Century Aluminum Co (CENX) Q4 2025 Earnings Call Transcript
•February 19, 2026
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Why It Matters
The results demonstrate Kaiser’s ability to boost margins and strengthen its balance sheet while repositioning its product mix for higher‑value, higher‑margin offerings, setting a solid foundation for growth in 2026.
Key Takeaways
- •Net sales $3.4B, conversion revenue $1.5B.
- •Shipments down 5% year‑over‑year.
- •Packaging revenue +11% from coated product shift.
- •Adjusted EBITDA $310M, margin 21.3%.
- •Leverage improved to 3.4x, liquidity $547M.
Pulse Analysis
Kaiser Aluminum’s 2025 earnings underscore a rare combination of top‑line resilience and margin expansion. Despite a 5% decline in total shipments, the company delivered $3.4 billion in net sales and lifted adjusted EBITDA to $310 million, translating into a 21.3% conversion‑revenue margin—up 470 basis points from the prior year. The balance sheet also strengthened, with net‑debt leverage falling to 3.4× and a robust $547 million liquidity cushion bolstered by a $500 million senior‑note refinancing and extended revolving credit facility. These financial fundamentals position Kaiser to weather aluminum price volatility while funding strategic initiatives.
A central driver of the margin uplift was the aggressive shift toward higher‑value coated packaging products. The commissioning of a fourth coating line at the Warrick facility pushed coated‑product volume to roughly 75% of packaging output, delivering an 11% revenue increase despite a 32 million‑pound shipment dip. This mix transition, coupled with Phase Seven expansions at Trentwood, has elevated pricing power and reduced reliance on commodity metal pricing. Kaiser’s focus on value‑added conversion aligns with broader industry trends favoring lightweight, corrosion‑resistant solutions in aerospace, automotive, and consumer packaging.
Looking ahead to 2026, management projects conversion‑revenue growth of 5‑10% and EBITDA gains of 5‑15%, anchored by operational efficiencies rather than metal‑price tailwinds. Aerospace shipments are expected to rebound 10‑15% as commercial OEM destocking eases, while packaging shipments should rise 5‑10% with conversion revenue climbing 15‑20% from the expanded coated‑product portfolio. Although automotive volumes may dip 5‑10% due to retooling, underlying demand remains solid. The continued dividend of $0.77 per share and disciplined capital allocation reinforce investor confidence, suggesting Kaiser is well‑positioned to capture incremental upside across its diversified end markets.
Century Aluminum Co (CENX) Q4 2025 Earnings Call Transcript
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DATE
Thursday, Feb. 19, 2026 at 10:00 a.m. ET
CALL PARTICIPANTS
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Chairman, President, and Chief Executive Officer — Keith A. Harvey
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Executive Vice President and Chief Financial Officer — Neal E. West
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Director, Investor Relations — Kimberly Orlando
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TAKEAWAYS
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Net Sales -- $3.4 billion for the year, with $1.5 billion in conversion revenue after deducting $1.9 billion in alloy metal hedge costs.
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Total Shipments -- 1.1 billion pounds, reflecting a 5% decrease, or 64 million pounds less than the previous year.
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Aerospace and High Strength Conversion Revenue -- $457 million, down 14% due to a 16% decrease in shipments, attributed to commercial aerospace OEM destocking and the planned Phase Seven investment in the second half.
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Packaging Conversion Revenue -- $544 million, up 11%, with a 32 million pound decline in shipments due to the transition to coated products and ramp-up of the new coating line.
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General Engineering Conversion Revenue -- $331 million, up 4%, on a 6% increase in shipments; supported by tariff-driven reshoring and favorable demand for Kaiser Select products.
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Automotive Conversion Revenue -- $122 million, up 2%, despite a 6% decrease in shipments; improved pricing and product mix helped offset lower volumes.
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Adjusted Operating Income -- $188 million, an increase of $63 million, with $6 million higher depreciation tied to the Trentwood Phase Seven expansion and Warrick coating line commissioning.
