended 31 December 2024. The company undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion. Reconciliations to the most comparable GAAP 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 effort.

Speaker #2: The company undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our discussion.

Speaker #2: Reconciliations to the most comparable GAAP 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 effort.

Speaker #2: 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.

Kim Orlando: 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. Further, slide 5 contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions. I would now like to turn the call over to Keith Harvey. Keith?

Speaker #2: Further, slide five contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions.

Speaker #2: I would now like to turn the call over to Keith Harvey. Keith?

Speaker #3: Thanks. Kim, and good morning, everyone. Thank you for joining us. I'll begin on slide seven. I'm pleased to report that our fourth quarter results continue to build on the momentum we've established throughout the year.

Keith Harvey: Thanks, Kim, and good morning, everyone. Thank you for joining us. I'll begin on slide 7. I'm pleased to report that our Q4 results continued to build on the momentum we've established throughout the year. This marks our fifth consecutive quarter of performance ahead of our internal expectations, and we exceeded the full-year outlook we provided in October. Startup costs moderated versus the prior two quarters, while metal pricing remained a tailwind. For the full year, we delivered more than 25% EBITDA growth, with margins above 21% and second-half margins improving to nearly 24%, driven by our packaging investment that enhanced our mix, along with modest operational progress in multiple areas of the business. Overall, we achieved record EBITDA in 2025 and established a solid foundation for continued growth as we move into 2026.

Speaker #3: This marks our fifth consecutive quarter of performance ahead of our internal expectations and we exceeded the full year outlook we provided in October. Startup cost moderated versus the prior two quarters, while metal pricing remained a tailwind.

Speaker #3: For the full year, we delivered more than 25% EBITDA growth, with margins above 21%, and second-half margins improving to nearly 24%, driven by our packaging investment that enhanced our mix, along with modest operational progress in multiple areas of the business.

Speaker #3: Overall, we achieved record EBITDA in 2025 and established a solid foundation for continued growth as we move into 2026. We are positioned to harvest the returns from our recent investments, continue strengthening margins, and generate free cash flow as we execute efficiently across the portfolio.

Keith Harvey: We are positioned to harvest the returns from our recent investments, continue strengthening margins, and generate free cash flow as we execute efficiently across the portfolio. With that, I'll turn the call over to Neal to review the quarter and full-year financial results. I'll then return to discuss our end market trends, our 2026 outlook, and the strategic priorities that will guide us in the years ahead.

Speaker #3: With that, I'll turn the call over to Neal to review the quarter and full year financial results. I'll then return to discuss our in-market trends our 2026 outlook and the strategic priorities that will guide us in the years ahead.

Speaker #4: Thank you, Keith. And good morning, everyone. I'll now turn to slide nine for an overview of our shipments and conversion revenue. Our full year total net sales were $3.4 billion. After adjusting for the hedge costs of alloy metal of $1.9 billion, our conversion revenue for the year was $1.5 billion.

Neal West: ... Thank you, Keith, and good morning, everyone. I'll now turn to slide nine for an overview of our shipments and conversion revenue. Our full year total net sales were $3.4 billion. After adjusting for the hedge costs of alloy metal of $1.9 billion, our conversion revenue for the year was $1.5 billion, relatively consistent with 2024. Our total shipments were 1.1 billion pounds, down 64 million pounds, or 5% from 2024.

Speaker #4: Relatively consistent with 2024. Our total shipments were $1.1 billion down 64 million pounds or 5% from 2024. Looking at each of our end markets in detail, aerospace and high-strength conversion revenue totaled $457 million, down 73 million dollars or approximately 14%, primarily due to a 16% decrease in shipments attributed to the commercial aerospace OEMD stocking of plate products and the impact of the planned Phase VII investment, which occurred in the second half of the year.

Neal West: Looking at each of our end markets in detail, aerospace and high-strength conversion revenue totaled $457 million, down $73 million or approximately 14%, primarily due to a 16% decrease in shipments attributed to the commercial aerospace OEM destocking of plate products and the impact of the planned Phase Seven investment, which occurred in the second half of the year. Commercial aerospace OEM destocking began to ease exiting the fourth quarter of 2025. Across our other aerospace high-strength applications, that includes the business jet, defense, and space end markets, demand has- Packaging conversion revenue for the year totaled $544 million, up $54 million, or approximately 11%, driven by our planned transition to coated products as we finalize commissioning of the new coating line.

Speaker #4: Commercial aerospace OEMD stocking began to ease exiting the fourth quarter of 2025. Across our other aerospace high-strength applications, that includes the business jet, defense, and space end markets, demand has packaging conversion revenue for the year totaled $544 million, up 54 million dollars or approximately 11%, driven by our planned transition to coated products as we finalized commissioning of the new coating line.

Speaker #4: While shipments declined by 32 million pounds during this transition, reflecting a slower ramp-up of the coating line than originally anticipated, the shift is generating higher conversion revenue per pound supported by the strong underlying market demand.

