Constellium SE - Ordinary Shares - Class A Aktie

Good day, and thank you for standing by. Welcome to the Constellium First Quarter 2026 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Jason Hershiser, Director of Investor Relations. Please go ahead.

Thank you, Shannon. I would like to welcome everyone to our first quarter 2026 earnings call. On the call today, we have our Chief Executive Officer, Ingrid Joerg; and our Chief Financial Officer, Jack Guo. 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'd 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 include statements regarding the company's anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties.

For a summary of specific risk factors that could cause 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 10-K. All information in this presentation is as of the date of the presentation. 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 GAAP disclosures.

And with that, I would now like to hand the call over to Ingrid.

Thanks, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. Before we start, I wanted to say we are very pleased with our first quarter performance, including record adjusted EBITDA. We are also raising our outlook for the full year and expect 2026 to be a record year for the company, both in terms of adjusted EBITDA and free cash flow.

Okay. Let's begin on Slide 5 and discuss the highlights from our first quarter performance. I would like to start with safety, our #1 priority. We delivered strong safety performance in the first quarter with a recordable case rate of 1.16 per million hours worked versus 1.91 in 2025. Despite this strong achievement, our safety journey is never complete. We remain focused on this critical priority every day, including achieving our safety target to reduce our annual recordable case rate to 1.5 per million hours worked.

Turning to our financial results. Shipments were 370,000 tons in the first quarter as higher shipments in A&T were offset by lower shipments in PARP and AS&I. Revenue of $2.5 billion increased 24% compared to the first quarter of 2025 due to the higher revenue per ton, including higher metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk.

Our net income was $196 million in the quarter compared to net income of $38 million in the first quarter last year. The main drivers of the increase were higher gross profit and favorable changes in other gains and losses in the quarter versus last year. Compared to the first quarter last year, adjusted EBITDA increased 93% to $359 million in the first quarter this year, so this includes a positive noncash impact from metal price lag of $97 million. If we exclude the impact of metal price lag, which, as you know, is the way we view the real economic performance of our business, we achieved an adjusted EBITDA of $262 million in the quarter. This represents an all-time record for the company and is up 78% versus the $147 million in the first quarter last year. Adjusted EBITDA was up in each of our operating segments in the quarter versus last year, including a new quarterly record for PARP and a new first quarter record for A&T.

Our free cash flow was $5 million in the quarter. And during the quarter, we returned $28 million to shareholders through the repurchase of 1.2 million shares. In March, we announced that our Board approved a new $300 million share repurchase program that expires in December 2028 and that will replace our existing program following our Annual Shareholders Meeting this May.

We delivered strong results this quarter, which were ahead of our own expectations despite macroeconomic and geopolitical uncertainties. During the quarter, we benefited from current market dynamics, including supply shortages of automotive rolled products in North America, improved aerospace and TID environment and highly favorable scrap and metal dynamics in North America.

Before turning the call over to Jack, I wanted to make a few comments regarding the expected impact from the conflict in the Middle East. In terms of metal supply, we do source some metal from the Middle East today, both slabs and billets, but they represent a small percentage of our overall needs. As such, we believe the impact on metal supply for us is limited at this stage, and we should be able to resource through a combination of internal and external metal flows.

On energy, most of our energy costs are locked in for 2026. For the small portion, which we chose to leave open, the impact of higher energy costs should be modest. In other cost categories, we are beginning to see some inflationary pressures in freight, lubricants and coatings, but we expect the net impact from this to be manageable. We currently do not expect any impact on our supply chain from lack of freight capacity.

In terms of other indirect impacts from the Middle East conflict, we have not seen much end market disruption at this stage, so we will continue to monitor it closely. To wrap up on this topic, the overall impact from the conflict in the Middle East appears digestible at this point. The longer-term impacts remain uncertain and difficult to predict, but we are confident in our ability to manage our business in any environment.

With that, I will now hand the call over to Jack for further details on our financial performance.

Thank you, Ingrid, and thank you, everyone, for joining the call today. Please turn now to Slide 7, and let's focus on our A&T segment performance. Adjusted EBITDA of $102 million increased 24% compared to the first quarter last year and represents a new first quarter record for A&T. Volume was a tailwind of $32 million due to higher shipments in both Aerospace and TID.

Aerospace shipments started the year strong and were up 13% in the quarter versus last year. TID shipments were up 18% versus last year as we continue to see increased demand from onshoring in the U.S. TID also benefited from automotive coil shipments from Ravenswood due to the current supply disruption in automotive rolled products in North America. Price and mix was a headwind of $2 million due to unfavorable mix in the quarter, mostly offset by improved contractual and spot pricing in Aerospace and TID.

Costs were a headwind of $16 million, primarily as a result of higher operating costs given higher activity levels. FX and other was a tailwind of $6 million in the quarter due to the weaker U.S. dollar.

Now turn to Slide 8, and let's focus on our PARP segment performance. Adjusted EBITDA of $151 million increased 152% compared to the first quarter last year and is a new quarterly record for PARP. Volume was a headwind of $6 million in the quarter as higher automotive shipments were more than offset by lower packaging shipments. Packaging shipments decreased 6% in the quarter versus last year, though underlying packaging demand remained healthy in both North America and Europe. Automotive shipments increased 12% in the quarter as we benefited from the current supply shortages in North America of aluminum automotive body sheet.

Price and mix was a tailwind of $26 million as a result of improved pricing and favorable mix in the quarter. Costs were a tailwind of $65 million, primarily as a result of favorable metal costs given higher throughput and improved productivity in our recycling and casting operations, continued improvement in scrap spreads and significantly higher metal pricing environment in North America. FX and other was a tailwind of $6 million in the quarter.

Now turn to Slide 9, and let's focus on the AS&I segment. Adjusted EBITDA of $24 million increased 50% compared to the first quarter last year. Volume was a $4 million headwind as a result of lower shipments in automotive and industry extruded products. Automotive shipments were down 3% in the quarter, mainly due to weakness in Europe. Even though the automotive markets in North America are relatively stable, our automotive structures business was negatively affected by the current supply shortages of aluminum automotive body sheet and its impact on production of certain platforms in the region. Industry shipments were down 5% in the quarter versus last year, though industrial markets in Europe have stabilized at these low levels.

Price and mix was a $2 million headwind in the quarter. Costs were a tailwind of $11 million, primarily due to lower operating costs. FX and other was a tailwind of $3 million in the quarter. It is not on the slide here, but our holdings and corporate expense was $15 million in the quarter. Holdings and corporate expense was up $4 million from last year due to higher labor costs and unfavorable foreign exchange translation.

As we said last quarter, we expect holdings and corporate expense to run at approximately $50 million in 2026. It is also not on the slide here, but I wanted to summarize the current cost environment we're facing.

As you know, we operate a pass-through business model, so we're not materially exposed to changes in the market price of primary aluminum, our largest cost input. On other metal costs, which includes our recycling profits, we have seen unprecedented levels of volatility over the last 18 months. Following the U.S. tariff announcement in 2025, market aluminum prices in the U.S., which includes the LME aluminum price plus the Midwest Premium have risen sharply to historical levels.

The current conflict in the Middle East has put additional upward pressure on global market aluminum prices. Spot scrap spreads for aluminum, mainly used beverage cans or UBCs, have also improved to historically wide levels in the spot market today. Both of these dynamics represent a sharp contrast from the lower metal price environment and historically tight scrap spread levels we experienced in the second half of 2024 and through the first half of 2025, during which period we were negatively impacted.

As discussed last quarter, we benefited from the improvement in scrap and metal pricing environment in the fourth quarter last year, and we saw more benefits in the first quarter this year. Looking ahead, most of our scrap needs in the second quarter are locked in at favorable levels, and our team is working tirelessly to secure additional scrap supply for the second half in an environment that remains volatile.

It is important to bear in mind that recycling is core to what we do as it takes a significant amount of investments and know-how, and we are focused on making the best out of the current favorable conditions and delivering a strong return on our recycling investments for our shareholders.

Moving on from metal costs. Inflationary pressures continue today across multiple operating cost categories, including labor, energy, maintenance and supplies, albeit at more normal levels. As Ingrid mentioned previously, we're beginning to see some elevated inflationary pressures in other categories such as freight, lubricants and coatings as a result of the conflict in the Middle East, though we expect the net impact from this to be digestible at this point.

Regarding tariffs, we have made progress on pass-throughs and other actions to mitigate a portion of our gross tariff exposure, and we believe at this stage, our direct tariff exposure remains manageable and is consistent with our prior expectations. The indirect positive impacts from the tariffs continue to ramp up, including higher demand for U.S. domestically produced aluminum products, a more favorable pricing environment compared to expensive imports and improved recycling process in the U.S.

Put it all together, we continue to believe that the current tariff and trade policies should be a net positive for us. All of the known tariff impacts, both direct and indirect and all of our mitigation efforts to offset the direct impacts are included in our guidance today. Wrapping up on costs, we have demonstrated strong cost performance in the past, and we're confident in our ability to maintain a right-sized cost structure in any environment.

Now let's turn to Slide 10 and discuss our free cash flow. We generated $5 million of free cash flow in the first quarter. The increase in free cash flow versus 2025 was primarily a result of higher segment adjusted EBITDA, partially offset by an unfavorable change in working capital and higher capital expenditures.

Looking at 2026, we now expect to generate free cash flow in excess of $275 million for the full year. We expect CapEx to be approximately $330 million, which is up from $315 million previously. Unchanged from previous guidance, CapEx still includes approximately $100 million of return-seeking CapEx, primarily related to key aerospace and recycling and casting projects we announced previously at Issoire, Muscle Shoals and Ravvenwood.

We expect cash interest of approximately $125 million, in line with prior guidance and cash taxes of approximately $80 million, up slightly from prior guidance, mainly due to the expected increase in profitability for the year. We expect working capital and other to be a larger use of cash for the full year than prior guidance, mainly due to higher metal prices. We expect to use the free cash flow generated this year for our share repurchase program and for gross debt reduction.

As Ingrid mentioned previously, we continued our share buyback activities in the quarter. During the quarter, we repurchased 1.2 million shares for $28 million. Since we started the share repurchase program, we have repurchased 14.7 million shares for $221 million. Also, as Ingrid said earlier, in March, we announced that our Board approved a new $300 million share repurchase program that expires in December 2028, and that will replace our existing program following our Annual Shareholders Meeting this May.

Now let's turn to Slide 11 and discuss our balance sheet and liquidity position. At the end of the first quarter, our net debt of $1.8 billion was stable compared to the end of 2025. We reduced our leverage to 2.2x at the end of the quarter, which is within our target range. We expect leverage to trend lower in 2026 and to maintain our target leverage range of 1.5x to 2.5x over time. As you can see in our debt summary, we have no bond maturities until 2028, and our liquidity increased by $38 million from the end of 2025 and remains very strong at $904 million as of the end of the first quarter.

With that, I'll now hand the call over to Ingrid.

Thank you, Jack. Let's turn now to Slide #13 and discuss our current end market outlook. The majority of our portfolio today is serving end markets benefiting from durable and attractive secular growth trends in which aluminum, a light and infinitely recyclable material plays a critical role.

Turning first to the aerospace market. Commercial aircraft backlogs are at record levels today and continue to grow. Major aerospace OEMs remain focused on increasing build rates for both narrow and wide-body aircraft. This is evidenced by higher plane deliveries year-over-year and rising delivery ambitions in the near term. Although supply chain challenges have continued to slow deliveries below what OEMs were expecting for several years in a row now, demand is steady for the most part and aluminum destocking in the supply chain appears to be easing.

Demand for high value-add products, which is one of our core focus areas, remains strong. We remain confident that the long-term fundamentals driving commercial aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel-efficient aircraft. In addition, demand remains stable in the business and regional jet market, whereas demand for space and military aircraft is strengthening.

We believe we are a leading provider of proprietary aluminum solutions for those customers in the space and military aviation markets today. As you know, we are investing in additional capacities and capabilities, such as our third Airware casthouse in Issoire, which we expect to start up by the end of this year to further strengthen our position in the future.

Looking across our entire commercial and military aviation and space businesses, we believe our product portfolio is unmatched in the industry, and we have industry-leading R&D capabilities for aluminum aerospace solutions.

Turning now to packaging. Demand remains healthy in both North America and Europe. The long-term outlook for packaging continues to be favorable as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from the can makers in both regions and the greenfield investments ongoing here in the U.S. We continue to see aluminum gain share against other substrates in the beverage market and the majority of new beverage products are launched in aluminum cans today due to its sustainable attributes. Aluminum cans are highly recyclable, and we are well positioned to capitalize on the benefits from recycling packaging materials at our facilities in Muscle Shoals and Neuf-Brisach.

Packaging markets are relatively stable and recession resilient as we have seen many times in the past. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe, providing a strong baseload for our operations in both regions.

Let's turn now to automotive, which continues to be a bit of a different story in North America versus Europe. In North America, demand is relatively stable, though the tariff environment continues to create some uncertainty. Last year, a U.S.-based facility at one of our competitors was impacted by fire, a very unfortunate event and which has created an interruption in the aluminum rolled product supply chain in North America.

The entire industry continues to mobilize to ensure we limit the impact on our customers. We continue to benefit from this in the first quarter this year in both our PARP and A&T businesses as we were able to help our customers during this outage.

On the automotive structures side, we are negatively impacted as some OEMs were forced to reduce production on certain platforms impacted by the disruption on the rolled product side. The overall impact in 2026 is a net positive on our results, which we expect to continue throughout the year. Automotive demand in Europe remains weak, particularly in the premium vehicle segment where we have greater exposure. European markets are seeing increased Chinese competition and have lowered their BEV ambitions.

Automotive production in Europe is also feeling the impact of the current Section 232 auto tariffs, given the number of vehicles Europe exports to the U.S. Longer term, though, we believe electric and hybrid vehicles will continue to grow, but at a lower rate than previously expected. Secular trends such as lightweighting, fuel efficiency and safety will continue to drive the demand for aluminum products. As a result, we remain positive on this market over the longer term in both regions despite the weakness we are seeing today. As you can see on the page, these 3 core end markets represent over 80% of our last 12 months revenue.

Turning lastly to other specialties. These markets are typically dependent upon the health of the industrial economies in each region, including drivers like the interest rate environment, industrial production levels and consumer spending patterns. Industrial market conditions in North America and Europe became more stable in the second half of 2025, and we believe the markets, particularly in Europe, have bottomed after 3 years of market downturn. Nevertheless, we expect the specialties markets in Europe to remain relatively weak in the near term.

