U.S. Markets open in 1 hr 20 mins

Edited Transcript of CSTM earnings conference call or presentation 9-Mar-17 4:00pm GMT

Thomson Reuters StreetEvents

Q4 2016 Constellium NV Earnings Call

Schipol-Rijk Mar 9, 2017 (Thomson StreetEvents) -- Edited Transcript of Constellium NV earnings conference call or presentation Thursday, March 9, 2017 at 4:00:00pm GMT

TEXT version of Transcript

================================================================================

Corporate Participants

================================================================================

* Paul Blalock

Constellium N.V. - Head of IR

* Jean-Marc Germain

Constellium N.V. - CEO

* Peter Matt

Constellium N.V. - EVP and CFO

================================================================================

Conference Call Participants

================================================================================

* David Gagliano

BMO Capital Markets - Analyst

* Matthew Fields

Bank of America - Analyst

* Brett Levy

Loop Capital - Analyst

* Christian Georges

Societe Generale - Analyst

* Sean Wondrack

Deutsche Bank - Analyst

* Jorge Beristain

Deutsche Bank - Analyst

* Karl Blunden

Goldman Sachs - Analyst

* Evan Kurtz

Morgan Stanley - Analyst

================================================================================

Presentation

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

Good day everyone and welcome to the Constellium full-year and fourth-quarter 2016 results conference call. (Operator Instructions) And please note that this event is being recorded.

I would now like to turn the conference over to Paul Blalock. Please go ahead, sir.

--------------------------------------------------------------------------------

Paul Blalock, Constellium N.V. - Head of IR [2]

--------------------------------------------------------------------------------

Thank you, William. Good day everyone and thank you for your interest in Constellium. I would like to welcome everyone to our fourth-quarter 2016 earnings call.

On the call today are our Chief Executive Officer Jean-Marc Germain and our Chief Financial Officer Peter Matt. After the presentation, we will have a Q&A session. A copy of the slide presentation for today's call is available on our website at constellium.com, and today's call is being recorded.

Before we begin, I would 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, including statements regarding the Company's anticipated financial and operating performance, future events and expectations that may involve known and unknown risks, and uncertainties. For a summary of specific risk factors that could cause today's 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 20-F.

All information in this presentation is as of the date of the presentation, and 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 IFRS disclosures.

I would now like to hand the call over to Jean-Marc.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [3]

--------------------------------------------------------------------------------

Thank you, Paul, and good morning. Good afternoon, everyone. Thank you, again, for your interest in Constellium.

I would like to start with highlights for 2016. They include full-year shipments at 1.5 million metric tons. They are in line with 2015. And the Q4 shipments of 344,000 metric tons were up 2% on a year-over-year basis.

Our revenue was EUR4.7 billion in 2016. That is down 8%, all due to lower metal prices, which I remind you, we passed through. Q4 revenue was EUR1.2 billion, up 3% for the same period one year ago, and that also was primarily due to slightly higher metal prices in Q4 compared to last year.

Constellium's net loss was EUR4 million in 2016 compared with a net loss of EUR552 million in 2015.

As a reminder, our 2015 net loss included asset impairment charges associated with our Muscle Shoals and Valais facilities. The net loss for the fourth quarter was EUR20 million as compared with the net loss one year ago of EUR429 million reflecting the same factors.

Our adjusted EBITDA grew 10% in 2016 to EUR377 million and in the fourth quarter was up 8% to EUR81 million from the same period a year ago, and we are pleased with these numbers. Overall, we posted strong results in our P&ARP segment, reflecting continued operational improvements, particularly at Muscle Shoals, and also strong momentum and significantly higher profitability in our AS&I segment and stable performance in our A&T segment.

Finally, just a few weeks ago in February, Constellium completed the refinancing of the Wise Senior Secured Notes with Unsecured Constellium Senior Notes.

So all-in-all, 2016 was a very important year for Constellium, and we are pleased with the results of the year and the quarter and the momentum for the year.

We stabilized operational performance, we completed the peak spending period of our capital investment program, and we are now focused on realizing the benefits of our investments.

In addition, our recent capital structure initiatives result in a significant reduction in interest expense and the expansion of our maturity profile. These are solid steps in the direction of bolstering our financial flexibility.

With that, I will now hand the call over to Peter for further details on our financial performance, and afterwards I will wrap up with some further updates on our end markets, our strategy, our investments, and our path forward. Peter?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [4]

--------------------------------------------------------------------------------

Thank you, Jean-Marc, and thank you all for joining the call today. Turning now to 7, you will find the growth in adjusted EBITDA by segment for the full year at the top of the page and the fourth quarter at the bottom of the page.

For the full year of 2016, Constellium grew adjusted EBITDA by 10%. The AS&I segment increased its adjusted EBITDA by EUR22 million to a record EUR102 million. P&ARP achieved 10% growth in adjusted EBITDA, improving by EUR18 million to EUR201 million. A&P was virtually unchanged at EUR103 million.