Neal West: While shipments declined by 32 million pounds during this transition, reflecting a slower ramp-up of the coating line than originally anticipated, the shift is generating higher conversion revenue per pound, supported by the strong underlying market demand. General engineering conversion revenue for the year totaled $331 million, up $14 million, or approximately 4% year-over-year, on a 6% increase in shipments. Tariff-driven reshoring activity and KaiserSelect quality attributes continued to create a favorable demand backdrop, supporting both volumes and pricing. And finally, automotive conversion revenue for the year totaled $122 million, up 2% year-over-year on a 6% decrease in shipments, primarily due to persistently high interest rates and tariff-related customer uncertainty affecting the automotive industry on the whole. However, improved pricing and product mix helped offset the lower shipments.

Speaker #4: General engineering conversion revenue for the year totaled $331 million, up $14 million, or approximately 4% year over year, on a 6% increase in shipments.

Speaker #4: Tariff-driven reef-shoring activity and Kaiser Select quality attributes continue to create a favorable demand backdrop, supporting both volumes and pricing. And finally, automotive conversion revenue for the year totaled $122 million, up 2% year over year, on a 6% decrease, with persistently high interest rates and tariff-related customer uncertainty affecting the automotive industry as a whole.

Speaker #4: However, improved pricing and product mix help offset the lower shipments. Additional details on conversion revenue and shipments by end-market application can be found in the appendix of this presentation.

Neal West: Additional details, conversion revenue, and shipments by end market application can be found in the appendix of this presentation. Now moving to Slide 10. Reported operating income for 2025 was $189 million. After adjusting for non-run rate income of approximately $1 million, our 2025 adjusted operating income was $188 million, up $63 million from 2024. In addition, 2025 operating income included a $6 million increase in depreciation expense associated with the Trentwood Rolling Mill Phase Seven expansion project and a commissioning of the new coating line at Warrick. An effective tax rate for the full year was 25%, comparable to 2024.

Speaker #4: Now, moving to slide 10. Reported operating income for 2025 was $189 million. After adjusting for non-run rate income of approximately $1 million, our 2025 adjusted operating income was $188 million.

Speaker #4: Up $63 million from 2024. In addition, 2025 operating income included a $6 million increase in depreciation expense associated with the Trentwood Rolling Mill Phase VII expansion project and the commissioning of the new coating line at work.

Speaker #4: An effective tax rate for the full year was 25%, comparable to 2024. For the full year 2026, we expect our effective tax rate before discrete items to be in the mid-20% range, including the impacts related to the new tax bill recently signed into law.

Neal West: For the full year 2026, we expect our effective tax rate before discrete items to be in the mid-20% range, including the impacts related to the new tax bill recently signed into law. Additionally, we anticipate that the 2026 cash tax payments for federal and state foreign taxes will be in the $5 to 7 million range. Reported net income from 2025 was $113 million, or $6.77 per net income per diluted share, compared to net income of $66 million, or $4.02 net income per diluted share in the prior year.

Speaker #4: Additionally, we anticipate that the 2026 cash tax payments for federal and state foreign taxes will be in the 5 to 7 million dollar range.

Speaker #4: Reported net income from 2025 was $113 million, or $6.77 per net income per diluted share. Compared to net income of $66 million, or $4.02 net income per diluted share in the prior year.

Speaker #4: After adjusting for net pre-tax non-run rate income of approximately $15 million, primarily related to legacy land sales and insurance settlements associated with prior year claims, adjusted net income for the year was $100 million, or $6.03 adjusted net income per diluted share.

Neal West: After adjusting for net pre-tax non-run rate income of approximately $15 million, primarily related to legacy land sales and insurance settlements associated with prior year claims, adjusted net income for the year was $100 million, or $6.03 adjusted net income per diluted share. This compares to adjusted net income of $60 million, or $3.67 adjusted net income per diluted share in 2024. Now turning to slide 11. Adjusted EBITDA for the year was $310 million, up approximately $69 million from 2024. Adjusted EBITDA as a percentage of conversion revenue improved to 21.3%, approximately 470 basis points above our 2024 margin of 16.6%.

Speaker #4: This comparison adjusted net income of $60 million or $3.67 adjusted net income per diluted share in 2024. Now turning the slide 11. Adjusted EBITDA for the year was $310 million.

Speaker #4: Up approximately 69 million dollars from 2024. Adjusted EBITDA as a percentage of conversion revenue improved to 21.3%, approximately $470 basis points above our 2024 margin of 16.6%.

Speaker #4: In 2025, we also incurred approximately $47 million of non-reoccurring operating and other related costs, primarily associated with our new coating line startup at work and planned Trentwood outage, which were more than offset by the impact of metal lag gain from rising metal prices.

Neal West: In 2025, we also incurred approximately $47 million of non-recurring operating and other related costs, primarily associated with our new coating line startup at Warrick and planned Trentwood outage, which were more than offset by the impact of metal lag gain from rising metal prices. The improvement in Adjusted EBITDA, even with the 5% year-over-year decline in shipments, reflects resilient underlying fundamentals across our business and our end markets, along with a richer mix of value-added products. Now turning to a discussion on our balance sheet and cash flow. At the end of December 31, 2025, total cash of approximately $7 million and approximately $540 million of net borrowing availability in our revolving credit facility resulted in a strong liquidity position of $547 million.

Speaker #4: The improvement in adjusted EBITDA, even with the 5% year-over-year decline in shipments, reflects resilient underlying fundamentals across our business and our end markets, along with a richer mix of value-added products.

