Welcome to the Constellium 2016 First Quarter Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Paul Blalock, Head of Investor Relations. Please go ahead..

Thank you Operator. Good day everyone and welcome to Constellium's first quarter 2016 earnings call. On the call today is our Chief Executive Officer, Pierre Vareille and our Chief Financial Officer, Didier Fontaine; after the presentation we will have a Q&A session.

A copy of the slide presentation for today's call is available on our website at constellium.com and as we've said today's call is being recorded. Before we begin, I'd like to encourage everyone to visit the Company's website and take a look at our recent filings.

Today's call may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements including statements regarding the Company's anticipated financial and operating performance, future events and expectations and may involve known and unknown risks and uncertainties.

For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statement, please refer to the factors presented under the heading Risk Factors in our annual report on Form 20-F.

All information in this presentation is as of the date of the presentation and we take no obligation to update or revise any forward-looking statement as a result of new information, future events or otherwise except as required by law. In addition, today's presentation includes information regarding certain non-GAAP financial measures.

Please see the reconciliations of non-GAAP financial measures attached in today's slide presentation which supplement our IFRS disclosures. I would now like to hand the call over to Pierre Vareille, our Chief Executive Officer..

Thank you, Paul and thank you all for joining us today, 2016 is off to a solid start with record results in AS&I, a continued recovery in the A&T and lower Q1 results in P&ARP as expected. Adjusted EBITDA was €92 million, down 3% from last year.

As the first quarter 2015 benefitted from one-time volume and then adjusted EBITDA resulting from a competitor's mill outage in the U.S.. Shipments was 362kt, we are 5% lower than last year primarily driven by the one-time volume increase I just mentioned. Revenue was €1.2 billion, down 5% on the like-for-like basis.

Automotive Rolled Products which include our Body-in-White shipments, grew 30% as compared with first quarter of 2015. The Body-in-White projects in Bowling Green, Kentucky and Neuf-Brisach in France remain on track with both lines producing first test coils ahead of schedule.

We successfully issued $425 million of senior secured notes which further strengthened our liquidity position to €773 million at the end of the quarter.

Lastly, as you know, I announced my decision in last quarter to retire and Jean-Marc Germain will be nominated as Executive direction during the Annual General Meeting in June with a view of his subsequent appointment as Chief Executive Officer over the course of December.

At the Board's request, I have also agreed to act as an advisor [indiscernible]. Turning now to slide 6. Total PRP shipments were 244kt in the first quarter of 2016, down 8% primarily due to the extra volume last year, previously mentioned.

And as noted a few moments ago, Automotive Rolled Products shipment was 30% compared with Q1 2015 due to continued strong Body-in-White demand. In addition, we had slightly lower demand in the first quarter of 2016 for specialty and other thin-rolled products. At Neuf-Brisach, we continued to have excellent operational performance.

And as I mentioned earlier, the first test coils have been produced ahead of schedule. Turning now to slide 7. The A&T segment continued to have strong demand with shipments of 5% from last year and continued recovery in both adjusted EBITDA and adjusted EBITDA per ton.

We recently signed new contract with Airbus effective in 2017 which focuses on higher value-added products.

Under this new contract, Constellium with supply Airbus with a broad range of advanced rolled products for airframes including while frames including wing skin panels, aero-sheets for fuselage panels, as well as rectangular and pre-machined plates for structural components.

Constellium and Airbus will also depend the corporation in [indiscernible]and recycling solutions. To reduce inventories along the supply chain and support the wrap of the key adverse programs such as the A320neo and the A350.

In support of Airbus continuous improvement targets, Constellium is also committed to improving the vital buy to fly ratio by developing and implementing near-net shape and pre-machined products.

In addition we see an improved long term outlook for the use of AIRWARE on Bombardier C-Series which we expect to be accretive over the next few years as they ramp up production. At our Ravenswood plant we remain on schedule to complete the new pusher furnace in late 2016 and the Ravenswood is well positioned for another year of high profitability.

