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Aerospace Drives Growth at Kaiser Aluminum

Kaiser Aluminum Corp. reported that its full year 2019 results were driven by record aerospace shipments and strong value-added pricing.

Aerospace demand at Kaiser was influenced by growing military airframe builds and restocking in the commercial aerospace supply chain. Value-added revenue for the full year 2019 increased 3% to $856 million (despite a 4% decrease in shipments), compared to $828 million in the prior year period. Value-added revenue for the company’s aerospace and high strength applications increased 12% to $511 million and shipments increased 10% reflecting continued strength in the aerospace market.

These results were negatively impacted by heat treat plate capacity constraints at the company’s Trentwood facility in Spokane, Washington, due to planned and unplanned downtime during the first half of 2019.

The positive results for 2019 were also partially offset by lower general engineering and automotive shipments. Value-added revenue for automotive extrusions decreased 20% to $93 million, reflecting a 10% decrease in shipments. The decrease in automotive shipments reflected the lower build rates, a significant number of automotive model changeovers and new program delays, in addition to the impact of the General Motors strike in the latter part of 2019.

Aerospace Growth Reflected in 2020 Outlook

In the short term, Kaiser Aluminum expects there to be demand implications from the Boeing 737 MAX situation (involving plane crashes, which has halted production until at least mid-2020). However, the company stated that it expects that strong long-term growth in aerospace applications will remain intact in 2020 and beyond, foreseeing continued demand for commercial aerospace applications in addition to growing long-term demand for its heat treat plate products. The company’s aerospace orders for 2020 will be further strengthened by increased defense spending and demand for the F35 Joint Strike Fighter, the F/A-18 Super Hornet, and other military applications.

Commencing in 2020, Kaiser has launched a strategic investment and expansion project aimed at further positioning the company to capitalize on demand growth throughout the next decade and beyond. The $375 million multi-year expansion and operational security investment project at its Trentwood facility will include an increase in heat treat plate production capacity by approximately 25% in addition to enhanced quality, cost, and inventory efficiency.

The first project at Trentwood will be the installation of a new $145 million heavy gauge plate stretcher that will relieve the load on the company’s existing plate stretcher, which has operated at far greater production rates than anticipated when it was installed in 2008. The new stretcher will provide increased capacity, redundancy, efficiency, and operational security for a critical operation in the company’s process flow.

Timing of the other investment projects in the multi-year expansion will depend upon market conditions. However, Kaiser currently expects to complete the full expansion project by 2025.

Regarding automotive, Kaiser also has a positive outlook. The company anticipates that North American automotive build rates in 2020 will be similar to 2019. The company expects double-digit year-over-year growth in its automotive shipments as new programs continue to come on stream.

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