KAISER ALUMINUM CORP

Kaiser Aluminum Corporation manufactures and sells semi-fabricated specialty aluminum mill products, including flat-rolled (plate, sheet, and coil), extruded (rod, bar, hollows, and shapes), drawn (rod, bar, pipe, tube, and wire), and certain cast aluminum products. The company strategically focuses on select end markets with demanding applications and high barriers to entry, including Aero/HS Products, Packaging, GE Products, and Automotive Extrusions. These technically challenging applications leverage core metallurgical and process technology capabilities to produce highly engineered mill products with differentiated characteristics.

The semi-fabricated aluminum industry is highly competitive. Kaiser Aluminum's primary competitors in the global market for Aero/HS Products are Arconic Corporation, Constellium N.V. and Novelis Inc. In North America, primary competitors for Packaging are Arconic Corporation, Constellium N.V., Novelis Inc. and Tri-Arrows Aluminum, Inc. For both GE Products and Automotive Extrusions, primary competitors are Arconic Corporation and Norsk Hydro ASA. The company seeks to differentiate itself through ongoing investments to improve quality and machinability, manufacture unique product attributes (Kaiser Select), and provide a broad product offering while maintaining a strong customer focus. As of December 31, 2025, approximately 70% of shipments are sold directly to manufacturers or tier one suppliers and approximately 30% are sold to metal service centers. For the years ended December 31, 2025 and December 31, 2024, the largest customer accounted for 16% of Net sales.

Kaiser Aluminum generates revenue by manufacturing and selling semi-fabricated specialty aluminum mill products. A fundamental part of the business model is to remain neutral to the impact from fluctuations in the market price for aluminum and certain alloys, thereby earning profit predominantly from the conversion of aluminum into semi-fabricated mill products, referred to as 'metal price neutrality.' The company purchases primary, rolling ingot and scrap, or recycled, aluminum and alloys at prices that fluctuate on a monthly basis, and pricing policies generally allow the pass-through of the current month underlying index cost of aluminum and certain alloys to customers. The three principal pricing mechanisms are spot price, index-based price, and firm-price. For firm-price sales agreements, the company mitigates price exposure through hedging and related programs. The majority of sales are to North America based customers.

Aero/HS Products include heat treated plate and sheet, hard alloy extruded shapes, cold finish rod and bar, seamless drawn tube and billet used in global aerospace, space, and defense industries. These products use high-strength 2000, 7000, and certain 6000-series aluminum alloys. For the year ended December 31, 2025, Aero/HS Products shipments were 204.8 million pounds and Net sales were $837.8 million ¹. Packaging products consist of bare and coated 3000 and 5000-series alloy aluminum coil used in the beverage and food packaging industry. The Warrick facility has a unique capability to produce high-margin coated packaging products representing approximately 75% of total Packaging shipments in 2025 ². For 2025, Packaging shipments were 560.5 million pounds and Net sales were $1,489.6 million ³. GE Products consist primarily of 6000-series aluminum alloy plate, sheet, rod, bar, tube, wire and standard extruded shapes with a wide range of industrial uses. For 2025, GE Products shipments were 247.5 million pounds and Net sales were $759.2 million ⁴. Automotive Extrusions consist primarily of 6000-series extruded aluminum products for North American automotive applications. For 2025, Automotive Extrusions shipments were 95.4 million pounds and Net sales were $286.4 million ⁵.

The company's products are highly engineered aluminum solutions designed to meet demanding performance requirements. These solutions contribute to reduced carbon emissions by enabling improved product performance, light weighting in applications such as aircraft and transportation for fuel efficiency, and increasing the use of recyclable aluminum beverage and food packaging. The company operates research and development centers including the Rolling and Heat Treat Center at Trentwood, Metallurgical Analysis Centers at Trentwood, Warrick, and Newark, the Solidification and Casting Center at Newark, and the Packaging Coating Center at Warrick. The Imperial Machine & Tool Co. (IMT) subsidiary provides technology and intellectual property that complements metallurgical and application engineering expertise.