Turning to slide 8, AS&I achieved record performance in this quarter. Shipments were up 2% to 57 kt, with strong demands in automotive structures and both adjusted EBITDA and adjusted EBITDA per ton reached record levels as Didier will discuss in a few moments. Over the last three years.

we've progressively built a strong backlog of future business which is now starting to come to fruition. As a consequence we are continuing to expand our capacity [indiscernible]for example with our new plant we announced last year in Bartow County, Georgia. We continue to consider additional gross opportunities which are low CapEx intensive.

Next our Decin expansion in Czech Republic remains on track to increase our capacity by 50% over the next four years. Lastly, in April Constellium University Technology Center at Brunel University in London which is our dedicated center of excellence for the design, development and prototyping of aluminum alloys and the automotive structural parts.

The center is mostly funded by economic development programs in the UK. We believe this program can help reduce development plans by at least 50%, expand our portfolio into 6000 service alloys and improve recyclability while finding advance solutions to future lightweighting challenges.

I am personally pleased with our progress in AS&I segment which we believe is now poised to deliver three point digit contribution to our annual adjusted EBITDA. In addition, we are gaining market share, thanks to our unravel expertise and global footprint. I will now hand over to Didier to further discuss our financial results..

Thank you, Pierre and welcome everyone. On slide 10, you can see our Q1 2016 adjusted EBITDA bridge as compared with the same period last year. Overall adjusted EBITDA of €92 million was relatively flat compared to last year, largely due to the 5% shipment reduction which Pierre already mentioned to you.

On the Q1 to Q1 comparison, the combined improvement in A&T and AS&I essentially offsets the lower P&ARP performance. On the next slide, slide 11, you can see our segment performance for Q1 2016 as compared with Q1 2015.

Starting with P&ARP, adjusted EBITDA decreased by €11 million or 20% to €42 million and adjusted EBITDA per ton decreased to €172 per ton. The lower results in P&ARP are primarily due to the larger shipments last year in Muscle Shoals as well as the higher cost of [indiscernible] at Muscle Shoals at the end of 2015.

This work is way through the plan during the first quarter of 2016. To be clear, the metal management issues at Muscle Shoals were results as of January 1. However, the hangover impact of the higher cost metal was apparently in the first quarter. At March, adjusted EBITDA was stronger than January and February combined.

We believe that this metal management issues follow behind us. In the A&T, adjusted EBITDA was €30 million, an improvement of €3 million and adjusted EBITDA per ton improved to reach €470. Last but not least, in AS&I, adjusted EBITDA increased €9 million, up 53% to a record €27 million and adjusted EBITDA per ton improved 51% to €486.

The strong performance in AS&I which we expect to continue mixed segment our best performing segment with the highest EBITDA per ton. Turning to slide 12, you will see your Q1 2016 adjusted free cash flow and as compared with last year.

Seasonally we have a historically used cash in first half of each year and generated cash in the second half of each year. This year should follow that normal pattern. In Q1 2016 cash flow from operating activities was a negative €59 million, that was significantly impacted by the €21 million newer-customer demand per usage growth.

In comparison, last year in Q1 2015 cash flow from operating activities was a positive €12 million as we benefited from a significant post acquisition reduction in trade working capital particularly at Muscle Shoals. Overall, we expect to reduce the use of cash in Q2 and generate significant adjusted free cash in the second half of the year.

Turning to the next slide 13. Our overall liquidity increased in Q1 2016 to reach €773 million which includes the proceeds for the successful issuance of $425 million senior secured notes. We also cancelled pre-existing €145 million new revolving credit facilities. I will now turn the call back to Pierre..

In summary, compared with Q1 2015, Constellium achieved record results and performance in AS&I, continued recovery in A&T and lower performance in P&ARP as expected. Q1 shipments and revenue on the like-for-like basis were both down 5% and adjusted EBITDA was down 3% when compared with Q1 2015.

I must say that I am particularly pleased by the recovery of A&T and the overall performance of AS&I we have become and we believe we will remain the main contributors to our profitability.

