Kaiser Aluminum's Q1 2025: Unpacking Contradictions in Aerospace Destocking, Packaging Revenues, and Margin Targets

Aerospace destocking cycle status, packaging pricing and revenue expectations, aerospace shipments and destocking cycle, and EBITDA margin improvement targets are the key contradictions discussed in Kaiser Aluminum's latest 2025Q1 earnings call.



Strong Financial Performance and Outlook Improvement:
- Kaiser Aluminum reported adjusted EBITDA of $73 million for Q1 2025, an increase of approximately $19 million from the prior year period.
- The improvement was driven by favorable metal pricing, optimized overheads, and effective cost management, leading to a 550 basis points improvement in adjusted EBITDA as a percentage of conversion revenue.
- The company expects continued improvements driven by new investments and recovering aerospace demand.

End Market Performance and Diversification:
- General engineering saw a 12% increase in shipments, contributing to a 4% year-over-year increase in conversion revenue, driven by trade policy uncertainty and strong demand.
- The company's strategy to focus on domestic and high-value products, particularly in aerospace and defense, positions it well for potential supply chain disruptions and reshoring trends.

Inventory Valuation Methodology Change:
- Kaiser Aluminum changed its inventory valuation methodology from LIFO to weighted average cost, better reflecting physical inventory flow and metal cost changes.
- The change resulted in a more accurate representation of inventory costs and a better alignment with current market conditions.

Investments and Expansion Projects:
- The company is advancing significant investments, including a fourth coating line and the Trentwood Phase Seven project, to expand capacity and support growth in key end markets.
- These investments are expected to drive a step change in EBITDA and margin performance, contributing to Kaiser Aluminum's strategic growth plan.