Constellium SE (CSTM) Earnings

Management highlights

### Safety Performance - Safety is the company's top priority; Q2 2026 recordable case rate was 1.5 per million hours worked, bringing year-to-date rate to 1.3 per million hours, down from 1.9 in 2025. Management remains focused on continuous safety improvement. ### Overall Operational Performance - The company delivered record quarterly adjusted EBITDA (excluding metal price lag) that exceeded internal expectations, despite macroeconomic and geopolitical uncertainty. Strength was driven by focused operations, strict cost control, and improving end market dynamics, with performance improving across all segments year-over-year. ### End Market Update - **Aerospace**: Demand has outperformed 2026 entry expectations, supported by record commercial aircraft backlogs and growing OEM build rate targets for narrow and wide-body aircraft. Aluminum destocking in the supply chain is easing, with strong demand for high-value products. The new third Aerospace casthouse at Issoir is now operational, with customer qualifications underway and ramp-up planned for 2027. Military/space aviation demand is robust, and long-term demand fundamentals remain strong. - **Packaging**: Underlying demand remains healthy in both North America and Europe, with favorable long-term outlooks supported by growing consumer preference for sustainable aluminum cans and continued can maker capacity expansion. Long-term growth is projected to be low-to-mid single digits, providing a stable baseload for operations. - **Automotive**: North American demand remains resilient, and the company has benefited from temporary supply shortages from a competitor's fire-related outage, with a net positive impact on 2026 results that will taper starting in Q3. European demand remains weak, particularly in premium segments, due to increased Chinese competition. Long-term secular trends for aluminum light-weighting in EV/hybrid vehicles remain intact, though growth is expected to be slower than previously forecast. - **Specialty Industrial Markets**: Conditions have stabilized after a prolonged downturn, with TID (Transportation and Industrial Design) markets in North America particularly strong due to tariffs making domestic production more competitive than imports, with opportunities in defense, semiconductors, and commercial transportation. ### Balance Sheet and Capital Allocation - The company generated $90 million in free cash flow in Q2, bringing year-to-date free cash flow to $95 million. Net debt fell to $1.8 billion, with leverage reduced to 1.8x, well within the 1.5x-2.5x target range. Liquidity stands at over $1 billion, a $192 million increase year-to-date. The company recently completed a $100 million partial redemption of 2028 senior notes. $20 million was returned to shareholders via share repurchases in Q2, with $48 million repurchased year-to-date and $287 million remaining under the existing share repurchase program expiring in 2028. Free cash flow will continue to be allocated to share repurchases and debt reduction.

Guidance

- Management raised full year 2026 guidance, now targeting adjusted EBITDA (excluding non-cash metal price lag impact) of $980 million to $1.02 billion, and full year free cash flow of more than $300 million. With this revision, the company now expects to hit its original 2028 financial targets two years ahead of schedule. - Capital expenditure guidance remains unchanged at approximately $330 million for the full year, including ~$100 million in return-seeking capital for previously announced aerospace, recycling, and casting projects. Cash interest guidance remains unchanged at ~$125 million, while cash tax guidance was increased to ~$105 million due to higher expected profitability. Working capital is expected to be a larger use of cash than previously guided, due to higher metal prices. - Full year 2026 holdings and corporate expense is expected to be approximately $55 million. - More than 50% of 2027 forecast energy consumption is already locked in via the company's rolling three-year hedging program. - Favorable scrap spreads are expected to remain supportive in the second half of 2026, though the year-over-year benefit will taper compared to the first half of the year.

