Constellium Q2 2025 Earnings Report

Constellium EPS Results

• Actual EPS: $0.25
• Consensus EPS: $0.28
• Beat/Miss: Missed by -$0.03
• One Year Ago EPS: N/A

Constellium Revenue Results

• Actual Revenue: $2.10 billion
• Expected Revenue: $2.08 billion
• Beat/Miss: Beat by +$21.13 million
• YoY Revenue Growth: N/A

Constellium Announcement Details

• Quarter: Q2 2025
• Date: 7/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, July 29, 2025
• Conference Call Time: 10:00AM ET

Constellium (NYSE:CSTM), together with its subsidiaries, engages in the design, manufacture, and sale of rolled and extruded aluminum products for the packaging, aerospace, automotive, defense, and other transportation and industry end-markets. The company operates through three segments: Packaging & Automotive Rolled Products, Aerospace & Transportation, and Automotive Structures & Industry. The Packaging & Automotive Rolled Products segment produces rolled aluminum products, including can stock and closure stock for the beverage and food industry, as well as foil stock for the flexible packaging market. This segment also supplies automotive body sheets and heat exchangers for the automotive market; and specialty reflective sheets. The Aerospace & Transportation segment provides rolled aluminum products, including aerospace plates, sheets, and extrusions; and aerospace wing skins, as well as plates and sheets for use in transportation, industry, and defense applications. The Automotive Structures & Industry segment offers extruded aluminium products and aluminium structural components for the automotive industry, including crash-management systems, body structures, side impact beams, and battery enclosures; and fabricates hard and soft alloy extruded profiles for various industry applications in the automotive, engineering, rail, and other transportation end markets. This segment also provides downstream technology and services, which include pre-machining, surface treatment, research and development, and technical support services. It sells its products directly or through distributors in France, Germany, the Czech Republic, the United Kingdom, Switzerland, and the United States, as well as Shanghai, and Seoul. The company was incorporated in 2010 and is headquartered in Paris, France.

Constellium Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: Q2 shipments rose 2% to 384k tonnes and revenue grew 9% to $2.1 billion, but net income fell to $36 million from $77 million and adjusted EBITDA of $146 million (or $159 million excluding metal lag) declined year-over-year.
• Positive Sentiment: Free cash flow was strong at $41 million in Q2, enabling $35 million of share repurchases; leverage peaked at 3.6× but is expected to fall to ≤3× by year-end.
• Neutral Sentiment: Constellium expects new aluminum tariffs to be a net positive, citing opportunities from local production, widened U.S. scrap spreads, and competitive positioning despite potential $20 million H2 cost headwinds pre-mitigation.
• Positive Sentiment: Packaging shipments climbed 14% and operational improvements at Muscle Shoals supported growth, underpinning outlook for low-to-mid single-digit long-term packaging demand.
• Positive Sentiment: The company raised its 2025 guidance, targeting adjusted EBITDA (ex-metal lag) of $620–650 million and free cash flow >$120 million, driven by cost controls, packaging strength, favorable scrap and FX dynamics.

Presentation

[Operator]

I will now hand the floor to Jason Hirschweizer, Director of Investor Relations, to begin. Sir Jason, please go ahead when you're ready.

[Jason Hershiser, Director of Investor Relations at Constellium]

Thank you, Adam. I would like to welcome everyone to our second quarter twenty twenty five earnings call. On the call today, we have our Chief Executive Officer, Jean Marc Germain and our Chief Financial Officer, Jack Kuo. After the presentation, we will have a Q and A session. A copy of the slide presentation for today's call is available on our website at consellium.com, and today's call is being recorded.

[Jason Hershiser, Director of Investor Relations at Constellium]

Before we begin, I'd like to encourage everyone to visit the company's website and take a look at our recent filings. Today's call may include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include statements regarding the company's anticipated financial and operating performance, future events and expectations, and may involve known and unknown risks and uncertainties. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward looking statements, please refer to the factors presented under the heading Risk Factors in our annual report on Form 10 ks. All information in this presentation is as of the date of the presentation.

