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Constellium’s Aerospace Segment: What Are Its Challenges?

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Aerospace segment

In the third quarter, Constellium warned that its Aerospace and Transportation, or A&T, segment’s profits could come down. Constellium N.V. (CSTM) and Precision Castparts (PCP) are major suppliers to the aerospace sector. Recently, Alcoa (AA) announced the acquisition of RTI Metals International (RTI). RTI is a supplier of titanium and specialty metals products to the aerospace, defense, and energy sectors.

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Ravenswood plant

Constellium faced an unplanned outage at its plant in Ravenswood in October. The outage came after the plant was restarted. It was restarted after planned maintenance. The outage had a negative impact on the fourth quarter EBITDA (earnings before interest, tax, depreciation, and amortization) of 5 million euro on its A&T segment. The segment’s shipments came down by 9% on a year-over-year, or YoY, basis. This is partially due to the outage at the Ravenswood plant.

Century Aluminum (CENX) also has a smelting plant in Ravenswood. The plant was idled after the financial crisis of 2008. Currently, Century Aluminum forms 2.5% of the SPDR S&P Metals and Mining ETF (XME). Kaiser Aluminum (KALU) forms 4.2% of XME.

AIRWARE

Constellium launched a new product called “AIRWARE.” It launched the product to meet its aerospace customers’ needs. The product was expected to be a game changer for Constellium. The above chart shows the product’s key features.

However, one of Constellium’s largest customers slowed its expansion plans. The customer was one of the top three buyers of AIRWARE. Delays on the customer’s end also led to lower shipments at the A&T segment.

Along with these operational challenges, certain market factors also negatively impacted the A&T segment’s financial performance. We’ll discuss this in more detail in the next part of this series.

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