We do believe TID markets in North America provide us with some opportunities today given the current tariffs make imports less competitive compared to domestic production. We also believe there are some opportunities in land-based defense and semiconductor markets given current market dynamics. As you know, we are focused on niche high value-added applications in most industrial markets.

To conclude on the end markets, we like the fundamentals in each of the markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company in any environment.

Turning lastly now to Slide 14, we detail our key messages and financial guidance. Our team delivered strong first quarter results that were ahead of our expectations despite macroeconomic and geopolitical uncertainties. We achieved record quarterly adjusted EBITDA, and we returned $28 million to shareholders with the repurchase of 1.2 million shares.

I want to thank each of our Constellium team members for their continued focus on strong cost control, free cash flow generation and commercial and capital discipline. Based on our current outlook for 2026, we are now targeting adjusted EBITDA, excluding the noncash impact of metal price lag in the range of $900 million to $940 million and free cash flow in excess of $275 million.

Our guidance for 2026 assumes that favorable market conditions will continue into the rest of 2026. These include benefiting from the current supply shortages of automotive rolled products in North America, and improved aerospace and TID environment and favorable scrap and metal dynamics in North America.

Our guidance also assumes the recent demand trends in our end markets that I described earlier will continue and the overall macroeconomic environment to remain relatively stable. Looking to the future, we remain laser-focused on executing our road map to delivering adjusted EBITDA, excluding the noncash impact of metal price lag of $900 million and free cash flow of $300 million by 2028.

The key drivers behind these targets compared to 2026 performance include executing on various return-seeking CapEx projects, strong cost control and productivity improvements, including our Vision 2028 program and continued price discipline.

Our 2028 targets also assume additional growth in markets such as aerospace, TID and packaging. As a reminder, these targets do not include the favorable scrap spread environment we are seeing today or the benefits we expect in 2026 from the current supply shortages of automotive rolled products in North America.

To conclude, we are extremely well positioned for long-term success and remain focused on executing our strategy and shareholder value creation.

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

[Operator Instructions] Our first question comes from the line of Corinne Blanchard with Deutsche Bank.

Congratulations. This is a very strong quarter and an amazing lift for the guidance. That being said, so I have a few questions around the cadence maybe that we can expect, especially 2Q versus the second half of 2026. And then the second part of the question would be, can you help us bridge 2027 and 2028. I know Ingrid and Jack, you mentioned that there is no tailwind from the current scrap spread environment. But how do we think about '27 and '28? Do we think of it as EBITDA slightly flat or going down in '27 and then going up again in '28? So that would be very helpful.

First of all, thank you very much, Corinne, and thank you for your questions. I'll start on the first one on the cadence, and then I'll let Jack complete on it.

You know that traditionally, our first half of the year is much stronger. We have seasonality in our earnings, but driven by volumes in our respective end markets, particularly the second quarter tends to be quite strong on the packaging side. And then we have higher costs in the second half of the year because of our annual outages in the summer period and around the Christmas period where we do our major maintenance work, which is also driving additional cost and I'll let Jack compete on the sequence of earnings.

Yes. So that's exactly right. And Q2 tends to be seasonally the strongest quarter in the year, and that's our expectation for the time being. And I think just looking ahead, we have good momentum in the business. We have good visibility into the second quarter. Now the macro environment, the geopolitical environment is very volatile, as all of you know, so there's higher degrees of kind of uncertainty, which may impact -- may or may not impact the broader demand in the second half.

Okay. As it relates to our targets for 2028, I think you have to see 2027 as a transition year in the execution of our strategic milestones that we presented some time ago. 2027, we will see the complete ramp-up of our recycling center in Neuf-Brisach. We will have our DC casting pit in Muscle Shoals ramping up in 2027 as well as our Airware casthouse investment, which will start up at the end of this year. So those investments are going to be complete or will start up. So we will have a kind of transition results.

We also still believe that 2027 will see a little bit of strength on the aerospace side as destocking may come to an end. I think we all know that the supply chain remains challenged, also particularly on the engine side. But we believe 2027 could be a turning point. Packaging is expected to remain strong and TID North America is also going to be stronger in 2027 from what we can see today.

I think on the drawbacks potentially, we don't know the full impact of the Middle East crisis today. We talked about inflationary pressures that we are seeing today. But the end market impact from the Middle East crisis that the longer it lasts may have some impact on some of our markets, and that really remains to be seen. We do not expect any improvement on the automotive side. We expect 2027 to be rather weak on automotive, particularly in Europe and maybe a little bit better in North America. I think these are the puts and takes for the 2027, which is really a transition year to our 2028 guidance.

That's very helpful. Maybe if I may, just quickly, like on aerospace, I know you commented and we saw some new contracts being signed. Can you just talk about expectation or your view on volume versus the high margin that you're getting from [ TID ]? Like how do we think about it for the rest of the year?

Yes. So the contract that we just announced is a multiyear contract with Airbus that is covering various extruded products delivered from our French operations, including some proprietary materials like our Airware aluminum-lithium technology. And it's really cementing the good relationship and partnership that we have with Airbus for a very long period of time. It's more to be seen as a continuation and strong mix for our extrusion business for the future.

Our next question comes from the line of Katja Jancic with BMO Capital Markets.

Maybe staying on the '26 guide. Jack, you mentioned that your scrap is secured or locked in for 2Q, but that your team is still looking to lock in some for the second half of the year. Can you talk about what does your guide assume for scrap spreads for the rest of the year? Or how should we think about it?

Yes, sure. So the second quarter, as we said, is essentially locked in at this stage. It's important to kind of remain focused on -- for us to remain focused on productivity and operational excellence. And in terms of the economics, if you will, the UBC spread is more favorable in the second quarter compared to our experience, what we experienced in the first quarter. And our assumption is the metal price conditions, which is pretty much at the all-time high, are expected to remain quite elevated, at least over the short term.

Now moving to the second half of the year, over -- I would say, over 50% of the needs are locked in at this stage. So there's still quite a bit that's open. The market remains, as you know, highly dynamic where you can use volatile as a word, right? And there are a number of factors that could drive you to a different set of scenarios. So there's a high degree of variation potentially. But for the remaining volume for our guide, we took sort of a middle of the road approach, that's still above our prior expectations for the second half. But it's not as aggressive as the first half of '26, but it's not nearly as conservative as what we have experienced in the second half of 2024 and through most part of 2025.

Okay. And then maybe your free cash flow generation is going to increase in the rest of the year versus the first quarter. You've been buying back shares. Is there an opportunity for you to accelerate the buybacks versus what you did in the first quarter? Or how are you thinking about it?

Yes. So it's a good question. So number one, I think when it comes to the buyback or just overall capital allocation, our approach has always been kind of maintain a balanced approach. Now more specifically with the share buyback, we're comfortable with the existing pace of running the buyback program. And as a reminder, it's $300 million over 3 years and having a steady pace has worked for us in the past, and we still view buying back shares as attractive. So we look to maintain this similar type of pace going forward.

Our next question comes from the line of Bill Peterson with JPMorgan.

Congrats on the strong results and raise. I wanted to ask actually a question, I don't think you really talked about during your prepared remarks. There have been some changes in the Section 232 derivative tariffs. I'm wondering how you're thinking about the potential impacts and how that may have on your business, whether it be supporting prices? Or what are you hearing from your customers on this front?

Thanks for the question, and thank you, Bill, for your comment. I think the last changes on the Section 232 do not really impact us. We have a very, very minor impact in our AS&I business. But overall, it's just a confirmation that tariffs are going to stick. And so we think the indirect benefits of Section 232 will continue for us. So no changes in our other businesses.

And then on automotive, you've mentioned about the U.S. being better than Europe, and I think you've benefited somewhat at the margin from the unfortunate incident that you talked about. Is that -- should that benefit really be, in your view, concluded in the second quarter? Or how are you thinking about the cadence of automotive for the remainder of the year, both in PARP and AS&I?

Yes. So I think on the PARP side, we are, at this stage, pretty confident that the benefits we have been seeing from the outage is going to continue. We are supplying basically from Europe. We are maxing out capacity in the U.S., and we are supplying material also from Ravenswood to feed into our rolling system so we can maximize overall capacity. That is allowing us to gain additional qualifications and supporting, obviously, the relationships with customers beyond what we are experiencing today.

AS&I is mostly impacted by slower ramp-up of production from -- on a certain platform. And we have no clear visibility of how the full year is going to look. But the impact of it, financially speaking, is rather minor for the company. And it is actually, if you think about the net impact, it remains largely very, very positive.

[Operator Instructions] Our next question comes from the line of Timna Tanners with Wells Fargo.

I just wanted to drill down a little bit more on some of the discussion about the European market, in particular on the auto side. So getting some questions about the BYD getting built in Europe and the implications for Constellium and any thoughts on aluminum versus steel consumption there and in the U.S. given some reports of switching?

Thank you for the question, Timna. So I think on the European automotive market, it's true that BYD has announced building production in Hungary and in Turkey, if you consider the wider Europe. But the cars that they are building have much more content of steel in the body of the car. So we don't really expect much impact in this. I mean our focus in Europe is mostly on premium vehicles with the German OEMs, but also others. And we do not see any impact at this point.

We're also producing mostly local for local, right? We're not generally shipping automotive material across. In the U.S., with respect to switching, we have not seen any evidence of people switching other than normal course of business. So we really expect that the need for fuel efficiency is going to continue. And this is what we see on both sides of the Atlantic.

Okay. Regarding the scrap spreads, if they persist at these levels, is there a much ability to increase the proportion of your product that's made from scrap? Meaning can you try to expand that production, especially given the tight markets that could persist in the broader U.S. and I guess, Europe?

I'll start and then I'll let Jack continue. So in fact, all of our businesses are using scrap. We mostly talk about UBC for the packaging market, but we're also using a lot of scrap in the rest of our operations. So certainly, with everything that's going on in the market, we have already been working in improving our metal costs through usage of more scrap and different types of scrap and also more difficult types of scrap.

You know that the industry is moving towards upcycling scrap streams that exist in the market through sorting technologies, and we are actively involved in this as well. But we also recycle material for our aerospace business, for TID business. And also on the extrusion side, we have a share of recycled content in all of the alloys that we produce today.

And just more broadly speaking, I mean, recycling and casting is core to what we do. So if you look at our capital expenditure profile, especially when it comes to return-seeking CapEx is going towards recycling and casting investment. So that's definitely a focus area for us, Timna.

Can you quantify any of your ability to expand recycling, again, given that we may have shortages of billet and the market has gotten quite tight there with the smelter disruptions. Is there any ability to expand the amount of finished aluminum you produce using scrap?

I wouldn't say that the shortage of primary aluminum is the main driver for us. I think it's an ongoing program where we continue to use as much scrap as we can find in the market in the alloys and the shapes that are available in the market. So it's quite volatile as well because not every scrap can go somewhere. But it's a focus of us for many, many years already to optimize as much as we can. But it's very much dependent on availability of the right type of scrap in the right moment.

So we have potential to improve, but it would be not additional casting output, if you want. It would be a lower metal cost because we would be replacing prime metal with scrap in our operations.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Ingrid Joerg, CEO of Constellium for closing remarks.

Thank you. Well, thank you, everybody, for your interest in Constellium. As you can see, we are off to a very strong start to the year. We delivered record performance in the first quarter and increased our outlook for 2026. We are very happy with the steps we are making towards our 2028 targets, and we look forward to updating you on our progress in July. Thank you very much.

This concludes today's conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Constellium Fourth Quarter and Full Year 2025 Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Jason Hershiser, Director of Investor Relations at Constellium.

Thank you, Josh. I would like to welcome everyone to our fourth quarter and full year 2025 earnings call. On the call today, we have our Chief Executive Officer, Ingrid Joerg; and our Chief Financial Officer, Jack Guo. 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'd 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 include statements regarding the company's anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties. For a summary of specific risk factors that could cause 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 10-K. All information in this presentation is as of the date of the presentation. 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 GAAP disclosures.

And with that, I would now like to hand the call over to Ingrid.

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium.

Let's begin on Slide #5. I want to start with safety, our #1 priority. In 2025, we achieved a recordable case rate of 1.9, an improvement compared to 2024 and much better than the industry average. While we did not meet our ambitious target of 1.5, this progress reinforces our commitment to safety and reminds us that reaching our goal will require continued strong efforts across the organization. Our safety journey is never complete, and we all need to remain committed to this critical priority every day.

Now let's turn to Slide #6 and discuss the highlights from our fourth quarter performance. Shipments were 365,000 tons or up 11% compared to the fourth quarter of 2024 due to higher shipments in each of our operating segments. Revenue of $2.2 billion increased 28% compared to the fourth quarter of 2024 due to higher shipments and higher revenue per ton, including higher metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk.

Our net income of $113 million in the quarter compares to a net loss of $47 million in the fourth quarter last year. The main driver of the increase was higher gross profit in the quarter versus last year. Compared to the fourth quarter last year, adjusted EBITDA increased 124% to $280 million in the fourth quarter this year, so this includes a positive noncash impact from metal price lag of $67 million. If we exclude the impact of price lag, which, as you know, is the way we view the real economic performance of the business, we achieved an adjusted EBITDA of $213 million in the quarter. This is a new fourth quarter record for us and is up 113% versus the $100 million in the fourth quarter last year.

Our free cash flow in the quarter was strong at $110 million. And during the quarter, we returned $40 million to shareholders through the repurchase of 2.4 million shares.

Now please turn to Slide #7 for our full year 2025 highlights. For the full year, shipments were 1.5 million tons were up 4% compared to 2024. Revenue of $8.4 billion increased 15% compared to 2024 due to higher shipments and higher revenue per ton, including higher metal prices. Our net income of $275 million compares to a net income of $60 million in 2024. The main driver of the increase was higher gross profit versus the prior year.

Adjusted EBITDA increased 36% to $846 million in 2025. So this includes a positive noncash impact from metal price lag of $126 million. Again, if we exclude the impact of metal price lag, the real economic performance of the business reflects adjusted EBITDA of $720 million for the year compared to $575 million we achieved in 2024, and represents our second best year ever.

Moving now to free cash flow. Our free cash flow for the year was $178 million in 2025. During the year, we returned $115 million to shareholders through the repurchase of 8.9 million shares. We reduced our leverage by the end of 2025 to 2.5x, which is at the upper end of our target range. Constellium achieved strong results in 2025 that were ahead of our own expectations coming into the year and despite the uncertain macroeconomic and end market environment. I want to thank each of our 11,500 employees for their commitment and relentless focus on safety and serving our customers. We delivered strong execution and demonstrated our ability to control costs throughout the year in 2025, and we believe we are well positioned heading into 2026 to capitalize on market opportunities as they arise.