Holdings and corporate accounted for EUR29 million of cost for the year, consistent with the EUR2 million to EUR3 million we expected on a monthly basis. For the fourth quarter, Constellium achieved EUR81 million of adjusted EBITDA, up 8% year over year. The P&ARP segment was the best performer, increasing adjusted EBITDA by EUR6 million to EUR43 million in the quarter. AS&I was up EUR3 million over last year, reaching EUR21 million in the quarter. A&T was softer by about EUR4 million in the fourth quarter of 2016, due to a larger percentage of high-value unique parts in the fourth quarter of 2015.

Turning now to slide 8 and focusing on the P&ARP segment, for the full-year 2016, shipments decreased 2% to just over 1 million metric tons on lower packaging and foil stock shipments. Automotive rolled product shipments increased 28% to 113 kt. This includes ABF and other automotive rolled products.

Adjusted EBITDA increased 10% to EUR201 million for the year, and adjusted EBITDA per ton increased 13% to EUR199 per ton on solid operational performance.

The primary drivers of P&ARP's improved performance were the continuations of strong operational momentum, primarily at Muscle Shoals, and improved price and mix benefits in our European operations, particularly in the fourth quarter.

On the bottom right-hand side of the chart, you'll see Q4 results, which benefited from many of the same trends. Shipments were down 1%, and adjusted EBITDA increased 19% to EUR43 million as compared with the same period last year.

In the fall of 2016, we began ramping up production on our new ABF finishing lines in Neuf-Brisach, France and Bowling Green, Kentucky. Jean-Marc will discuss our progress on these startups in greater detail in a few minutes.

Turning now to slide 9 and focusing on the A&T segment, for the full-year 2016, shipments increased by 5% to 243,000 tons and included a 2% increase in aerospace shipments and a 9% increase in transportation shipments. Despite higher shipments and improved costs, a weaker mix resulted in adjusted EBITDA remaining unchanged for the year at EUR130 million.

Adjusted EBITDA per ton of EUR425 was down 4%, reflecting a deterioration in mix. We also experienced this in the fourth quarter of 2016 where, despite higher shipments, our adjusted EBITDA declined by 13% year over year and our adjusted EBITDA per ton declined by 25% to EUR384 per ton. Jean-Marc will comment in greater detail on what we're seeing in our aerospace business in his outlook discussion a bit later. But we expect slightly lower aerospace shipments in 2017, primarily due to excess inventory in the aerospace supply chain to be offset by slightly stronger shipments in our transportation, industry and defense markets.

A few additional updates from A&P include the new pusher furnace at Ravenswood is operating according to design standards and is being used for production volumes where it is expected to improve our manufacturing efficiency and lower our costs.

In addition, with respect to AIRWARE, we continue to make progress in increasing capacity and sales and improving our manufacturing efficiency. The bill rate increases the Airbus A350, and the comeback of the Bombardier Series C will provide incremental sales opportunities.

Turning now to slide 10 and focusing on the AS&I segment, for the full-year 2016, shipments reached 217,000 tons, an increase of 3% on solid demand across all markets. AS&I reported a record adjusted EBITDA of EUR102 million, which increased 27% over the EUR80 million contribution in 2015. Overall for the year, AS&I demonstrated improved price and mix. This was evident in the adjusted EBITDA per ton where AS&I grew 24% over last year, reaching EUR471 in 2016.

We believe this is a sustainable performance and an opportunity for additional improvement in the future. Adjusted EBITDA in the fourth quarter grew 11% to EUR21 million from EUR18 million last year, and adjusted EBITDA per ton grew 7% to EUR423 per ton.

AS&I continues to demonstrate solid execution across all products and facilities. In addition, our expansion projects are all on schedule and on budget as Jean-Marc will cover shortly.

New program awards in crash management systems and automotive structures continue to drive the need to expand our capacity. In fact, new business totaling over EUR1 billion of backlog in lifetime revenue was awarded to AS&I during 2016. One recent example is a new large battery box contract for a major electric vehicle project. In addition to our legacy business, we continue to see significant light weighting opportunities with both hybrids and electric vehicles.

Now turning to slide 11, I want to switch gears and say a few words about our capital structure and our liquidity. As most of you probably know, we recently refinanced our 2018 Wise Senior Secured Notes. This transaction fully integrates Muscle Shoals into the Constellium family and, together with the December PIK Toggle Note redemption, will reduce our interest call by EUR27 million annually.

In addition, through this financing, we extended our 2018 maturity to 2025. Our nearest maturity is now 2021 as you can see in the chart at the bottom of the page.

We believe this transaction was an important step in increasing our financial flexibility.

On the next slide, number 12, we have presented our current salary balance sheet and liquidity profile. Our net debt at December 31, 2016 was EUR2 billion, and our cash plus amounts available under committed facilities was EUR537 million. While our leverage remains high, we continue to believe that our current capital structure and our liquidity provides the flexibility we need to realize the benefits of our investment strategy.

Before turning it back to Jean-Marc, I want to provide you with two additional updates. In 2016, we changed the presentation of interest in our cash flow statement. Interest paid, which we have previously reported in financing cash flows, is now reported in operating cash flows. In addition, we now report free cash flow, which we have defined as net cash flow from operating activities less purchases of PP&E, equity contributions, investments in joint ventures, and other investing activities. As free cash flow is a non-GAAP measure, we provide the reconciliation in our press release.

