Kaiser Aluminum Q1 net income rose 22% year-over-year to US$11M, net sales grew 20.6% to US$322.6M, driven by improved demand across end markets, acquisition-related growth
FOOTHILL RANCH, California
April 28, 2011
Value added revenue of $157 million for the first quarter ended March 31, 2011 increased $20 million from $137 million in the prior year quarter. Adjusted consolidated EBITDA of $23 million or 15% of value added revenue reflected the favorable impact of stronger demand and recent acquisitions, partially offset by a margin squeeze due to a lag in passing through rapidly increasing metal costs on some products during the quarter.
"Improving demand across our end market applications combined with the benefit of our recent acquisitions of Alexco and Nichols Wire drove higher sales and higher adjusted EBITDA," said Jack A. Hockema, President, CEO and Chairman. "However, we did not fully realize our earnings potential during the quarter as the timing and amount of price increases on spot sales for high value added products have been insufficient to recover sharply rising aluminum and alloying costs. We are encouraged that recently implemented price increases are sustainable, and we expect to begin to recapture some of the margin squeeze in the second quarter," said Mr. Hockema.
"The ramp-up of our Kalamazoo, Michigan extrusion facility continues to gain momentum. We expect that EBITDA margins will improve throughout the year as we realize price increases and improving cost benefits from Kalamazoo," concluded Mr. Hockema.
As indicated in the Company's prior earnings call outlook, higher value added revenue and adjusted EBITDA in the first quarter reflected the benefit of additional sales from the acquisitions of Alexco and Nichols Wire in addition to improving demand and higher shipments across virtually all of the Company's products and end market applications. Adjusted consolidated EBITDA was $23 million for the first quarter of 2011, or 15% of value added revenue, compared to $20 million, or 15% of value added revenue in the prior year quarter.
Consolidated operating income was $21 million in the first quarter 2011, up $6 million compared to the prior year quarter partially as a result of more favorable non-run-rate adjustments. Adjusted for non-run-rate items, consolidated operating income was $17 million for the first quarter 2011 compared to $16 million the first quarter 2010. Operating income in the first quarter 2011 reflected a $2 million increase in depreciation and amortization due to assets placed in service during 2010.
During the quarter, the Company completed the acquisition of Alexco, a Chandler, Arizona based manufacturer of hard alloy extrusions for the aerospace industry. The net cash consideration paid was approximately $83 million. Total cash combined with borrowing availability under the revolving credit facility exceeded $245 million as of March 31, 2011.
"We are experiencing strong demand throughout our extensive aerospace product offering with the exception of aerospace plate where shipments have been constrained by the overhang of excess inventory in the supply chain. However, we anticipate that our aerospace plate order rate will begin to ramp up in the second half and into 2012. Longer term we expect very substantial aerospace demand growth driven by increasing build rates, larger airframes, and monolithic design," said Mr. Hockema.
"Our general engineering and automotive applications continue to experience slowly improving underlying demand, modest restocking in the supply chain, and growth in new aluminum extrusion automotive programs. Although we have not to date experienced any change in demand for our automotive and semi-conductor applications as a result of manufacturing disruptions in Japan, there remains some uncertainty as to the potential impact, if any, on the overall supply chain.
"Overall, we expect that our shipments and value added revenue in the second quarter of 2011 will be similar to the first quarter, and we expect our adjusted EBITDA margin as a percentage of value added revenue will benefit from improving operating efficiencies and partial recovery of the margin squeeze caused by rising aluminum costs. Looking to the second half of the year, we are optimistic that we will get a strong second half boost from higher order rates for aerospace plate, and we anticipate further EBITDA margin improvement as we gain increasing benefits from higher aerospace plate shipments, the Kalamazoo ramp up, and improved pricing," concluded Mr. Hockema.
Kaiser Aluminum Corporation will host a conference call on April 28, 2011, at 10:00am (Pacific Time); 12:00pm (Central Time); 1:00pm (Eastern Time), to discuss first quarter 2011 results. To participate, the conference call can be directly accessed from the U.S. and Canada at (877) 645-6210, and accessed internationally at (914) 495-8566. A link to the simultaneous web cast can be accessed on the Company's website at http://investors.kaiseraluminum.com/events.cfm. A copy of a presentation will be available for download prior to the call and an audio archive will be available on the Company's website following the call.
Kaiser Aluminum Corporation, headquartered in Foothill Ranch, Calif., is a leading producer of semi-fabricated specialty aluminum products, serving customers worldwide with highly-engineered solutions for aerospace and high-strength, general engineering, and custom automotive and industrial applications. The Company's North American facilities produce value-added sheet, plate, extrusions, rod, bar, tube and wire products, adhering to traditions of quality, innovation and service that have been key components of our culture since the Company was founded in 1946. The Company's stock is included in the Russell 2000(R) index and the S&P SmallCap 600(R) index.
IndustryIntel Editor's Note: In an omitted table, the company reported Q1 net sales of US$322.6 million. For the same quarter a year ago, the company reported net sales of $267.5 million.
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