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Adjusted Net Income -- $100 million, or $6.03 per diluted share, up from $60 million, or $3.67 per share; excludes $15 million pretax non-run-rate income related mainly to land sales and insurance settlements.
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Adjusted EBITDA -- $310 million, up $69 million with a margin of 21.3%, 470 basis points higher than 16.6% the prior year, despite $47 million in nonrecurring costs tied to new project start-ups and outages.
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Net Debt Leverage Ratio -- 3.4x at year-end, improved from 4.3x, supported by refinancing and extension of debt maturities including a $500 million senior notes offering maturing in 2034.
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Liquidity -- $547 million at year-end, combining $7 million in cash and $540 million of borrowing capacity.
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Capital Expenditures -- $107 million for the year, mainly for projects at Warrick and Trentwood; 2026 guidance is $120 million to $130 million, with increased allocation for new automotive capacity initiatives.
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Dividend Payments -- $51 million returned to shareholders with a quarterly per-share dividend of $0.77 announced January 13, marking nineteen consecutive years of dividends.
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Packaging Product Mix Shift -- Approximately 75% of packaging volumes are now coated products, supported by full commissioning of the fourth coating line at Warrick, with ongoing ramp toward 80% utilization in 2026.
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2026 Conversion Revenue Outlook -- Projected year-over-year improvement of 5%-10% with EBITDA growth expected in the 5%-15% range, based on operational performance rather than further gains from metal pricing.
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Aerospace Shipments and Revenue Guidance -- Shipments anticipated to rise 10%-15%, and conversion revenue to increase 5%-10% in 2026, as commercial aircraft production recovers and destocking subsides.
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Packaging Segment 2026 Outlook -- Shipments guided to grow 5%-10% with a 15%-20% increase in conversion revenue, benefiting from higher value coated products and long-term customer agreements.
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General Engineering 2026 Guidance -- Shipments and conversion revenue forecast to grow 3%-5%, with potential upside tied to customer inventory restocking and semiconductor market strength.
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Automotive Outlook for 2026 -- Shipments and conversion revenue projected to decline 5%-10% due to planned outages at Bellwood facility as part of retooling for specialty product capacity; underlying demand remains intact.
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Free Cash Flow Guidance -- 2026 free cash flow projected at $120 million to $140 million, depending on metal price movement and working capital impacts.
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Tax Rate and Cash Taxes -- Effective tax rate for 2026 expected in the mid-20% range; cash tax payments estimated at $5 million to $7 million.
SUMMARY
Kaiser Aluminum(KALU+1.22%) delivered record adjusted EBITDA and robust margin expansion in 2025, primarily driven by the ramp-up of packaging investments and a strategic shift toward higher value-added coated products. Year-end leverage improved through balance sheet actions including a $500 million senior notes refinancing and extension of the revolving credit facility to 2030, supporting an enhanced liquidity position and long-term financial flexibility. The company outlined 2026 targets featuring conversion revenue improvement of 5%-10% and EBITDA growth of 5%-15%, underpinned by operational gains from new capacity, planned cost reduction initiatives, and stable end-market conditions rather than anticipated continued tailwinds from metal prices.
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Kaiser Aluminum's product mix evolution, notably within packaging, is expected to underpin continued margin improvement as the Warrick facility’s new fourth coating line approaches 80% utilization, with further scale anticipated across the year.
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Automotive segment guidance indicates short-term volume declines tied to retooling activity, but management highlighted unplanned investments to capture emerging specialty product demand in the truck and SUV market as a multiyear growth lever.
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Management reported no demand destruction in any of the company’s product lines and expressed strong confidence in visible customer bookings and order flows across all major segments, signaling stable industrial fundamentals entering 2026.
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Both operating and manufacturing cost reductions are set as top priorities in 2026, with management highlighting a shift toward harvesting returns through margin expansion given the completion of major growth capital expenditures.
INDUSTRY GLOSSARY
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Conversion Revenue: Revenue derived from processing aluminum, net of pass-through metal costs, highlighting the value generated by transforming raw material into finished product.