Speaker #4: Now turning to a discussion on our balance sheet and cash flow. At the end of December 31st, 2025, total cash of approximately $7 million and approximately $540 million of net borrowing availability in our revolving credit facility resulted in a strong liquidity position of $547 million.

Speaker #4: As a reminder, the October extension of our $575 million revolving credit facility further demonstrates the strength of our balance sheet and the continued confidence our lenders have in our long-term strategy.

Neal West: As a reminder, the October extension of our $575 million revolving credit facility further demonstrates the strength of our balance sheet and the continued confidence our lenders have in our long-term strategy. The extended facility is set to mature in October 2030. Additionally, in November, we completed a $500 million offering of senior notes due in 2034 with favorable terms. We used the proceeds along with revolver borrowings and available cash to redeem our 2028 notes, effectively completing a planned refinancing that extends our long-term debt maturity profile and supports our long-term financial flexibility. Our senior notes interest costs are fixed, fixed at $54 million annually, and as of the year-end, our net debt leverage ratio was 3.4 times, an improvement from the 4.3 times at December 31, 2024.

Speaker #4: The extended facility is set to mature in October 2030. Additionally, in November, we completed a $500 million offering of senior notes due in 2034 with favorable terms.

Speaker #4: We used the proceeds along with revolver borrowings and available cash to redeem our 2028 notes. Effectively completing a planned refinancing that extends our long-term debt maturity profile and supports our long-term financial flexibility.

Speaker #4: Our senior notes interest costs are fixed at $54 million annually, and as of year-end, our net debt leverage ratio was 3.4 times. An improvement from the 4.3 times at December 31st, 2024.

Speaker #4: Our full year 2025 capital expenditures came in at $137 million, following the completion of our major growth projects at Warrick and Trentwood. It is important to note that the $168 million usage of working capital during 2025 was a direct impact from rising metal prices through the year.

Neal West: Our full year 2025 capital expenditures came in at $137 million, following the completion of our major growth projects at Warrick and Trentwood. It is important to note that that a $168 million usage of working capital during 2025 was a direct impact of rising metal prices through the year. For 2026, we expect capital expenditures to be in a range of $120 to 130 million, with free cash flow anticipated being in a range of $120 to 140 million, subject to metal price movement and resulting impact in working capital. As a reminder, we define free cash flow as cash flow from operations less capital expenditures.

Speaker #4: For 2026, we expect capital expenditures to be in a range of $120 to $130 million, with free cash flow anticipated being a range of $120 to $140 million.

Speaker #4: Subject to metal price movement and resulting impact in working capital. As a reminder, we define free cash flow as cash flow from operations less capital expenditures.

Speaker #4: Additionally, in 2025, we returned approximately $51 million to our shareholders through dividend payments, marking our 19th consecutive year of dividend payments to our shareholders.

Neal West: Additionally, in 2025, we returned approximately $51 million to our shareholders through dividend payments, marking our 19th consecutive year of dividend payments to our shareholders. On 13 January, we announced that our board of directors declared a quarterly dividend of $0.77 per common share, reflecting our ongoing commitment to disciplined capital allocation and delivering long-term value to our stockholders. With that, I'll turn the call back over to Keith to discuss our outlook. Keith?

Speaker #4: On January 13th, we announced that our board of directors declared a quarterly dividend of $77 per common share, reflecting our ongoing commitment to disciplined capital allocation and delivering long-term value to our stockholders.

Speaker #4: With that, I'll turn the call back over to Keith to discuss our outlook. Keith?

Speaker #5: Thanks, Neal. Let me now turn to our outlook and priorities as we move into 2026 on slide 13. In 2026, Kaiser will celebrate its 80th anniversary, a milestone that speaks to the resilience of our operations and the durability of our long-standing customer relationships.

Keith Harvey: Thanks, Neal. Let me now turn to our outlook and priorities as we move into 2026 on slide 13. In 2026, Kaiser will celebrate its 80th anniversary, a milestone that speaks to the resilience of our operations and the durability of our long-standing customer relationships. Fittingly, our outlook reflects what we expect will be record years for both conversion revenue and EBITDA. I'll begin with aerospace and high-strength products. We expect shipments to increase in a range of 10% to 15% in 2026, with conversion revenue expected up approximately 5% to 10%. This implies conversion revenue per pound, consistent with our first half 2025 run rate, as last year's second half benefited from a richer aerospace extrusion mix as we upgraded plate lines at Trentwood.

Speaker #5: Fittingly, our outlook reflects what we expect will be record years for both conversion revenue and EBITDA. I'll begin with aerospace and high-strength products. We expect shipments to increase in a range of 10 to 15 percent in 2026, with conversion revenue expected up approximately 5 to 10 percent.

Speaker #5: This implies conversion revenue per pound consistent with our first half 2025 run rate, as last year's second half benefited from a richer aerospace extrusion mix as we upgraded plate lines at Trentwood.

Speaker #5: The Phase VII install was executed seamlessly and timed well to support the demand growth we expect in 2026 and beyond. Commercial aircraft production continues to recover, with increasing build rates at our OEM partners.