During the fourth quarter of 2025, the company entered into amendment No. 5 to its Revolving Credit Facility to, among other things, extend the maturity date to October 2030 and incorporate certain improved terms offering greater operational flexibility. The company issued a new $500.0 million ⁶ aggregate principal amount of 5.875% unsecured Senior Notes, due 2034, replacing the $500.0 million ⁷ aggregate principal amount of 4.625% unsecured Senior Notes due in 2028. Total capital expenditures were $136.9 million ⁸ in 2025 and $180.8 million ⁹ in 2024. The company paid a total of approximately $51.3 million ¹⁰, or $3.08 ¹¹ per common share, in cash dividends during 2025. At December 31, 2025, $93.1 million ¹² remained available to repurchase common shares pursuant to the stock repurchase program. The company suspended share repurchases as of March 2020.

For the fiscal year ended December 31, 2025, Net sales were $3.373 billion ¹³, compared to $3.024 billion ¹⁴ in 2024. Net income was $112.5 million ¹⁵ in 2025, compared to $65.7 million ¹⁶ in 2024. Diluted EPS was $6.77 ¹⁷ in 2025 versus $4.02 ¹⁸ in 2024. Adjusted EBITDA was $310.2 million ¹⁹ in 2025, compared to $241.0 million ²⁰ in 2024. The increase in Net sales reflected an increase in the average realized sales price per pound of $0.46 (18%), partially offset by a 64.1 million pound (5%) decrease in shipment volume. The decrease in shipment volume primarily reflects the impact of a planned partial outage at the Trentwood facility in conjunction with the Phase VII capacity expansion project, destocking of plate products in the commercial aerospace portion of Aero/HS Products, and the delayed ramp up of the fourth coating line at the Warrick facility.

The company anticipates total capital spending in 2026 of approximately $120.0 million to $130.0 million ²¹. Capital investments will be funded using cash generated from operations, available cash and cash equivalents, borrowings under the Revolving Credit Facility, and/or other third-party financing arrangements. The level of anticipated capital expenditures may be adjusted from time to time depending on business plans, price outlook for fabricated aluminum products, ability to maintain adequate liquidity, and other factors.

The company believes it is well-positioned to benefit from positive secular trends across its served markets, including growing aerospace demand driven by increasing air travel and space-related applications. Demand for Aero/HS Products is heavily impacted by commercial airframe build rates and, to a lesser degree, by business jets, space applications, defense related airframes, and other products. The company believes the long-term demand for air travel and fuel efficiency will continue to drive long-term growth for its products. Growth in demand for aerospace plate has exceeded demand growth for other forms of Aero/HS Products, as aircraft manufacturers have migrated to monolithic component design.

The company anticipates further growth in Packaging underpinned by sustainability trends, the secular shift from plastic to aluminum and the fact that North American packaging capacity has been reallocated towards other end markets, including automotive and industrial. Aluminum can demand is driven by the packaging industry's shift towards environmentally sustainable materials due to the fact that aluminum is infinitely recyclable and has the highest consumer recycling rate among beverage containers. The company believes fuel efficiency standards and continued consumer preference for lightweight vehicles will continue to drive growth in demand for aluminum extruded components in passenger vehicles as a replacement for the heavier weight of steel components. Demand for GE Products is closely related to North America general industrial and semi-conductor growth and the recent desire of many companies to lessen their risk of supply chain disruptions by reshoring suppliers and shortening the supply chain.

The company strives to strengthen its competitive position through strategic capital investments aimed at increasing capacity and expanding manufacturing capabilities. A significant portion of recent capital projects related to investment in a fourth coating line at Warrick to increase capacity for higher margin coated aluminum material for packaging applications and the Trentwood modernization projects, which focused on equipment upgrades throughout the process flow to reduce conversion costs, increase efficiency, and further improve the competitive cost position on all products produced at Trentwood. These improvements have allowed and will continue to allow the company to gain incremental manufacturing capacity to enable future sales growth. The company anticipates total capital spending in 2026 of approximately $120.0 million to $130.0 million ²².

The company's capital investment plans remain focused on supporting demand growth through capacity expansion, sustaining operations, enhancing product quality, and increasing operating efficiencies. The company expects to continue to deploy capital thoughtfully so that investment decisions align with demand expectations in order to maximize the earnings potential of the business and maintain financial strength and flexibility. The company has a culture of continuous improvement facilitated by the Kaiser Production System (KPS), which management believes enables continued reduction of manufacturing costs and elimination of waste throughout the value chain.