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OEM: Original Equipment Manufacturer; refers here specifically to commercial aerospace producers who are direct customers for Kaiser Aluminum’s plate and extrusion products.
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Metal Lag: Profit or loss effect resulting from timing differences between purchasing (input) and selling (output) prices for aluminum, particularly meaningful in periods of price volatility.
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Kaiser Select: Branded line of Kaiser Aluminum's general engineering products recognized for quality attributes appealing to reshoring and industrial customers.
Full Conference Call Transcript
Kimberly Orlando: If you have not seen a copy of our earnings release, please visit the Investor Relations page of our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call. Joining me on the call today are Chairman, President and Chief Executive Officer, Keith A. Harvey, and Executive Vice President and Chief Financial Officer, Neal E. West. Before we begin, I would like to refer you to the first four slides of our presentation and remind you that the statements made by management and the information contained in this that constitute forward-looking statements are based on management's current expectations.
For a summary of specific risk factors that could cause results to differ materially from the forward-looking statements, please refer to the company's earnings release and reports filed with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K for the full year ended 12/31/2024. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. In addition, we have included non-GAAP financial information in our
Operator: discussion.
Kimberly Orlando: Reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of the presentation. Reconciliations of certain forward-looking non-GAAP financial measures to comparable GAAP financial measures are not provided because certain items required for such reconciliations are outside of our control and cannot be reasonably predicted or provided without unreasonable effort. Any reference to EBITDA in our discussions today means adjusted EBITDA, which excludes non-run-rate items, for which we have provided reconciliations in the appendix. Further, slide five contains definitions of terms and measures that will be commonly used throughout today's presentation. At the conclusion of the company's presentation, we will open the call for questions.
I would now like to turn the call over to Keith A. Harvey. Keith?
Keith A. Harvey: Thanks, Kim, and good morning, everyone.
Kimberly Orlando: Thank you for joining us.
Keith A. Harvey: I will begin on slide seven. I am pleased to report that our fourth quarter results
Neal E. West: continue to build on the momentum we have established throughout the year.
Keith A. Harvey: This marks our fifth consecutive quarter of performance
Neal E. West: ahead of our internal expectations and we exceeded the full year outlook we provided in October. Start-up costs moderated versus the prior two quarters, while metal pricing remained a tailwind. For the full year, we delivered more than 25% EBITDA growth with margins above 21% and second-half margins improving to nearly 24% driven by our packaging investment that enhanced our mix along with modest operational progress in multiple areas of the business. Overall, we achieved record EBITDA in 2025 and established a solid foundation for continued growth as we move into 2026. We are positioned to harvest the returns from our recent investments, continue strengthening margins, and generate free cash flow as we execute efficiently across the portfolio.
With that, I will turn the call over to Neal to review the quarter and full year financial results. I will then return to discuss our end market trends, our 2026 outlook, and the strategic priorities that will guide us in the years ahead. Thank you, Keith.
Keith A. Harvey: And good morning, everyone.
Neal E. West: I will now turn to slide nine for an overview of our shipments and conversion revenue. Our full year total net sales were $3,400,000,000. After adjusting for the hedge costs of alloy metal of $1,900,000,000, our conversion revenue for the year was $1,500,000,000, relatively consistent with 2024. Our total shipments were 1,100,000,000 pounds, down 64,000,000 pounds, or 5% from 2024. Looking at each of our end markets in detail, aerospace and high strength conversion revenue totaled $457,000,000, down $73,000,000 or approximately 14%, primarily due to a 16% decrease in shipments attributed to the commercial aerospace OEM destocking of plate products and the impact of the planned Phase Seven investment, occurred in the second half of the year.
Commercial aerospace OEM destocking began to ease exiting 2025. Across our other aerospace and high strength applications, that includes the business jet, defense, and space end markets, demand has remained strong. Packaging conversion revenue for the year totaled $544,000,000, up $54,000,000 or approximately 11% driven by our planned transition to coated products as we finalized commissioning of the new coating line. Shipments declined by 32,000,000 pounds during this transition, reflecting a slower ramp-up of the coating line than originally anticipated. The shift is generating higher conversion revenue per pound supported by the strong underlying market demand. General engineering conversion revenue for the year totaled $331,000,000, up $14,000,000 or approximately 4% year over year on a 6% increase in shipments.
