Business context and reporting period
Constellium SE’s FY2019 Form 20-F covers the year ended December 31, 2019; it is an annual filing, not a standalone Q4 report. The filing does not provide a clear set of separate fourth-quarter results. The company makes rolled and extruded aluminium products for packaging, aerospace, automotive and other markets. Its statements are audited and prepared under IFRS.
Financial and operating highlights
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | €5.907bn | €5.686bn |
| Gross profit / margin | €602m / 10% | €538m / 9% |
| Income from operations | €255m | €404m |
| Net income | €64m | €190m |
| Adjusted EBITDA | €562m / 10% of revenue | €498m / 9% |
| Shipments | 1.589m metric tons | 1.534m metric tons |
| Cash flow from operating activities | €447m | €66m |
| Capital expenditure | €271m | €277m |
Revenue grew 4%, reflecting 4% higher shipments, improved pricing and mix, partly offset by lower metal prices. Operating cash flow rose substantially, mainly from a €378m improvement in working-capital cash flows; operating cash flow before working-capital changes was described as stable. Operating cash flow less capital expenditure was approximately €176m, a simple calculation rather than a company-reported free-cash-flow measure.
At year-end, cash and cash equivalents were €184m and total liquidity was €516m, including undrawn facilities and factoring availability. Borrowings were €2.361bn, including lease liabilities; cash less borrowings implies approximate net debt of €2.177bn. Total equity was negative €85m. Contractual obligations included €2.166bn of borrowings and €601m of interest payments.
Material changes versus the prior comparable period
- Net income fell by €126m despite higher revenue and Adjusted EBITDA. FY2018 included a €190m net gain from the Sierre asset transaction; FY2019 instead recorded €19m of net other losses, including derivative effects.
- Adjusted EBITDA increased 13% to €562m. Aerospace & Transportation rose to €204m from €152m, and Packaging & Automotive Rolled Products rose to €273m from €243m. Automotive Structures & Industry declined to €106m from €125m, reflecting higher costs and operational challenges on newer automotive programs.
- Finance costs increased to €175m from €149m, partly reflecting IFRS 16 lease accounting and currency effects. Depreciation and amortization increased to €256m from €197m.
- Constellium acquired the remaining 49% of Bowling Green in January 2019 and began consolidating it. Bowling Green contributed €333m of revenue and a €48m net loss in 2019.
- IFRS 16 adoption added €102m of lease liabilities and right-of-use assets at January 1, 2019. Management said its Adjusted EBITDA impact was €22m.
Outlook, risks, contingencies and unusual items
- Management expected operating cash flows, cash on hand and financing availability to meet requirements for the foreseeable future, subject to trading, raw-material costs and financial-market conditions. The filing provides no specific earnings guidance.
- Planned capital expenditure was approximately €1.3bn in aggregate for 2020–2024, expected to be financed with cash and external sources. The company emphasized harvesting returns from recent investments, ramping up Bowling Green and controlling costs.
- Key risks include cyclical demand, customer and supplier concentration, metal and energy cost volatility, the ability to pass costs through, execution and ramp-up risks, substantial indebtedness, refinancing and covenant exposure, pension obligations, and currency and hedging volatility. The filing also identified the emerging COVID-19 outbreak as a potential risk to economies, markets and operations.
- The group reported €670m of pension and other post-employment benefit obligations net of plan assets, up from €610m; 2019 contributions were €50m. Close-down and environmental remediation provisions were €90m, included in total provisions of €122m.
- A customer arbitration alleges defective products and significant damages. The company disputes the claim and concluded a loss was not probable. A Ravenswood retiree medical-plan dispute remained pending; an arbitrator ruled against the company in 2019, and the company sought to vacate that decision.
- There were no margin calls at December 31, 2019. The company reported compliance with debt covenants. Management concluded going-concern accounting remained appropriate despite negative equity; auditors gave unqualified opinions on the financial statements and internal control.
Important facts for investors to verify
- Review the quality and sustainability of the €447m operating cash flow, particularly the large working-capital contribution, alongside the €271m capital expenditure.
- Assess debt maturities, interest costs, available borrowing capacity and covenant headroom; verify how lease liabilities affect leverage comparisons.
- Track Bowling Green’s production ramp-up and losses, and whether Automotive Structures & Industry can address its cost and execution issues.
- Separate recurring operating performance from the prior-year Sierre gain, derivative mark-to-market movements and IFRS 16 effects; Adjusted EBITDA is a non-IFRS measure.
- Monitor pension funding assumptions, the Ravenswood benefit disputes, environmental obligations and the customer arbitration.