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KA

KAISER ALUMINUM CORP (KALU)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered a strong print: adjusted EPS $1.86 and adjusted EBITDA $81.3M with a 23.2% EBITDA margin, despite an 8% YoY shipment decline due to a planned Trentwood outage; management raised FY2025 adjusted EBITDA growth to 20–25% YoY .
  • Versus consensus, EPS, EBITDA, and margins were notable beats; revenue was ~1% below Street. Adjusted EPS $1.86 vs $0.89*; EBITDA $81.3M vs $62.2M*; revenue $843.5M vs $850.0M* . Values retrieved from S&P Global*.
  • Guidance mixed: Conversion revenue trimmed to flat–up 5% (from up 5–10% in Q2), while adjusted EBITDA raised to +20–25% YoY; ETR guided low–mid 20%, capex ~$130M, FCF $30–50M, dividend $0.77 declared .
  • Catalysts: Warwick 4th coating line ramp toward full run-rate; Phase 7 plate capacity nearing completion; ongoing aero destocking easing into 2026; contract pricing/mix driving 300–400 bps EBITDA margin uplift in packaging .

What Went Well and What Went Wrong

What Went Well

  • Packaging mix/pricing: Packaging conversion revenue rose to $137.8M (+7% YoY) despite lower shipments, aided by stronger pricing and mix; Warwick’s 4th coating line showed strongest output in September, momentum into October .
  • Margin and EBITDA: Adjusted EBITDA hit $81.3M with 23.2% margin, supported by favorable metal price lag (~$28M); fourth consecutive quarter above expectations .
  • Balance sheet/liquidity: Net debt leverage improved to 3.6x (vs 4.3x at YE2024); revolver extended to 2030; total liquidity $602M (Oct 14) with $560M availability and $42M cash .

What Went Wrong

  • Aero/HS shipments down 30% YoY (to 41.8 mmlbs) and conversion revenue down 22% (to $99.5M) due to a planned 12‑week Trentwood outage and ongoing destocking/OEM production cadence .
  • Startup/inefficiency costs: ~$20M non‑recurring startup costs tied to Trentwood and Warrick weighed on results, expected to taper through year‑end .
  • Revenue slightly below Street: Net sales of $843.5M versus $850.0M consensus*; conversion revenue declined 3% YoY to $350.7M as shipments fell 8% YoY . Values retrieved from S&P Global*.

Financial Results

MetricQ3 2024Q2 2025Q3 2025
Net Sales ($USD Millions)$747.7 $823.1 $843.5
Conversion Revenue ($USD Millions)$362.0 $374.2 $350.7
Shipments (mmlbs)292.2 288.4 270.2
Operating Income ($USD Millions)$13.2 $38.0 $48.8
Net Income ($USD Millions)$8.8 $23.2 $39.5
Diluted EPS ($)$0.54 $1.41 $2.38
Adjusted EBITDA ($USD Millions)$46.2 $67.7 $81.3
Adjusted EBITDA Margin (%)12.7% 18.1% 23.2%
Adjusted EPS ($)$0.31 $1.21 $1.86

Segment breakdown (Conversion Revenue and Shipments):

SegmentQ3 2024Q2 2025Q3 2025
Aero/HS Conversion Revenue ($MM)$127.9 $127.2 $99.5
Aero/HS Shipments (mmlbs)59.5 59.9 41.8
Packaging Conversion Revenue ($MM)$128.4 $129.7 $137.8
Packaging Shipments (mmlbs)150.9 141.1 144.1
GE Conversion Revenue ($MM)$76.1 $85.7 $81.9
GE Shipments (mmlbs)55.6 63.4 60.4
Automotive Conv. Revenue ($MM)$28.7 $31.6 $31.5
Automotive Shipments (mmlbs)25.2 24.0 23.9

Consensus vs Actual

MetricQ2 2025 Consensus*Q2 2025 ActualQ3 2025 Consensus*Q3 2025 Actual
Primary EPS ($)$0.76*$1.21 $0.89*$1.86
Revenue ($USD Millions)$786.7*$823.1 $850.0*$843.5
EBITDA ($USD Millions)$56.1*$67.7 $62.2*$81.3

Values retrieved from S&P Global*

KPIs and Cash/Liquidity

KPIQ2 2025Q3 2025
Cash from Operations ($MM)—$59
Capital Expenditure ($MM)—$25
Net Debt Leverage (x)—3.6x (vs 4.3x at 12/31/2024)
Total Liquidity ($MM)$538 (6/30/2025) $602 (10/14/2025)
Cash & Equivalents ($MM)$13 (6/30/2025) $42 (10/14/2025)
Revolver Availability ($MM)$525 (6/30/2025) $560 (10/14/2025)
Dividend per Share ($)$0.77 (7/15 declaration) $0.77 (10/14 declaration)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Conversion Revenue YoYFY 2025Up 5–10% Flat to up 5% Lowered
Adjusted EBITDA YoYFY 2025Up 10–15% Up 20–25% Raised
Effective Tax RateFY 2025—Low to mid-20% before discrete items; cash taxes $5–$7M New detail
CapexFY 2025—~$130M New detail
Free Cash FlowFY 2025—$30–$50M, reflecting temporary WC impacts from higher metal costs New detail
DividendQ4 2025—$0.77 per share declared, payable Nov 14 Maintained
Aerospace shipments & conv. revFY 2025—Down ~10% YoY (destocking; outage) New segment guide
Packaging conv. rev & shipmentsFY 2025—Conv. rev up 12–15%; shipments down 3–5% YoY (mix shift to coated) New segment guide
GE shipments & conv. revFY 2025—Up ~5–10% YoY New segment guide
Automotive conv. rev & shipmentsFY 2025—Conv. rev up ~3–5%; shipments down ~5–7% YoY New segment guide