[Jason Hershiser, Director of Investor Relations at Constellium]

We undertake no obligation to update or revise any forward looking statement as a result of new information, future events or otherwise, except as required by law. In addition, today's presentation includes information regarding certain non GAAP financial measures. Please see the reconciliations of non GAAP financial measures attached in today's slide presentation, which supplement our GAAP disclosures. And with that, I would now like to hand the call over to Jean Marc.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. Let's begin on Slide five and discuss the highlights from our second quarter results. I would like to start with safety, our number one priority. Our recordable case rate in the second quarter was 2.6 per million hours worked, following our strong safety performance in the first quarter and bringing our year to date recordable case rate to 1.8 per million hours worked.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

While this performance remains best in class, this is a humbling reminder that we all need to constantly maintain our focus on safety to achieve the ambitious target we have set of 1.5 per million hours worked. Turning now to our financial results. Shipments were 384,000 tonnes or up 2% compared to the 2024 due to higher shipments in PARP that were partially offset by lower shipments in A and T and AS and I. Revenue of $2,100,000,000 increased 9% compared to the 2024 due to higher shipments and favorable price and mix, including higher metal prices experienced in the quarter versus last year. Remember, while our revenues are affected by changes in metal prices, we operate a pass through business model, which minimizes our exposure to metal price risk.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Our net income of $36,000,000 in the quarter compares to net income of $77,000,000 in the second quarter last year. Adjusted EBITDA was $146,000,000 in the quarter, though this includes a negative noncash impact from metal price lag of $13,000,000 If we exclude the impact of metal price lag, the real economic performance of the business reflects adjusted EBITDA of $159,000,000 in the quarter compared to the $180,000,000 last year. Moving now to free cash flow. Our free cash flow in the quarter was strong at $41,000,000 During the quarter, we returned $35,000,000 to shareholders through the repurchase of 3,400,000.0 shares. Our leverage at the end of the second quarter was 3.6 times, though we expect this to be the peak and for leverage to trend down as we move through the rest of the year.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We delivered solid results this quarter despite continued demand weakness across most of our end markets outside of packaging. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline. Overall, I am quite pleased with our second quarter and first half performance. Now please turn to Slide number six. Before turning the call over to Jack, I wanted to give you a quick update on the Section two thirty two tariffs as well as other tariffs under IEEPA and how we see the potential impact to Constellium.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Before going into details on the slide, let me summarize a bit. As I mentioned last quarter, the tariff situation is a fluid and multifaceted situation. We see both some positive and negative impacts on our business. And at this stage, we continue to believe it presents us with various opportunities as well as some additional costs, but it should be a net positive for us. The guidance we are giving today does include the direct impact from tariffs that we are able to estimate given what we know today, and it does include several mitigating factors we have identified to offset the impacts.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

It also includes our current assumptions on end market demand in the current environment. Our guidance assumes a relatively stable macro environment, and it does not include potential impacts from additional tariffs to those that are known today. Shifting to the details on the slide now. On the production side, we are mostly local for local in the regions where we operate. Our automotive structures business in The U.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

S. Buys extrusions from Canada, including from our joint venture in Canada. These extrusions have become more expensive under Section two thirty two tariffs, which impacted the first half by around $7,000,000 on a gross basis. The gross costs could continue to accumulate going forward to an additional $20,000,000 for the rest of the year before mitigating items. We are working with our customers and suppliers on pass throughs and other mitigation efforts, and we have made good progress on a number of them.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We expect these actions to result in some benefits in the second half, which will help mitigate the impact on our results. In aerospace, we shipped small quantities from Europe to The US to serve global OEMs, although this has passed through today, and we will not be impacted. Regarding the automotive specific tariffs that fall under Section two thirty two, the volumes we ship across Mexican and Canadian borders are compliant with USMCA. On the metal supply side, we import some primary aluminum from Canada given the lack of smelter capacity here in The U. S.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

As of today, we have commercial agreements in place to help mitigate the tariff impact on this metal. In terms of scrap, aluminum scrap is excluded from the current scope of Section two thirty two tariffs, and we purchased most of our scrap needs from dealers in The US. The impact on scrap from tariffs should be a net positive as a rise in The US regional premium is beneficial for the domestic supply chain. We are starting to see this already as scrap spreads for used beverage cans, for instance, in The U. S, have widened in the first half of this year, and we expect to see some benefit of this in the second half.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

In terms of commercial impacts, these two should be a net positive for Constellium. Today, over 1,000,000 tons of flat rolled aluminum imports are coming into The U. S. Each year given the lack of domestic supply available. Tariffs will make domestically produced products more competitive, and we should benefit from this.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

During the first half of this year, we announced price increases for all rolled products shipped in The U. S. This has already started to benefit us on non contracted volumes in the second quarter of this year, and this benefit should continue to grow moving forward. In terms of end markets, the tariff and trade situation is creating broader macro uncertainty, and it is having a negative impact on markets such as automotive. Our guidance assumes weak conditions in automotive in both North America and Europe, and we are monitoring the conditions very closely.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We believe that the newly announced trade deals will somewhat reduce uncertainty in the global markets. That said, we are not discounting the broader macro uncertainty. We remain focused on our cost reduction efforts under our Vision 25 program, and we are optimizing our existing capacity depending on market conditions, such as shifting some capacity where we can from automotive markets into packaging markets. To close out on tariffs, as I said before, the situation remains very fluid. We are continually monitoring and assessing the potential impact of current and future trade policies, though at this stage, we believe the net impact of tariffs on aluminum present us with some opportunities in the current environment.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

With that, I will now turn the call over to Jack for further details on our financial performance. Jack?