As far the P&ARP is concerned, although in the short term, Muscle Shoals will not deliver the performance which we expected when we acquired, Wise Metals we believe most of the issues are now [indiscernible] and that make sure we improve year-over-year. Marginality of Body-in-White expansion projects are on track, both in the U.S.

and Europe and we expect to ramp up production in 2017 as anticipated. Our clear growth strategy is now stabilized and is really starting to pay off. Our [indiscernible] automotive projects are on track. We believe that our government issues at A&T are resolved.

And that's why we'd benefit from our increased capacity and the solid growth on the aerospace market. Lastly, on packaging business, we continue to be a bedrock for our Company due to the resilience of the business throughout the economic cycle.

Before we conclude today's call, I would like to mention that at our first Analyst Day in New York, about two years ago in April 2014, we articulated a goal for standalone aerospace automotive business to reach 57% of group adjusted EBITDA by 2018.

I am happy to report that even with significantly greater packaging volumes and aerospace operational constraints, we have reached that goal in the first quarter of 2016, two years ahead of schedule. I fully expect that Constellium will continue to benefit from these trends in both the midterm and long term future.

Thank you for listening today and thank you for interest in Constellium. Operator, we'll now open up the lines for questions..

[Operator Instructions]. The first question comes from Curt Woodworth of Credit Suisse. Please go ahead..

I was wondering if you could drill down more specifically into the margin outlook for P&ARP.

I mean I think at the start of the year, you talked about how was the metal management issues advise would've been? Completed and you have the mix shift into Body-in-White and I think the thought process was margins would recover and of course, we are back to that $200 per ton level.

But since then other companies have talked about scrap spread narrowing obviously some lingering issues arise and then called out the contract term and then this quarter too. So if you could give us some update on how you see margins evolving the remainder of the year in that segment..

I think especially if we focus on Wise for second seconds because I think that's where the difference compared to last year is coming from.

Last year Wise had 20,000 ton in Q1 and compared to this year, built as a premium Wise today is running at low 99,000 tonnes with an EBITDA per ton which is €150 per ton which is down the low side what we're expecting.

However, as we were saying we are seeing a positive impact of the volumes resuming in March and March P&L was much better than January and February combined. So we do expect to have Muscle Shoals coming back to beating the 2015 number. And get closer to the €200 we mentioned previously at the previous call.

I was seeing on [indiscernible] doing very well in Europe grew about 30%, we had pretty margin. So on that side in Europe we are pretty solid..

Okay. And in terms of the comment about free cash flow being very strong in the back half of the year.

Could you kind of quantify what your expectation is around that level?.

On the adjusted free cash flow we expect Q2 to be above €100 million..

And what about the second half..

The second half is to be about over €100 million positive..

I think we are just following the seasonal trend which we have every year. If you get back to the former years which in Q1 we burnt cash and then starting in Q2, we start to build cash which comes from the can packaging business mainly, as you it reramping up in Q2 and Q3, seasonally just because it's summer time..

Our next question comes from Evan Kurtz of Morgan Stanley. Please go ahead..

So my question is on something that's been talked about in some of the other conference calls this quarter. It's nano steel, it's a product that I guess GM is testing right now. AK is producing the product. And so I've been doing a little bit reading on it.

It sounds like it's something that may be able to offer similar weight savings versus aluminum Body-in-White. If it goes up to what it says it can do, they can do that with cold stamping technology. So, many know kind of significant capital investment for an automaker.

And I'm just wondering, is this something like that you're looking at as a potential threat.

If you kind of just step back, how comfortable are you today versus where you were maybe a couple of years ago when there is a lot of excitement the F-150 kind of when aluminum -- the growth rate of aluminum Body-in-White you feel like, maybe steel is putting up a little bit more of a fight today versus a couple of years ago? Thanks..

We are more excited than we are two years ago. We're saying that, I will always say that steel would fight back for [indiscernible]. So, but aluminum is also getting traction everywhere. The new regulations and what say has been happening with the Volkswagen situation is accelerating the trend.

But steel, you describing right now, is nothing new frankly. It's part of every year, first we have new alloys. Every year, steel has new alloys. At the end of the day, to be very quick [indiscernible] in a situation where steel is significantly more heavier than aluminum.