Keith Harvey: The Phase Seven install was executed seamlessly and timed well to support the demand growth we expect in 2026 and beyond. Commercial aircraft production continues to recover, with increasing build rates at our OEM partners. We are well-positioned to support that growth with the additional plate capacity from Trentwood. As we've discussed previously, destocking at commercial OEMs has continued to temper near-term sell-through of plate products. However, we expect this to largely dissipate as we exit the year, if not earlier. We will continue to update you throughout 2026 on supply chain conditions. Importantly, I am very encouraged by the momentum building in one of our premier markets, momentum that should benefit results in 2026 and continue to build through the end of the decade. Defense and business jet demand remains consistent, and we continue to benefit from new opportunities across space and specialty platforms.

Speaker #5: We are well positioned to support that growth with the additional plate capacity from Trentwood. As we've discussed previously, destocking at commercial OEMs has continued to temper near-term sell-through of plate products.

Speaker #5: However, we expect this to largely dissipate as we exit the year if not earlier. We will continue to update you throughout 2026 on supply chain conditions.

Speaker #5: Importantly, I am very encouraged by the momentum building in one of our premier markets. Momentum that should benefit results in 2026 and continue to build through the end of the decade.

Speaker #5: Defense and business jet demand remains consistent, and we continue to benefit from new opportunities across space and specialty platforms. Now moving to packaging. Packaging demand and fundamentals continue to improve.

Keith Harvey: Now moving to packaging. Packaging demand and fundamentals continue to improve, supported by our long-term contracts that provide excellent visibility. Importantly, we completed our final contract commitment at this facility during Q4 2025. For 2026, we are targeting shipment growth of 5% to 10% and conversion revenue growth of 15% to 20%. Our fourth coating line at Warrick is fully commissioned, qualified, and progressing toward full production. This investment shifts our mix toward higher-coated volumes, now at approximately 75% and growing, and supports the margin uplift we've targeted. The progress at Warrick reflects a multiyear journey that began with the strategic decision to acquire the facility in 2021. In 2026, we expect to see a step change in financial and customer satisfaction performance in this business.

Speaker #5: Supported by our long-term contracts that provide excellent visibility. Importantly, we completed our final contract commitment at this facility during the fourth quarter of 2025.

Speaker #5: For 2026, we are targeting shipment growth of 5 to 10 percent and conversion revenue growth of 15 to 20 percent. Our fourth coating line at work is fully

Speaker #1: Commission qualified and progressing toward full production. This investment shifts our mix toward higher coded volumes, now at approximately 75% and growing, and supports the margin uplift we've targeted. The progress at Warwick reflects a multi-year journey that began with the strategic decision to acquire the facility in 2021.

Speaker #1: In 2026 , we expect to see a step change in financial and customer satisfaction performance in this business , as we previously stated , while profitability will improve meaningfully in 2026 , the line will not yet be operating at its optimal rate .

Keith Harvey: As we've previously stated, while profitability will improve meaningfully in 2026, the line will not yet be operating at its optimal rate. We plan to operate at approximately 80% utilization as we continue to fine-tune quality and reliability. Customer service remains a core tenet of Kaiser's values and a key differentiator in all our markets. Now turning to general engineering. We expect another year of growth, supported by improving GDP and strengthening demand in the semiconductor market. Shipments and conversion revenue are expected to grow approximately 3% to 5% year-over-year, with the potential for even stronger growth, depending on the strength of the North American economy, as inventory levels at most customers remain at multi-year lows. Our businesses are well-positioned to respond quickly as these markets continue to improve. Now turning to automotive.

Speaker #1: We plan to operate at approximately 80% utilization as we continue to fine tune quality and reliability . Customer service remains a core tenant of Kaiser's values and a key differentiator in all our markets .

Speaker #1: Now , turning to general engineering We expect another year of growth , supported by improving GDP and strengthening demand in the semiconductor market Shipments and conversion revenue are expected to grow approximately 3 to 5% year over year , with the potential for even stronger growth depending on the strength of the North American economy .

Speaker #1: As inventory levels at most customers remain at multiyear lows , our businesses are well positioned to respond quickly as these markets continue to improve Now , turning to automotive .

Speaker #1: Automotive opportunities continue to expand, even as we remain highly selective in the products and services we provide to this market. The shift towards more internal combustion engine vehicles in the light truck and SUV category is driving demand for several of our products at a faster pace than previously anticipated. To support this expected multi-year demand outlook, we will be retooling select facilities and adding incremental capacity. While shipments and conversion revenue in 2026 are expected to decline approximately 5% to 10% year over year.

Keith Harvey: Automotive opportunities continue to expand, even as we remain highly selective in the products and services we provide to this market. The shift towards more internal combustion engine vehicles in the light truck and SUV category are driving demand for several of our products at a faster pace than previously anticipated. To support this expected multi-year demand outlook, we will be retooling select facilities and adding incremental capacity. While shipments and conversion revenue in 2026 are expected to decline approximately 5% to 10% year-over-year, this primarily reflects planned outages, most notably at our Bellwood facility, associated with retooling rather than underlying demand. These actions position us to support higher demand and higher returns as market conditions evolve. Now turning to Slide 14 and our summary outlook.

Speaker #1: This primarily reflects planned outages , most notably at our Bellwood facility associated with retooling rather than underlying demand These actions position us to support higher demand and higher returns as market conditions evolve Now turning to slide 14 and our summary outlook with our two major growth investments .