[Jack Guo, EVP & CFO at Constellium]

Thank you, Jean Marc, and thank you, everyone, for joining the call today. Please turn now to Slide eight, and let's focus on our A and performance. Adjusted EBITDA of $78,000,000 decreased 13% compared to the second quarter last year. Volume was a headwind of $18,000,000 due to lower aerospace and TID shipments. Aerospace shipments were down 12% in the quarter versus last year as commercial OEMs continue to work through excess inventory as a result of lingering supply chain challenges.

[Jack Guo, EVP & CFO at Constellium]

Demand in space and military aircraft remained healthy. TID shipments were down 11 versus last year as commercial transportation and general industrial markets remained weak in the quarter. Price and mix was a tailwind of $2,000,000 due to improved contractual and spot pricing in aerospace and TID, partially offset by weaker overall mix in the quarter. Costs were a tailwind of $2,000,000 primarily as a result of lower operating costs. FX and other was also a tailwind of $2,000,000 in the quarter due to the weakening of the U.

[Jack Guo, EVP & CFO at Constellium]

S. Dollar. Now turn to Slide nine, and let's focus on our PARP segment performance. Adjusted EBITDA of $74,000,000 increased 12% compared to the second quarter last year. Volume was a tailwind of $14,000,000 as higher shipments in packaging were partially offset by lower shipments in automotive.

[Jack Guo, EVP & CFO at Constellium]

Packaging shipments increased 14% in the quarter versus last year as demand remained healthy in both North America and Europe. In North America, we also benefited at Muscle Shoals from improved operational performance in the quarter. Automotive shipments decreased 14% in the quarter with weakness in both North America and Europe. Price and mix was a headwind of $7,000,000 in the quarter due to tariff related metal impacts and weaker mix. Costs were a modest headwind of $1,000,000 primarily as a result of unfavorable metal costs, mostly offset by lower operating costs.

[Jack Guo, EVP & CFO at Constellium]

FX and other was a tailwind of $2,000,000 in the quarter. Now turn to Slide 10. Let's focus on our AS and I segment. Adjusted EBITDA of $18,000,000 decreased 40% compared to the second quarter of last year. Volume was a $1,000,000 headwind as a result of lower shipments in automotive, mostly offset by higher shipments in industry extruded products.

[Jack Guo, EVP & CFO at Constellium]

Automotive shipments were down 12% in the quarter with weakness in both North America and Europe. Industry shipments were up 14% in the quarter versus last year. The increase in industry shipments is a result of us catching up to the lost volumes from the Vale interruption as industry markets in Europe remained weak overall. Price and mix was a $16,000,000 headwind in the quarter due to weaker pricing for spot volumes and a weaker mix. Costs were a tailwind of $5,000,000 primarily due to lower operating costs, partially offset by the net impact of tariff headwind in the quarter.

[Jack Guo, EVP & CFO at Constellium]

It is not on the slide here, but our holdings and corporate expense was $12,000,000 in the quarter. Holdings and corporate expense this quarter was up $6,000,000 from last year due to additional IT spending with the upgrade of our ERP system and higher accrued labor costs, partially offset by lower headcounts. As we said last quarter, we expect Holdings and Corporate expense to run at approximately $40,000,000 in 2025. It is also not on the slide here, but I wanted to summarize the current cost environment we're facing. As you know, we operate a pass through business model, so we're not materially exposed to changes in the market price of aluminum, our largest cost input.

[Jack Guo, EVP & CFO at Constellium]

Other metal costs, we experienced a dramatic tightening of spot scrap spreads in North America in 2024. The tightness continued into the beginning of this year, though spreads improved in the spot market as we moved through the first half of the year. Given our scrap purchases were essentially locked in for the second quarter, we did not benefit from this dynamic during the period. However, we expect to benefit starting in the third quarter this year and into the rest of the year. For energy, our 2025 costs are moderately more favorable compared to 2024, although energy prices remain above historical averages.