The company maintains a disciplined approach to capital allocation. At December 31, 2025, $93.1 million ²³ remained authorized and available for future repurchases of common stock under the stock repurchase program. The company has consistently paid a quarterly cash dividend since the second quarter of 2007. Dividends declared per common share were $3.08 ²⁴ for each of the years ended December 31, 2025, 2024, and 2023. The future declaration and payment of dividends and the purchase of shares under the repurchase program are at the discretion of the Board of Directors and will depend on a number of factors, including financial and operating results, the availability of surplus and/or net profits, liquidity position, anticipated cash requirements, and contractual restrictions under the Revolving Credit Facility and the indentures for outstanding Senior Notes.

Macroeconomic factors including labor shortages, supply chain disruptions, inflation and recession risks have adversely affected the business and could cause additional downturns in the aerospace, packaging, automotive, and ground transportation industries. The commercial aerospace industry is highly cyclical and subject to disruption. Numerous factors could result in cancellations or deferrals of aircraft orders and a global decrease in new commercial aircraft deliveries, including declines in global travel, airline industry profitability, concerns regarding terrorism, and regulatory actions impacting production rates at certain airframe manufacturers. The automotive industry is highly cyclical, as new vehicle demand is dependent on consumer spending and is tied closely to the overall strength of the North American economy.

The company faces risks related to the pricing and availability of primary aluminum and recycled scrap aluminum. Primary aluminum pricing fluctuates in response to global supply and demand and also reflects the impact of duties, tariffs, and sanctions. Metal Price Lag resulting from decreases in the price of primary aluminum could have an adverse effect on financial position and results of operations. The company also faces risks related to the pricing and availability of alloying metals such as copper, zinc, magnesium, and silicon. Volatility in aluminum prices can impact borrowing availability and cause liquidity to decline. The company's hedging programs have been and could continue to be adversely impacted by fluctuations as a result of supply chain disruptions, geopolitical activity and general economic conditions.

The company derives a significant portion of revenue from products sold to the aerospace, defense, packaging, automotive, semi-conductor and ground transportation industries, and macroeconomic factors including labor shortages, supply chain disruptions, inflation and recession risks could cause downturns in these industries. The five largest customers in total accounted for approximately 56% ²⁵ of 2025 net sales, creating concentration risk. Approximately 65% ²⁶ of employees are represented by labor unions, and 26% ²⁷ of those employees were covered by collective bargaining agreements with expiration dates occurring within one year from December 31, 2025, exposing the company to potential labor disruptions. The company relies on Alcoa Corporation for certain resources essential to the day-to-day operation of the Warrick facility, including potable water, and if Alcoa were to fail to provide these resources, the company could incur substantial costs. The company has outstanding fixed-rate notes with an aggregate principal amount of $1.05 billion ²⁸, and covenants in the Revolving Credit Facility and indentures governing the Senior Notes impose operating and financial restrictions that could limit the company's ability to undertake certain transactions.

Management's message emphasizes the company's strategic focus on select end markets with demanding applications and high barriers to entry, where it believes it has sustainable competitive advantages that allow premium pricing and long-term profitable growth. Key themes include maintaining financial strength and flexibility through business and economic cycles, disciplined capital allocation, and being the supplier of choice through 'Best in Class' customer satisfaction driven by quality, availability, service and delivery performance. Management highlights the company's strong balance sheet and liquidity position, with $547.2 million ²⁹ of combined cash and cash equivalents and net borrowing availability under the Revolving Credit Facility as of December 31, 2025. Strategic priorities emphasized include benefiting from positive secular trends across served markets, including growing aerospace demand, continued light weighting initiatives in the automotive industry, and long-term demand for coated packaging products supported by consumer preference for sustainable and recyclable materials. Management also notes the successful issuance of a new $500.0 million ³⁰ aggregate principal amount of 5.875% unsecured Senior Notes, due 2034, replacing the $500.0 million ³¹ aggregate principal amount of 4.625% unsecured Senior Notes due in 2028, and the amendment of the Revolving Credit Facility to extend the maturity date to October 2030 with improved terms.