Tariff-driven reshoring activity and Kaiser Select quality attributes continued to create a favorable demand backdrop, supporting both volumes and pricing. And finally, automotive conversion revenue for the year totaled $122,000,000, up 2% year over year and a 6% decrease in shipments, primarily due to persistently high interest rates and tariff-related customer uncertainty affecting the automotive industry on a whole. However, improved pricing and product mix helped offset the lower shipments. Additional details on conversion revenue and shipments
William Chapman Peterson: by end market application can be found in the appendix of this presentation. Now moving to slide 10. Reported operating income for 2025 was $189,000,000. After adjusting for non-run-rate income of approximately $1,000,000, our 2025 adjusted operating income was $188,000,000, up $63,000,000 from 2024. In addition, 2025 operating income included a $6,000,000 increase in depreciation expense associated with the Trentwood rolling mill Phase Seven expansion project and a commissioning of the new coating line at Warrick. An effective tax rate for the full year was 25%, comparable to 2024.
For the full year 2026, we expect our effective tax rate before discrete items to be in the mid-20% range, including the impacts related to the new tax bill recently signed into law. Additionally, we anticipate that the 2026 cash tax payments for federal and state foreign taxes will be in the $5 to $7,000,000 range. Reported net income from 2025 was $113,000,000, or $6.77 net income per diluted share, compared to net income of $66,000,000, or $4.02 net income per diluted share in the prior year.
After adjusting for net pretax non-run-rate income of approximately $15,000,000, primarily related to legacy land sales and insurance settlements associated with prior year claims, adjusted net income for the year was $100,000,000, or $6.03 adjusted net income per diluted share. This compares to adjusted net income of $60,000,000, or $3.67 adjusted net income per diluted share in 2024. Now turning to slide 11. Adjusted EBITDA for the year was $310,000,000, up approximately $69,000,000 from 2024. Adjusted EBITDA as a percentage of conversion revenue improved to 21.3%, approximately 470 basis points above our 2024 margin of 16.6%.
In 2025, we also incurred approximately $47,000,000 of nonrecurring operating and other related costs, primarily associated with our new coating line start-up at Warrick and planned Trentwood outage, which were more than offset by the impact of metal lag gain from rising metal prices. The improvement in adjusted EBITDA, even with the 5% year-over-year decline in shipments, reflects resilient underlying fundamentals across our business and our end markets, along with a richer mix of value-added products. Now turning to a discussion on our balance sheet and cash flow. At December, total cash of approximately $7,000,000 and approximately $540,000,000 of net borrowing availability in our revolving credit facility resulted in a strong liquidity position of $547,000,000.
As a reminder, the October extension of our $575,000,000 revolving credit facility further demonstrates the strength of our balance sheet and the continued confidence our lenders have in our long-term strategy. The extended facility is set to mature in October 2030. Additionally, in November, we completed a $500,000,000 offering of senior notes due in 2034 with favorable terms. We used the proceeds along with revolver borrowings and available cash to redeem our 2028 notes, effectively completing a planned refinancing that extends our long-term debt maturity profile and supports our long-term financial flexibility.
Our senior notes interest cost are fixed at $54,000,000 annually, and as of the year end, our net debt leverage ratio was 3.4 times, an improvement from the 4.3 times at 12/31/2024. Our full year 2025 capital expenditures came in at $107,000,000 following the completion of our major growth projects at Warrick and Trentwood. It is important to note that a $168,000,000 usage of working capital during 2025 was a direct impact to rising metal prices through the year. For 2026, we expect capital expenditures to be in a range of $120 to $130,000,000 with free cash flow anticipated being in a range of $120 to $140,000,000, subject to metal price movement and resulting impact in working capital.
