Kaiser Aluminum's Q2 2025: Unpacking Contradictions in Aerospace Supply Chains, Automotive Demand, and Tariff Impacts

Aerospace inventory and supply chain dynamics, automotive demand insulation, tariffs and trade dynamics, and aerospace inventory destocking cycle are the key contradictions discussed in Kaiser Aluminum's latest 2025Q2 earnings call.



Strong Financial Performance and EBITDA Outlook:
- Kaiser Aluminum reported second-quarter results that exceeded expectations, leading to an increase in the full-year EBITDA outlook.
- The growth was driven by favorable metal pricing, improved product mix, and enhanced operating efficiencies.

Capital Investments and Capacity Expansion:
- Kaiser Aluminum is advancing its Trentwood Phase VII investment, which is expected to bring additional production capacity for aerospace and general engineering plate products in 2026.
- The company is also progressing through the material qualifications phase for its new coating line at the Warrick rolling mill, anticipating full run rate in late Q4 2025.

Packaging Segment Challenges and Recovery:
- Packaging conversion revenue increased by 9% year-over-year, with improved mix of higher value-added products, despite a 3% decline in shipments due to mix shifts and coating delays.
- The company attributes the challenges to start-up issues and underperformance by converters, but expects improved performance and increased capacity throughput in the second half.

Automotive Segment Volatility:
- Automotive conversion revenue declined by 4% year-over-year, primarily due to tariff-related customer uncertainties affecting the automotive industry.
- Despite the challenges, Kaiser's exposure is concentrated in key platforms like SUVs and light trucks, which remain healthy.

Operating Costs and Free Cash Flow Outlook:
- Operating costs were higher due to start-up expenses on the fourth roll coat line and timing of maintenance projects, impacting adjusted EBITDA.
- Free cash flow for 2025 is now projected to be between $50 million and $70 million, down from the initial expectation of $100 million, primarily due to increased working capital requirements related to metal pricing.