I would now like to hand it back to Jean-Marc.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [5]

--------------------------------------------------------------------------------

Thank you, Peter. So turning to slide 14, I wanted to start by sharing with everyone our view of our end markets, both in Europe and in the US. In automotive, we continue to see double-digit growth for the aluminum autobody sheets and automotive exclusions markets in both Europe and in the US over the next five years, and that is driven primarily by the increasing for light weighting and it is underpinned by vehicles that have been designed for which we have contracts.

In aerospace, the secular growth in air traffic combined with a significant backlog in plane orders of approximately nine years suggests steady, long-term demand for aircraft. Also over the long-term, we do expect composites will remain a factor. But we believe that aluminum will continue to be the material of choice for aircraft manufacturers and will continue to grow, albeit at a lower rate than the markets for aircraft.

In the short term, we are experiencing a temporary inventory overhang which we mentioned in Q3, and when coupled with reductions in selected widebody build rates, we expect we will also create headwinds for our A&P business in 2017.

In packaging, long-term demand is flat to slightly higher depending on the geography. In Europe, demand continues to grow based on the substitution of aluminum for steel, and the current packaging markets in Europe is actually at the moment about 85% aluminum and we expect the continuation of this shift towards aluminum.

In 2016, on the other side of the ocean, the aluminum beverage can market actually posted its first gain in several years, growing 1.2% in the US and Canada, driven largely by the increase in craft beers moving to cans for which we are very pleased. Longer-term, the continued progression of ABS demand will also help further tighten this market.

So moving to slide 15, I would like to give you a brief strategic update and go back to some mentions I made in last quarter's call. I mentioned that I was reviewing our senior management team, and I can now say that the team reporting directly to me is complete and with the changes we have made in finance, manufacturing excellence, as well as human resources.

We also looked at the long-term operational strategic and financial plan for the Company. In the fourth quarter, this plan has been endorsed by management and the board. And it is a plan that we not only plan to execute, but we have already started to execute. And we will tell you more about this at our upcoming Analyst Day in a couple weeks.

Our growth investments remain on track and should begin to contribute and generate returns. I will go into greater detail on this point in just a few moments.

Our capital spending has been very high in the past couple of years, and it has peeked at EUR355 million in 2016. And again, we said we would instill greater discipline to our capital deployment process. We reviewed our capital plans and put in place a strong methodology and process to govern future spending.

And also, we mentioned that we would take steps to enhance our financial flexibility, and as Peter just described, we have accomplished several initial steps around the big circle nodes and the Wise secured bonds in this process already so that we can simplify our capital structure, reduce our interest expense, and lower our financial risk.

Turning to page 16, let me now take a moment to update you on our key projects and opportunities. Last September, I attended the official opening of our automotive sheet plant in Bowling Green, Kentucky. This plant, which is a joint venture with UACJ, has a capacity of 100,000 tons and will help meet the growing needs of the North American automotive markets.

I am pleased to see the progress we're making as production is increasing and customer qualification, which is the most significant step at this early stage is proceeding well. Our diversified customer base for this exciting facility adds complexity to the qualification process. However, we are, in fact -- we expect to be halfway through our ramp-up by the end of 2017, and again the diversity of the customer base is a good thing in our view in terms of reducing any risk to these projects.

Also in the fall of 2016, we launched a similar new automotive sheet finishing facility in Neuf-Brisach, France to serve our automotive customer base in Europe. This equally important project is also performing well, and I am very impressed with its progress. We expect solid shipment growth from this project as we will ramp up protection over the next three years.

In White, Georgia and San Luis Potosi, Mexico, we are on schedule and on budget for the new AS&I plan to occur later this year and in 2018 respectively. And we have customer commitments for their capacity. Paul Warton, our President of Automotive Structures and Industry units, will further discuss these opportunities at our upcoming Analyst Day later this month in New York.

Turning to page 17, I want to confirm the guidance we provided last quarter and give you a little additional color on the first quarter of 2017. So, again, we expect high single-digit growth in adjusted EBITDA annually over the next three years. We continue with our capital spending target of EUR275 million in 2017. In addition, recognizing the importance of free cash flow, we are currently focused on a number of initiatives to reduce costs, improve cash generation in the immediate and intermediate future as part of our goal to generate positive free cash flow in 2019, and my sentiment towards that goal is improving compared to the end of last year.

With respect to the first quarter of 2017, we expect it will be somewhat softer than the first quarter of 2016 as we expect A&T to continue to experience the headwinds that played in Q4 2016. Despite this, we remain on track for full-year results to be consistent with the range we have given and for all units to perform well in 2017.

In conclusion, on page 18, I am pleased with Constellium's performance in 2016 and in the fourth quarter. In 2016, we delivered 10% growth in adjusted EBITDA, in line with our stated guidance. We had strong performance in P&ARP and AS&I segments and stable performance, despite the headwinds, in our aerospace and transportation segments.

Finally, we have simplified our cash flow structure and increased our financial flexibility. We remain highly focused on continuous -- continued operational execution and disciplined capital deployment.

Before I open the call for Q&A, I will also remind you one more time that we have an Analyst Day scheduled for March 22 at the New York Stock Exchange, and we look forward to seeing you there. For those of you who could not attend, the event will be webcast.

With that, William, we will now open the Q&A session.