[Jack Guo, EVP & CFO at Constellium]

Other inflationary pressures have eased to more normal levels. And as we said in previous quarters, given the weakness we're seeing in several of our markets, we have accelerated our Vision '25 cost improvement program with measures such as improving operational efficiency, reducing headcounts and other labor costs, reducing nonmetal procurement spending, optimizing maintenance costs by minimizing the use of outside contractors, and cost reduction efforts across many other categories. We have demonstrated strong cost performance in the past, and we're confident in our ability to right size our cost structure for the current demand environment. Now let's turn to Slide 11 and discuss our free cash flow. We generated $41,000,000 of free cash flow in the quarter, bringing our year to date total to $38,000,000 The year over year increase in the first half is a result of less cash used for working capital, lower capital expenditures and lower cash taxes, partially offset by lower segment adjusted EBITDA and higher cash interest.

[Jack Guo, EVP & CFO at Constellium]

Looking at 2025, we expect to generate free cash flow in excess of $120,000,000 for the full year, which is unchanged from our prior guidance. We expect CapEx to be around three twenty five million dollars for the full year. We still plan to reduce our CapEx this year to stay prudent, though most of the benefits are offset by unfavorable foreign exchange translation. Cash interest and cash taxes are running slightly higher for the year than previously expected at 100 and $25,000,000 and $45,000,000 respectively. We expect working capital and other items to be a modest use of cash for the full year, which includes the impact of higher metal prices this year and the working capital ramp up in Vale.

[Jack Guo, EVP & CFO at Constellium]

At this stage, we have fully rebuilt our supply chain and inventories in Vale, which has had a negative impact on free cash flow in the first half of this year. As Jean Marc mentioned previously, we continued our share buyback activities in the quarter. During the quarter, we repurchased 3,400,000.0 shares for $35,000,000 bringing our year to date total to 4,800,000.0 shares for $50,000,000 We have approximately $171,000,000 remaining on our existing share repurchase program, and we intend to use a large portion of the free cash flow generated this year for the program. Now let's turn to Slide 12 and discuss our balance sheet and liquidity position. At the end of the second quarter, our net debt of $1,900,000,000 was up approximately $120,000,000 compared to the 2024, with the largest driver being the translation impact from the weaker U.

[Jack Guo, EVP & CFO at Constellium]

S. Dollar at the end of the quarter. Our leverage was 3.6x at the end of the quarter or up 0.5x versus the 2024. As Jean Marc mentioned previously, we expect this to be the peak leverage and to trend down as we move through the year with the expected improvement in trailing adjusted EBITDA. We currently expect to finish the year with leverage at or below 3x, and we're committed to bringing our leverage back down into our target leverage range of one half to two and half times and maintaining this range over time.

[Jack Guo, EVP & CFO at Constellium]

As you can see in our debt summary, we have no bond maturities until 2028. Our liquidity increased by $114,000,000 from the 2024 and remains strong at $841,000,000 as of the end of the second quarter. Before turning it back over to Jean Marc, I wanted to mention a recent development for the company. As of 06/30/2025, Constellium no longer qualified as a foreign private issuer and will transition into becoming a US domestic domestic filer starting in 2026. As you probably recall, beginning in 2025, Constellium was already voluntarily electing to file annual reports on Form 10 k and quarterly reports on Form 10 Q with the SEC.

[Jack Guo, EVP & CFO at Constellium]