So at the end to get to a sense weight as aluminum, you will have to have steel which is very, very, very, very thin by definition to a point where there would be new problems popping up. The last point I wanted to make. We don't expect metals to become aluminum.

That we always said that steel was still be the minority material in the vehicles for the foreseeable future and that's not what we're looking for. If you look at, you don't need a lot of models to switch from steel to aluminum to more than fill up the capacity what the industry is committing.

So long story short, steel has new IDs, aluminum has new IDs. We are not making announcement every time we have a new alloy and so on. And steel will always be the majority in the car and average in the world, but aluminum doesn't need to have a high percentage to feed all plants than more than our plants..

And maybe just as a follow-up, can you just kind of remind us some discussion earlier, but from a commitment standpoint as you spend the CapEx on some of these additional outlines and kill them are they becoming more and more formalized as time goes on or how confident are you the automakers will definitely be there as soon as these things come into the market..

Very confident, we are continuing to have discussions with OEMs which are very promising. The first line which we are just -- the two lines which we are just started in Europe and in the U.S. are re-committed and we are working on the local next lines. So I would say nothing more missing in this report. I think it's a long term trend.

So it's not one day, it's a long term trend so the answer, we'd not be suddenly that we have the line full, we are little-by-little getting orders and I think I've already explained. We don't expect -- to make same shift as F150, but all the OEMs both in Europe and in the U.S., we are increasing policy with the aluminum content..

Our next question comes from David Gagliano of BMO Capital Markets. Please go ahead..

I just have a couple of drill down a little bit further in the packaging and rolled Products segment. You mentioned the automotive rolled product shipments were up 30% year-over-year in Q1.

What was the actual number of automotive rolled product shipments in Q1?.

You mean the actual tons or percentage, Percentage we say 50% more..

What's the actual ton volume?.

You mean in Q1, 27,000 tons..

27,000 tons.

And then what was the margin numbers?.

27 tons..

What was the margin per ton on average associated with those 27,000 tons..

It's well in excess of the average of the past, we don't want to disclose that, but you see significantly higher than the average of the talked business..

And then just my last question.

You mentioned free cash flow number of in excess of €100 million in the second half of the year, my question is, what are you assuming in that number for working capital changes?.

Working capital changes will be positive..

How much? I'm just wondered what the assumption is?.

Marginally positive..

Our next question comes from George Bernstein of Deutsche Bank. Please go ahead..

It's [indiscernible] with Deutsche Bank. I just had a question more on SG&A. We did notice a bit of an uptick this quarter in your corporate overhead. I think it was about €61 million and that was about €5 million higher than what we saw in the fourth quarter but lower year-on-year.

So, I was just kind of wondering if you could give us an explanation as to why we saw the uptick Q1 versus Q4, if there is any seasonality there? And then within your R&D expense as well, will there be any new expenses because of this research center that you're funding in England that would flow through the R&D that we should be aware of?.

No, I can answer to the second part of your question. The R&D center in the UK is 100% funded, close to 100% funding..

As regard to your G&A, the only difference we've seen is the average Forex over the period, especially for Swiss and the U.S. dollars..

So, just to be clear the increase was more FX related in the retranslation of your G&A?.

It was both FX related and translation of that in the balance sheet..

Okay.

And could you comment, have there been any more significant contract that you can comment about in Body-in-White that have been won by your Company even if you're not able to disclose the client?.

We never disclose any contracts with the OEMs as it was -- so we are, as I said, we don't expect to have 100,000 tons or 200,000 tons contract. Its contracts for one part, two parts in a vehicle.

And we are very happy of that because it makes the ramp up much more easier because it's better to have different part with small volume than to have only a few parts with very high volumes. So we don't disclose this contract, but again most of these contract are 10,000 tons..

Okay.

And sorry, maybe I missed this earlier, but did you disclose specifically what your Body-in-White volumes were for the quarter?.

We disclose the automotive portion of the P&ARP so we disclosed 27,000 tons and is part of that, that's the vast majority..

