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Constellium upbeat despite low LME prices

Keywords: Tags  Constellium, Pierre Vareille, Didier Fontaine, quarterly earnings, aerospace, automotive, can stock, aluminum extrusions soft alloys

CHICAGO — A little red ink isn’t getting in the way of Constellium NV’s plans to push further into value-added aluminum products and its optimism about the long-term prospects for aluminum in the aerospace and automotive sectors.

The aluminum company posted a €2-million ($2.7-million) net loss (, June 17) for the three months ended March 31, but the results would have been better if they were adjusted to reflect constant metal prices and foreign exchange rates, Constellium chief financial officer Didier Fontaine said.

During the quarter, the average cash aluminum price on the London Metal Exchange dropped to $1,912.78 per tonne in March, down 6.1 percent from an average of $2,037.20 in January. In May, that average declined further to $1,830.26 per tonne.

Fontaine conceded during a conference call that Constellium had also been hurt by weaker demand for soft alloys in the building and construction sector, as well as lower can stock sales in Europe. Decreased can stock volumes resulted from bad weather in Europe in the first quarter, he said.

In addition, demand from the transportation industry was "subdued" by continued weak market conditions in Europe and pricing pressure in Asia, Fontaine said.

On a more positive note, Constellium’s facility in Ravenswood, W.Va., "continued to make progress" in 2013 after making a "turnaround to profitability" in 2012, he said.

And while soft alloy demand for extrusions has slowed, that has been "largely offset" by increased activity in Constellium’s hard alloy business, Fontaine said, adding that "slow growth" into the automotive sector is also bolstering results as new programs ramp up.

Despite some headwinds, Constellium is upbeat about 2013 and continues to see "attractive growth prospects" in its key end markets: aerospace, automotive and packaging, according to chief executive officer Pierre Vareille.

Vareille pointed to the Schiphol-Rijk, Netharlands-based aluminum producer’s multiyear contract with Toulouse, France-based Airbus SAS (, March 28), which not only gave the company a good idea of what its future aerospace sales would be but also indicated its success into moving the business "toward higher-end products," he noted.

On the aerospace front, Vareille conceded that the company had observed some "short-term" inventory issues. "But this is more than offset by gains in market share," he said, noting that the company expects stable growth in aerospace supported by long-term contracts and an eight-year order backlog.

In the automotive sector, Constellium has seen "significant growth" because of material substitution favoring aluminum, he said.

In the packaging sector, meanwhile, the company should see "healthy growth" in Europe as aluminum cans replace glass and steel containers, Vareille said.

However, he warned that can sales could be hurt if poor weather in Europe continues to drag on results in the second and third quarters.

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