As a reminder, we define free cash flow as cash flow from operations less capital expenditures. Additionally, in 2025, we returned approximately $51,000,000 to our shareholders through dividend payments, marking our nineteenth consecutive year of dividend payments to our shareholders. On January 13, we announced that our Board of Directors declared a quarterly dividend of $0.77 per common share, reflecting our ongoing commitment to disciplined capital allocation and delivering long-term value to our stockholders. With that, I will turn the call back over to Keith to discuss our outlook.
Kimberly Orlando: Keith?
Neal E. West: Thanks, Neal. Let me now turn to our outlook and priorities as we move into 2026 on slide 13. In 2026, Kaiser will celebrate its eightieth anniversary, a milestone that speaks to the resilience of our operations and the durability of our long-standing customer relationships.
William Chapman Peterson: Fittingly,
Neal E. West: our outlook reflects what we expect will be record years for both conversion revenue and EBITDA. I will begin with aerospace and high strength products. We expect shipments to increase in the range of 10% to 15% in 2026, with conversion revenue expected up approximately 5% to 10%. This implies conversion revenue per pound consistent with our first half 2025 run rate as last year's second half benefited from a richer aerospace extrusion mix as we upgraded plate lines at Trentwood. The Phase Seven install was executed seamlessly and timed well to support the demand growth we expect in 2026 and beyond. Commercial aircraft production continues to recover, with increasing build rates at our OEM partners.
We are well positioned to support that growth with the additional plate capacity from Trentwood. As we have discussed previously, destocking at commercial OEMs has continued to temper near-term sell-through of plate products. However, we expect this to largely dissipate as we exit the year, if not early. We will continue to update you throughout 2026 on supply chain conditions. Importantly, I am very encouraged by the momentum building in one of our premier markets, momentum that should benefit results in 2026 and continue to build through the end of the decade. Defense and business jet demand remains consistent, and we continue to benefit from new opportunities across space and specialty platforms. Now moving to packaging.
Packaging demand and fundamentals continue to improve, supported by our long-term contracts that provide excellent visibility. Importantly, we completed our final contract commitment at this facility during 2025. For 2026, we are targeting shipment growth of 5% to 10% and conversion revenue growth of 15% to 20%. Our fourth coating line at Warrick is fully commissioned, qualified, and progressing toward full production. This investment shifts our mix toward higher coated volumes, now at approximately 75% and growing, and supports the margin uplift we have targeted. The progress at Warrick reflects a multiyear journey that began with the strategic decision to acquire the facility in 2021.
In 2026, we expect to see a step change in financial and customer satisfaction performance in this business. As we have previously stated, while profitability will improve meaningfully in 2026, the line will not yet be operating at its optimal rate. We plan to operate at approximately 80% utilization as we continue to fine-tune quality and reliability. Customer service remains a core tenet of Kaiser's values and a key differentiator in all our markets. Now turning to general engineering. We expect another year of growth supported by improving GDP and strengthening demand in the semiconductor market.
Shipments and conversion revenue are expected to grow approximately 3% to 5% year over year, with the potential for even stronger growth depending on the strength of the North American economy, as inventory levels at most customers remain at multiyear lows. Our businesses are well positioned to respond quickly as these markets continue to improve. Now turning to automotive. Automotive opportunities continue to expand, even as we remain highly selective in the products and services we provide to this market. The shift towards more internal combustion engine vehicles in the light truck and SUV category are driving demand for several of our products at a faster pace than previously anticipated.
To support this expected multiyear demand outlook, we will be retooling select facilities and adding incremental capacity. While shipments and conversion revenue in 2026 are expected to decline approximately 5% to 10% year over year, this primarily reflects planned outages, most notably at our Bellwood facility, associated with retooling rather than underlying demand. These actions position us to support higher demand and higher returns as market conditions evolve. Now turning to slide 14, and our summary outlook. With our two major growth investments now behind us, 2026 will mark a shift toward harvesting returns through margin expansion.