Given this change in filing status, we will begin to file all other required U. S. Domestic forms with the SEC, including a DEF 14A and Section 16 forms, in addition to our annual and quarterly reports starting on 01/01/2026. With that, I will now hand the call back to Jean Marc.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Thank you, Jack. Let's turn to Slide 14 and discuss our current end market outlook. The majority of our portfolio today is serving end markets benefiting from durable, sustainability driven, secular growth, in which aluminum, a light and infinitely recyclable material, plays a critical role. However, many of these markets continue to face demand headwinds today and are also now facing uncertainty given the tariff situation. Turning first to the aerospace market.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Commercial aircraft backlogs are robust today and continue to grow. Major aero OEMs remain focused on increasing build rates for both narrow and wide body aircraft. Those supply chain challenges have continued to slow deliveries below what OEMs were expecting for several years in a row now. As a result, aerospace supply chains need to adjust to lower than expected build rates, which is causing a shift in demand to the right for some of our products. Despite the slowdown in the near term, demand has stabilized for the most part, and we remain confident that the long term fundamentals driving aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel efficient aircraft.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Demand also remains stable in the business and regional jet market and healthy for space and military aircraft. Looking across our entire aerospace business, we believe our product portfolio is unmatched in the industry, and we have industry leading r and d capabilities for aluminum aerospace solutions. In terms of outlook, I want to make one additional point on our A and T segment. In the past, we have talked about through the cycle adjusted EBITDA target for the segment of $1,000 per ton. Based on our contractual positions and the performance of the business, we now expect through the cycle adjusted EBITDA of $1,100 per ton, and we expect to remain above that level in the near term.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Turning now to packaging. Demand remains healthy in both North America and Europe. The long term outlook for this end market continues to be favorable as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from both can makers in both regions from all can makers in both regions, sorry, and the greenfield investments ongoing here in North America. Longer term, we continue to expect packaging markets to grow low to mid single digits in both North America and Europe. Let's turn now to automotive.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Automotive OEM production of light vehicles in Europe remains well below pre COVID levels and is still below pre COVID levels in North America as well. Demand in North America has continued to soften in the near term and is expected to feel the impact of the current Section two thirty two auto tariffs. Demand in Europe remains weak, particularly in the luxury and premium vehicle and electric vehicle segments where we have greater exposure. Automotive production in Europe is also expected to feel the impact of the current Section two thirty two auto tariffs given the amount of vehicles The U. S.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Imports from Europe. In the long term, we believe electric and hybrid vehicles will continue to grow, but at a lower rate than previously expected. Sustainability trends such as lightweighting and increased fuel efficiency will continue to drive the demand for aluminum products. As a result, we remain positive in this market over the longer term in both regions despite the weakness we are seeing today. As you can see on the page, these three core end markets represent over 80% of our last twelve months revenue.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Turning lastly to other specialties. In North America, demand appears to have stabilized, albeit at low levels, and demand remains weak in Europe. We have experienced weakness across most specialties markets for three years now. We believe TID markets in North America provide us with some opportunities today, given the current tariffs make imports less competitive compared to domestic production. As a reminder, these specialties markets are typically dependent upon the health of the industrial economies in each region, including drivers like the interest rate environment, industrial production levels and consumer spending patterns.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We continue to work hard to adjust our cost structure to the current demand environment, which will put the business in an even better position when the industrial economies do recover. To conclude on the end markets, we like the fundamentals in each of the markets we serve, and we strongly believe that diversification of our end markets is an asset for the company in any environment. Turning lastly now to Slide 15, we detail our key messages financial guidance. Our team delivered solid results in the second quarter this year despite continued demand weakness across most of our end markets outside of packaging. We returned 35,000,000 to shareholders in the quarter with a repurchase of 3,400,000.0 shares.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

While tariffs are creating broader macro uncertainty and impacting end markets like automotive, we are proactively managing our business to the current environment. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline. Given our solid performance in the first year and based on our current outlook, including the current end market conditions I just described and assuming a relatively stable macro environment, we are raising our guidance for 2025. We are now targeting adjusted EBITDA, excluding the noncash impact of metal price lag, in the range of $620,000,000 to $650,000,000 and free cash flow in excess of $120,000,000 Our guidance assumes a modest improvement in the second half this year compared to the first half. This improvement includes the timing of certain tariff mitigations and customer compensations, which will be more pronounced in the third quarter as well as the more favorable scrap purchasing, the ramp up in Vale and favorable foreign exchange translation in the back half of the year.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Looking to the future, I also want to reiterate our long term targets of adjusted EBITDA, excluding the noncash impact of metal price lag of $900,000,000 and free cash flow of $300,000,000 in 2028. To conclude, while we continue to face challenging conditions in most of our markets today, we believe that this will pass, and I remain very excited about our future and the ability to seize the many opportunities in front of us, which we have demonstrated in the past. We are extremely well positioned for long term success and remain focused on executing our strategy and shareholder value creation. With that, operator, we will now open the Q and A session, please.

[Operator]

And our first question today comes from Correne Blanchard from Deutsche Bank. Karim, your line is open. Please go ahead.

[Corinne Blanchard, Director at Deutsche Bank]

Great. Thank you. Good morning, everyone. Two questions here. Maybe the first one, can you dive a little bit into what gave you the confidence to raise the guidance this quarter?