With that, I will now hand the call over to Jack for further details on the financial performance. Jack?

Thank you, Ingrid, and thank you, everyone, for joining the call today. Please turn now to Slide 9, and let's discuss our A&T segment performance. Adjusted EBITDA of $83 million increased 43% compared to the fourth quarter last year. Volume was a tailwind of $31 million due to higher TID shipments. TID shipments were up 41% versus last year. First, as we continue to see increased demand from onshoring in the U.S.; and secondly, we also benefited from higher shipment in Valais following a recovery from the flood last year.

Aerospace shipments were stable in the quarter versus last year as commercial OEMs continue to work through excess aluminum inventory in the supply chain. Demand in space and military aircraft remain generally healthy. Price and mix was a headwind of $28 million due to unfavorable mix in the quarter, partially offset by improved contractual and spot pricing in aerospace and TID. Costs were a tailwind of $18 million, primarily as a result of lower operating costs. FX and other was also a tailwind of $4 million in the quarter due to the weaker U.S. dollar. For the full year 2025, A&T generated adjusted EBITDA of $339 million, an increase of 16% compared to 2024. The drivers of the full year performance were similar to those in the fourth quarter, except volume was a headwind of $1 million for the full year.

Now I'll turn to Slide 10, and let's focus on our PARP segment performance. Adjusted EBITDA of $136 million increased 143% compared to the fourth quarter last year and is a new quarterly record for PARP. Volume was a tailwind of $19 million in the quarter. Packaging shipments increased 15% in the quarter versus last year as demand remained healthy in both North America and Europe. In North America, we also benefited at Muscle Shoals from continued improvement of operational performance in the quarter.

Automotive shipments were relatively stable in the quarter overall though we did benefit in both regions from the current supply shortages in North America of aluminum automotive body sheet. Price and mix was a tailwind of $15 million, mainly as a result of improved pricing and favorable mix in the quarter. Costs were a tailwind of $40 million primarily as a result of favorable metal costs given improved scrap spreads and higher metal pricing environment in North America and increased consumption of scrap given the Muscle Shoals improvement, which is partially offset by higher operating costs.

FX and other was a tailwind of $6 million in the quarter. For the full year 2025, PARP generated adjusted EBITDA of $353 million, an increase of 46% compared to 2024. The drivers of the full year performance were similar to those in the fourth quarter though we benefited more in the fourth quarter from favorable metal costs compared to the full year.

Now turn to Slide 11, and let's focus on the AS&I segment. Adjusted EBITDA of $5 million increased by $1 million compared to the fourth quarter of last year. Volume was a $4 million tailwind as a result of higher shipments in industry touted products, partially offset by lower shipments in automotive. Industry shipments were up 33% in the quarter versus last year as we had higher shipments in Valais following recovery from the flood last year.

The industrial markets in Europe appear to have bottomed, although they remain at depressed levels. Automotive shipments were down 10% in the quarter with weakness in both North America and Europe. Even though the broad automotive market in North America are relatively stable, our automotive structures business was negatively affected by the current supply shortages of aluminum automotive body sheet and its impact on production of certain platforms in the region which automotive structures business supplied to.

Price and mix was a $6 million headwind in the quarter. Costs were a tailwind of $1 million primarily due to lower operating costs, partially offset by the impact of tariffs. FX and other was a tailwind of $2 million in the quarter. For the full year 2025, AS&I generated adjusted EBITDA of $72 million, a decrease of 3% compared to 2024. The drivers of the full year performance were similar to those in the fourth quarter, except the volume was stable for the full year. And in the third quarter, we received net customer compensation for the underperformance of an automotive program.

It is not on the slide here, but our holdings and corporate expense for the full year 2025 was $44 million, up $11 million compared to the prior year. The increase is primarily due to higher labor costs and costs associated with corporate transformation projects. We currently expect holdings and corporate expense to run at approximately $50 million in 2026.

Now please turn to Slide 12. It is not on the slide here, but I wanted to summarize the current cost environment we're facing. As you know, we operate a passive business model, so we're not materially exposed to changes in the market price of primary aluminum, our largest cost input. Other metal costs. following the U.S. tariff announcements in 2025, market aluminum prices in the U.S., which includes the LME aluminum price plus the Midwest premium, have risen sharply to historical levels. Spa scrap spreads for aluminum, mainly used beverage cancer UBCs have also improved from historically tight levels experienced in the second half of 2024 and into 2025. Both of these dynamics unfolded as we moved through the year in 2025.

Given that a portion of our scrap purchases were negotiated previously, we did not benefit much from this dynamic in 2025 until the fourth quarter, and the favorable impact was augmented through strong performance at Muscle Shoals in the quarter. As we look at 2026, we expect to benefit from these trends, especially in the first half.

Moving on to inflation. Inflationary pressures continue today across operating cost categories, including labor, energy, maintenance and supplies, albeit at more normal levels. Regarding tariffs, we have made some progress on past dues and other actions to mitigate a portion of our gross tariff exposure, and we believe at this stage, our direct tariff exposure remains manageable and the current tariff and trade policies are net positive for us.

In terms of the overall cost management, we have demonstrated strong cost performance in the past and we're confident in our ability to maintain a right-sized cost structure in any environment. On that front, we're pleased today to announce our next group-wide excellence program, which we're calling Vision 2028. This program will target both operational efficiencies and cost reduction across our businesses and is one of the building blocks in our road map to our 2028 targets. We look forward to updating you on our progress going forward.

Now let's turn to Slide 13 and discuss our free cash flow. We generated $178 million of free cash flow in 2025, well ahead of a very challenged 2024. The increase in free cash flow in 2025 was primarily a result of higher segment adjusted EBITDA and lower capital expenditures, partially offset by higher cash interest. Looking at 2026, we expect to generate free cash flow in excess of $200 million for the full year. We expect CapEx to be approximately $115 million, which includes approximately $100 million of return-seeking CapEx, primarily related to key aerospace and recycling and casting projects we announced previously at SAR, Muscle Shoals and Ravenswood. We expect cash interest of approximately $125 million and cash taxes of approximately $70 million, and we expect working capital and other to be a use of cash for the full year.

As Ingrid mentioned previously, we continued our share buyback activities in the quarter. During the quarter, we repurchased 2.4 million shares for $40 million bringing our 2025 total to 8.9 million shares for $115 million. We have approximately $106 million remaining on our existing share repurchase program, which we intend to complete by using our free cash flow generated this year.

Now let's turn to Slide 14 and discuss our balance sheet and liquidity position. At the end of the fourth quarter, our net debt of $1.8 billion was up approximately $50 million compared to the end of 2024 with the largest driver being the translation impact from the weaker U.S. dollar at the end of the year. We reduced our leverage to 2.5x at the end of 2025, which is at the upper end of our target range. We expect leverage to trend lower in 2026 and to maintain our target leverage range of 1.5 to 2.5x over time.

As you can see in our debt summary, we have no bond maturities until 2028. And as of the end of 2025, we had no outstanding borrowings under the Penn U.S. ABL facility. Our liquidity increased by around $140 million from the end of 2024 and remains very strong at $866 million as of the end of 2025.

With that, I'll now hand the call over to Ingrid.

Thank you, Jack. Let's turn to Slide 16 and discuss our current end market outlook. The majority of our portfolio today is serving end markets benefiting from durable and attractive secular growth trends in which aluminum light an infinitely recyclable material plays a critical role. Turning first to the aerospace market. Commercial aircraft backlogs are at record levels today and continue to grow. Major aerospace OEMs remain focused on increasing build rates for both narrow-body and wide-body aircraft as evidenced by higher plane deliveries year-over-year, and rising delivery ambitions in the near term. Although supply chain challenges have continued to slow deliveries below what OEMs were expecting for several years in a row now. Demand is steady for the most part, and aluminum destocking in the supply chain appears to be easing.

Demand for high value-add products, which is one of our core focus areas remain strong. We remain confident that the long-term fundamentals driving commercial aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel-efficient aircraft. In addition, demand remains stable in the business and regional jet market, whereas demand for space and military aircraft is strengthening. We believe we are a leading provider of proprietary aluminum solutions for those customers in the space and military aviation markets today. As you know, we are investing in additional capacities and capabilities, such as our third Airware casthouse in Issoire, which we expect to start up by the end of this year to further strengthen our position in the future.

Looking across our entire commercial and military aviation and space businesses, we believe our product portfolio is unmatched in the industry, and we have industry-leading R&D capabilities for aluminum aerospace solutions. Given the visibility over the next several years, we are raising our adjusted EBITDA per ton target for our A&T business to $1,300, which is up from $1,100 that we provided last year.

Turning now to packaging. Demand remains healthy in both North America and Europe. The long-term outlook for packaging continues to be favorable as evidenced by the growing consumer preference for the sustainable aluminum beverage can. Capacity growth plans from the can makers in both regions and the greenfield investments ongoing here in the U.S. We continue to see aluminum gain share against other substrates in the beverage market and the majority of new beverage products are launched in aluminum cans today due to its sustainable attributes.

Aluminum cans are highly recyclable, and we are well positioned to capitalize on the benefits from recycling packaging materials at our facilities in Muscle Shoals and Packaging markets are relatively stable and recession resilient as we have seen many times in the past. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe, providing a strong base load for our operations in both regions.

Now let's turn to automotive, which continues to be a bit of a different story in North America versus Europe. In North America, demand is relatively stable, so the tariff environment is creating some uncertainties. Last year, one of our competitors' U.S.-based facilities was impacted by fire, a very unfortunate event and which has created an interruption in the aluminum rolled product supply chain in North America. The entire industry continues to mobilize to ensure we limit the impact on our customers. In the fourth quarter, we started to benefit on the rolled product side as we were able to help our customers during this outage.

On the automotive structure side, we were negatively impacted as some OEMs were forced to reduce production on certain platforms impacted by the disruption on the Rolled Products side. The overall impact in 2025 was a net positive on our results, which we expect to continue into the first half of 2026.

Automotive demand in Europe remains weak, particularly in the premium vehicle segment, where we have greater exposure. European markets are seeing increased Chinese competition and have lowered their battery electric vehicle ambitions. Automotive production in Europe is also feeling the impact of the current Section 232 auto tariffs given the number of vehicles Europe exports to the U.S. Longer term, we believe electric and hybrid vehicles will continue to grow, but at a lower rate than previously expected. Secular trends such as lightweighting, fuel efficiency and safety will continue to drive the demand for aluminum products. As a result, we remain positive on this market over the longer term in both regions despite the weakness we are seeing today. As you can see on the page, these 3 core end markets represent over 80% of our last 12 months' revenue.

Turning lastly to other specialties. These markets are typically dependent upon the health of the industrial economies in each region including drivers like the interest rate environment, industrial production levels and consumer spending patterns. Industrial market conditions in North America and Europe became more stable in the second half of 2025 and we believe the markets, particularly in Europe, have bottomed after 3 years of market downturn. Nevertheless, we expect the specialties markets in Europe to remain relatively weak in the near term.

We do believe TID markets in North America provide us with some opportunities today given the current tariffs make imports less competitive compared to domestic production. We also believe there are some opportunities in land-based defense and semiconductor markets given current market dynamics. In most industrial markets, we are focused on niche high value-added applications. To conclude on the end markets, we like the fundamentals in each of the markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company in any environment.

Turning lastly now to Slide 17, we detail our key messages and financial guidance. Our team delivered strong execution and results in 2025 that were well ahead of our expectations coming into the year. Excluding metal price lag, our adjusted EBITDA in 2025 was our second best year ever. We returned $115 million to shareholders in the year with the repurchase of 8.9 million shares, and we reduced our leverage to 2.5x by year-end. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline. Based on our current outlook, for 2026, we are targeting adjusted EBITDA, excluding the noncash impact of metal price lag in the range of $780 million to $820 million and free cash flow in excess of $200 million.

Our guidance assumes the recent demand trends in our end markets that I described earlier, will continue into at least the early part of 2026 and the overall macroeconomic environment to remain relatively stable. Looking into the future, we also want to reiterate our targets of adjusted EBITDA, excluding the noncash impact of metal price lag of $900 million and free cash flow of $300 million by 2028.

To conclude, we are extremely well positioned for the long-term success and remain focused on executing our strategy and shareholder value creation.

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

[Operator Instructions] And our first question comes from Katja Jancic BMO Capital Markets.

Maybe starting on the '26 guide. Can you let us know how much of a benefit for scrap spreads is embedded in this guide?

Katja, so I think it's -- thank you for the question. Regarding the scrap benefits for 2026, and here, I'm going to go on for a little bit. Obviously, it's -- we believe it's a tailwind for us in 2026. Our expectation is, given our scrap consumption needs are fully contracted in the first quarter, we should see similar type of benefits as we've seen in the fourth quarter of 2025. And if you were to kind of look at the bridge for Q4 2025 for PARP business unit, you'll see that and we called this out, right? The metal benefits in system, so it includes the European plants as well as Muscle Shoals more than offset a little bit of a higher operating cost, if you will. So the net impact is $40 million, which gives you an idea on the amount of the benefits we had in the fourth quarter of 2025, and we believe that should continue to carry into at least the first quarter of 2026.

Now obviously, there's quite a bit of interest on this topic. So I think it is -- we think it's important to have some context. Number one, as we mentioned and discussed previously, the recycling economics is quite complex. There are really a lot of elements at work Here, we're talking about the market aluminum price levels. We're talking about scrap spreads. We're talking about scrap consumption levels, productivity, mount loss type of scrap. We procure and it's not just UBCs. We'll also consume other types of scrap, even within UBCs, you have different grades. So it gets really, really complicated. And if you just -- if you just take 3 of the many elements there, it becomes a 3-dimensional matrix. So it's very complicated as they can work in sync or they can work against one another.

I think another important point to understand is recycling economics have averaged out over time. And that was the case when markets were much more stable and call it the pre-2024 time periods where we have mentioned previously that the annual swings could vary between sort of the $20 million to $30 million range, but they have averaged out over time. And that is also the case in times which are more volatile like between 2024 today. And if you just rewind a little bit, in '24, we saw sharp contracting scrap spreads, and we had challenges at Muscle Shoals. So we experienced actually $15 million to $20 million worth of quarterly headwind, if you will. And then you kind of multiply that by 4, you get the full year headwind. So it is quite substantial. And then we saw a similar type of headwind in the first half of 2025, which was more pronounced in the first quarter, to a lesser extent in the second quarter as spot spreads tightened, but Muscle Shoals was doing better. And the Midwest saw a sharp increase due to the tariffs. But overall, if you look at '24 to the first half of 2025, that was an extremely challenging 18 months for us from a metal profit perspective.

