Why Constellium’s A&T profits fell in 3Q14

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Aerospace & Transportation segment

In the previous part of this series, we saw how the future profits of Constellium’s (CSTM) Automotive & Transportation (A&T) segment could be lower beginning next quarter. This segment, whose profits came in lower compared to last year, has been a concern for Constellium.

a&t

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3Q14 profits lower over last year

The previous chart shows the 3Q14 financial results of Constellium’s A&T segment. As you can see, both revenues and profitability are lower over 3Q13. For profitability, we have taken earnings before interest, taxes, depreciation, and amortization (or EBITDA) per ton. 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. We will discuss this in detail going forward.

As discussed previously, the A&T segment supplies to the aerospace and automotive industries, which have driven revenues for aluminum companies in recent quarters. Aluminum plays such as Alcoa (AA), Century Aluminum (CENX), and Rio Tinto (RIO) have posted higher revenues in 3Q14, back on strong demand from these two sectors.

Demand continues to be strong

Constellium (CSTM) also admits that the company is not facing any demand-related issue. It seems to be the other way around. According to analysts, there is a race among automotive companies to secure aluminum supplies for their plants. Alcoa (AA) is doing expansion at its plants to serve this fast-growing market. According to Alcoa, it has already contracted the future revenues from these expansions. The demand from automotive companies has been strong as more automakers shift to aluminum bodies for their vehicles.

The Packaging and Automotive Rolled Products segment supplies the auto sheet. We’ll learn more about this segment in the next part of this series.

Be aware that the aluminum industry can also be assessed through the Standard and Poors depositary receipit (or SPDR) S&P Metals and Mining exchange-traded fund (or ETF) (XME).

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