Business context and reporting period
Constellium SE filed its annual report on Form 20-F for the fiscal year ended December 31, 2021. This is an audited full-year report, not a standalone fourth-quarter filing. The French-domiciled group manufactures rolled and extruded aluminum products, principally for packaging, aerospace, automotive, transportation and industry, across three operating segments. Financial statements are prepared under IFRS as issued by the IASB and endorsed by the EU.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | €6,152 million | €4,883 million |
| Shipments | 1,571 kt | 1,431 kt |
| Gross profit / margin | €664 million / 10.8% | €490 million / 10.0% |
| Operating income / margin | €484 million / 7.9% | €125 million / 2.6% |
| Net income (loss) | €262 million | (€17 million) |
| Adjusted EBITDA / margin | €581 million / 9.4% | €465 million / 9.5% |
| Cash flow from operating activities | €357 million | €334 million |
| Capital expenditures | €232 million | €182 million |
| Cash and cash equivalents | €147 million | €439 million |
| Borrowings | €2,129 million | €2,391 million |
| Total liquidity | €773 million | €981 million |
At year-end 2021, net debt was approximately €1,982 million, calculated as borrowings less cash. Management reported leverage of 3.4x. The Group reported total equity of €291 million, compared with a €101 million deficit a year earlier. The filing reports an aggregate pension and other post-employment benefit deficit of €599 million, down from €664 million.
Material changes versus the prior comparable period
- Revenue rose 26% year over year, reflecting 10% higher shipments and 15% higher revenue per ton; the latter was primarily attributable to higher metal prices.
- Net income improved from a €17 million loss to €262 million of income. Operating income increased to €484 million from €125 million.
- Adjusted EBITDA increased 25% to a record €581 million. P&ARP EBITDA rose to €344 million; AS&I increased to €142 million; A&T rose modestly to €111 million, while aerospace remained weak. Adjusted EBITDA margin eased to 9.4% from 9.5%.
- Operating cash flow increased €23 million, but working capital was a significant use of cash, including a €435 million inventory outflow. Investing cash outflow was €221 million, and financing cash outflow was €435 million, including substantial debt repayments and refinancing activity.
- Debt fell by €262 million. The Company issued $500 million of 3.750% sustainability-linked notes due 2029 and €300 million of 3.125% sustainability-linked notes due 2029, refinancing higher-coupon notes, and redeemed $200 million of its 5.875% notes due 2026.
Outlook, commentary, risks and unusual items
Management expected packaging demand to remain strong in 2022, with automotive demand constrained by semiconductor shortages in the first half and improving in the second half. It anticipated a beginning recovery in aerospace and year-over-year shipment growth in coming quarters, while industrial demand was expected to remain strong. Management also expected inflationary pressures in labor, energy and alloying metals. No numerical 2022 earnings or cash-flow guidance is provided in the filing.
- COVID-19 continued to weigh on aerospace and automotive demand and contributed to supply-chain disruption, staffing challenges and cost inflation. Semiconductor shortages affected automotive customers.
- Aluminum and regional premiums rose sharply in 2021; the average LME price increased 41%, the Midwest premium 106%, and Rotterdam premium 108%. The company generally passes through or hedges metal costs, but timing differences, fixed-price contracts, regional premiums, alloy costs and scrap spreads can affect results.
- Other gains and losses included €117 million of net gains in 2021, mainly reflecting €113 million of realized derivative gains and €39 million of unrealized derivative gains. These gains are not necessarily indicative of underlying operating performance and can be volatile.
- Finance costs included €27 million of net debt-settlement losses, including redemption fees and write-offs of deferred financing costs associated with refinancing and debt repayment.
- A €31 million pension past-service-cost loss followed an adverse appellate ruling in the Ravenswood retiree medical-benefits dispute. The Group chose not to pursue further legal action.
- Environmental and close-down provisions totaled €88 million. The filing also reports €27 million of provisions for legal claims and other costs, including €9 million for occupational disease claims. Management did not expect currently pending litigation to materially affect future results.
- Key risks include cyclical end markets, customer and supplier concentration, raw-material and energy costs, production interruptions, execution of capital projects, indebtedness, hedging and counterparty exposures, pensions, environmental obligations, cybersecurity and climate regulation. The filing also flags potential economic and supply-chain effects from Russia’s invasion of Ukraine.
- Management reported compliance with debt covenants at year-end and no derivative margin calls. Total liquidity included cash and undrawn facilities; €29 million of cash was held in countries with capital-control restrictions.
Most important facts for investors to verify
- How much of 2021’s record Adjusted EBITDA and improvement in operating income reflects durable operating gains versus metal-price timing, mix and derivative effects.
- Whether working-capital demands, especially inventory investment, persist and how they affect free cash flow, debt reduction and liquidity.
- The pace of aerospace recovery and the duration and impact of automotive semiconductor shortages, alongside the strength and capacity requirements of packaging demand.
- Debt maturity, refinancing and covenant headroom, including the sustainability-linked note targets and potential coupon step-ups.
- Assumptions supporting €148 million of recognized net deferred tax assets; the auditor identified recoverability of deferred tax assets as a critical audit matter.
- Developments in pension obligations, the Ravenswood dispute, environmental remediation provisions and other contingencies.