Now Q3 2025 was stable. And then in the fourth quarter, as I mentioned, we benefited from a favorable environment and quite strong performance at Muscle Shoals, which have allowed us to recoup the losses we had in the first half of 2025 plus a bit more. So now looking at 2026, I've already covered the first quarter and looking at the future quarters, we do have some open volumes -- and we're working very hard to lock in those additional open volumes beyond the first quarter. But the incremental benefits based on the current expectation is that they should gradually taper off as we move through the year. But overall, we should -- our expectations is that we should be able to recoup the losses we had from 2024. So that's a long answer, but it gives you a lot of kind of color around the scrap topic. And I think the takeaway is, one, it's a very complicated topic. Number two, it does average out over time. And number three, recycling, it requires a lot of investments, which we have made. It requires a lot of know-how. We've been operating it for decades. It is one of the cylinders being our engine, as we mentioned previously. And when the market conditions are more favorable like it is today, you can count us to make the best out of the opportunity.

Okay. And I understand that it's complicated. But let's say, if these scraps stay at the current level. And then looking more to your 28 target of $900 million. it seems that, that target might be conservative. Can you just remind us how we get there? Or what are some of the moving parts there?

Katja, thank you for this follow-up question. I'll let Jack come in later. But maybe with respect to 2028, I think when we talk the first time a year ago about our bridge, we said we were going to take more conservative assumptions on the metal side. So what you're seeing today is that we had due to metal benefits versus our 2028 target. But obviously, this is a very dynamic end market environment and things can change very, very quickly. So Midwest premium can change very quickly and the percentages of spreads can change very quickly, which is why we have taken a conservative assumption in the first place.

We don't know if the current situation that we experienced in 2026 are going to last and for how long they're going to last, which is why we have prefer to remain at a more prudent stance and assumptions in our 2028 target.

Our next question comes from Bill Peterson with JPMorgan.

Maybe outside of the scrap spread. I'm trying to get a sense for some other factors within the 2026 guidance. For example, what is your latest thoughts on aerospace recovery? How much can be attributed to Vision 2028? Any sort of assumptions related to 1 of the peers in the space with their rolling mill ramping for the automotive space? Trying to get a sense for some other puts and takes within the full year guidance.

Thank you very much for the question, Bill. I'll start and let Jack completed. Let me start on the market side maybe. I think we believe that packaging is going to remain a good driver of growth for us going into this year. We see those regions U.S. and Europe with solid performance. And we have been having quite a good turnaround in our Muscle Shoals operation, and so we have been growing on the packaging side, and we expect to continue to grow.

On the automotive side, I think we have a very mixed picture between the U.S. and Europe. The U.S. seems to be rather stable. But remember, we do -- we only have one continuous annealing line in the U.S., so our capacity on the rolled product side is limited to this one line. We have seen nice benefits in Q4 from this unfortunate event that happened in the U.S. supply chain. And we've also had benefits in Europe which we expect to last until the first half of 2026. As you know, the European automotive market has remained weak, and we have not seen any change. It seems that the market has bottomed out, but it's very hard to predict at this point in time.

On the aerospace side, we see the business is steady. We see quite a strong -- good and strong mix on the aerospace products today in 2026. We have a little bit more visibility today than we had during our last call on '26 and maybe also 2027. We feel that military chats and space is going to continue to grow and be positive for us. Just as a reminder, we are also going to get our new Airware cast house that will ramp up towards the end of this year. So most of the benefit you should expect coming in -- starting to come in 2027 and not this year, but we are fully on track with the expansion of our Airware capacities and capabilities.

I think on the more negative side is maybe that industrial markets and specialty markets in Europe remain weak. We also feel they have bottomed out, but we do not see a recovery coming in Europe as of yet. So I think there's a good mixture of positives and also some uncertainties in the market that we see for 2026.

On the recycling side, we continue to expand our recycling with the investments we've made in the past and the strong operating performance that we also had in Q4. So it was not just because of scrap spreads, but also strong operating performance, and we expect that to continue in 2026. As Jack already explained, the second half our scrap spreads may be less favorable. So this is something that we will update as we go along.

Important also to note that inflationary pressures are continuing, that's why we are very focused on cost control and controlling what we can control in this environment, market environment that we are experiencing. And with our Vision 2028 program, we want to underpin our road map to 2028 in terms of operating efficiencies, which is something that we need to focus on every year.

Okay. Great for that -- Maybe it's a little bit early days, but there's been some news here about some potential tariff relief on downstream derivative products. Trying to get a sense of maybe if there's any overlap with your own product suite that you sell into the U.S. What are you hearing on the ground? And I guess specifically, is there any risk if there's relief on derivative products that, that could have some impact on your business? Any sort of thoughts would be helpful.

I think the situation remains very fluid as it comes to tariffs. So with the information we are having today, we do not see any impact on us. And we continue to believe that tariffs are a net positive for us, given that we will have stronger demand within the North American market.

Our next question comes from Mike McNulty with Deutsche Bank.

Sorry, this is Corinne. Can you hear me?

Yes, Corinne.

So maybe a few questions. And first of all, congratulations. I mean, this is an amazing quarter and a pretty good outlook, what you're giving us here. Can you talk maybe about the cadence that we can expect in terms of EBITDA and free cash flow? And then the second question, Ingrid, if you can go back on the Vision 2028. I think we know that before you going to focus quite a lot on cost control. But I'm interested to hear more about the operational efficiencies. And especially in terms of debottlenecking, where are the opportunities that you're seeing in which market?

Thank you for the question. So I'll start, Corinne, and appreciate the comments. I'll start on the cadence question, and then Ingrid outbound on the Vision '28. So in terms of '26 cadence for EBITDA, I think as you know, Q1 and first half. Typically, there's seasonality in our business. So from a seasonality perspective, they tend to be stronger than the second half, that's normal course. Now for '26, I've mentioned about the incremental benefits we expect to see in the first quarter from favorable recycling economics, right, recycling profits. So that should come in the first quarter. And on top of it, we expect to see a full quarter of benefits related to the automotive supply due to the unfortunate fire that happened at one of our competitors' plans last year. So we should see a full quarter benefit. So Q1 is set up nicely and it should be stronger than to Q4 of 2025 based on the current expectation.

And then from a free cash flow perspective, typically, we build working capital in the first quarter and then into the first half of the year, and then we would release working capital. So that gives you an idea on the cadence for free cash flow.

Thanks, Corinne. So in terms of Vision 2028, this is a program that is really going to support our 2028 target. We have net productivity assumed in our bridge, and this program is there to support achieving those numbers. So in terms of major pillars, we're certainly targeting asset reliability. You see when Muscle Shoals is running well, that it's a very important driver of profitability for us. So asset reliability remains an opportunity across our system, which will support through maximization and goes along with the portfolio optimization of the products that we make today. Given that some markets are rather weak and others have continued growth ahead of us, we want to better optimize how we are using our assets, and this project is going to help us work more cross qualification so that we optimize our overall footprint and not just optimize one site. So asset reliability, throughput and optimized load, we have debottlenecking activities that are part of our bridge to 2028, with some limited investment that is embedded in our numbers. And then on top of it, I think we also have still opportunity to improve recycling and metal cost reduction. These are really going to be the focus areas of this program.

In terms of which markets, additional capacity should be going to. I think it's -- it's clear from what we see in the market, it's on the packaging side. So can sheet, we would continue to like to grow with the market. in both regions. And then obviously, on the aerospace side, this is our highest margin product. And with the new cast house coming in on the aero side, we would like to continue to grow this business for space military but also commercial aviation. And we have invested in some finishing capability in our sites that will allow us to support the ramp of the aerospace that is expected to come somewhere around '27.

[Operator Instructions] Our next question comes from with Wells Fargo.

I think I'm the only person from Wells Fargo. This is Tim, and I hope you all are doing well. I wanted to dig down back to question if I could. Just if you look at the second half cadence and annualize it, that's above where the midpoint is on your guidance. So just trying to really understand what takes a step down, maybe more in the second half? Can you help elaborate on that and please give us the assumptions on the Midwest premium and scrap spread that's baked into your guidance?

So I'll start. So -- the way to think about it is the Q4 '25, we've seen fairly substantial amount of metal benefits, as I mentioned previously, right? But then the first half is quite challenged. Then from a relative comparison perspective after we go through the year, Q1 F'25 was extremely weak. Q2 was also weak. So the incremental benefits on the metal side, you would expect it to kind of to be more significant in the first half of 2026. I think that's one point. Then the other piece of it is we have more certainty, more visibility. Obviously, as we stand here today, February looking at Q1 and into the first half of the year and some of the markets, the visibility there is not as certain into the second half.

Okay. So does that mean that you have assumption of the Midwest premium and scrap spreads stronger in the first half than the second half. I was hoping for modification, but even if we just know that that's the way to think about it would be helpful.

I think there is more the volume consumption volume that's locked in the first quarter relative to the future quarters. And so we have more exposure.

Got you. And then if I could, we're hearing a bit about demand destruction, a little bit of switching to steel away from aluminum and some auto and tractor trailer applications, but also opportunities for aluminum to take share from copper. So I was hoping you could comment on that. And along those same lines, it would be great to get any thoughts on the CBM impact as there were some public quote on Constellium on that topic recently.

Okay. Let me start, Timna. So I think with respect to aluminum substitution in automotive, we really do not any evidence of that and particularly nothing related to the outage that has happened in North America. You know that these design decisions, I mean, it takes a long time. To change design is very, very costly. And we develop a lot of platform-specific products. And usually, once you're on the program, it doesn't really -- or on a platform, it really doesn't happen that you get substituted. So -- we haven't seen any impact or any talk from our customers with respect to with steel. The trailer bills are low right now and that's more related, I think, also to the general economic situation. But clearly, we haven't seen it, and we do not expect it. Because they're trying lightweight, the trend -- the better safety needs and the fuel economy, this is just going to stay. So we are not worried that on the automotive or transportation market, anything like this could happen.

And then with respect to copper, I have to say I have -- I'm not aware of this. In terms of substitution of materials, we have been able to substitute some materials in the past with our more high-performing alloys on the aerospace side, for example, but not particularly related to copper.

Now going to your question on We are even though has been adjusted a little bit, we still think it's negative for the industry in Europe. We need to really create a level playing field with people importing into Europe. We need much more than what is on the table right now. We think the is going to be reflected in the regional premium in Europe. And so it's for people who are exporting a lot from Europe, it's not going to be good higher metal prices in Europe for exports. We produce mostly local for local, so we are not really directly impacted by this. But clearly, the design as it is today is flawed and will not prevent carbon leakage and it could potentially lead to resource reshuffling material coming into Europe based on recycled content that is very, very difficult to prove. So overall, we continue as an industry to oppose to the to its current design, and we're working with industry associations like European aluminum to work on changing it and adjusting it to the needs that the industry has.

I would now like to turn the call back over to Ingrid Joerg, CEO of Constellium for any closing remarks.

Well, thank you, everybody, for your interest in Constellium. As you see, we have delivered strong results in 2025. And today, we provided a strong outlook for 2026. We are very happy with the steps that we are making towards our 2028 targets, and we look forward to updating you on our progress in April. Thank you very much, everyone.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Constellium Third Quarter 2025 Results Conference Call and webcast. [Operator Instructions] Please note that today's conference is being recorded. I would now like to turn the conference over to your speaker, Jason Hershiser, Director of Investor Relations at Constellium. Please go ahead.

Thank you, Razia. I would like to welcome everyone to our third quarter 2025 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; our Chief Operating Officer and CEO appointee, Ingrid Joerg; and our Chief Financial Officer, Jack Guo. 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'd 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 include statements regarding the company's anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties. For a summary of specific risk factors that could cause 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 10-K.

All information in this presentation is as of the date of the presentation. We undertake no obligation to update or revise any forward-looking statements 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 GAAP disclosures. And with that, I would now like to hand the call over to Jean-Marc.

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. I want to begin by addressing our executive leadership change that was announced this morning. On December 31, I will be retiring from my role as Chief Executive Officer of Constellium, and I will also be stepping down from my position as a Director on the Board at the same time. I plan to continue to serve as a special adviser to Board and management in 2026. Ingrid Joerg will assume the role of Chief Executive Officer of Constellium, and the Board will appoint Ingrid as a Director for the remaining term of my directorship.

This leadership change comes following a multiyear planning process, and I will continue to support the Board and the management for a seamless transition in 2026, as I just said. Since I joined the company almost 10 years ago, Ingrid and I have worked very closely together, including the last 2-plus years, during which Ingrid was in charge of the company's operations in our capacity as the Chief Operating Officer. With more than 25 years of experience in the aluminum industry, including the last 10 with Constellium, Ingrid possesses deep industry knowledge, proven operational expertise, a wide network across our industry and strong commitment to our stakeholders, including our customers, employees and our shareholders. Ingrid has also contributed significantly to the development of the company's strategy and its long-term objectives.

As you can see, our results and our outlook are strong today, and I am confident that Ingrid will continue to build on this strong foundation and lead Constellium to what will be a bright future for our shareholders. Okay. Now turning to Slide 5 now. Let's discuss the highlights from our third quarter results. I would like to start with safety, our #1 priority. Our recordable case rate in the third quarter was 1.7 per million hours worked, and our year-to-date recordable case rate remains at 1.8 per million hours worked. While this performance remains best-in-class, we all need to constantly maintain our focus on safety to further improve. Turning to our financial results. Shipments were 373,000 tons or up 6% compared to the third quarter of 2024 due to higher shipments in each of our operating segments.

Revenue of $2.2 billion increased 20% compared to the third quarter of 2024 due to higher shipments and higher revenue per ton, including higher metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk. Our net income of $88 million in the quarter compares to net income of $8 million in the third quarter last year. The main driver of the increase was higher gross profit in the quarter versus last year. Compared to the third quarter last year, adjusted EBITDA increased 85% to $235 million in the third quarter this year, though this includes a positive noncash impact from metal price lag of $39 million. If we exclude the impact of metal price lag, which, as you know, is the way we view the real economic performance of the business, we achieved an adjusted EBITDA of $196 million in the quarter.

This is a new third quarter record for us, and it is up 50% versus the $131 million in the third quarter last year. Moving now to free cash flow. Our free cash flow in the quarter was strong at $30 million. During the quarter, we returned $25 million to shareholders through the repurchase of 1.7 million shares. Our leverage at the end of the third quarter was 3.1x or down about 0.5 turn from the peak last quarter. We delivered strong results this quarter that were above our own expectations despite the uncertain economic environment and continued demand weakness across many of our end markets. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline.