I heard 19,000 in the background, so was body-in-white specifically 19,000..

If you have that, that's probably true..

Our next question comes from Christian Georgia of Societe Generale. Please go ahead..

I wanted to ask you on A&SI which proportion of volume is actually automotive related and also I think from -- your commercial spread, even if I addressed for the matured premium of €10 million, it looks like, highest spread you had in many, many quarters.

Is that the level in the incoming quarters or we have?.

I think we have increased because we have a backlog which is full of orders which we have taken in the last years in the automotive industry for A&SI, because there is so much engineering, co-engineering work with the customers and so, to get the order in year one and you start processing in the industry and of course we know exactly where we are as far the next years are and it will be growing, we are number one in the world for this product, we are taking market share and are more-and-more -- to look at the aluminum for what we produce and the EBITDA per ton for this product is by far highest which the Company is doing..

So when you say, if you could contribute for the three digit to EBITDA there could be-- ?.

Yes..

Just mix things very clear and not too much imply Q1 by 4, you know that the automotive has seasonally affected has well in August and December.

OEM's are shutting down, so we do not expect necessarily the same numbers in term of EBITDA for the total -- of each other year, there will be a little bit lower in second half because of the seasonality of the business..

What was the proportion roughly of the automotive volume in your shipments in the first quarter..

Both 50%,.

And just wanted mentioning the C-series, Bombardier's seems to be having few orders coming through. My understanding is that there were sort of inventory that Bombardier [indiscernible] and that was your shipment were stopped.

I mean, should we see some impact as soon as Q2 and accelerating into the full year?.

No. You're right. We have inventory in the pipeline. So, it's something which will affect Q2, may be marginally the full year. What we know is that, if you remember I announced in November of 2014 that we were losing €10 million EBITDA in A&T because of Bombardier not ordering anymore. They started to restarted orders not at the full volume..

Does second half should have an pretty impact?.

No. That's to be on the cautious side, I would say in 2017 and beyond..

Our next question comes from Curt Woodworth of Credit Suisse. Please go ahead..

I was wondering if you can just provide some more color on the allies contract shift which was I think about a €20 million cash outflow.

And then can you also talk about the new contract with Airbus and give us a sense of how accretive that could be to your existing margin structure?.

I saw the contract is Wise concerned, the discussion with specific customer and we changed on contractual terms and it's required a one-time payment. So, it was booked as a contra renewed item at the HSE level as the appropriate accounting treatment.

As far as Airbus is concerned, we expect the new contracts in 2017 to show significantly improved EBITDA per ton, but it's only in 2017..

Our next question comes from David Deterding of Wells Fargo. Please go ahead..

This is Charlie Wheatley in for David.

Can you guys talk a little bit about the liquidity picture Wise, just given this smaller receivables facility and liquidity be enough to handle the Q4 spike in AR?.

I think twice first, we have continued to support Wise as a company and we have injected $113 million as following the secured note that we have completed.

So today for the term being Wise is comfortable on the cash you're having on liquidity and also we are working very hard to our factoring facilities available for the company finance the AR flows..

Okay and would you guys be willing to support with fresh capital should there be a shortfall?.

That's what we did. I think today, we are more looking at finding capacity to fund trade working capital flows..

Our next question comes from Josh Sullivan of Sterne Age CRT. Please go ahead..

Just Boeing finished up it's Annual Investor Conference this week, there is a talk about contractual step-down, pricing interest as volumes increase on the aerospace side. How should we be looking at that from Constellium's perspective going forward here..

We don't see anything going down or either if I see the prices are fixed for 5 years or 7 years from most of the customers anyway. As far as we are not concerned we don't see anything on this, any drop in volumes as you know we are not looking just are trying to -- place in the non-Aerospace alloys which are in the used by the OEMs.

We are always focusing more and more on proprietary alloys, especially Aerospace alloys and special parts, more pre-machining, more cutting which are specific to aircraft, we don't sell a lot to distribution most of what we do goes directly to the OEM, so that's the reason why we are immune.