Keith Harvey: With our two major growth investments now behind us, 2026 will mark a shift toward harvesting returns through margin expansion. With the execution risk of large-scale projects largely behind us, we are proactively intensifying our focus on reducing both manufacturing and operating costs to drive additional operating leverage and maximize the return on these investments. These actions are expected to also strengthen cash flow, continue reducing our debt leverage ratios, and improve our customer service standards. As we look ahead, we are establishing an initial outlook for 2026 of 5% to 10% Conversion Revenue improvement year-over-year, with resulting EBITDA growth of 5% to 15%, setting the stage for another record EBITDA performance year for the company.

Speaker #1: Now behind us . 2026 will mark a shift toward harvesting returns through margin expansion with the execution risk of large scale projects largely behind us .

Speaker #1: We are proactively intensifying our focus on reducing both manufacturing and operating costs to drive additional operating leverage and maximize the return on these investments These actions are expected to also strengthen cash flow , continue reducing our debt leverage ratios , and improve our customer service standards As we look ahead , we are establishing an initial outlook for 2026 of 5 to 10% conversion revenue improvement year over year , with resulting EBITDA growth of 5 to 15% , setting the stage for another record EBITDA performance year for the company While metal pricing was a meaningful contributor to our performance in 2025 , our expectations for 2026 are driven primarily by operational execution , with metal assumptions aligned with current future curves .

Keith Harvey: While metal pricing was a meaningful contributor to our performance in 2025, our expectations for 2026 are driven primarily by operational execution, with metal assumptions aligned with current future curves. In closing, we entered 2026 with a strong foundation, clear visibility into our end markets, and the assets firmly in place to deliver meaningful improvement in profitability and cash generation. We look forward to updating you on our progress throughout the year. With that, I will now open the call to any questions you may have. Operator?

Speaker #1: In closing, we entered 2026 with a strong foundation, clear visibility into our end markets, and the assets firmly in place to deliver meaningful improvement in profitability and cash generation. We look forward to updating you on our progress throughout the year.

Speaker #1: With that, I will now open the call to any questions you may have. Operator.

Speaker #2: Thank you . We will now conduct a question and answer session . If you would like to ask a question , please press star one on your telephone keypad .

Operator: Thank you. We will now conduct a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question at this time. One moment while we poll for questions. The first question comes from Bill Peterson with J.P. Morgan. Please proceed.

Speaker #2: A confirmation tone will indicate your line is in the question queue . You may press star two to remove your question from the queue .

Speaker #2: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star one to ask a question at this time.

Speaker #2: One moment while we pull for questions The first question comes from Bill Peterson with J.P. Morgan . Please proceed

Speaker #3: Yeah . Hi . Good morning . Thanks for taking the questions . And yeah , really nice results for the year My first question is on the 2026 outlook at a at a higher level .

Bill Peterson: Yeah. Hi, good morning. Thanks for taking the questions, and yeah, really nice results for the year. My first question is on the 2026 outlook at a higher level. So I think it looks like the aerospace conversion revenue is below shipments, while packaging conversion revenue is above shipments. Is there anything to call out on mix? If we think about aero, for example, commercial business jet or defense, or is this more, you know, just more high strength and non-aero? And then on packaging, similarly, is this a pricing statement or a mix towards more coated products? Just any sort of color for the difference between the shipments and conversion revenue outlooks.

Speaker #3: So I think it looks like aerospace conversion revenue is below shipments while packaging conversion conversion revenues above shipments . Is there anything to call out on on mix ?

Speaker #3: If you think about Aero , for example , commercial business jet or defense or is this more just more high strength in non aero and and then on packaging similarly is this a is this a pricing statement or mix towards more coated products .

Speaker #3: Just any sort of color for the difference between shipments and conversion revenue outlooks?

Speaker #1: Sure . Hey good morning Bill Let me hit aero first . You know we called out some specifics because as you recall , we had an outage at Trent Wood mainly through the third quarter .

Keith Harvey: Sure. Hey, good morning, Bill. Let me hit aero first. You know, we called out some specifics because, as you recall, we had an outage at Trentwood mainly through the third quarter. So if you looked at the two halves of the year, our shipments in the second half were actually down 25% from the first half of the year. That was mainly plate related, and you saw a pretty higher number there because extrusions generally carry a higher price than the plate. We expect to come back rapidly on the plate in this year, so that the numbers we're reflecting there says we're back to having that full plate capacity. And so you'll see that in the numbers.

Speaker #1: So if you looked at the two , two halves of the year , our shipments in the second half were actually down 25% from the first half of the year .

Speaker #1: That was mainly plate related . And and you saw a pretty a higher number there because extrusions generally carry a higher price than the plate .

Speaker #1: We expect to come back rapidly on the plate in this year . So that the numbers we're reflecting there says we're back to having that full plate capacity and and so you'll see that in the numbers .

Speaker #1: The prices have remained very strong . And consistent . Of course , the majority of that is backed up by long term agreements in place .

