Constellium N.V. — 2017 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2017. This is an annual report, not a standalone fourth-quarter filing; the provided filing text does not give clear Q4-only financial results. Financial statements are prepared under IFRS as issued by the IASB and endorsed by the EU. Amounts below are in euros unless indicated otherwise.
Business context and key financial metrics
Constellium manufactures rolled and extruded aluminum products, principally for packaging, aerospace, automotive, transportation and industrial markets. It reported approximately 12,000 employees and 23 production facilities at year-end.
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | €5,237 million | €4,743 million |
| Gross profit / gross margin | €539 million / 10% | €516 million / 11% |
| Income from operations / operating margin | €321 million / 6% | €246 million / 5% |
| Net loss | €31 million | €4 million |
| Adjusted EBITDA / margin | €431 million / 8% | €377 million / 8% |
| Shipments | 1,482 kt | 1,470 kt |
| Cash from operating activities | €160 million | €88 million |
| Capital expenditure | €276 million | €355 million |
| Cash and cash equivalents at year-end | €269 million | €347 million |
| Total borrowings at year-end | €2,127 million | €2,468 million |
| Total liquidity at year-end | €531 million | €537 million |
| Total equity at year-end | (€319 million) | (€570 million) |
Net trade working capital increased to €232 million from €199 million. Net trade working capital is a non-IFRS measure. The group also reported pension and other post-employment benefit obligations of €664 million, down from €735 million.
Changes versus the prior year
- Revenue increased 10%, while shipments rose only 1%; higher average revenue per ton, primarily reflecting higher aluminum prices and regional premiums, drove most of the increase.
- Cost of sales rose 11%, faster than revenue, largely because raw-material costs increased €405 million. Gross margin consequently declined by about one percentage point.
- Adjusted EBITDA increased 14% to €431 million. Aerospace & Transportation EBITDA rose to €133 million from €103 million; Automotive Structures & Industry rose to €119 million from €102 million. Packaging & Automotive Rolled Products was broadly flat at €202 million.
- Net loss widened to €31 million. Finance costs increased to €243 million from €167 million, including €91 million of net debt-settlement losses related to refinancing. The €80 million income-tax expense and €29 million share of joint-venture losses also weighed on results.
- Operating cash flow improved by €72 million, but remained below capital expenditure. Year-end cash declined €78 million; reported total liquidity was broadly stable.
- Borrowings declined €341 million, with the filing attributing part of the change to currency movements as well as the 2017 refinancing transactions.
Outlook, commentary, risks and unusual items
- Management said it expects operating cash flow, cash on hand, financing and available facilities to meet funding needs for the foreseeable future, while noting this depends on operating performance and market conditions. The filing does not provide a specific 2018 earnings or revenue guidance target.
- Constellium expected approximately €1.4 billion of capital expenditure in aggregate for 2018–2022, including growth investments in automotive body sheet and automotive structures. The company cautioned that some projects remain in ramp-up and may not deliver anticipated returns or timing.
- The UACJ automotive-sheet joint venture remained in ramp-up; Constellium recorded a €29 million share of joint-venture losses in 2017 and expected further losses over the following 12–24 months, with additional partner funding anticipated.
- In February 2018, Constellium agreed to sell the North Building Assets at its Sierre plant and contribute shared infrastructure to a 50-50 joint venture with Novelis for a total agreed price of €200 million; closing was expected in Q2 2018, subject to conditions.
- The company planned to convert from a Dutch N.V. to a Societas Europaea and transfer its corporate seat to France, subject to employee negotiations and shareholder approvals. Completion was then expected in the second half of 2018 or shortly thereafter; anticipated cost and tax benefits were not assured.
- Other notable items included a €20 million pension-plan amendment gain, €57 million of unrealized derivative gains, and a €16 million unfavorable U.S. tax-reform impact on deferred taxes. The filing also disclosed €81 million in close-down and environmental remediation provisions and €101 million of capital expenditure commitments at year-end.
- Principal risks include substantial debt and refinancing/liquidity needs; customer concentration (the ten largest customers represented about 55% of revenue); dependence on key suppliers; aluminum and scrap-premium volatility; execution and qualification risks for growth projects; cyclical end-markets; pension funding; environmental obligations; and possible trade-policy changes. U.S. aluminum tariffs were authorized after year-end, on March 8, 2018, and the filing warned of potential adverse effects.
- The company reported compliance with debt covenants at year-end and effective disclosure controls and internal control over financial reporting. PwC issued an unqualified audit opinion on the IFRS financial statements and internal controls.
Most important facts for investors to verify
- Whether the 2017 EBITDA improvement converts into sustained operating cash flow after working-capital needs and ongoing capital investment.
- Debt service, refinancing costs, liquidity availability and borrowing-facility conditions, including the credit-rating conditions attached to Muscle Shoals factoring.
- Automotive body-sheet and UACJ joint-venture ramp-up progress, required funding, customer qualification milestones and expected returns.
- Whether the €200 million Sierre transaction closes on schedule and how proceeds are applied.
- Outcomes and costs of the proposed corporate-seat transfer, including required approvals and tax rulings.
- Exposure to customer concentration, aluminum premiums, tariff and trade changes, the €664 million benefit-plan deficit, and environmental provisions.