================================================================================

Questions and Answers

--------------------------------------------------------------------------------

Operator [1]

--------------------------------------------------------------------------------

(Operator Instructions) David Gagliano, BMO Capital Markets.

--------------------------------------------------------------------------------

David Gagliano, BMO Capital Markets - Analyst [2]

--------------------------------------------------------------------------------

First of all, thank you for providing the additional color around the first quarter. My question is actually related to that commentary plus the full-year commentary. I'm wondering if we could just drill down a bit further on the -- for the full year on the drivers behind the high single-digit adjusted EBITDA target. For example, if you could just give us by segment what you think we should be modeling in for each segment as we go through the year, and then secondly, how much of your EBITDA target is somehow tied up under fixed margin contracts at this point?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [3]

--------------------------------------------------------------------------------

Right. David, thanks for the question. And I will disappoint you in the level of granularity I will be giving, but I will try to add more color to my comments from year.

So, for the full year, we are going to -- we maintain our guidance by single-digit growth for EBITDA. And this is driven by the continuation of the operational improvements that you have seen at play in 2016, and not all of them at the end of January 1, 2016 happened throughout the year to get some carryover into 2017.

We also have pretty good visibility on our contracted revenues as you mentioned, and because of our pass-through model, we pretty much know what our value-added revenue is going to be for the year. And that number is well north of 80% of our business which is contracted. So we've got pretty good visibility there.

The little softness I am describing for Q1 comes in the wake of -- well, first of all, there's seasonality, right? Obviously. We've got aerospace which is soft right now, and we've also -- the timing of our outages in our (inaudible) business is such that the beginning of the year is a little bit more of a challenge because of some outages that we would have taken in the fourth quarter have been taken in the first quarter. So that obviously reduces shipments -- some level of shipments and puts some level of cost pressure in the first quarter.

So all-in-all, those temporary things are going to go away. Obviously (inaudible) are already done, right, with. And they will wash out before the end of the quarter, and that's why we look at the rest of the year as a substantially better sequence of quarters, and we are looking at virtually every unit to be up year on year.

--------------------------------------------------------------------------------

David Gagliano, BMO Capital Markets - Analyst [4]

--------------------------------------------------------------------------------

That's helpful. Thank you. Just one click clarification. You said 80% of the business on the revenue side is contracted. Any reason that that should be different if we think about it from an EBITDA perspective?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [5]

--------------------------------------------------------------------------------

No.

--------------------------------------------------------------------------------

David Gagliano, BMO Capital Markets - Analyst [6]

--------------------------------------------------------------------------------

Okay. Thank you.

--------------------------------------------------------------------------------

Operator [7]

--------------------------------------------------------------------------------

Matthew Fields, Bank of America.

--------------------------------------------------------------------------------

Matthew Fields, Bank of America - Analyst [8]

--------------------------------------------------------------------------------

I just want to focus on the structures in industry segment for a little bit. The EBITDA per ton was down pretty far sequentially about EUR50 per ton or 10% quarter on quarter. I thought this was like a high EUR400 EBITDA per ton sort of consistent performer. Can you talk about this particular quarter and why profitability was down?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [9]

--------------------------------------------------------------------------------

Yes, well -- I mean I wouldn't read into it too much, and there is, again, seasonality. We all know that the last two weeks of the year, the automakers are not very much active. So there is a slowdown there, and that is the main driver behind it. But we -- I think Peter mentioned the EBITDA total we are seeing for the year is a good number, we are pleased with it, and we believe that it has got some improvement opportunities on a go forward basis.

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [10]

--------------------------------------------------------------------------------

Yes, I would echo that. I would not read any softness into the fourth-quarter EBITDA per ton number.

--------------------------------------------------------------------------------

Matthew Fields, Bank of America - Analyst [11]

--------------------------------------------------------------------------------

Okay. And then just that Mexican plant that you are building, is that contracted to send cars -- to go into cars that will be sold in the US or sold abroad?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [12]

--------------------------------------------------------------------------------

Most of what we have in Mexico is for platforms that are going to be sold in Mexico and outside of Mexico but not in the US.

--------------------------------------------------------------------------------

Matthew Fields, Bank of America - Analyst [13]

--------------------------------------------------------------------------------

Okay. And then on the --

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [14]

--------------------------------------------------------------------------------

If anybody is worried about US policy, for that specific reason, we're not worried.

--------------------------------------------------------------------------------

Matthew Fields, Bank of America - Analyst [15]

--------------------------------------------------------------------------------

I think you got the gist of my question there. On your A&T side, we are pretty, I think, well familiar with the aerospace destocking at this point. But on the transport side, we are seeing some nice inflection points out of the Class 8 truck orders. Are you seeing a corresponding increase in trailer build rates on that side of the business for you?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [16]

--------------------------------------------------------------------------------

It is early to tell. And we have suffered in transportation segments in 2016, and we're still seeing it soft. So if anything, those early signals are encouraging for us.

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [17]

--------------------------------------------------------------------------------

But nothing yet on the order patterns?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [18]

--------------------------------------------------------------------------------

No, it's not moving the needle yet. (multiple speakers) Yes, just wanting to come back on your comments on AS&I, right? Quarter over quarter, it is still -- in 2016 versus 2015 and the improvement over the course of the year is even more significant, right, where we show 24% improvement in EBITDA per ton in 2016 versus 2015. And I think that is a good story, and there's always some give and take in a given quarter, but a very good story unfolding.