Keith Harvey: The prices have remained very strong and consistent. Of course, the majority of that is backed up by long-term agreements in place. So, you know, as we've noted, as the industry continues to improve, continue to get improved shipments, output by our customers, we should see those numbers pop up. From a mix perspective, what you will also see out of our flat roll shipments, Bill, we're starting to see activity again on the semiconductor side. So as you know, we put that capacity in that can service both aero and general engineering. I'm really encouraged by the activity at the beginning of the year on semiconductor. So I think after maybe a two-year hiatus there, we're gonna start to see some good activity through the balance of the year that should really support that increased capacity at Trentwood.

Speaker #1: And so , you know , as we've noted , as as the industry continues to improve , continue to get improved shipments output by our customers , we should see those numbers pop up from a mix perspective .

Speaker #1: What you will also see out of our flat rolled shipments bill , we're starting to see activity again on the semiconductor side So as you know , we put that capacity in that can service both arrow and general engineering .

Speaker #1: I'm really encouraged by the activity at the beginning of the year on semiconductor. So I think after maybe a two-year hiatus there, we're going to start to see some good activity through the balance of the year.

Speaker #1: That should really support that increased capacity at Trent Wood . You know , as I move over to the packaging side and look at our business , I really think we're we're positioned for a very strong year .

Keith Harvey: You know, as I move over to the packaging side and look at our business, I really think we're positioned for a very strong year. We're in our seventh month of increasing output from our cold roll four, the new investment that we made. So we're beginning to see the better throughput that was expected. We're beginning to, you know, get all the qualifications behind us. We're ramping up speeds, and so the opportunities there continue to exist, quite frankly, beyond what we have. We are working with some of our converters to try to get their performance up, improved, as I think the opportunities there exceed even all of our capacities there together. So as we also mentioned in our notes, we're really pleased to complete the final contract, multi-year contractual opportunity for the new capacity.

Speaker #1: The the we're in our seventh month of increasing output from our Roku for the new investment that we made . So we're beginning to see the better throughput .

Speaker #1: Throughput that was expected . We're beginning to , you know , get all the qualifications behind us . We're ramping up speeds . And so the opportunities there continue to exist .

Speaker #1: Up , quite frankly , beyond what we have . We are working with some of our converters to try to get their performance up improved .

Speaker #1: As I think the opportunities there . Exceed even all of our capacities . There together . So as we also mentioned in our notes , we're really pleased to complete the final contract multiyear contractual opportunity for the new capacity .

Speaker #1: So what you're going to begin seeing and what you have seen is that the mix shift has begun in earnest . You'll start seeing some improved pricing on that side as a result of those those investments and and the contractual commitments that were made .

Keith Harvey: So what you're gonna begin seeing and what you have seen is that the mix shift has begun in earnest. You'll start seeing some improved pricing on that side as a result of those investments and the contractual commitments that were made. And so we're really positioned there. You know, we talked about bringing that an additional 300 to 400 basis points impact on the total company. We're beginning to already see that, and they were a major influence into what happened for us, even at the end of the year. So a lot of expectations for that for 2026. Food market, the food packaging side is very strong. It's even stronger than beverage, and as you know, we're a major player there, so we see full output.

Speaker #1: And so, we're really positioned there. You know, we talked about bringing that an additional 300 to 400 basis points impact on the total company.

Speaker #1: We're beginning to already see that. And they were a major influence into what happened for us, even at the end of the year.

Speaker #1: So, a lot of expectations for that for 2026. The food market, the food packaging side is very strong. It's even stronger than beverage.

Speaker #1: And as you know , we're a major player there . So we see full output . You know the surprise to me and continue if I can .

Keith Harvey: You know, the surprise to me, and I'll just continue if I can. The surprise to me is the automotive opportunity that we highlighted in our comments. You know, with the move back toward the internal combustion engines, man, we're seeing demand on trucks and SUVs. So we made a decision to make an investment that we really hadn't contemplated in the last 12 months, but we'll be making that decision to increase our capacity through some of our highly specialty products, and that all services trucks and SUVs. So that's gonna be an unexpected focus for continued growth for us in that category.

Speaker #1: The surprise to me is the automotive opportunity that we that we highlighted in our in our comments , you know , with the move back toward the internal combustion engines , man , we're seeing demand on trucks and SUVs .

Speaker #1: So we made a decision to make an investment that we really hadn't contemplated in the last 12 months. But we will be making that decision to increase our capacity through some of our highly specialty products.

Speaker #1: And that all services , trucks and SUVs . So that's going to be a unexpected focus for continued growth for us in that category

Speaker #3: Great . Can I pick up on that last point , this this auto opportunity ? It sounds like it's it's capacity expansion , but it's not I'm trying to get a sense would this take away from other markets how much capacity growth does this imply ?

Bill Peterson: Can I pick up on that last point? This auto opportunity, it sounds like it's capacity expansion, but it's not. I'm just trying to get a sense, would this take away from other markets? How much capacity growth does this, you know, imply? You know, when will this be? I guess, when will you be ready to sort of support this effort? And maybe taking a step back, similar to my question on the guidance. You're looking for this year to be down, following a pretty rich, I guess, mix last year. Anything to call out from the market environment or, you know, platforms that you're on or things like that within the 2026 guidance?

Speaker #3: You know , when will this I guess will we be ready to sort of support this effort and maybe taking a step back similar to my my question on the guidance you're looking for this year to be down following a pretty rich , I guess mix last year .