[Corinne Blanchard, Director at Deutsche Bank]

And I think everyone sees you guys have been pretty cautious, and we would probably have expected it to happen next quarter. So that was definitely a great surprise to read that this morning. And then the second question, could you also give some detail on the cadence that you are expecting between 3Q and 4Q? I know you mentioned the second half has been slightly better than the first half, but just wondering now that they've dropped between the two quarters. Thank you.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Yes. Good morning, Corine. Thanks for the question. So to start with the first one, and I'll ask some help from Jack for both questions one and two, actually. The confidence to raise guidance.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So we are quite pleased with our first half, and we look at our order book and we look at our performance. That's what is informing us second half. I think it's useful to, as you said, to maybe give us different puts and takes here going into the second half. In terms of what is going well, I mean, packaging is going well. We in both continents, and our performance at Muscle Shoals continues to improve.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So we're quite pleased with that, and that's helping us really secure substantial gains in packaging, as you've seen in the growth that we are experiencing over the last year. The second impact is, last year was a tough year for us. We've really focused very strongly on cost reduction. Our Vision 25 program is running very well ahead of our expectations, like the packaging volumes are. And finally, the scrap spreads are also beneficial in The U.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

S. With the new tariff situation and the increase in the Midwest premium. So these factors are good. As Jack mentioned, the scrap spreads really haven't really benefited us in the first half. Another element also that is benefiting us in terms of translation into US dollars is a foreign exchange.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

It hasn't really benefited us in the first half. It's gonna benefit us in the second half. So these four factors, right, packaging volumes, Vision 25, scrap spreads and foreign exchange are better than our assumptions that were underlying our initial guidance. Now there's a few things that are worse, and it's really on automotive, where the picture is not getting prettier. We thought at the beginning of the year that our assumptions were conservative.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We don't think so anymore. The outside forecasts have kept on going down week after week nearly. So we are approaching automotive in the second half with quite a bit of caution actually. So that's weighing down on our raised guidance, so to say. And then in terms of aero and TID and well, this is kind of going as planned.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We would like aero to pick up a little bit quicker and sooner, but we're not planning for it in the second half. So that's kind of, what's underlying the different assumptions. Jack, you wanna add anything and maybe comment on the cadence as well?

[Jack Guo, EVP & CFO at Constellium]

Sure. So I think the only other point I wanted to add is we're doing quite well in terms of working with our customers and suppliers on mitigating the tariff impact as well as some of the weakness we're seeing in end markets such as automotive. So those benefits, we expect them to start coming in in the third quarter and into the rest of the year, which is a factor to be considered. And given those benefits coming into the third quarter, we're expecting third quarter performance to be stronger than the second quarter. But then obviously, in Q4, we have the normal kind of seasonality, so it'll be weaker than Q3.

[Corinne Blanchard, Director at Deutsche Bank]

Great. Thank you.

[Operator]

The next question comes from Bill Peterson from JPMorgan. Bill, your line is open. Please go ahead.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

Good morning, John, Mark and Jack. This is Bennett on for Bill. Thank you for taking my questions today.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Hey, Bennett.

[Jack Guo, EVP & CFO at Constellium]

Good morning, Bennett.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

I wanted to start with packaging. Good morning. The packaging shipments came in quite strong. It looks like the strongest actually since the 2022. So could you shed a little more color on what improvements you saw at Muscle Shoals during the quarter?

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

And if you would and or could pivot further ABS capacity to packaging in the meantime?

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Yes. So the packaging strength is in both Europe and North America. And as you point out, when automotive is weak, it gives us opportunity to have more time available on our mills to dedicate to packaging. And that's with the backdrop of the packaging market that is quite healthy in both regions. So that that has helped us quite quite a bit in, you know, achieving that very nice performance in our shipments in q two.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So as I said, some of it is because we're running well, so that's a good thing. Some of it is because automotive is not going well, which is not such a good thing. In terms of running well, our operations on the socials are stabilized quite a bit. You know that we are running to quite a few operational issues post COVID that took us quite a bit of time to address in terms of getting the right manning, the right training, the right performance from our assets through a more predictive maintenance. So all these things are coming into play now, and we feel quite confident that now that we've had, you know, seven, eight months of very good performance at Muscle Shoals and we keep on making progress, I will feel very confident about the future.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So we'll keep on working hard to maintain that and improve that level of performance, but I think all things are pointing in the right direction. At the same time, it's a plan that has further potential for improvement, which we're working on, and that requires, obviously, some capital expenditures, which we are planning for in the in the in the, you know, through planning horizon through '28. But not only are we happy with where we are, but we're quite excited about the opportunities we have at for further improvements at Muscle Shoals.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

Thanks for that. And then coming to Europe and auto, the outlook remains challenging. I think in the past you've suggested the company wouldn't look to invest meaningfully there just given the import pressures. But as we think about the strategic outlook for this business, to what extent have you started to engage at all with any Chinese OEMs looking to localize capacity in the coming years?