--------------------------------------------------------------------------------

Matthew Fields, Bank of America - Analyst [19]

--------------------------------------------------------------------------------

Absolutely. You had [EUR470], [EUR497], [EUR486], which is why this quarter was a little bit of a surprise, and that is why I asked about it.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [20]

--------------------------------------------------------------------------------

Definitely. Thank you.

--------------------------------------------------------------------------------

Operator [21]

--------------------------------------------------------------------------------

Brett Levy, Loop Capital.

--------------------------------------------------------------------------------

Brett Levy, Loop Capital - Analyst [22]

--------------------------------------------------------------------------------

Starting with the CapEx for the year, you gave the number. Is there any way of breaking it down by projects or giving a sense as to what portion of that is maintenance?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [23]

--------------------------------------------------------------------------------

So I'll answer that, Brett, and Peter will chime in. So we don't like to break it down too much. But we have communicated that our maintenance CapEx is in the area of EUR175 million, and that's a good maintenance that makes us very competitive. So you've got EUR100 million of those projects roughly in it. And obviously given the stronger growth profile we are seeing in AS&I and when Peter talked about a lot of booked business, more than 2 times our annual business was booked last year in that segment. But a lot of the CapEx is going towards AS&I, which we like because it's small size projects on the smaller end side. But I don't want to say that EUR10 million is a small amount of money. Every dollar counts. But it's on the small side of the projects, and it is underpinned by contracts with our customers.

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [24]

--------------------------------------------------------------------------------

The other thing I would add, Brett, is that -- and good to talk to you again, but the other thing that I would add is that it is a -- this is an $80 million or EUR80 million reduction from what we spent in 2016. So the direction of our capital spending in conjunction with the increased discipline we are trying to show on our capital spending, cash generation, is down.

--------------------------------------------------------------------------------

Brett Levy, Loop Capital - Analyst [25]

--------------------------------------------------------------------------------

And actually it leads right into sort of the follow-up, which is looking at 2018 and 2019, do you see that direction continuing to trend lower in CapEx?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [26]

--------------------------------------------------------------------------------

Yeah. I mean, look, we have not put out any guidance for 2018 and 2019, but what I would tell you is the -- our inclination is to try to bring it down and we will not be bringing it higher.

--------------------------------------------------------------------------------

Brett Levy, Loop Capital - Analyst [27]

--------------------------------------------------------------------------------

And then the last one is more of a theoretical thing. I know that in a lot of the initial work on the transformation from steel bodies to aluminum bodies in cars was -- had been a real result in a 30% CAGR kind of growth rate from 2015 through 2020.

As you look at kind of some of the political changes and some of the other challenges and that sort of thing, would you adjust that number based on what you are hearing from the platforms or when these platforms may be shifting over to aluminum? Just it was sort of a big study and it sort of got people very optimistic about this space. Would you temper that 30% CAGR in any way as you look at the outlook today?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [28]

--------------------------------------------------------------------------------

So that's a good and very topical question obviously. So -- in our plants we have always planned on more like 20% growth rate for autobody sheet, number one.

Number two, the cars that are being built by definition are already designed, and there's very few cars that are designed that are not built yet that are underpinning the growth of our shipments over the next two, three, four years. So we do not see an impact on the delivery and the execution of our current capital investments in both the US and Europe.

Now, with the announcement by the administration that they would restate the midterm review of the (inaudible) that they could relax and obviously that can provide some opportunities for carmakers to not be as aggressive as they were on light weighting. I think it's too early to tell, and there can be speculation, but -- so it may delay the adoption of aluminum. But I am seeing this as a 2020, 2021, 2022 kind of impact on the volumes for us and on new volumes really, not growth of new volumes, and we believe our lines are fully committed now.

--------------------------------------------------------------------------------

Brett Levy, Loop Capital - Analyst [29]

--------------------------------------------------------------------------------

Thanks very much, guys.

--------------------------------------------------------------------------------

Operator [30]

--------------------------------------------------------------------------------

Evan Kurtz, Morgan Stanley.

--------------------------------------------------------------------------------

Unidentified Participant [31]

--------------------------------------------------------------------------------

Hi, Jean-Marc and Peter. This is (inaudible) sitting in for Evan Kurtz. I have a couple questions.

First one, how should we think about autobody sheet startup expenses in your EBITDA whether in 4Q or 2017? Would you be able to quantify it in any way?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [32]

--------------------------------------------------------------------------------

So, if you look at our financials and the disclosures, you'll see that we have some startup comps factored in in the financials. And in the 2016 year, we've got a EUR25 million number factored in for startup costs across the IW line.

--------------------------------------------------------------------------------

Unidentified Participant [33]

--------------------------------------------------------------------------------

And so something similar for 2017 is probably a good ballpark for us to use?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [34]

--------------------------------------------------------------------------------

Yes, I would say it's definitely going to be lower. I mean obviously the biggest chunk of the startup costs is in the front part, and we have made a lot of progress. So I would suspect that it -- well, I don't have a precise number for that, but it will definitely not be the same number.