Overall, I am very pleased with our third quarter and year-to-date execution and performance. It is not on the slide here, but I wanted to quickly note that during the third quarter, we completed a small divestment of our Nanjing automotive structures plant to a local Chinese investment holding company. The terms of the transaction will remain confidential. Please turn now to Slide 6. Before turning the call over to Jack, I wanted to give you a quick update on the current tariff environment and how we see the potential impact to Constellium. As a reminder, we are mostly local for local in the regions where we operate. Today, our gross tariff exposure is mostly concentrated at our metal supply from Canada to our operations here in the U.S. We have made significant progress on pass-throughs and other actions to mitigate a large portion of our gross tariff exposure.

At this stage, our direct tariff exposure remains manageable and is consistent with our prior expectations. Now the indirect positive impacts from tariffs are continuing to ramp up, including improved scrap spreads in the U.S., higher demand for domestically produced aluminum products and a more favorable pricing environment compared to expensive imports. Put it all together, we continue to believe that the current trade policies should be a net positive for us. Lastly, on tariffs, I want to reiterate that all known tariff impacts, both direct and indirect, and all of our mitigation efforts to offset the direct impacts are included in our guidance. With that, I will now hand the call over to Jack to further detail our financial performance. Jack?

Thank you, Jean-Marc. Congratulations, Ingrid, and thank you, everyone, for joining the call today. Before I get into the quarterly results, I wanted to point out that we had a revision of certain disclosures in previously issued financial statements. During the third quarter this year, we identified and corrected certain immaterial errors affecting metal price lag and the resulting segment adjusted EBITDA for the A&T segment for certain prior periods in 2025 and 2024. This revision resulted in slightly higher segment adjusted EBITDA as compared to prior disclosures in those periods. We included more details on this revision in both our earnings release and presentation today.

Turning now to Slide 8, and let's focus on our A&T segment performance. Adjusted EBITDA of $90 million increased 67% compared to the third quarter last year. Volume was a tailwind of $6 million due to higher TID shipments, partially offset by lower aerospace shipments. TID shipments were up 16% versus last year. First, as commercial transportation and general industrial markets became more stable in the quarter, and we started to see some increased demand from onshoring in the U.S. And secondly, we also benefited from higher shipments in Valais following recovery from the flood last year. Aerospace shipments were down 9% in the quarter versus last year as commercial OEMs continue to work through excess inventory as a result of lingering supply chain challenges.

Demand in space and military aircraft remained healthy. Price and mix was a tailwind of $11 million due to improved contractual and spot pricing in Aerospace and TID as well as improved aerospace mix in the quarter. Costs were a tailwind of $16 million, primarily as a result of lower operating costs. FX and other was also a tailwind of $3 million in the quarter due to the weaker U.S. dollar. As a reminder, the third quarter last year included an $8 million unfavorable impact from the Valais flood. Now turn to Slide 9, and let's focus on our Parts segment performance. Adjusted EBITDA of $82 million increased 14% compared to third quarter last year. Volume was a tailwind of $11 million as higher shipments in packaging were partially offset by lower shipments in automotive and specialty rolled products. Packaging shipments increased 11% in the quarter versus last year as demand remained healthy in both North America and Europe.

In North America, we also benefited at Muscle Shoals from continued improvement of operational performance in the quarter. Automotive shipments decreased 13% in the quarter with weakness in both North America and Europe. Price and mix was a tailwind of $3 million, mainly as a result of improved pricing, partially offset by unfavorable mix in the quarter. Costs were a headwind of $7 million as a result of higher operating costs, including the impact from tariffs. FX and other was a tailwind of $3 million in the quarter. Now turn to Slide 10, and let's focus on the AS&I segment. Adjusted EBITDA of $33 million increased 371% compared to the third quarter of last year. Volume was a $9 million tailwind as a result of higher shipments in industry extruded products, partially offset by lower shipments in automotive. Industry shipments were up 40% in the quarter versus last year as we had higher shipments in Valais following recovery from the flood last year, while the industrial markets in Europe remained generally weak in the quarter. Automotive shipments were down 7% in the quarter with weakness in both North America and Europe.

Price and mix was an $18 million tailwind in the quarter, mainly due to net customer compensation for the underperformance of an automotive program as previously discussed and better mix in the quarter. Costs were a headwind of $3 million, primarily due to the impact of tariffs. FX and other was a tailwind of $2 million in the quarter. As a reminder, the third quarter last year included a $10 million unfavorable impact from the Valais flood. It is not on the slide here, but our holdings and corporate expense was $9 million in the quarter. Holdings and corporate expense this quarter was up $7 million from last year, mainly due to higher accrued labor costs given our stronger performance this year, partially offset by lower head count. We now expect holdings and corporate expense to run at approximately $45 million in 2025, which is a slight increase compared to our view previously.

It is also not on the slide here, but I wanted to summarize the current cost environment we're facing. As you know, we operate a pass-through business model, so we're not materially exposed to changes in the market price of aluminum, our largest cost input. Our other metal costs, we experienced a dramatic tightening of spot scrap spreads in North America in 2024. The tightness continued into the beginning of this year, though spreads have improved in the spot market as we move through the year. Given that a portion of our scrap purchases were negotiated previously, we did not benefit much from this dynamic during the period. However, we expect to benefit more in the fourth quarter this year.

For energy, our 2025 costs are moderately more favorable compared to 2024, although energy prices remain above historical averages. Other inflationary pressures have eased to more normal levels. And as we said in previous quarters, given the weakness we're seeing in several of our markets, we have accelerated our Vision 25 cost improvement program. We have demonstrated strong cost performance in the past, and we're confident in our ability to maintain a right-sized cost structure for the current environment. Now let's turn to Slide 11 and discuss our free cash flow. We generated $30 million of free cash flow in the third quarter, bringing our year-to-date total to $68 million. The year-over-year increase in the first 9 months this year is a result of higher segment adjusted EBITDA, lower capital expenditures and lower cash taxes, partially offset by more cash used for working capital and higher cash interest.

Looking at 2025, we still expect to generate free cash flow in excess of $120 million for the full year, which is unchanged from our prior guidance and from our guidance to start the year despite significantly higher working capital needs in the current environment. Working capital and other is now a larger use of cash compared to previous guidance, driven by higher activities as well as a significantly higher metal price environment in the U.S. compared to the start of the year. It also includes the working capital rebuild in Valais following the flood. So this was already embedded in our guidance to start the year. We continue to expect CapEx, cash interest and cash taxes to be around the same levels as per the previous guidance. As Jean-Marc mentioned previously, we continued our share buyback activities in the quarter. During the quarter, we repurchased 1.7 million shares for $25 million, bringing our year-to-date total to 6.5 million shares for $75 million.

We have approximately $146 million remaining on our existing share repurchase program, and we still intend to use a large portion of the free cash flow generated this year for the program. Now let's turn to Slide 12 and discuss our balance sheet and liquidity position. At the end of the third quarter, our net debt of $1.9 billion was up approximately $115 million compared to the end of 2024, with the largest driver being the translation impact from the weaker U.S. dollar at the end of the quarter. As indicated previously, we expected leverage from last quarter to represent [ a peak ] and that leverage will trend down in the second half of this year. We have made good progress on that front, and our leverage decreased by almost 0.5 turn to 3.1x at the end of the third quarter, and we're on track to be below 3x by the end of the year.

We remain committed to bringing our leverage back down into our target leverage range of 1.5 to 2.5x and maintaining this range over time. As you can see in our debt summary, we have no bond maturities until 2028. Our liquidity increased by over $100 million from the end of 2024 and remains very strong at $831 million as of the end of the third quarter. With that, I will now hand the call over to Ingrid.

Thank you very much, Jack, and thank you, Jean-Marc, for your kind words. I'm honored by the trust placed in me by the Board, and I'm very excited to lead Constellium into its next chapter. Over the past years, we have developed and executed on a value creation strategy at Constellium through the focus on high value-added products, enhancing customer connectivity, optimizing margins and utilizations, focusing on cost and continuous improvement and showing strong commitment to our stakeholders, all of which I'm committed to carry forward. Together with the support of our talented teams, we will continue to strengthen our partnerships with our customers, deliver innovative, sustainable solutions and create value for our shareholders. With that, let's turn to Slide 14 and discuss our current end market outlook.

The majority of our portfolio today is serving end markets benefiting from durable sustainability-driven secular growth in which aluminum, a light and infinitely recyclable material plays a critical role. Turning first to the aerospace market. Commercial aircraft backlogs are at record levels today and continue to grow. Major aerospace OEMs remain focused on increasing build rates for both narrow and wide-body aircraft as evidenced by higher plane deliveries this year compared to last year. Also, supply chain challenges have continued to slow deliveries below what OEMs were expecting for several years in a row now, we are beginning to see signs that these challenges are easing. Demand has stabilized for the most part, and we remain confident that the long-term fundamentals driving aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel-efficient aircraft.

Demand remains stable in the business and regional jet market and demand for space and military aircraft is strengthening. Looking across our entire aerospace business, we believe our product portfolio is unmatched in the industry, and we have industry-leading R&D capabilities for aluminum aerospace solutions. Turning now to packaging. Demand remains healthy in both North America and Europe. As Jack mentioned earlier, we continue to benefit from improved performance at Muscle Shoals, which has set numerous operational records this year. The long-term outlook for packaging continues to be favorable as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from the can makers in both regions and the greenfield investments ongoing here in the U.S.

Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe. Let's now turn to automotive, which is a bit of a different story in Europe versus North America. Automotive production of light vehicles in Europe remains well below pre-COVID levels. Demand in Europe remains weak, particularly in the luxury and premium vehicle and electric vehicle segments where we have greater exposure. Automotive production in Europe is also expected to feel the impact of the current Section 232 auto tariffs given the number of vehicles the U.S. imports from Europe. In North America, automotive production is also below pre-COVID levels. So demand has remained relatively stable. During the quarter, one of our competitors had a very unfortunate fire at one of their facilities in the U.S., which has created an interruption in the aluminum rolled product supply chain in North America.

The entire industry is mobilizing to ensure we limit the impact on our customers. We currently expect a modest benefit from this, so more so in 2026 than this year. In the longer term, we believe electric and hybrid vehicles will continue to grow, but at a lower rate than previously expected. Secular trends such as lightweighting and increased fuel efficiency will continue to drive the demand for aluminum products. As a result, we remain positive on this market over the longer term in both regions despite the weakness we are seeing today. As you can see on the page, these 3 core end markets represent over 80% of our last 12 months revenue. Turning lastly to other specialties. Industrial market conditions in North America and Europe became more stable in the second half of this year and overall demand appears to have stabilized, also at low levels.

We have experienced weakness across most specialties markets for 3 years now. As a reminder, these specialty markets are typically dependent upon the health of the industrial economies in each region, including drivers like the interest rate environment, industrial production levels and consumer spending patterns. We continue to work hard to adjust our cost structure to the current demand environment, which will put the businesses in an even better position when the industrial economies begin to recover. We do believe TID markets in North America can provide us with some opportunities today given the current tariffs make imports less competitive compared to domestic production, and we are already seeing positive momentum on this front.

To conclude on the end markets, we like the fundamentals in each of the markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company in any environment. With that, I turn it back over to Jean-Marc.

Thank you, Ingrid. Turning lastly to Slide 16, we detail our key messages and financial guidance. Our team delivered very strong results that were ahead of our expectations in the third quarter this year, including record third quarter adjusted EBITDA and we returned $25 million to shareholders in the quarter with a repurchase of 1.7 million shares, which led us to reduced leverage of 3.1x. While tariffs are creating broader macro uncertainty and impacting end markets like automotive, we are proactively managing our business to the current environment. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline.

Given our strong performance in the first 9 months of this year and based on our current outlook, including the current end market conditions that Ingrid just described, we are raising our guidance for 2025. We are now targeting adjusted EBITDA, excluding the noncash impact of metal price lag in the range of $670 million to $690 million and free cash flow in excess of $120 million. Our guidance assumes an improvement in the second half this year compared to the first half, including our strong performance in the third quarter. The second half improvement includes the timing of certain tariff mitigations and customer compensations as well as more favorable scrap purchasing, the ramp-up in the Valais and favorable foreign exchange translation. Our guidance also assumes modest benefit from the recent aluminum supply chain interruptions in automotive and includes a revision in our A&T segment that Jack mentioned previously.

Looking to the future, we also want to reiterate our long-term targets of adjusted EBITDA, excluding the noncash impact of metal price lag of $900 million and free cash flow of $300 million in 2028. To conclude, while we continue to face challenging conditions in many of our markets today, some of these challenges are starting to ease compared to the start of this year. We're extremely well positioned for long-term success and remain focused on executing our strategy and shareholder value creation. Before we move to Q&A, I just want to say that it has been an extraordinary honor to lead Constellium and to work alongside such talented colleagues across the globe. Together, we have built a stronger company, and I am deeply proud of what we have accomplished. Ingrid is an exceptional leader with a vision and experience to guide Constellium forward, and I am confident she will take the company to even greater heights. With that, operator, we will now open the Q&A question, please.

[Operator Instructions] And our first questions come from the line of Katja Jancic from BMO Capital Markets.

First, I want to congratulate both Ingrid and Jean-Marc. And then I want to start on the scrap spread. I know you mentioned it was a small impact this quarter. It's going to be a bigger impact next quarter. Can you maybe provide a little bit more color on what that impact specifically was and will be? And then how we should think about looking into next year, given that I think some of your contracts are being negotiated now.

Thank you for your kind words and encouragement and talking now about scrap spreads. So if you remember, in the past, we are saying in any given quarter, scrap spreads can move plus or minus $5 million, right? That was the past. Then obviously, in '24 and in '25, we had unprecedented changes of scrap spreads, very much tightening in '24 and now widening in '25. And we said the full impact in any given quarter can be $15 million to $20 million. However, plus or minus, right? In this case, last year, it was minus. This year, it's a plus. However, as you know, we buy our scrap in staggered installments and some of them are bought over spot market, some of them are quarterly, some of them are yearly. So you've got some kind of a tail in terms of how these scrap spreads flow to our bottom line.

In Q3, we were still buying scrap at spot prices, but also higher prices from earlier in the year. And Q4, that has significantly gone down. And we're seeing the scrap spreads also widening as a consequence of the unfortunate fire we saw at one of our competitors. Looking into next year, to your question about next year, if we remain in the same environment, we believe that there will be some further help from tailwind from scrap spreads. We still maintain the $15 million to $20 million a quarter, but it wouldn't be -- we would be realizing all of it next year, and we've already realized some of it this year. Jack, do you want to add anything?