With the execution risk of large-scale projects largely behind us, we are proactively intensifying our focus on reducing both manufacturing and operating cost to drive additional operating leverage and maximize the return on these investments. These actions are expected to also strengthen cash flow, continue reducing our debt leverage ratios, and improve our customer service standards. As we look ahead, we are establishing an initial outlook for 2026 of 5% to 10% conversion revenue improvement year over year, with resulting EBITDA growth of 5% to 15%, setting the stage for another record EBITDA performance year for the company.
While metal pricing was a meaningful contributor to our performance in 2025, our expectations for 2026 are driven primarily by operational execution, with metal assumptions aligned with current future curves. In closing, we entered 2026 with a strong foundation, clear visibility into our end markets, and the assets firmly in place to deliver meaningful improvement in profitability and cash generation. We look forward to updating you on our progress throughout the year.
William Chapman Peterson: With that,
Neal E. West: we will now open the call to any questions you may have. Operator?
Operator: Thank you. We will now conduct the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that is 1 to ask a question at this time. One moment while we poll for questions. The first question comes from William Chapman Peterson with JPMorgan. Please proceed.
Neal E. West: Yes. Hi, good morning. Thanks for taking the questions and really nice results for the year. First question is on the 2026 outlook at a higher level. So
Operator: I think
Neal E. West: it looks like aerospace conversion revenue is below shipments while packaging conversion revenue is above shipments. Is there anything to call out on mix? If you think about aero, for example, commercial, business jet, or defense, or is this more, you know, just more high strength and non-aero? And then on packaging, similarly, is this a pricing statement or mix towards more coated products? Just any sort of color for
Operator: for the
Neal E. West: difference between the shipments and conversion revenue outlooks. Sure. Hey, good morning, Bill. Let me hit aero first. You know, we called out some specifics because, as you recall, we had an outage at Trentwood mainly through the third quarter. So you looked at the two halves of the year, our shipments in the second half were actually down 25% from the first half of the year.
Operator: That was mainly plate related.
Neal E. West: And you saw a pretty higher number there because extrusions generally carry a higher price than the plate. We expect to come back rapidly on the plate in this year so that the numbers we are reflecting there says we are back to having that full plate capacity, and so you will see that in the numbers. The prices have remained very strong and consistent. The majority of that is backed up by long-term agreements in place, and so, you know, as we have noted, as the industry continues to improve, continue getting improved shipments output by our customers, we should see those numbers pop up.
From a mix perspective, what you will also see out of our flat roll shipments, Bill, we are starting to see activity again on the semiconductor side. So as you know, we put that capacity in that can service both aero and general engineering. I am really encouraged by the activity at the beginning of the year on semiconductor. So I think after maybe a two-year hiatus there, we are going to start to see some good activity through the balance of the year. That should really support that increased capacity at Trentwood. You know, as I move over to the packaging side and look at our business, I really think we are positioned for a very strong year.
We are in our seventh month of increasing output from our Rollcoat Four, the new investment that we made. So we are beginning to see the better throughput
William Chapman Peterson: throughput that was expected. We are beginning to
Neal E. West: get all the qualifications behind us. We are ramping up speeds, and so the opportunities there continue to exist, quite frankly, beyond what we have. We are working with some of our converters to try to get their performance up improved as I think the opportunities there
Operator: exceed
Neal E. West: even all of our capacities there together. So as we also mentioned in our notes, we are really pleased to complete the final contract multiyear contractual opportunity for the new capacity. So what you are going to begin seeing, and what you have seen, is that the mix shift has begun in earnest. You will start seeing some improved pricing on that side as a result of those investments and the contractual commitments that were made, and so we are really positioned there. You know, we talked about bringing that an additional 300 to 400 basis points impact on the total company.
We are beginning to already see that, and they were a major influence into what happened for us even at the end of the year. So a lot of expectations for that for 2026. Food market, the food packaging side is very strong. It is even stronger than beverage, and as you know, we are a major player there. So we see full output. You know, the surprise to me, and I will just continue if I can, the surprise to me is the automotive opportunity that we highlighted in our comments. You know, with the move back toward the internal combustion engines, man, we are seeing demand on trucks and SUVs.