--------------------------------------------------------------------------------

Unidentified Participant [35]

--------------------------------------------------------------------------------

Okay. Thanks for the color. And a follow-up. If I heard you correctly, you said autobody sheet planned in the US would be ramped up halfway by the end of this year, and Europe I think the full ramp-up is like three years away. So when you say ramp up, should we think of it as commercial revenue, or should we think of it as production that is still getting qualified?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [36]

--------------------------------------------------------------------------------

No, no, no. So it's full commercial revenue, but -- so we did two years in North America and three years in Europe. So at the end of 2017. So at the end of 2018, we are running flat out in North America. At the end of 2019, we are running flat out in Europe.

--------------------------------------------------------------------------------

Unidentified Participant [37]

--------------------------------------------------------------------------------

Thanks for the color, guys.

--------------------------------------------------------------------------------

Operator [38]

--------------------------------------------------------------------------------

Christian Georges, Societe Generale.

--------------------------------------------------------------------------------

Christian Georges, Societe Generale - Analyst [39]

--------------------------------------------------------------------------------

Had two of the questions. On your park operations, I think it's three quarters in a row that we are being flat volume development. Within that, should we consider it going forward? Would we continue seeing a relative weakening of packaging volume against a relative improvement of automotive volume?

The second question is historically you have been giving us some hints on what was the contribution of Muscle Shoals in the EBITDA of the division. I think we've got EUR20 million in the second quarter, EUR26 million in the last. Has this been a steady performance in the fourth, or has there been some more weakening there than there has been in the rest of the business?

And my last question is on the -- the joint venture in your P&L from Bowling Green, EUR14 million loss. What should we consider looking forward on this? Is this the maximum loss you are going to get from the joint venture, and is that gradually receding? Thank you.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [40]

--------------------------------------------------------------------------------

Sure. So, on the volumes in P&ARP, Q2, Q3, Q4, so we have seasonality. Q2 is a very strong month -- very strong quarter because we need to make the cash (inaudible) and sell it in time for the season. Q3 is also seasonably good, but not as strong as Q2, and Q4 is obviously less strong. So that is a typical pattern for canned sheet.

Now, if you step back and look at it strategically, what we have said is, as automotive sheet grows, this will displace -- to the extent that continues to be the case, this will displace less profitable products. So if automotive sheet is more profitable than canned sheet, we will make more autobody sheets, and we will, therefore, displace a bit of canned sheet. So that is the equation on a go forward basis.

And we run the system that we like to run at full capacity as much as possible and optimize our product mix and make sure we make the most money out of the assets we have before we invest into expanding our asset base in rolling.

Your second question about Muscle Shoals. So they are now a fully integrated part of the family, and we do not plan to communicate on financial performance of an official standalone. So I am sorry, and I apologize for disappointing you.

And on your third question about the JV P&L and the EUR14 million loss, so Peter?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [41]

--------------------------------------------------------------------------------

No problem. So the P&L impact was EUR14 million, just to be clear. I think you said a different number, but the -- in terms of next year, as we look forward, we think probably EUR7 million to EUR8 million is probably a good approximation. And that is after financing costs, too.

--------------------------------------------------------------------------------

Christian Georges, Societe Generale - Analyst [42]

--------------------------------------------------------------------------------

So we have more loss next year and then (inaudible) breakeven, and two years from now would be a realistic -- ?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [43]

--------------------------------------------------------------------------------

Yes, I think that's -- because if you think about it, so we have 2017, we'll -- if we were to get halfway through the ramp up and then in 2018, we are fully ramped up, we should be cresting into breakeven and positive earnings profile.

--------------------------------------------------------------------------------

Christian Georges, Societe Generale - Analyst [44]

--------------------------------------------------------------------------------

Great. And can I ask you just one quickly a question as well -- actually you have served some terms at Sierre and Valais to try to help them get control of the plant there. What were the situations there? Are you discussing with them for one or the other to take over the assets, or what do you want to do?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [45]

--------------------------------------------------------------------------------

So the Sierre facility or Valais we refer to it, we own it. When the separation between what was Alcan and Novelis took place in 2005 or 2004, it was negotiated in four and separation took place in 2005. There was an agreement that Novelis would be using part of the facility, a building that has a number of equipment against the lease. That lease contract, we believe, that Novellus has breached the material terms of the contract, and we have, therefore, issued a termination notice to that. And they are considering their options and so are we.

--------------------------------------------------------------------------------

Christian Georges, Societe Generale - Analyst [46]

--------------------------------------------------------------------------------

Okay. Thank you very much.