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We haven't done any of that, Bennett. I mean we'll see whether they build assembly plants. As as I mentioned, we'll be a legitimate supplier to, you know, whatever assembly line there is in Europe. You know that the products we make don't travel very much because they age harden and therefore, you know, you got a few weeks of shelf life, really. So, you know, local assembly of, you know, wherever an assembly line is, they need to procure their parts from reasonably close by.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So we'll be a legitimate supplier to whatever customer sets up new lines in Europe, but we haven't been engaged in any discussion of that nature just yet.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

Understood. Thank you for the context. I'll get back in the queue.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Thank you, Bennett.

[Operator]

The next question comes from Josh Sullivan from The Benchmark Company. Josh, your line is open. Please go ahead.

[Josh Sullivan, Equity Research Analyst - Industrial Technology, Aerospace & Defense at The Benchmark Company LLC]

Hey, good morning.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Good morning, Josh.

[Jack Guo, EVP & CFO at Constellium]

Hi, Josh.

[Josh Sullivan, Equity Research Analyst - Industrial Technology, Aerospace & Defense at The Benchmark Company LLC]

Hi, Josh. Mark. Hey, Jean Marc, just on aerospace, in your comments, you talked about the shift in demand to the right from some products. Was that a general comment just on the overall aerospace cycle that we've seen over the last couple of quarters that we're adjusting to? Or is there any color you can provide just on the aerospace demand incremental either way in 2Q?

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Yes. So I think, Josh, as you know, our products have quite a bit of lead time between the time you know, we ship them to the customer and the time the aircraft actually is delivered. And what we you've seen, I think even better than us, is, you know, between the forecast that were done, say, two years ago by any OEM and what they are building today, there's quite a gap. And that gap has kept on being pushed like a bubble to the right. And that that's where we're we're caught in.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Right? So the shipments we made two years ago were higher than what is needed to make the planes that they are making and delivering today, and that's kind of the stocking up that's happened over the past few years. So it is not getting worse. It just gets, you know, pushed to the, you know, to the right. And I do hope that it resolves itself reasonably quickly.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We'll see. It's very difficult to tell. Now what we do know, because we've been through this cycle a few times, is when it comes back, it snaps back very quickly, right, in a matter of a few months. We are not seeing any sign of that just yet, but it's not getting worse.

[Josh Sullivan, Equity Research Analyst - Industrial Technology, Aerospace & Defense at The Benchmark Company LLC]

Got it. And then maybe just on the Airwear product, we've obviously seen a lot of activity in space. Just curious what you guys are seeing as far as market demand signals from the space market.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Yeah. So it's quite lumpy, but it's Airwear is a fantastic product for space applications because of its how light it is, the weight savings you you achieve, obviously, which translates to better payload, which is super important if you wanna launch anything into space. It's got also excellent cryogenic properties. So it can resist, you know, high temperatures and extremely low temperatures. So there is a lot of demand for for this product.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We're really, you know, subject to here again, it's a matter of the supply chain. Right? You know, launches, more launches are good for us, but, you know, our products are ordered on the base of what are the launches that are forecast for one year or two years down the road. And that, obviously, there there's not a absolute fidelity between the forecast made now for two years from now and what will happen in two years from now. So it's a bit lumpy.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

It goes up very quickly, goes down very quickly. But on on average, it's growing, and it's a very good product line for us.

[Josh Sullivan, Equity Research Analyst - Industrial Technology, Aerospace & Defense at The Benchmark Company LLC]

Thank you for the time.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

And I should also specify that there is no to our products. So we've got, you know, very strong patents and experience.

[Operator]

And to final call for questions, that's star followed by one on your telephone keypad. We have a follow-up from Bill at JPMorgan. Bill, please go ahead.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

Hi, there. Bennett back on for Bill. Just wanted to follow-up on the scrap spreads quickly. It sounds like listed in the positive category into the back half, but could you help us understand, I guess, if where spreads are today, is this more than off enough to more than offset the prior guidance of, I think it was a 15,000,000 to $20,000,000 quarter headwinds? And are you seeing any change in flows in Europe just given the attractive pricing in The U.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