Speaker #3: Anything to call out from the market environment or , you know , platforms that you're on or things like that within the 2026 guidance ?

Speaker #1: Yeah , no , the the only difference we don't expect any price deterioration there in any of the markets . Bill . The only change that was going to be highlighted probably on the on the arrow side was a slight adjustment as you bring back more plate as opposed to extrusion on the arrow on the on the automotive piece that I was just referring to , we're actually these are these are actually fairly high margin products for us .

Keith Harvey: Yeah. No, the only difference, we don't expect any price deterioration there in any of the markets, Bill. The only change that was gonna be highlighted probably on the aero side was a slight adjustment as you bring back more plate as opposed to extrusion on the aero. On the automotive piece that I was just referring to, we're actually—these are, these are actually fairly high margin products for us. They're all specialty products. They're actually products that Kaiser has 100% or close to 100% supply position. And as the markets turn back to stronger growth on planned on trucks, especially around ICE vehicles, we're the only play. So there's gonna be an outage that, a couple of outages that we'll take through the year to prepare for that.

Speaker #1: They're all specialty products . They're actually products that Kaiser has 100% or close to 100% supply position . And and is the markets turn back to to stronger growth on planned on trucks , especially around Ice vehicles .

Speaker #1: We're the only play. So there's going to be an outage—actually, a couple of outages—that will take through the year to prepare for that.

Speaker #1: So you may be actually that may impact some of the shipments this year , but certainly preparing us for 2027 , strength , continued strength .

Keith Harvey: So you may actually, that may impact some of the shipments this year. But certainly preparing us for 2027 strength, continued strength, and we see these as multi-year. We don't think that the change, the shift that's gone to EV is just a single year or a temporary slope. We see this focus on ICE vehicles for trucks to be multi-year. That's what our customers are telling us. So we're gonna ramp up the investment, and I would expect to see we'll highlight it more in April, but our automotive component here on very specialized products has the opportunity to increase substantially within the next 12 to 18 months.

Speaker #1: And we see these as multiyear . We don't think that the change , the shift that's gone to EV is is just a single year or a temporary slope .

Speaker #1: We see this this focus on Ice vehicles for trucks to be multi-year . That's what our customers are telling us . So we're going to ramp up the investment .

Speaker #1: And I would expect to see we'll highlight it more in April . But our our automotive component here on very specialized products has the opportunity to to increase substantially within the next 12 to 18 months

Bill Peterson: ... Okay, maybe picking up, again on this. So, you know, CapEx guidance is, looks to be a little higher than expected. Is a lot of this driven by this auto opportunity? Or maybe you could parse out, you know, the CapEx guide, maybe in the context, you know, I guess Phase Seven, I think came in dead under budget. Just any sort of context on the CapEx guidance?

Speaker #3: Okay . Maybe picking up again on this . So CapEx guidance is looks to be a little higher than expected . Is a lot of this driven by this auto opportunity .

Speaker #3: Or maybe you could parse out , you know , CapEx guide . Maybe in the context , you know , I guess phase seven I think came a bit under budget , just any sort of context on the CapEx guidance .

Speaker #1: Yeah , actually , we were expecting to be probably somewhere between a 100 , $112 million this year . And and that that change in range for us is purely that automotive opportunity .

Keith Harvey: Yeah. Actually, we were expecting to be probably somewhere between $100 to 112 million this year. And, and that, that change in range for us is purely that automotive opportunity. You know, our customers would take it today. They're actually utilizing some steel products because they don't have the availability of the aluminum products in the, in the quantities that they need. So we've, we've updated that opportunity, and, and that's the reason that's probably a slightly higher CapEx than, than you may have expected.

Speaker #1: You know , our customers would take it today . They're actually utilizing some steel products because they don't have the availability of the aluminum products in the in the quantities that they need .

Speaker #1: So we've we've updated that opportunity . And that's the reason that's probably a slightly higher CapEx than , than you may have expected

Speaker #3: Great . Maybe just my last one . Obviously , you mentioned earlier that you're not expecting any changes . I guess , to sort of Midwest premiums or things like that .

Bill Peterson: Great. Maybe just my last one. Obviously, you mentioned earlier that you're not expecting any changes, I guess, to sort of, Midwest premiums or things like that. I assume that also may be similar around where scrap spreads are. But given the high prices that were or costs, I guess, for your customers, given where aluminum pricing is today, are you hearing any evidence of demand destruction? Or what areas would you be concerned with? And then maybe secondarily, you know, we're hearing more about derivative tariffs. Any potential impact to your business? And I realize it's 30 days on that, on that second point.

Speaker #3: I assume that also may be somewhere around where scrap spreads are , but given the high prices that were cost , I guess for your customers , given where aluminum pricing is today , are you hearing any evidence of demand destruction or what areas would you be concerned with ?

Speaker #3: And then maybe secondarily , you know , we're hearing more about derivative tariffs . Any potential impact to your business . And I realize it's early days on that .

Speaker #3: On that second point .

Speaker #1: Yeah . No . You know , it's fascinating what's going on . You know , I can tell you this , bill , this is a way to look at 25 and 26 for Kaiser .