Yes. I think the only thing I want to add, Katja, is that in Q3, we actually didn't see much benefit relative to last year given the dynamic that Jean-Marc mentioned. And year-to-date, it's actually been a headwind for us.

Yes, that's an important precision.

Okay. And just because I'm thinking -- I think the $15 million to $20 million was in '24, right, on a quarterly basis when the scrap spreads really compressed. But when we look at the Midwest premium where it is today, which is an all-time high, why -- I'm just trying to understand why the spreads as we see them right now wouldn't contribute more than the $15 million to $20 million.

And I think that's what -- I mean, it's always part of what reference are you taking, right? Back in '24, we benefited from good scrap spreads that were bought in '23 and bad scrap spreads that were spot purchased, right? So that diminished the impact. This year, the same phenomenon happens the other way around. And you're absolutely right that with LME and -- well, mostly the Midwest rising, that is widening even more the spreads in dollar terms. And we'll see most of that. We'll see some of that in Q4. We'll see most of that next year if the current environment continues.

Maybe just.

And maybe, just on the 15 and 20, maybe trending closer to the 20 than the 15 given the Midwest price.

Okay. And on the -- I know there was a quick mention on the Novelis fire would have a small benefit in '26. Can you quantify how big of a benefit it could potentially be?

It's enough that we talk about it, but not enough that we would put a number just yet. It will depend on a number of factors. As you know, following this fire, the whole industry rallied to support our common customers, right? But it was very hard to deliver in quantities in the -- just in the wake of the fire because products need to come a little bit from the U.S., which is actually quite tapped out in terms of capacity. So a lot of it needs to come from overseas. That takes time. You need qualification time even if it's accelerated. So we think we're going to see some benefit in '26, more in '26 than we're seeing in '24 -- in '25, sorry, and that should continue through the first half of '26. Precise number is too early to tell.

We are now going to proceed with our next question. And the questions come from the line of Corinne Blanchard from Deutsche Bank.

Congratulations on the strong quarter. Jean-Marc, I'm sure you will be missed, and welcome to Ingrid, and I'm sure people will be looking forward to hear more in the coming weeks. Maybe 2 questions. I mean, on the aerospace, I mean, you guys have had an amazing margin profile if you look back in the last 4 to 6 quarters, and I think we're only seeing an increase. Can you help us understand how do we model it out in 4Q and in 2026? And then maybe the second question would be now you're about $200 million away from that $900 million of EBITDA by 2028. Can you just help me again bridge the gap over the next 2 years and how to think about it from a volume and pricing perspective?

I'll ask my colleagues, both Ingrid and Jack to help me in answering your 2 questions. So -- but I'll take a crack at it first. So the -- if you take the midpoint of the range, we are 220 million away from our 2028 target. So there's still quite a bit of wood to chop, but I think it's fair to say we are ahead of our plan, and we feel more confident now. We felt very confident, but we feel even more confident with our 2028 target. If you remember the bridge to '28, we had a number of actions, but a lot of them were under our control. We have some specific investments that are in the plan. They are actually -- some of them are already operating like our recycle center in Neuf-Brisach. Others, we are digging furiously. Others, we're building furiously. And I'm thinking of the casting center in Muscle Shoals and the Airware, the aerospace-focused products in [indiscernible]. And then we have some that are still on the drawing board, even though we are starting to build -- to buy some long lead time items like the modernization and extension of our Cast House in Ravenswood.

And when I say these are under our control, they are under our control from 2 standpoints. One is it's CapEx, right? So we build stuff and then we'll make products out of it. The other one is we don't need customers for these to be profitable. And certainly, as you know, most of these investments are geared towards recycling more products. And obviously, in the current environment, these investments are going to be more exciting and more profitable. The Airware investment is a little bit of a different story, even though it is casting, you need customers for that. And I think what we're seeing with the aerospace ramp-up getting a little bit easier and especially the development in space applications where we have a very strong position. I think that bodes very well for this investment. So overall, it's a long answer to one part of the bridge, right, the CapEx side, we feel very comfortable with our execution on CapEx and our ability to make money and maybe more money than what we had initially planned with those investments.

Now there are other aspects to the bridge. Some of it was our outlook on scrap spreads. The scrap spreads we have in the bridge to 2028 are lower. I mean, are narrower just to be precise and what is currently the case, much narrower. We'll see whether the current spreads continue. And if they are, that would be a tailwind to us. Now on the headwind side, I think it's fair to say that we're disappointed with automotive, the end market, right, the SAARs, the number of vehicles built in Europe, especially, but also a little bit in the U.S. So that would be a headwind. And we are seeing overall weak conditions in Europe. Now by 2028, I think Europe will have gotten their act together and things will be better. But at the moment, if I look honestly at it, I think we're running behind on that front. So that's kind of the puts and takes to the 2028 target.

And obviously, on the cost side, we've done a very good progress with our cost management with Vision 25, more to come. I'm sure Ingrid will have a new plan for us, for the company in the future. So I think we're in pretty good shape on this. And then you had a question also on Aerospace, I think Ingrid knows aerospace inside out. So it is best she answers it. And obviously, you've got your own views on the 2028 long term. So please go ahead.

Thank you very much, Jean-Marc. And thank you, Corinne, for your nice words. I think with respect to aerospace, I think what makes us very different from some of our competitors is that we have a very, very wide product portfolio, including aluminum lithium technology, which is really a great material for a lot of niche markets where we play. So we are really focused on more value-add per product that we sell versus some of our competitors are maybe more dependent on volume ramp-ups of aerospace OEMs. And this is really driving our margin that is very, very different to some of our peers. And that's really a multiyear journey that we have developed with our R&D capabilities. So we have a lot of innovation material in the pipeline that is driving this differentiated margin, and we will continue to work on this.

You also know military jets are good. Space has been actually quite good for us in terms of development. And overall, the supply chain in aerospace seems to improve, particularly on the side of Airbus. With respect to 2028, I think Jean-Marc has already mentioned almost all of it. I would just maybe add one little point around commercial discipline and operational execution. I think you have seen now that [ TARP ] has much better financial performance driven in part by the Muscle Shoals better operational performance. So that remains a huge focus for us. We have worked very hard already on this on the cost side and operational excellence, but we still have potential to improve, and this will also be part of our journey to the $900 million for 2028.

I will just add, I mean, Ingrid doesn't brag about it, but you guys have followed us for quite a while. You see our aerospace margin, which you hinted at being exceptional this quarter, Corinne. We say we're at more than $1,500, $1,600 year-to-date. When Ingrid took over the A&T segment, that's 2015, right, 10 years ago, we're running at less than $500 per ton. So the focus on value-added cannot be understated -- overstated, sorry. We have really an excellent commercial and capital discipline to make sure we -- an innovation drive to make sure we get the best out of our assets so that we get the best returns for our shareholders.

We are now going to proceed with our next question. The questions come from the line of Bill Peterson from JPMorgan.

I also would like to congratulate Ingrid on the new appointment and also John-Marc, it's been a pleasure working with you. I wanted to first ask about the bridge, just basically to understand the drivers for the 2025 guidance, if you can quantify or stack rank things like the onetime customer payment, any benefit or if there is any benefit from the restatement you spoke to, maybe the potential tariff headwind, which may not be as much of a headwind or where you maybe found some success versus what you've been able to mitigate. And then, of course, scrap spreads, just to try to really define how much, I guess, of a benefit we should think about in the fourth quarter or if there's anything else to raise as part of why you raised your guidance for this year?

Thank you, and I'll turn it to Jack for this difficult question.

Yes. I'll start and Jean-Marc can help me. So you mentioned a few elements, Bill. I think you have -- there's a reference point. You have to be careful about whether it's versus our prior expectation or kind of versus prior year, if you will. and the expectation there. But for customer compensation, for example, AS&I, that was already embedded in our prior guidance. Now we did realize the benefits this quarter, which is great. And specifically in terms of the amount, we're not going to be very kind of explicit, Bill. But if you were to refer to the bridge in the price and mix bucket, mix was a little bit more favorable, if you will. But then the vast majority of the price is driven by this customer compensation for the underperformance of automotive program. So that's kind of one piece.

And then in terms of raising the guidance, obviously, we had a very strong third quarter, which has led us -- give us more conviction into Q4 and to finish off the year. And Q3 was -- came in better than what we had expected. On top of it, you alluded to this accounting adjustment and the magnitude there, we can be very explicit because it's been disclosed. It for the first half of the year, it's in the neighborhood of $10 million -- $12 million to be exact, $12 million of benefits, a good guide for A&T segment adjusted EBITDA. And then in terms of the scrap piece, I think Jean-Marc already talked a lot about the dynamics there. We didn't see as much benefit as maybe you would have imagined based on where the spot markets are today year-to-date, but we do expect to see more benefits in the fourth quarter given our kind of more open positions and some modest benefits coming in from the unfortunate fire that happened at one of our competitors' plants. And obviously, we'll continue to focus on cost control and Vision 25.

On the flip side, and here, I'm going to a little bit of kind of puts and takes, right? On the other side, when you look at the guidance for Q4 with relation to the view on the full year, we had very strong performance in A&T. We're able to benefit from favorable mix in aerospace due to a good volume of high-margin products, which could help compensate for a weaker mix in the fourth quarter due to timing reasons. And then Europe continues to be quite weak across many different markets. And by the way, yes, we should see some modest benefit from the fire at our competitors' [ plants ]. But on the other hand, it also it's creating a little bit of uncertainty or volatility with order patterns with the domestic OEMs. So you got to take that into consideration.

And maybe more specifically to this point, Bill, we'll sell more rolled products, but not enough, obviously, to compensate for the shortfall that is created by this fire. You've heard [ Ford reduce ] their projections for build rates. And obviously, we also supply out of auto structures and industry products to different customers, including this one. So if you don't build the cars, we don't sell the product. So there's all kinds of puts and takes to our -- to this guidance here. But fundamentally, we have momentum [ which ] I think, the main message.

Yes. No, a lot there. I appreciate the color. I wanted to ask a bit more on aerospace. It sounds incrementally more positive that the aerospace destocking is easing. I guess how should we view the recovery? Is this still kind of maybe in your mind, more of a 2027 story? Or is this -- can this actually revert and turn positive in '26? Just trying to get a sense for the trajectory of coming out of this destocking cycle.

Thanks for the question, Bill. I believe that -- I mean, it's very hard to predict because there is new issues for [indiscernible] as they ramp up. But clearly, we see, particularly on the European side that now it's only 2% of the supply chain that is holding back the rest of the supply chain. So it's a very small number today. And I'm sure with the different task forces that exist to overcome those industry challenges, this is going to ease throughout the year of 2026. Now whether it's going to come towards the end of '26 or '27, I think, still remains to be seen. But clearly, there is an improvement that we feel across the supply chain. And you have heard also that Boeing is going to raise the build rates. They got approval from FAA for the 737 MAX, even though it's small, but it's the first path to the trajectory of growth that they have been painting to their suppliers. So I feel that things are starting to come together.

And in a few quarters from now, we should see a potentially much better picture than we see today.

Bill, I think it's fair to say that we are more optimistic about faster path to recovery for the supply chain than we were 3 months ago.

Yes, definitely.

It's difficult to put a date to it. We'll let you know as soon as we see.

[Operator Instructions] We are now going to proceed with our next question. And the questions come from the line of Timna Tanners from [indiscernible].

Congrats to Ingrid. Best wishes to Jean-Marc. I wanted to follow up with the same kind of question that Bill asked on aerospace, but on the broader European market. I know for a while now we've been waiting for that market to kind of bottom out broadly. Any things that we should watch for just interest rates, any sentiment, anything that you can guide us to, to get confidence in a turnaround in Europe and timing there?

You're talking the broad European market beyond aerospace, right?

Yes.

Timna, thank you for the question. Yes, I think it feels that the markets have been really weak for 3 years now. And we see some markets to really bottom out. It's very, very difficult to predict. As you know, we have strong markets in Europe, like packaging is very strong for can sheet, but also other packaging markets like flexible packaging. So these are running very, very well and very stable. Automotive, of course, is impacted by everything that's happening from the tariffs to the transition to electric vehicles. So I think there's a lot of questions right now on what is the best powertrain for the future and how is regulation going to change. So I think a lot of our automotive customers are really reviewing what their strategy medium to long term is really going to be.

And then I think on industrial markets, we see mixed pictures. I mean some of our operations are well loaded. Some operations are really struggling. Rail business is good and continues to grow. So I would say it's a very, very diversified picture, but it's clear that the more commodity-based markets like building and construction, where we don't really have a footprint continue to be weak. So I would say there is positives and negatives.

But it feels to Ingrid's point about 3 years and counting, Germany seems to go into a mode of stimulating a little bit more its economy. So that's a positive, should be a positive. And then you've got defense spending, which should ramp up as well, where we are well positioned. So I think the way to think of Europe is a tale of many different niches, right? There's one big market, can sheet, which is great. Actually, it's undersupplied. We're sold out for many, many years. And then you've got plenty of different niches that are some good, some bad. And automotive, I think the jury is still out.

Okay. My other question is just trying to dig in a little bit on the impact of the rise in aluminum and Midwest premium price in particular. So I know you exclude the noncash impact of the metal price lag, but the higher EBITDA guidance and no change in free cash flow implies an increase in working capital that makes sense. Can you talk us through any -- or quantify any benefits of the price run-up in the quarter for your higher EBITDA? Or is that at all an impact? And if you could also address the way to think about the cash impact as well.

So Jack will help me. But on the EBITDA side, the only benefit from the rise in LME and Midwest is actually through scrap spreads, right, which follow supply-demand balance situation, and it's favorable to the buyers today. So -- but that's an impact we have, right? Recycling becomes more profitable when the material is more expensive, primary is more expensive and recycling scrap becomes more profitable. But on the other aspects, it's a pass-through business. So you may have a little bit of a timing-related impact one month to the next, but that's nothing really to write home about. And on the cash impact, obviously, rising metal prices means we need to replenish our inventories constantly, and we replenish them with more expensive metals. So that is a drag on our cash flow. That's a one-off drag on our cash flow this year.

Yes. And I think -- I mean, it's a type of question, Timna, that we can go into a lot more details afterwards, right? But maybe one way to think about it is to take a look at the changes in working capital over the first 9 months, and you see it's a large negative. Now there's an element related to higher activities, right? We're doing more business, higher volume. But then there is a big piece that related to the metal price increase. But all in all, on a net basis, that's why we have maintained our free cash flow guidance of over $120 million even though -- even though adjusted EBITDA, excluding that lag, the guidance there was great.