S. And maybe more flows getting shipped across the pond here? Thank you.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Sure. Yes. So on scrap spreads, so as you know, we are buying some of our scrap metal on an annual basis and some of it on a more spot basis and call it fifty-fifty just for the sake of the argument. So at the beginning of the year, when we, you know, we were still buying metal, scrap metal at a pretty elevated price, so very very narrow spreads on the heels of what happened in '24. But now the scrap spreads are widened.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Our open position is larger as well. So we're buying still some scrap metal at prices that were negotiated at the end of last year, but we're buying also quite a bit now at prices at our spot prices. What typically in any so that's how we've been operating for years and years. Right? And typically in any quarter, you could swing, you know, 5,000,001 way or the other.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

And I made the commentary last year that we had you know, we are experiencing swings of 15 to 20,000,000, which were very unusual. So what we could be seeing in the second half, if some of that, so more than five and less than 15, swinging back the the proper way and the proper way in our favor. And that that is what, you know, is kind of embedded in our in our revised guidance. Did I answer your question Thank you for for that.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

Best of luck. Yes.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

I guess the one minor follow-up would be any changes in Europe that you're seeing in scrap availability.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Yes. Sorry. You asked for that, and I didn't I wasn't trying to dodge it. No. We're not seeing really big flows out of Europe that would be penalizing us.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

But, yes, there is a bit of leakage from Europe into The U. S, but it's not material to our operations.

[Bennett Moore, VP - Equity Research at JPMorgan Chase]

All right. Thank you very much.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Thank you.

[Operator]

The next question comes from Sean Wondrack from Deutsche Bank. Sean, your line is open. Please go ahead.

[Sean Wondrack, Director at Deutsche Bank]

Hi there. Thanks for taking my question. Just one for me, and I apologize if you touched on this already. But, do you expect to have any impact from the big beautiful bill, whether it's tax or otherwise?

[Jack Guo, EVP & CFO at Constellium]

So, Sean, it's a really good question. So we're currently assessing the impact, but at the moment, we do not anticipate a significant impact on our financial results this year.

[Sean Wondrack, Director at Deutsche Bank]

Right. Okay. That's it for me. Thank you.

[Jack Guo, EVP & CFO at Constellium]

Thank you, Sean.

[Operator]

We have have a follow-up from Karim at Deutsche Bank. Karim, please go ahead.

[Corinne Blanchard, Director at Deutsche Bank]

Hey. Thank you for bringing me back. Just maybe I missed it, but can you just go back the mid cycle margin target? So I think in aerospace, you mentioned a jump from $1,000 per tonne to, like, 1,100 per tonne. But can you just confirm that?

[Corinne Blanchard, Director at Deutsche Bank]

And then on packaging, do you have any room to see, like, a price increase coming at some point? Maybe not over the coming months, but I'm just kind of trying to see over the next six to twelve months. Yes.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

So Corine, on the aerospace and TID, that's a blended margin, right? Yes. We're pulling it up through the cycle from $1,000 to $1,100 per ton. And that's a reflection of, you know, our performance and, you know, the contractual positions we have. You know that we've got some contracts that extend several years in the future, so that gives us a good appreciation for where we think we we should be.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

We also said that we're going to be above that level for the near future, namely '25 and '26, right? So that's it. I hope that confirms that is to your response to your question. Regarding packaging, I don't wanna go into too much specifics, but we're seeing an environment which is very supportive to pricing going into '26. So our negotiations with customers are going well, and we're very happy with where we are trending.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Remember, know, a lot of the the a lot, the vast, vast majority of this business is multiyear. Right? So there's some inertia. And, you know, on average, we like to say we may be renegotiating every year 20% of our business. Right?

[Jean-Marc Germain, CEO & Executive Director at Constellium]

25% of our business. So whatever, you know, change there is, upside or downside to price, you know, is kind of amortized over, you know, several years. But at the moment, it's reasonably positive.

[Corinne Blanchard, Director at Deutsche Bank]

That was very helpful. Thank you.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Thank you.

[Operator]

We have no further questions. So I hand the call back to Jean Marc for some closing comments.

[Jean-Marc Germain, CEO & Executive Director at Constellium]

Well, thank you, everybody, for again, for your interest in Constellium. We are happy with the progress we're making, and we look forward to an exciting second half. And I look forward to updating you on our progress in October. Thank you very much. Have a good day.

[Operator]

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Participants

Executives

• Jason Hershiser, Director of Investor Relations
• Jean-Marc Germain, CEO & Executive Director
• Jack Guo, EVP & CFO

Analysts

• Corinne Blanchard, Director at Deutsche Bank
• Bennett Moore, VP - Equity Research at JPMorgan Chase
• Josh Sullivan, Equity Research Analyst - Industrial Technology, Aerospace & Defense at The Benchmark Company LLC
• Sean Wondrack, Director at Deutsche Bank