Keith Harvey: Yeah, no, you know, it's fascinating what's going on. You know, I, I can tell you this, Bill, this is a way to look at 2025 and 2026 for Kaiser. No question, we had some significant tailwinds. We had some significant higher operating costs as we put in these, these capacities. We don't expect those to extend into 2026. So you're gonna see a recovery on those costs that were out in 2026 versus, excuse me, 2025 versus 2026. Our outlook also has the expectation that you won't necessarily you won't see that tailwind reoccur in 2026. Now, it may. You know, we're still seeing favorable higher prices than expected in Q1, but our outlook did not assume that to continue throughout the year.

Speaker #1: No question . We had some significant tailwinds . We had some significant higher operating costs as we put in these these capacities . We don't expect those to extend into 2026 .

Speaker #1: So you're going to see a recovery on those costs that were out in 26 versus , excuse me , 25 versus 26 . Our outlook also has the expectation that you won't necessarily you won't see that that tailwind reoccur in 2026 .

Speaker #1: Now it may you know , we're still seeing favorable higher prices than expected in Q1 . But our outlook did not assume that to continue throughout the year .

Speaker #1: And so that gain that we're talking about here is purely operational gain based on the investments we've made , the cost and the efficiency gains , we expect to make in our operations .

Keith Harvey: And so that gain that we're talking about here is purely operational gain based on the investments we've made, the cost and the efficiency gains we expect to make in our operations. So any continued higher price tailwinds are going to be a tailwind above what we're talking about on this call. So, you know, it could conceivably go higher than what we're. You know, that's why we gave the initial outlook the way we did. You know, I have to tell you, as you asked the question, and I look at it constantly, Bill, we've seen absolutely no demand destruction in any of our product lines. We're seeing the general market, the general business, start out very strong. We see continued bookings, shipments going through the months.

Speaker #1: So any any continued higher price tailwinds are going to be a tailwind above what we're talking about on this call . So , you know , it could conceivably go higher than what we're it's why we gave the initial outlook the way we did .

Speaker #1: You know, I have to tell you, as you asked the question and I look at it constantly, Bill, we've seen absolutely no demand destruction in any of our product lines.

Speaker #1: We're seeing the general market , the general business start out very strong . We see continued bookings , shipments going through the months .

Speaker #1: I'm more encouraged than I had been on the general engineering that , you know , with GDP . So I'm feeling better about that side of our business , our packaging business is I talked about we can sell every pound , we can make food .

Keith Harvey: I'm more encouraged than I had been on the general engineering, you know, with GDP, so I'm feeling better about that side of our business. Our packaging business, as I talked about, we can sell every pound we can make. Food business is up to the high single digits, year-over-year growth. And then when I look at what's going on, I know the market corrected, felt like, wow, those 232 tariffs were gonna fall off. All indications that we're getting are that what they're considering is more downstream-type products and not removing the tariffs, but perhaps loosening tariffs, but addressing the full end product versus just the raw material. And at this point, we really don't see those tariffs coming off.

Speaker #1: Business is up to the high single digits year over year growth . And then and then when I look at what's going on , I know the market corrected felt like , wow , those 232 tariffs were going to fall off .

Speaker #1: All indications that we're getting are that what they're considering is more downstream type products . And not removing the tariffs . But perhaps loosening tariffs .

Speaker #1: But addressing the full end product versus just the raw material . And at this point we really don't see those tariffs coming off .

Speaker #1: And and even if we did , we you know , we've commented we're neutral to positive slightly positive . There . And and we've said all along while we appreciate and enjoy the tariffs excuse me some of the tailwinds we get from metal pricing .

Keith Harvey: And even if we did, you know, we've commented, we're neutral to positive, slightly positive there. And we've said all along, while we appreciate and enjoy the tariffs, excuse me, some of the tailwinds we get from metal pricing, you know, we should state at any point, if we saw a rapid decline, those could turn into headwinds. And so we'll call those out, and that's why we remain super, uber focused on operational gains in our business, which we've highlighted here in our comments this morning.

Speaker #1: You know we we should stay at at any point . If we saw a rapid decline those those could turn into headwinds . And so we'll call those out .

Speaker #1: And that's why we remain super, uber-focused on operational gains in our business, which we've highlighted here in our comments this morning.

Speaker #3: Well, I appreciate all those comments. I'll pass it on. But thanks for the color, and we'll look forward to following the progress.

Bill Peterson: Well, I appreciate all those comments. I'll pass it on, but thanks for the call, and we'll look forward to following the progress and, you know, good luck on the execution ahead.

Speaker #3: And good luck on the execution ahead .

Speaker #1: Thank you . Bill

Keith Harvey: Thank you, Bill.

Speaker #2: Thank you . There are no questions . Thank you . At this time I would like to turn the call back to Mr. Keith Harvey for closing comments .

Operator: Thank you. There are no questions in queue at this time. I would like to turn the call back to Mr. Keith Harvey for closing comments.

Speaker #1: All right . Well , thank you for joining us today . We're off to a strong start of the year and we're excited for our 2026 prospects .

Keith Harvey: All right. Well, thank you for joining us today. We're off to a strong start of the year, and we're excited for our 2026 prospects, and I look forward to sharing details on our continued progress in April. Have a good day.

Speaker #1: And I look forward to sharing details on our continued progress in April . Have a good day

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

Q4 2025 Kaiser Aluminum Corp Earnings Call

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