And Timna, just to build on that, if you look at our initial guidance and now our guidance today, the EBITDA has increased, the cash flow hasn't. And the delta here can approximate the drag we get because of the LME Midwest going up, right? So that gives you an idea, are we in the $60 million, $70 million, $80 million, $90 million. I mean that's kind of a broad range of drag we have. So what it means is the cash flow generation, if everything holds exactly the same next year [ that ] $120 million is vastly understated.

Right. And just to finally clarify, so the guidance does reflect the fact that the aluminum price is even higher today's spot price than where it was average for the third quarter. Is that reflective in your guidance?

Absolutely.

Thank you. We have no further questions at this time. So I'll hand back to Jean-Marc Germain, CEO of Constellium for closing remarks.

Thank you. Thank you, everybody. So as you can see, we are ahead of our plan. We are building momentum, and our new CEO, Ingrid, is ideally suited to lead the company towards its 28 objectives and beyond. I leave as CEO at the end of the year, but I remain as a shareholder as an adviser to the Board, very excited about what's ahead, and I very much look forward to hearing about our prospects for 2026 from Jack and Ingrid when they update us on our progress in February of next year. Thank you, everybody, and have a good day. Bye-bye. Ingrid.

Thank you very much, Jean-Marc, for your kind words. Well, thanks, everybody, for your interest in Constellium. We are happy with the progress we made, as Jean-Marc just said, and we look forward to an exciting end of the year. We also look forward to updating you on our progress in February, and thank you very much in the meantime. Bye-bye.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a great day.

Good morning or good afternoon, and welcome to the Constellium Second Quarter 2025 Earnings Call. My name is Adam, and I'll your operator today. [Operator Instructions] I will now hand the floor to Jason Hershiser, Director of Investor Relations to begin. So Jason, please go ahead when you're ready.

Thank you, Adam. I would like to welcome everyone to our second quarter 2025 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; and our Chief Financial Officer, Jack Guo. 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'd 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 include statements regarding the company's anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties.

For a summary of specific risk factors that could cause 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 10-K. All information in this presentation is as of the date of the presentation. 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 to supplement our GAAP disclosures.

And with that, I would now like to hand the call over to Jean-Marc.

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. Let's begin on Slide 5 and discuss the highlights from our second quarter results. I would like to start with safety, our #1 priority. Our recordable case rate in the second quarter was 2.6 per million hours worked, following our strong safety performance in the first quarter and bringing our year-to-date recordable case rate to 1.8 per million hours worked. While this performance remains best in class, this is a humbling reminder that we all need to constantly maintain our focus on safety to achieve the ambitious target we have set of 1.5 per million hours worked.

Turning now to our financial results. Shipments were 384,000 tons or up 2% compared to the second quarter of 2024 due to higher shipments in part that were partially offset by lower shipments in A&T and AS&I. Revenue of $2.1 billion increased 9% compared to the second quarter of 2024 due to higher shipments and favorable price and mix including higher metal prices experienced in the quarter versus last year. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk.

Our net income of $36 million in the quarter compares to net income of $77 million in the second quarter last year. Adjusted EBITDA was $146 million in the quarter, though this includes a negative noncash impact from metal price lag of $13 million. If we exclude the impact of metal price lag, the real economic performance of the business reflects adjusted EBITDA of $159 million in the quarter compared to the $180 million last year.

Moving now to free cash flow. Our free cash flow in the quarter was strong at $41 million. During the quarter, we returned $35 million to shareholders through the repurchase of 3.4 million shares. Our leverage at the end of the second quarter was 3.6x, though we expect this to be the peak and for leverage to trend down as we move through the rest of the year. We delivered solid results this quarter despite continued demand weakness across most of our end markets outside of packaging. We remain focused on strong cost control, free cash flow generation and commercial and capital discipline. Overall, I am quite pleased with our second quarter and first half performance.

Now please turn to Slide #6. Before turning the call over to Jack, I wanted to give you a quick update on the Section 232 tariffs as well as other tariffs under IEEPA and how we see the potential impact to Constellium. Before going into details on the slide, let me summarize a bit. As I mentioned last quarter, the tariff situation is a fluid and multifaceted situation. We see both some positive and negative impacts on our business. And at this stage, we continue to believe it presents us with various opportunities as well as some additional costs, but it should be a net positive for us. The guidance we are giving today does include the direct impact from tariffs that we are able to estimate given what we know today, and it does include several mitigating factors we have identified to offset the impact. It also includes our current assumptions on end market demand in the current environment. Our guidance assumes a relatively stable macro environment, and it does not include potential impacts from additional tariffs to those that are known today.

Shifting to the details on the slide now. On the production side, we are mostly local for local in the regions where we operate. Our automotive structures business in the U.S. buys extrusions from Canada, including from our joint venture in Canada. These extrusions have become more expensive under Section 232 tariffs which impacted the first half by around $7 million on a gross basis. The gross costs could continue to accumulate going forward to an additional $20 million for the rest of the year before mitigating items. We are working with our customers and suppliers on pass-throughs and other mitigation efforts, and we have made good progress on a number of them. We expect these actions to result in some benefits in the second half, which will help mitigate the impact on our results.

In Aerospace, we shipped small quantities from Europe to the U.S. to serve global OEMs, although this has a pass-through today, and we will not be impacted. Regarding the automotive specific tariffs that fall under Section 232, the volumes we ship across Mexican and Canadian borders are compliant with USMCA. On the metal supply side, we import some primary aluminum from Canada given the lack of smelter capacity here in the U.S. As of today, we have commercial agreements in place to help mitigate the tariff impact on this metal.

In terms of scrap, aluminum scrap is excluded from the current scope of Section 232 tariffs, and we purchased most of our scrap needs from dealers in the U.S. The impact of the scrap from tariffs should be a net positive as the rise in the U.S. regional premium is beneficial for the domestic supply chain. We are starting to see this already as scrap spreads for used beverage cans, for instance, in the U.S., have widened in the first half of this year, and we expect to see some benefits of this in the second half.

In terms of commercial impacts, these 2 should be a net positive for Constellium. Today, over 1 million tons of flat-rolled aluminum imports are coming into the U.S. each year, given the lack of domestic supply available. Tariffs will make domestically produced products more competitive, and we should benefit from this. During the first half of this year, we announced price increases for all rolled products shipped in the U.S. This has already started to benefit us on noncontracted volumes in the second quarter this year, and this benefit should continue to grow moving forward.

In terms of end markets, the tariff and trade situation is creating broader macro uncertainty, and it is having a negative impact on markets such as automotive. Our guidance assumes weak conditions in automotive in both North America and Europe, and we are monitoring the conditions very closely. We believe that the newly announced trade deals will somewhat reduce uncertainty in the global markets. That said, we are not discounting the broader macro uncertainty. We remain focused on our cost reduction efforts under our Vision 25 program, and we are optimizing our existing capacity depending on market conditions such as shifting some capacity where we can from automotive markets into packaging markets.

To close out on tariffs, as I said before, the situation remains very fluid. We are continually monitoring and assessing the potential impact of current and future trade policies, though at this stage, we believe the net impact of tariffs on aluminum present us with some opportunities in the current environment.

With that, I will now turn the call over to Jack for further details on our financial performance. Jack?

Thank you, Jean-Marc, and thank you, everyone, for joining the call today. Please turn now to Slide 8, and let's focus on our A&T segment performance. Adjusted EBITDA of $78 million decreased 13% compared to the second quarter last year. Volume was a headwind of $18 million due to lower aerospace and TID shipments. Aerospace shipments were down 12% in the quarter versus last year as commercial OEMs continue to work through excess inventory as a result of lingering supply chain challenges. Demand in space and military aircraft remained healthy. TID shipments were down 11% versus last year as commercial transportation and general industrial markets remained weak in the quarter. Price and mix was a tailwind of $2 million due to improved contractual and spot pricing in Aerospace and TID partially offset by weaker overall mix in the quarter. Costs were a tailwind of $2 million primarily as a result of lower operating costs. FX and other was also a tailwind of $2 million in the quarter due to the weakening of the U.S. dollar.

Now turn to Slide 9, and let's focus on our P&ARP segment performance. Adjusted EBITDA of $74 million, increased 12% compared to the second quarter last year. Volume was a tailwind of $14 million as higher shipments in packaging were partially offset by lower shipments in automotive. Packaging shipments increased 14% in the quarter versus last year as demand remained healthy in both North America and Europe. In North America, we also benefited at Muscle Shoals from improved operational performance in the quarter. Automotive shipments decreased 14% in the quarter with weakness in both North America and Europe. Price and mix was a headwind of $7 million in the quarter due to tariff-related metal impacts and weaker mix. Costs were a modest headwind of $1 million primarily as a result of unfavorable metal costs mostly offset by lower operating costs. FX and other was a tailwind of $2 million in the quarter.

Now turn to Slide 10. Let's focus on our AS&I segment. Adjusted EBITDA of $18 million decreased 40% compared to the second quarter of last year. Volume was a $1 million headwind as a result of lower shipments in automotive mostly offset by higher shipments in industry shooted products. Automotive shipments were down 12% in the quarter with weakness in both North America and Europe. Industry shipments were up 14% in the quarter versus last year. The increase in industry shipments is a result of us catching up to the lost volumes from the Valais interruption as industry markets in Europe remained weak overall. Price and mix was a $16 million headwind in the quarter due to weaker pricing for spot volumes and a weaker mix. Costs were a tailwind of $5 million primarily due to lower operating costs, partially offset by the net impact of tariff headwind in the quarter. It is not on the slide here, but our holdings and corporate expense was $12 million in the quarter. Holdings and corporate expense this quarter was up $6 million from last year due to additional IT spending with the upgrade of our ERP system and higher accrued labor costs partially offset by lower headcount. As we said last quarter, we expect holdings and corporate expense to run at approximately $40 million in 2025.

It is also not on the slide here, but I wanted to summarize the current cost environment we're facing. As you know, we operate a pass-through business model. So we're not materially exposed to changes in the market price of aluminum, our largest cost input. On other metal costs, we experienced a dramatic tightening of spot scrap spreads in North America in 2024. The tightness continued into the beginning of this year, though spreads improved in the spot market as we moved through the first half of the year. Given our scrap purchases we're essentially locked in for the second quarter, we did not benefit from this dynamic during the period. However, we expect to benefit starting in the third quarter this year and into the rest of the year.

For Energy, our 2025 costs are moderately more favorable compared to 2024, although energy prices remain above historical averages. Other inflationary pressures have eased to more normal levels. And as we said in previous quarters, given the weakness we're seeing in several of our markets, we have accelerated our Vision 25 cost improvement program with measures such as improving operational efficiency, reducing headcounts and other labor costs, reducing nonmetal procurement spending, optimizing maintenance costs by minimizing the use of outside contractors and cost reduction efforts across many other categories. We have demonstrated strong cost performance in the past, and we're confident in our ability to rightsize our cost structure for the current demand environment.

Now let's turn to Slide 11 and discuss our free cash flow. We generated $41 million of free cash flow in the quarter, bringing our year-to-date total to $38 million. The year-over-year increase in the first half is a result of less cash used for working capital, lower capital expenditures and lower cash taxes, partially offset by lower segment adjusted EBITDA and higher cash interest. Looking at 2025, we expect to generate free cash flow in excess of $120 million for the full year, which is unchanged from our prior guidance. We expect CapEx to be around $325 million for the full year. We still plan to reduce our CapEx this year to stay prudent though most of the benefits are offset by unfavorable foreign exchange translation.

Cash interest and cash taxes are running slightly higher for the year than previously expected at $125 million and $45 million, respectively. We expect working capital and other items to be a modest use of cash for the full year which includes the impact of higher metal prices this year and the working capital ramp-up in Valais. At this stage, we have fully rebuilt our supply chain and inventories in Valais, which has had a negative impact on free cash flow in the first half of this year. As Jean-Marc mentioned previously, we continued our share buyback activities in the quarter. During the quarter, we repurchased 3.4 million shares for $35 million bringing our year-to-date total to 4.8 million shares for $50 million. We have approximately $171 million remaining on our existing share repurchase program, and we intend to use a large portion of the free cash flow generated this year for the program.

Now let's turn to Slide 12 and discuss our balance sheet and liquidity position. At the end of the second quarter, our net debt of $1.9 billion was up approximately $120 million compared to the end of 2024, with the largest driver being the translation impact from the weaker U.S. dollar at the end of the quarter. Our leverage was 3.6x at the end of the quarter were up 0.5x versus the end of 2024. As Jean-Marc mentioned previously, we expect this to be the peak leverage and to trend down as we move through the year with the expected improvement in trailing adjusted EBITDA. We currently expect to finish the year with leverage at or below 3x, and we're committed to bringing our leverage back down into our target leverage range of 1.5 to 2.5x and maintaining this range over time. As you can see in our debt summary, we have no bond maturities until 2028. Our liquidity increased by $114 million from the end of 2024 and remains strong at $841 million as of the end of the second quarter.

Before turning it back over to Jean-Marc, I wanted to mention a recent development for the company. As of June 30, 2025, Constellium no longer qualified as a foreign private issuer and will transition into becoming a U.S. domestic filer starting in 2026. As you probably recall, beginning in 2025, Constellium was already voluntarily electing to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC. Given this change in filing status, we will begin to file all other required U.S. domestic forms with the SEC, including a DEF 14A and Section 16 forms in addition to our annual and quarterly reports starting on January 1, 2026.

With that, I will now hand the call back to Jean-Marc.

Thank you, Jack. Let's turn to Slide 14 and discuss our current end market outlook. The majority of our portfolio today is serving end markets benefiting from durable sustainability-driven secular growth, in which aluminum light an infinitely recyclable material plays a critical role. However, many of these markets continue to face demand headwinds today and are also now facing uncertainty given the tariff situation.

Turning first to the aerospace market. commercial aircraft backlogs are robust today and continue to grow. Major aero OEMs remain focused on increasing build rates for both narrow and wide-body aircraft, those supply chain challenges have continued to slow deliveries below what OEMs are expecting for several years in a row now. As a result, aerospace supply chains need to adjust to lower-than-expected build rates which is causing a shift in demand to the right for some of our products. Despite the slowdown in the near term, demand has stabilized for the most part, and we remain confident that the long-term fundamentals driving aerospace demand remain intact, including growing passenger traffic and greater demand for new, more fuel-efficient aircraft.