I think to this kind of a situation what we are looking at, these are main customers accelerating the build rates for some of the aircraft. So again, so far we are quite bullish on this market..

And then just one on AIRWARE, with the recent C-Series orders has it been any increase on AIRWARE expectations on your end?.

As I said before, it's too early to say I think for 2016 there will not be any significant increase. The increase will come more from the A350, the A350 is much larger aircraft than the C-Series and yes, we will ship more and more AIRWARE over the quarters and the years to come..

Our next question comes from David Gagliano of BMO Capital. Please go ahead..

I just wanted to try and circle back to the question I had asked earlier regarding the working capital changes and the free cash flow target in the second half of the year. In the first quarter, if we strip out working capital, it look like there was a burn of rough and obviously the debt transaction.

It looks like there was a burn of about €70 million. I think what you said was, you think you'll generate €100 million of free cash flow with no working capital benefit in the second half. I'm trying to figure how if you could bridge--.

No, I said that we will, in term of adjusted free cash flow, we are going to generate €100 million and we are negative in working capital. But I think we are going to generate positive working capital in second half, making that year-on-year it will be probably a delta slightly positive..

For the full year, working capital will be--.

For the full year, yes. For the second half, it will be positive..

And how much -- that was my question, what is the assumption for the positive working capital in the second half of the year to get to the -- I guess I can order back into that, never mind. Thank you very much. You clarified it. Thanks..

And the next question comes from David Olkovetsky of CQS. Please go ahead..

You guys said that March EBITDA was more positive than January and February combined. I think you were talking about Wise. Just want to confirm, is that on an IFRS basis, a GAAP basis or both? And if you could give us a little bit more detail around what that actually means in terms of dollar figure that would be great..

First is, both in GAAP and U.S. GAAP and IFRS, we are going to post publicly the result in the next days, as it request by the [indiscernible]. So, we are going to fight that as a -- we see them. But EBITDA for Wise in the first quarter will be $13 million versus last year $21 million. And in IFRS by the way, it's an equivalent of €50 million.

So, it's below because of volumes are going down significantly. But once again, both in IFRS and U.S. GAAP, the month of March was better than January and February combined..

So, I want to make sure I hear that correctly, I think you said that, last year was $21 million, you're referring to the FIFO number there, not the IFRS number? Is that correct?.

I was referring to the LIFO number..

Okay, so the LIFO number this coming quarter you're saying is €13 million that's correct and that's on a GAAP basis right?.

That's on the GAAP basis..

And then I just want to confirm since you recent guidance of €90 million to €100 million for that business a few months ago, I just want to make sure nothing has changed, I understand that the January and February piece, I think the market understood that there were going to be rollover metal management issues and so hopefully people understood that's really a run rate from say March through December, but I just want to conform that nothing has changed since that prior €90 million to €100 million guidance for that 10 months period..

Very interesting to answer because we said, we would not give figures for Muscle Shoals and the other thing as you know we have shifted the business from Muscle Shoals to Ravenswood which has an impact of the maybe something €6 million. So having said all of this we confront the figures which you just mentioned..

And then, Pierre. Can you just let me know how many shares you own and how that has changed over the last year and also what you intend to do with them. Thank you..

I have purchased shares each and every quarter since the IPO, so I own around 1.3 million shares today. I do not intend to sell my shares, I believe the Constellium stocks remain undervalued to be frank.

So I'm very happy to retain their shares for the foreseeable future, you should know that just in passing that there will be filing of our registration statements in the days to come in connection with the basic shares for investments which we made pre-IPO under our management equity plans. Remember that we were on the private equity.

We had management equity plan, the shares we were restricted we have register these shares now, it's a technical filing and we owned these shares and so it's not new equity. Coming back to your question I don't intend to sell. I intend to make money with share at Constellium..

And then just to clarify how many shares you own a year ago..

How many shares what owned you said?.

I mean you said a year ago, 1.3 million today, how much of that increased over the last year?.

Around 300,000 to 400,000 shares. I don't know precisely, more precision than that..

This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..