--------------------------------------------------------------------------------

Operator [47]

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [48]

--------------------------------------------------------------------------------

When you think about EBITDA in 2017, you have guided that the first quarter should be down a bit, but for the full year, it should be up in the high single digits. That sort of implies that you will be backend loaded. How do you see the cadence of EBITDA between Q2, Q3, and Q4 playing out? Should we -- like a big bump in Q2, or should things start to strengthen as we get through the year?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [49]

--------------------------------------------------------------------------------

I will not comment on this. I'm sorry.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [50]

--------------------------------------------------------------------------------

Okay. No, okay. How about with respect to working capital in 2017? Could you guide us in either direction? Should we be sourcing -- using working capital? Do you need working capital in these new facilities? How should that play out?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [51]

--------------------------------------------------------------------------------

So we actually think -- Jean-Marc made the comment that we have undertaken a series of initiatives to focus on costs and cash improvement in the Company, and working capital is one of the opportunities that we see in the Company. So we will be focused on reducing working capital over the course of the year.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [52]

--------------------------------------------------------------------------------

Okay. So do you expect that will result in the source of working capital or flattish working capital, and what is your underlying assumption there?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [53]

--------------------------------------------------------------------------------

We believe that working capital should be a source of cash this year for sure. We have not quantified the magnitude of that source, but we think there are some opportunities in working capital.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [54]

--------------------------------------------------------------------------------

Okay. Great. Thank you for that. And then just real quickly, to hit on the second cap line that you are pursuing here in the US. Can you talk about how that has been developing? Have your thoughts changed at all? Can you comment on that please, Jean-Marc?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [55]

--------------------------------------------------------------------------------

Sure. So we are in discussions with a number of carmakers. We are actually pushing the envelope on the first (inaudible) as being full as we have reported. But we don't have yet made -- we haven't made yet any determination as to a second count line in the US. And actually the way we would think of it is given the fact that the net (inaudible) line has a longer ramp-up period thaen the Bowling Green one, we may use more of the net (inaudible) line to feed the North American market and, therefore, delay the need for investment in the US, which is a more protective use of cash and using up our returns for our investments in (inaudible) and Bowling Green.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [56]

--------------------------------------------------------------------------------

Okay. That is very helpful. And then just the very last question. One of your items of guidance that you had said is your targeting free cash flow in 2019. I believe on the last call, you had said this is dependent on potentially a contract. I know there's a contract that you had had out there with potential like Rexam. Has anything changed there, or has that been resolved and that gives you more clarity as to free cash flow in 2019, or are we still where we were last quarter?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [57]

--------------------------------------------------------------------------------

So the contractual relationship with the customer -- and I'm not commenting on whether it's the one you're mentioning on that. The contractual relationship with the customer is unchanged, so we are still at risk of this being triggered. However, given the plans we have, the activities we see ahead of us, I said earlier and I am saying it again, I feel much more comfortable in our ability to be free cash flow positive in 2019, even if this negative event with this customer is triggered.

--------------------------------------------------------------------------------

Sean Wondrack, Deutsche Bank - Analyst [58]

--------------------------------------------------------------------------------

Thank you very much for your answers.

--------------------------------------------------------------------------------

Operator [59]

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [60]

--------------------------------------------------------------------------------

A question on the packaging side. There have been some recent startups of plants by Crown and Can-Pack in Europe, and I'm just wondering if you could comment if you will be supplying them with aluminum can sheet and just kind of to mention a number or what kind of bump that could provide to P&ARP?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [61]

--------------------------------------------------------------------------------

So we're not commenting on individual customers, but you are right to say that there is capacity increases in Europe. So that's good for the market. That's good for us. At the same time, I think everybody has seen that some of our competitors have commented on pension and price and volume and the increased competitiveness in cans. So there are some good things developing here and some not so good things developing there. Overall, we remain balanced in our outlook for can, and we are delighted to see new can plants opening.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [62]

--------------------------------------------------------------------------------

Okay. Your EBITDA guidance for the next three years of high single digit, can you comment if you view that as being kind of an even cadence of high single digits every year, or do you view it being more back-end skewed towards 2018, 2019?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [63]

--------------------------------------------------------------------------------

Even-ish. I mean it's not a hockey stick.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [64]

--------------------------------------------------------------------------------

Okay.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [65]

--------------------------------------------------------------------------------

If that is your concern because it will be mine as well.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [66]

--------------------------------------------------------------------------------

Yes. And then just could you comment a little bit about what caused some of the quote-unquote other gains and losses net swing from -- you had about a EUR19 million gain in the third quarter, and that swung to a EUR19 loss in the fourth. And could you just comment if some of those were related to the refinancing, and how much of those are one-offs and if you could talk about what is cash versus non-cash? Because that was a pretty big swing and contributor to your fourth-quarter message.

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [67]

--------------------------------------------------------------------------------

Yes, it is predominantly mark-to-market adjustments on currency and metal derivative positions, and it is predominantly non-cash.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [68]

--------------------------------------------------------------------------------

If -- knowing where we are currently in the quarter against metals moves that have already taken place, do you see or could you give us any guidance for what 1Q 2017 could look like for that item?

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [69]

--------------------------------------------------------------------------------

Yes, I don't have a good number for you, so I don't want to put that out there.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [70]

--------------------------------------------------------------------------------

Again, we are pass through metal, right? The whole purpose is to insulate our cash flows from the variations of currencies and NME, and those numbers are non-cash. And we like to see them balancing one way and the other because it showed that our edging is effective.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [71]

--------------------------------------------------------------------------------

Okay. Was there any sort of discrete cash charges from the debt refinance that impacted 4Q that will not recur in 1Q?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [72]

--------------------------------------------------------------------------------

I don't think so. Peter? (multiple speakers) I guess your question -- because we did two operations because we had the redemption of the PIK notes in Q4 and the (multiple speakers)

--------------------------------------------------------------------------------

Peter Matt, Constellium N.V. - EVP and CFO [73]

--------------------------------------------------------------------------------

He is talking about the redemption and -- EUR2 million is the number I think you're looking for.