Demand also remained stable in the business and regional jet market and healthy for space and military aircraft. Looking across our entire aerospace business, we believe our product portfolio is unmatched in the industry, and we have industry-leading R&D capabilities for aluminum aerospace solutions. In terms of outlook, I want to make one additional point on our A&T segment. In the past, we have talked about through the cycle adjusted EBITDA target for the segment of $1,000 per ton. Based on our contractual positions and the performance of the business, we now expect through the cycle adjusted EBITDA of $1,100 per ton, and we expect to remain above that level in the near term.

Turning now to packaging. Demand remains healthy in both North America and Europe. The long-term outlook for this end market continues to be favorable, as evidenced by the growing consumer preference for the sustainable aluminum beverage can, capacity growth plans from both can makers in both regions -- from all can makers in both regions, sorry, and the greenfield investments ongoing here in North America. Longer term, we continue to expect packaging markets to grow low to mid-single digits in both North America and Europe.

Let's turn now to automotive. Automotive OEM production of light vehicles in Europe remains well below pre-COVID levels and is still below pre-COVID levels in North America as well. Demand in North America has continued to soften in the near term and is expected to feel the impact of the current Section 232 auto tariffs. Demand in Europe remains weak particularly in the luxury and premium vehicle and electric vehicle segments, where we have greater exposure. Automotive production in Europe is also expected to feel the impact of the current Section 232 auto tariffs given the amount of vehicles the U.S. imports from Europe.

In the long term, we believe electric and hybrid vehicles will continue to grow, but at a lower rate than previously expected. Sustainability trends such as light-weighting and increased fuel efficiency will continue to drive the demand for aluminum products. As a result, we remain positive on this market over the longer term in both regions despite the weakness we are seeing today. As you can see on the page, these 3 core end markets represent over 80% of our last 12 months revenue.

Turning lastly to other specialties. In North America, demand appears to have stabilized, albeit at low levels and demand remains weak in Europe. We have experienced weakness across most specialties markets for 3 years now. We believe TID markets in North America provide us with some opportunities today given the current tariffs make imports less competitive compared to domestic production. As a reminder, these specialties markets are typically dependent upon the health of the industrial economies in each region, including drivers like the interest rate environment industrial production levels and consumer spending patterns.

We continue to work hard to adjust our cost structure to the current demand environment, which will put the business in an even better position when the industrial economies do recover. To conclude on the end markets, we like the fundamentals in each of the markets we serve, and we strongly believe that the diversification of our end markets is an asset for the company in any environment.

Turning lastly now to Slide 15. We detail our key messages and financial guidance. Our team delivered solid results in the second quarter this year despite continued demand weakness across most of our end markets outside of packaging. We returned $35 million to shareholders in the quarter with a repurchase of 3.4 million shares. While tariffs are creating broader macro uncertainty and impacting end markets like automotive, we are proactively managing our business to the current environment. We remained focused on strong cost control, free cash flow generation and commercial and capital discipline.

Given our solid performance in the first year and based on our current outlook, including the current end market conditions I just described and assuming a relatively stable macro environment, we are raising our guidance for 2025. We are now targeting adjusted EBITDA excluding the noncash impact of metal price lag in the range of $620 million to $650 million and free cash flow in excess of $120 million. Our guidance assumes a modest improvement in the second half this year compared to the first half. This improvement includes the timing of certain tariff mitigations and customer compensations, which will be more pronounced in the third quarter as well as a more favorable scrap purchasing, the ramp-up in Valais and favorable foreign exchange translation in the back half of the year.

Looking to the future, I also want to reiterate our long-term targets of adjusted EBITDA, excluding the noncash impact of metal price lag of $900 million and free cash flow of $300 million in 2028. To conclude, while we continue to face challenging conditions in most of our markets today, we believe that this will pass, and I remain very excited about our future and the ability to seize the many opportunities in front of us which we have demonstrated in the past. We are extremely well positioned for long-term success and remain focused on executing our strategy and shareholder value creation.

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

[Operator Instructions] And our first question today comes from Corinne Blanchard from Deutsche Bank.

Two questions here. Maybe the first one, can you dive a little bit into what gave you the confidence to raise the guidance this quarter? And I think everyone since you guys have been pretty cautious and we will probably have expected it to happen next quarter. So that was definitely a great surprise to read that this morning. And then the second question, could you also give some detail on the cadence that you're expecting between 3Q and 4Q? I know you mentioned the second half being slightly better than the first half, but just wondering how that developed between the 2 quarters?

Yes, good morning, Corinne, thanks for the questions. So to start with the first one, and I'll ask some help from Jack for both questions 1 and 2 actually. The confident to raise guidance. So we are quite pleased with our first half, and we look at our order book, and we look at our performance, that's what is informing us for the second half. I think it's useful to, as you said, to maybe give the different puts and takes here going into the second half. In terms of what is going well, I mean, packaging is going well. We -- in both continents, and our performance at Muscle Shoals continues to improve. So we're quite pleased with that, and that's helping us really secure substantial gains in packaging, as you've seen in the growth that we are experiencing over the last year.

The second impact is last year was a tough year for us. We've really focused very strongly on cost reduction. Our Vision 25 program is running very well ahead of our expectations, like the packaging volumes are. And finally, the scrap spreads are also beneficial in the U.S. with new tariff situation and the increase in the Midwest premium. So these factors are good. As Jack mentioned, the scrap spreads really -- haven't really benefited us in the first half. Another element also that is benefiting us in terms of translation into U.S. dollars is a foreign exchange. It hasn't really benefited us in the first half. It's going to benefit us in the second half. So these 4 factors, right, packaging volumes, Vision 25, scrap spreads and foreign exchange are better than our assumptions that were underlying our initial guidance.

Now there's a few things that are worse, and it's really on automotive, where the picture is not getting prettier we thought at the beginning of the year that our assumptions were conservative. We don't think so anymore. The outside forecasts have kept on going down week after week nearly. So we are approaching automotive in the second half with quite a bit of caution actually. So that's weighing down on our raised guidance, so to say.

And then in terms of aero and TID and -- well, this is kind of going as planned. We would like aero to pick up a little bit quicker and sooner, but we're not planning for it in the second half. So that's kind of what's underlying the different assumptions. Jack, do you want to add anything and maybe comment on the cadence as well?

Sure. So I think the only other point I wanted to add is we're doing quite well in terms of working with our customers and suppliers on mitigating the tariff impact, as well as some of the weakness we're seeing in end markets such as automotive. So those benefits, we expect them to start coming in, in the third quarter and into the rest of the year, which is a factor to be considered. And given those benefits coming into the third quarter, we're expecting third quarter performance to be stronger than the second quarter. But then obviously, in Q4, we have the normal kind of seasonality will be weaker than Q3.

The next question comes from Bill Peterson from JPMorgan.

This is Bennett on for Bill. I wanted to start with packaging. The packaging shipments came in quite strong. It looks like the strongest actually since the second quarter of '22. So could you shed a little more color on what improvement you saw at Muscle Shoals during the quarter? And if you would and/or could pivot further ABS capacity to packaging in the meantime?

Yes. So the packaging strength is in both Europe and North America. And as you point out, when automotive is weak, it gives us opportunity to have more time available on our mills to dedicate to packaging. And that's with the backdrop of a packaging in a market that is quite healthy in both regions. So that has helped us quite a bit in achieving that very nice performance in shipments in Q2. So as I said, some of it is because we're running well. So that's a good thing. Some of it is because automotive is not going well, which is not such a good thing.

In terms of running well, our operations at Muscle Shoals are stabilized quite a bit. You know that we ran into quite a few operational issues post COVID that took us quite a bit of time to address in terms of getting the right manning, the right trading, the right performance from our assets through a more predictive maintenance. So all these things are coming into play now. And we feel quite confident that now that we've had 7, 8 months of very good performance at Muscle Shoals, and we keep on making progress. And we feel very confident about the future. So we'll keep on working hard to maintain that and improve that level of performance.

But I think all things are pointing in the right direction. At the same time, it's a plan that has further potential for improvement, which we're working on, and that requires obviously some capital expenditures, which we are planning for in the -- in the -- through planning horizon through '28. But not only are we happy with where we are, but we're quite excited about the opportunities we have for further improvements at Muscle Shoals.

And then coming to Europe and auto, the outlook remains challenging. I think in the past, you've suggested that the company wouldn't look to invest meaningfully there just given the import pressures. But as we think about the strategic outlook for this business, to what extent have you started to engage at all with any Chinese OEMs looking to localize capacity in the coming years?

We haven't done any of that, Bennett. I mean we'll see whether they build assembly plants. As I mentioned, we'll be a legitimate supplier to whatever assembly line there is in Europe. You know that the products we make don't travel very much because the age Arden. And therefore, you've got a few weeks of shelf life, really. So local assembly of wherever an assembly line is, they need to procure their parts from reasonably close by. So we'll be a legitimate supplier to whatever customer sets up new lines in Europe, but we haven't been engaged in any discussion of that nature just yet.

[Operator Instructions] Our next question comes from Josh Sullivan from The Benchmark Company.

Jean-Marc, just on aerospace. In your comments, you talked about the shift in demand to the right from some products. Was that a general comment just on the overall aerospace cycle that we've seen over the last couple of quarters that we're adjusting to? Or is there any color you can provide just on the aerospace demand incremental either way in 2Q?

Yes. So I think, Josh, as you know, our products are quite a bit of lead time between the time we -- we ship them to the customer and time the aircraft actually is delivered. And what you've seen, I think, even better than us is between the forecast that were done, say, 2 years ago by an OEM and what they are building today, there's quite a gap. And that gap has kept on being pushed like a bubble to the right. And that's what we're caught at, right? So the shipments we made 2 years ago were higher than what is needed to make the planes that they are making and delivering today, and that's kind of the stocking up that's happened over the past few years.

So it is not getting worse. It just gets pushed further to the right. And I do hope that it results itself reasonably quickly, we'll see. It's very difficult to tell. Now what we do know because we've been through this cycle a few times is when it comes back, it snaps back very quickly, right, in a matter of a few months. We are not seeing any sign of that just yet, but it's not getting worse.

Got it. And then maybe just on the Airware products. We've obviously seen a lot of activity in space. Just curious what you guys are seeing as far as market demand signals from the space market?

Yes. So it's quite lumpy, but it's -- Airware is a fantastic product for space applications because of its how light it is the weight savings you achieve, obviously, which translates into better payload, which is super important if you want to launch anything into space, and it's got also excellent cryogenic properties. So it can resist high temperatures and extremely low temperatures. So there is a lot of demand for this product. We're really subject to -- here again it's a matter of the supply chain, right? Launches, more launches are good for us, but our products are ordered on the base of one of the launches that are forecast for 1 year or 2 years down the road.

And that, obviously, there's not an absolute fidelity between the forecast made now for 2 years from now and what will happen in 2 years from now. So it's a bit lumpy. It goes up very quickly, it goes down very quickly. But on average, it's growing, and it's a very good product line for us. And I should also specify that there is no [indiscernible] to our products where we've got very strong patents and experience.

[Operator Instructions] We have a follow-up from Bill at JPMorgan.

Bennett back on for Bill. Just wanted to follow up on the scrap spreads quickly. It sounds like a listed in the positive category into the back half, but could you help us understand, I guess, if where spreads are today, is this more than off -- enough to more than offset the prior guidance of, I think it was a $15 million to $20 million quarter headwind? And are you seeing any change in flows in Europe just given the attractive pricing in the U.S. and maybe more flows getting shipped across the pond here?

Sure. Yes. So on scrap spreads, so as you know, we are buying some of our scrap metal on an annual basis and some of it on a more spot basis and call it 50-50 just for the sake of the argument. So at the beginning of the year, when we -- we were still buying metal -- scrap metal at a pretty elevated price, so very narrow spreads on the heels of what happened in '24. But now the scrap spreads have widened. Our open position is larger as well. So we're buying still some scrap metal at prices that were negotiated at the end of last year, but we're buying also quite a bit now at prices at our spot prices.

What -- typically in any -- so that's how we've been operating for years and years, right? And typically, in any quarter, you could swing $5 million one way or the other. And I met the commentary last year that we had -- we are experiencing swings of $15 million to $20 million, which were very unusual. So what we could be seeing in the second half if some of that, so more than $5 million and less than $15 million swinging back the proper way and -- the proper way in our favor. And that is what is kind of embedded in our revised guidance. Did I answer your question?

Yes. Yes. I guess the one minor follow-up would be any changes in Europe that you're seeing in scrap availability?

Sorry, you asked for that, and I didn't -- I wasn't trying to touch it. No, we are not seeing really big flows out of Europe that would be penalizing us. But yes, there is a bit of leakage from Europe into the U.S., but it's not material to our operations.

Our next question comes from Sean Wondrack from Deutsche Bank.

Just one for me, and I apologize if you touched on this already. But do you expect to have any impact from the big beautiful bill, whether it's tax or otherwise?

So Sean, it's a really good question. So we're currently assessing the impact. But at the moment, we do not anticipate a significant impact on our financial results this year.

We have a follow-up from Corinne at Deutsche Bank.

Just maybe I missed it, but can you just go back on the mid-cycle margin targets? So I think in aerospace, you mentioned a jump from $1,000 per ton to like $1,100 per ton. But can you just confirm that? And then on packaging, do you have any room to see like the price increase coming at some point, maybe not over the coming months, but I'm just kind of trying to see over the next 6 to 12 months?

Yes. So Corinne, on the aerospace and TID, that's a blended margin, right? Yes, we are calling it up through the cycle from $1,000 to $1,100 per ton. And that's a reflection of our performance, and the contractual positions we have. You know that we've got some contracts that extend several years in the future. So that gives us a good appreciation for where we think we should be. We also said that we're going to be above that level for the near future, namely '25 and '26, right? So that's it. I hope that confirms that is to your -- response to your question.

Regarding packaging, I don't want to go into too much specifics, but we're seeing an environment which is very supportive to pricing going into '26. So our negotiations with customers are going well, and we're very happy with where we are trending. But remember, a lot of -- a lot, the vast, vast majority of this business is multiyear, right? So there's some inertia. And on average, we'd like to say we may be renegotiating every year, 20% of our business, right, 20%, 25% of our business. So whatever change there is upside or downside to price, is kind of amortized over several years. But at the moment, it's reasonably positive.

We have no further questions. So I'll hand back to Jean-Marc for some closing comments.

Well, thank you, everybody, for -- again, for your interest in Constellium. We are happy with the progress we're making, and we look forward to an exciting second half. And I look forward to updating you on our progress in October. Thank you very much. Have a good day.

This concludes today's call. Thank you very much for your attendance.