Kaiser Aluminum beats Street on 3Q and 9-month results; offers rosy 2019 outlook

Kaiser Aluminum Corp (NASDAQ:KALU) reported beats in both third-quarter and nine-month earnings while predicting the company should perform even better going into 2019.

The Foothill Ranch, California, company said net sales for the first nine months of 2018 were $1.2 billion, up approximately 15% from the $1.0 billion in the prior year, reflecting 4% higher shipments and a 10% increase in average selling price per pound. The increase in average selling price reflected a 22% increase in contained metal costs per pound while value added revenue per pound was comparable to the prior year period.

Net sales for the third quarter 2018 were $393 million, an increase of approximately 18% from the $333 million in the prior year period, reflecting 6% higher shipments and a 12% increase in average selling price per pound. The increase in average selling price reflected an approximately 23% increase in underlying contained metal cost and a 3% increase in value added revenue per pound. The consensus for the quarter was $389.3 million.

“As we begin to look to 2019, we expect demand across our end markets to be strong. Although sales margins have improved, they remain at historical lows. We will continue to monitor market conditions to determine timing for further price increases to restore our sales margins to a level more reflective of the strong overall demand climate,” said Jack Hockema, the chairman and CEO of Kaiser.

“For the full year 2018, we continue to anticipate mid-single-digit growth in shipments and value added revenue with adjusted EBITDA margin in the mid-20 percent range. We expect continued underlying demand strength in the fourth quarter 2018 with moderating destocking in the aerospace supply chain and normal seasonality in industrial demand,” he said.

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The official said “strong operating leverage and improved sales margins more than offset the temporary impact of tariffs on our internal cross-border shipments” referring to the tariffs slapped on metal imports by the Trump administration

“We are awaiting government approvals of certain countermeasures that we have initiated to eliminate nearly all our cross-border tariff costs and retroactively recover costs incurred. Although the tariffs have negatively impacted short-term results, we continue to anticipate that the long-term impact to us will be neutral to slightly positive should the tariffs remain in place,” he added.

Kaiser Aluminum is a producer of semi-fabricated specialty aluminum products.

Reporting by Rene Pastor, contactable on [email protected]

Story by ProactiveInvestors