--------------------------------------------------------------------------------

Jorge Beristain, Deutsche Bank - Analyst [74]

--------------------------------------------------------------------------------

Okay. Thanks very much.

--------------------------------------------------------------------------------

Operator [75]

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs.

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs - Analyst [76]

--------------------------------------------------------------------------------

Just two longer-term ones here. Aerospace has been a little disappointing, I guess, in terms of the inventory correction. At what point in time are you going to reassess your longer-term expectations for that end market, and have your longer-term expectations changed at all over the last couple of months?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [77]

--------------------------------------------------------------------------------

No, they've got no bearing on our long-term -- not that we don't ask ourselves the question. But our inventory has got no bearing on the long-term outlook. We believe aerospace is a good market. It continues to grow. And in discussing with (inaudible) in building the message is deliver, deliver, deliver. There's hiccups here and there in the supply chain, and -- but that is something that has happened for at least 25 years and it is going to continue for 25 years. But the outcome remains very solid.

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs - Analyst [78]

--------------------------------------------------------------------------------

Got you. And then just on the auto and body and wide side of things, there's a lot of discussion with regards to the new administration and potential easing of environmental standards pushing back penetration or slowing it. What is the gating factor you are seeing with the customers right now? These are long-term decisions obviously, and the one thing I have in mind specifically is, if we do see higher CapEx expensing -- it is still a potential outcome -- would that help you from a -- reducing the cost of retooling, or is that not really a material driver of the business?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [79]

--------------------------------------------------------------------------------

Yes, so I think the outlook here is -- again, it's a bit of a speculation because we don't know what relaxation, if any, there would be to the CAFE standards, right? But fundamentally, light weighting continues. Not everything is driven out of rules that are made in Washington. The states have their own views. We have the -- electric vehicles are growing. They are very good for aluminum. You've got cities in the world that are putting strict limits on pollution and controls, and Europe has a very stringent emissions team and would be -- the diesel gates -- the scrutiny on meeting those standards is even higher.

So, in the grand scheme of things, and that -- all of us, we like to drive bigger and more equipped vehicles, and if you don't trim the weight off, then you just can't get that -- get out of your parking garage because it would become too heavy, right?

So we think fundamentally, the light weighting is going to continue. Is it going -- if the CAFE standards are relaxed, there is a possibility that this model, that this carmaker was thinking maybe we will convert, maybe we will not, maybe they will decide to not convert, but we don't think it's going to fundamentally change the outlook for aluminum in automotive.

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs - Analyst [80]

--------------------------------------------------------------------------------

Got it.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [81]

--------------------------------------------------------------------------------

We'll talk more about that in two weeks' time. We remain pretty optimistic.

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs - Analyst [82]

--------------------------------------------------------------------------------

Sure. It makes sense. (multiple speakers)

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [83]

--------------------------------------------------------------------------------

I'm sorry and I just want to add again, which I mentioned earlier, in the next four or five years, our book of orders is not going to change. People are not going to move back a car that is already on the road from aluminum to steel because they can't burn more gas, right?

--------------------------------------------------------------------------------

Karl Blunden, Goldman Sachs - Analyst [84]

--------------------------------------------------------------------------------

Sure. No, it's helpful to hear the more granular take. It sounds like your specific conversations haven't changed yet, so that's encouraging. Thanks very much.

--------------------------------------------------------------------------------

Operator [85]

--------------------------------------------------------------------------------

Evan Kurtz, Morgan Stanley.

--------------------------------------------------------------------------------

Evan Kurtz, Morgan Stanley - Analyst [86]

--------------------------------------------------------------------------------

Just a housekeeping thing on our end. Just want to check if your EBITDA growth target of mid-single digits, are you proportionately consolidating the US [EJ] JV in those numbers?

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [87]

--------------------------------------------------------------------------------

We are not.

--------------------------------------------------------------------------------

Evan Kurtz, Morgan Stanley - Analyst [88]

--------------------------------------------------------------------------------

Okay. Thank you.

--------------------------------------------------------------------------------

Operator [89]

--------------------------------------------------------------------------------

This will conclude the question-and-answer session. I would like to turn the conference back over to CEO, Jean-Marc Germain, for any closing remarks.

--------------------------------------------------------------------------------

Jean-Marc Germain, Constellium N.V. - CEO [90]

--------------------------------------------------------------------------------

Thank you, William, and thank you, everyone, for attending the call. Again, lots of discussion on our guidance, so I think it comes across pretty strongly that we believe we've got of path, we have got a strategy, we are executing on it, and we feel confident about the outlook. Some things come and go, and it's not always linear from here to there. But we are very confident in our ability to grow EBITDA at high single digits over the next three years, be free cash flow positive in 2019, and I very much look forward with the whole management team to see you in New York on the 22nd of March.

Thank you so much, and have a great day.

--------------------------------------------------------------------------------

Operator [91]

--------------------------------------------------------------------------------

The conference has now concluded. Thank you all for attending.