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Packaging coating line rampPreparing commissioning; strong pipeline September strongest output; momentum into Oct; full run-rate to support 2026 shipments Improving execution, accelerating ramp
Aerospace destocking & build ratesSolid position; anticipating recovery Destocking easing; build rates strengthening; outage impacted Q3; shipments to recover in Q4 and 2026 Positive trajectory into 2026
Pricing/Mix upliftSustained margin levels >19% in H1; favorable metal tailwinds Packaging contract progress; targeting 300–400 bps EBITDA margin uplift; measured 75–80% capacity to protect delivery performance Structural margin expansion
Tariffs/macroNeutral to positive impact implied in H1 commentary Neutral to slightly positive; LME premium pass-through; better demand for domestic products Supportive for domestic mix
Metal price lagFavorable MWTP tailwinds in Q1/Q2 ($21M/$14M) Favorable metal lag ~$28M in Q3 Continued tailwind in rising price environment
Cost discipline & operationsFocus on cost discipline and deleveraging Renewed focus post-investment cycle; inefficiencies (~$20M) expected to taper Near-term drag easing

Management Commentary

  • “We are proud to deliver our fourth consecutive quarter of results above our expectations, prompting an upward revision to our full-year 2025 Adjusted EBITDA outlook... favorable metal tailwinds offset these costs.” — Keith A. Harvey, CEO .
  • “We delivered 23% EBITDA margins in the third quarter and over 20% year-to-date... Phase 7 plate capacity expansion... remains on time and on budget.” — Prepared remarks .
  • “Adjusted EBITDA for the third quarter was $81 million... achieved despite the 8% year-over-year reduction in our shipments.” — CFO Neal West .
  • “We’re staying pretty firm with our 300 to 400 basis points increase on the EBITDA margin side of [packaging]... one last major customer... finalized before the end of the year.” — CEO on contracts .

Q&A Highlights

  • Aerospace trajectory: Q4 shipments expected close to 1H run-rate; Phase 7 will trim Q4 modestly (5–10% vs 1H); build-rate increases at aircraft OEMs point to improvement through 2026 .
  • Packaging pricing/mix: Contracting progress underpins 300–400 bps EBITDA margin uplift; measured capacity release (75–80%) to ensure delivery performance in 2026 ramp .
  • Startup costs outlook: Majority tied to Warwick coating line; Trentwood impact limited; expect lower startup costs through year-end .
  • Tariffs impact: Neutral to slightly positive; domestic demand pull; LME premiums passed through; opportunity for GE price enhancement as tailwinds build .
  • 2026 cadence: Gradual first-half ramp, stronger second half as aero and packaging hit full run-rate and GE strengthens .

Estimates Context

  • Q3 2025: EPS beat (Actual $1.86 vs $0.89*), EBITDA beat (Actual $81.3M vs $62.2M*), revenue slight miss (Actual $843.5M vs $850.0M*). Values retrieved from S&P Global* .
  • Q2 2025: EPS and EBITDA beats; revenue beat (Actual $823.1M vs $786.7M*). Values retrieved from S&P Global* .
  • Implications: Street likely revises FY EBITDA higher given raised guidance and stronger margin trajectory; revenue revisions modest given mix/metal pass-through dynamics, with focus on 2026 volume ramp and packaging contracts .

Key Takeaways for Investors

  • Margin story strengthening: Adjusted EBITDA margin expanded to 23.2% on mix/pricing and metal lag tailwinds; packaging contracts targeting 300–400 bps uplift support sustained margin expansion .
  • Temporary volume headwinds: Aero/HS shipments down on planned outage/destocking; recovery expected in Q4 and into 2026 as build rates rise .
  • Guidance quality up: FY2025 adjusted EBITDA raised to +20–25% while conversion revenue narrowed to flat–up 5%, emphasizing profitability over volume near-term .
  • Execution on investments: Warwick 4th coating line showing momentum; Phase 7 plate capacity nearing completion; startup costs (~$20M) to taper, underpinning 2026 run-rate .
  • Balance sheet/liquidity de-risked: Net debt leverage 3.6x; revolver extended to 2030; liquidity $602M with no revolver borrowings at extension date .
  • Cash allocation: FY capex ~$130M supports growth; FCF $30–50M expected; dividend maintained at $0.77 per share, signaling confidence in cash generation .
  • Trading setup: Near-term catalysts include Q4 recovery in aero shipments, packaging ramp validation, and confirmation of contract margin uplift; watch for metal price lag normalization and any tariff/regulatory developments impacting demand .