Constellium SE — FY2020 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2020; this is an annual report, not a standalone Q4 filing. The audited consolidated financial statements are prepared under IFRS as issued by the IASB and endorsed by the EU. Amounts below are in euros unless stated otherwise.
Business context
Constellium designs and manufactures rolled and extruded aluminium products, principally for packaging, aerospace, automotive, transportation and industrial markets. It reported three operating segments: Packaging & Automotive Rolled Products (P&ARP), Aerospace & Transportation (A&T), and Automotive Structures & Industry (AS&I). The Group operated 29 production facilities and employed approximately 12,000 people at year-end. Shares trade on the NYSE under CSTM.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change / context |
|---|---|---|---|
| Revenue | €4,883m | €5,907m | Down 17% |
| Shipments | 1,431 kt | 1,589 kt | Down 10% |
| Gross profit / margin | €490m / 10% | €602m / 10% | Margin broadly stable |
| Operating income / margin | €125m / 3% | €255m / 4% | Down materially |
| Net income / (loss) | (€17m) | €64m | Basic and diluted EPS: (€0.15) |
| Adjusted EBITDA | €465m | €562m | Non-IFRS measure; reported margin rounded to 10% |
| Cash flow from operations | €334m | €447m | Down €113m |
| Capital expenditures | €182m | €271m | Reduced amid pandemic response |
| Free cash flow | €157m | Not stated here | Management-reported measure |
Revenue and shipment declines reflected pandemic-related demand weakness and disruptions, as well as lower metal prices. Gross margin held at 10%, while operating margin fell to approximately 2.6% from 4.3%. Results included €43m of asset impairments, €13m of restructuring costs and a €6m loss from discontinuing hedge accounting for forecast sales no longer expected to occur. Adjusted EBITDA excludes specified items and is not an IFRS measure.
By segment, P&ARP revenue was €2,734m and Adjusted EBITDA €291m; A&T revenue was €1,025m and Adjusted EBITDA €106m; AS&I revenue was €1,167m and Adjusted EBITDA €88m. P&ARP EBITDA increased despite lower shipments, supported by cost control and improved price and mix. A&T EBITDA fell 48%, principally on reduced aerospace and other shipments. AS&I EBITDA declined 18%.
At year-end, cash and cash equivalents were €439m, total borrowings were €2,391m, and reported total liquidity was €981m, including €542m of available undrawn facilities. Borrowings less cash imply net debt of approximately €1,952m. Total equity was negative €101m. Pension and other post-employment benefit obligations were €664m net; the aggregate plan deficit was €664m. The Group reported compliance with applicable debt covenants at year-end.
Operating, investing and financing cash flows were €334m, (€176m) and €101m, respectively. Operating cash flow fell year over year, mainly from a less favorable working-capital contribution. The filing reports €182m of capital expenditure; cash-flow investing outlays net of grants were €177m.
Material changes, outlook and risks
- COVID-19 impact: Automotive customers curtailed operations in spring and recovered toward prior-year levels in the second half. Aerospace demand remained depressed; aerospace shipments fell about 35%. Packaging demand was comparatively resilient. The Company reduced purchases, discretionary spending, labor costs and capital expenditure, and used government support; €22m of COVID-related subsidies reduced employee benefit expenses.
- 2021 outlook: Management expected packaging demand to remain strong, automotive demand to start strongly but face possible semiconductor-related shutdowns and delays, and aerospace demand to remain muted at least through the first half as the supply chain destocked. No numerical earnings or revenue guidance is provided in the filing text.
- Financing after year-end: On February 24, 2021, Constellium issued $500m of 3.750% sustainability-linked notes due 2029. Proceeds and cash on hand funded repurchase and redemption of its 6.625% notes due 2025. The new notes’ coupon can step up if specified sustainability targets are not met. This is a subsequent event, not part of 2020 year-end borrowings.
- Key risks: Continued pandemic effects and cyclical demand, especially aerospace; customer and supplier concentration; raw-material, energy, currency and hedging volatility; high debt and refinancing/covenant exposure; capital-intensive operations; pension funding; environmental requirements; and execution and quality risks in new automotive programs. Derivative mark-to-market and collateral demands could affect liquidity.
- Contingencies and unusual matters: Environmental close-down and remediation provisions were €88m. Asbestos-related disease claims were provided for at €5m; management did not anticipate current litigation having a material effect. A customer arbitration over alleged defective products was resolved in 2020. The auditor identified goodwill impairment testing for P&ARP and deferred-tax-asset recoverability as critical audit matters; no material weakness in internal control was reported.
Important facts for investors to verify
- Whether packaging strength offsets continued aerospace weakness and any automotive production interruptions, and how this affects volumes and segment margins.
- The composition, availability and maturity profile of the €981m liquidity figure, including reliance on factoring and revolving facilities.
- Debt and net-debt levels after the 2021 refinancing, including the new notes’ sustainability targets and potential coupon step-ups.
- The assumptions supporting the €410m P&ARP goodwill balance and €183m net deferred tax assets, particularly forecast cash flows and taxable profits.
- Whether the €88m environmental provision and €664m pension deficit remain adequate as regulations, discount rates and remediation estimates change.