Segment performance

Constellium has three operating segments, plus a holding and corporate function: 1. A&T (Aerospace & Transportation and Industrial Design): Adjusted EBITDA was $135 million, up 61% year-over-year, hitting a new quarterly record. Higher shipments drove a $40 million tailwind (aerospace up 14% YoY, TID up 26% YoY), price/mix added a $16 million tailwind, higher operating costs created a $7 million headwind, and FX added a $2 million tailwind. 2. PARP (Packaging and Automotive Rolled Products): Adjusted EBITDA was $165 million, up 123% YoY, also a new quarterly record. Volume was a $5 million headwind (higher automotive shipments offset by 9% lower packaging shipments), price/mix added a $20 million tailwind, improved scrap spreads, higher throughput and recycling productivity created a $74 million tailwind, and FX added a $2 million tailwind. 3. ASMI (Automotive and Speciality Extrusions): Adjusted EBITDA was $26 million, up 44% YoY. Volume was flat year-over-year, price/mix created a $5 million headwind, lower operating costs created a $12 million tailwind, and FX added a $1 million tailwind. 4. Holdings and Corporate: Expenses were $16 million in the quarter, up $4 million YoY due to higher labor costs and unfavorable FX translation. Total company revenue for the quarter was $2.7 billion, up 31% YoY, with total adjusted EBITDA (including metal price lag impact) of $439 million, or $310 million excluding metal price lag (up 88% YoY, an all-time quarterly record).

Risks & headwinds

- Ongoing macroeconomic and geopolitical uncertainty, including volatility in primary aluminum prices and metal premiums, creates uncertainty for second half performance. - The ongoing conflict in the Middle East has created emerging inflationary pressures in freight, lubricants, and coatings, though management expects the net impact to be manageable at this stage. While the company sources a small share of its metal slab and billet from the region, management expects any supply impact to be limited and mitigable via reallocation of internal and external supply. No meaningful supply chain or end market disruption has been observed to date, though longer-term impacts remain uncertain. - European automotive demand remains weak due to increased Chinese competition, and long-term EV/hybrid growth is expected to be slower than previously forecast. - Proposed EU aluminum scrap export taxes (expected to be voted on in 2026, with implementation no earlier than 2027) create policy uncertainty, though management notes the change would be supportive of European scrap spreads and is positive for the company's European recycling investments.

Analyst Q&A

• Q: The full year 2026 guidance implies a softer second half compared to the strong first half performance. What factors drive this implied slowdown, and what could lead to better than expected results? /

  A: Seasonality creates a natural slowdown in the second half: lower summer and holiday season demand, particularly in Europe, and the company schedules most planned maintenance outages during this period, which increases maintenance costs. Additionally, the large year-over-year benefit from improving recycling market conditions was concentrated in the first half of 2026, as markets were very adverse in the first half of 2025, and incremental benefits will taper in the second half.

• Q: Recent scrap spread compression has been observed in North America. What impact will this have on second half 2026 performance, and how should we think about 2027? /

  A: Most of the company's scrap needs for the second half of 2026 are already locked in at favorable spreads similar to first half levels. The observed compression reflects recent downward metal price movements, which are already incorporated into the revised guidance. Management is focused on operational improvements to maximize recycling returns, including optimizing scrap sourcing and improving yield. It is still too early to provide formal 2027 guidance, and the company is taking a wait-and-see approach to market conditions.

• Q: The company is hitting its 2028 EBITDA target two years early. How should investors think about EBITDA growth trajectory beyond 2026? /

  A: The company's core strategic plan remains unchanged. Key growth investments are on track: the Spezak recycling center will ramp to full capacity in 2027, the Issoir Aerospace casthouse will ramp in 2027 after qualification, the Matthew Schultz casting complex will come online in 2027, and the Ravenswood casting projects will come online in 2028. All projects are targeted to reduce metal costs and support growth, all have an IRR of over 15%. End market fundamentals remain supportive: aerospace volumes are growing, defense demand is rising, North American automotive is resilient, packaging demand is stable, and European industrial markets have bottomed out. Operational efficiency and cost control via the Vision 2028 program will continue to drive performance.

• Q: A&T segment hit a record $2,000+ EBITDA per ton in Q2. How much of this is sustainable, and what is a normalized long-term range? /

  A: The $2,000 per ton level reflected an exceptional quarter with very strong volumes, exceptional product mix, and strong TID pricing, so it is not a normal level. The company's through-cycle long-term guidance for normalized A&T EBITDA per ton is $1,300, and the average since 2022 has been roughly $1,500.