Kaiser boosted by aerospace demand in 3Q

California-based rolling mill Kaiser Aluminum expects profit in the fourth quarter to be on par with a year earlier, as impacts from the General Motors (GM) strike, weaker industrial demand and seasonal slowdowns counter momentum from strong aerospace demand.

Kaiser is bracing for a potential $3mn-6mn hit to its profits in the fourth quarter directly related to the GM strike, which began on 16 September. GM and the United Automobile Workers (UAW) reached a tentative agreement on 16 October, but workers remain off the job until it is ratified.

The extent of the impacts from the strike and seasonal weakness will depend on how quickly demand ramps up in the supply chain, Kaiser chief executive Jack Hockema said yesterday. Still, he said results should be "similar" to a year earlier, when the company posted a $24mn profit.

Continued strength in aerospace demand and increases in value added pricing will help to mitigate the impacts of the GM strike, with shipment volume increases to aerospace customers offsetting declines to automotive shipments.

The company remains optimistic on its longer-term aerospace and capacity outlook, despite uncertainty revolving around the Boeing 737-MAX resolution, with strong aerospace orderbook giving the company visibility well into 2020.

Growth in aerospace demand over the last year has prompted the company to allocate some of its general engineering plate capacity to meet the stronger demand.

Kaiser's profits across all segments for the third quarter ended 30 September rose to $25.4mn on sales of $374.9mn, driven by strong aerospace demand and value added revenue pricing, compared with profits of $21.7mn on sales of $393.1mn a year earlier.

The drop in third quarter sales reflected a 3pc drop in shipments, as well as a 2pc decrease in average selling prices.

Shipments fell by 3pc to 154mn lbs in the third quarter from 159mn lbs a year earlier due to a combination of weaker industrial demand, destocking activities and low automotive demand.

High-strength and aerospace volumes were up by 13pc, which helped to offset declines in both general engineering and automotive extrusion shipments.

General engineering volumes slipped by 1pc during the quarter on a combination of weaker demand and a reallocation of some of the company's heat-treated plate capacity to meet stronger aerospace demand

Automotive extrusion shipments dipped by 2pc in the third quarter compared to the prior year following delays in program launches and the broader impact of the GM strike on demand.

Value-added revenue, which excludes commodity costs, rose to $1.39/lb from $1.29/lb.

source: Argus Media