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Constellium’s key revenue drivers
The EBITDA of Wise Metals is expected to be $116 million in 2014. Constellium plans to invest $700 million to transform part of this plant to produce automotive sheets.
Constellium intends to use a mix of debt and equity to fund the Wise Metals acquisition. However, raising equity looks tough with Constellium’s share price hitting a 52-week low.
Shipments for Constellium’s Automotive Structures and Industry increased by 11% over 3Q13. The EBITDA per ton, though, decreased by 4% over last year.
Shipments in Constellium’s P&ARP segment increased by 4% over 3Q13. The growth in shipments is due to higher shipments of automotive sheets, which increased a whopping 82% over last year.
The slowdown in revenues was due to maintenance activities in the Ravenswood plant. Constellium is in the process of streamlining its maintenance process, which will help the company better manage maintenance-related issues.
Constellium (CSTM) has not been able to fully pass on the aluminum premiums to its customers. Because of this, Constellium was negatively impacted by 6 million Euros in the third quarter.
In October 2014, Constellium faced an unplanned outage at its plant in Ravenswood. Constellium expects this outage to negatively impact the 4Q14 EBITDA of its Aerospace & Transportation segment by five million Euros.
Constellium’s earning per share (or EPS) fell by almost 75% over 3Q13. The fall in EPS was due largely to the impact of unrealized losses on derivative transactions.
Constellium’s aerospace sector is expected to grow at a healthy pace over the next few years. Its packaging industry is one of the biggest aluminum consumers globally. Constellium provides automotive solutions to help reduce vehicle weight.
Constellium is engaged in the aluminum fabrication business. It produces aluminum sheets and other value added products, but it’s not a primary aluminum producer
Rising aluminum premiums negatively impacted Constellium’s 3Q14 profits, unlike primary producers such as Rio Tinto (RIO) and Alcoa (AA).
In the commodity business, Alcoa is either closing or selling the plants that have high unit costs. The cost savings will be a key driver for Alcoa.
Alcoa contributed ~95% of its growth capital towards the value-add business. Most of this capital went into the Firth Rixson acquisition.
AA opened the world’s largest aluminum-lithium facility in Indiana. The facility will produce components for the aerospace industry.
Alcoa’s Engineered Products segment had revenues of ~5.7 billion in 2013. The power and propulsion business is the largest segment. It contributes ~$1.8 billion.
Alcoa developed an aluminum foil that’s around a third of the thickness of human hair. It’s called aseptic foil. It’s used by the milk packaging industry in Brazil.
Alcoa is working to expand its capacity in Tennessee. It’s a $275 million investment. Alcoa expects that the facility will be operational by mid-2015.
Alcoa’s GRP segment converts the primary aluminum into sheets. The sheets are used in the packaging, automotive, and aerospace industries.
Along with closing plants with high unit production costs, Alcoa is in the process of exiting its plants in Jamaica and Suriname. These plants represent Alcoa’s high-cost operations.
Alcoa is an integrated player in the aluminum value chain. This means its operations extend from bauxite refining to aluminum fabrication.