So we made a decision to make an investment that we really had not contemplated in the last twelve months, but we will be making that decision to increase our capacity through some of our highly specialty products. And that all services trucks and SUVs. So that is going to be an unexpected focus for continued growth for us in that category. Great. Can I pick up on that last point? This auto opportunity, it sounds like it is capacity expansion, but it is not. I am just trying to get a sense. Would this take away from other markets? How much capacity growth does this imply?
You know, when will this be, I guess, when would be ready to sort of support this effort? And maybe taking a step back some more to my question on the guidance, you are looking for this year to be down following a pretty rich, I guess, mix last year. Anything to call out from the market environment, or, you know, platforms that you are on or things like that within the 2026 guidance? Yeah. No. The only difference, we do not expect any price deterioration there in any of the markets, Bill.
The only change that was going to be highlighted probably on the aero side was a slight adjustment as you bring back more plate as opposed to extrusion on the aero. On the automotive piece that I was just referring to, we are actually, these are actually fairly high margin products for us. They are all specialty products. They are actually products that Kaiser has 100%, or close to 100%, supply position on. And as the markets turn back to stronger growth, planned on trucks, especially around ICE vehicles, we are the only play. So there is going to be an outage, a couple of outages that we will take through the year to prepare for that.
So you may be, actually, that may impact some of the shipments this year, but certainly preparing us for 2027 strength, continued strength, and we see these as multiyear. We do not think that the change, the shift that has gone to EV is just a single year or a temporary slope. We see this focus on ICE vehicles for trucks to be multiyear. That is what our customers are telling us. So we are going to ramp up the investment, and I would expect to see—we will highlight it more in April—but our automotive component here on very specialized products has the opportunity to increase substantially within the next twelve to eighteen months. Okay.
Maybe picking up again on this. So CapEx guidance looks to be a little higher than expected. Is a lot of this driven by this auto opportunity? Or maybe you could parse out the CapEx guide, maybe in the context, I guess, Phase Seven, I think, came a bit under budget. Just any sort of context on the CapEx guidance. Yeah. Actually, we were expecting to be probably somewhere between $100 to $112,000,000 this year, and that change in range for us is purely that automotive opportunity. You know, our customers would take it today. They are actually utilizing some steel products because they do not have the availability of the aluminum products in the quantities that they need.
So we have updated that opportunity, and that is the reason that is probably a slightly higher CapEx than you may have expected.
Operator: Great.
Neal E. West: Maybe just my last one. Obviously, you mentioned earlier that you are not expecting any changes, I guess, to sort of Midwest premiums and things like that. I assume that also may be somewhere around where scrap spreads are. But given the high prices or cost, I guess, for your customers, given where aluminum pricing is today, are you hearing any evidence of demand destruction? Or what areas would you be concerned with? And then maybe secondarily, we are hearing more about derivative tariffs. Any potential impact to your business? And I realize it is early days on that second point. Yeah. No. You know, it is fascinating what is going on. You know, I can tell you this, Bill.
This is a way to look at 2025 and 2026 for Kaiser. No question, we had some significant tailwinds. We had some significant higher operating costs as we put in these capacities. We do not expect those to extend into 2026. So you are going to see a recovery on those costs that were out in '25 versus '26. Our outlook also has the expectation that you will not necessarily, you will not see that. Now it may, that tailwind reoccur in 2026. You know, we are still seeing favorable higher prices and expected in Q1. But our outlook did not assume that to continue throughout the year.
And so that gain that we are talking about here is purely operational gain based on the investments we have made, the cost, and the efficiency gains we expect to make in our operations.
Operator: So any continued
Neal E. West: higher price tailwinds are going to be a tailwind above what we are talking about on this call. So, you know, it could conceivably go higher than what we are—that is why we gave the initial outlook the way we did. You know, I have to tell you, as you ask the question and I look at it constantly, Bill, we have seen absolutely no demand destruction in any of our product lines. We are seeing the general market, the general business start out very strong. We see bookings, shipments going through the months. I am more encouraged than I had been on the general engineering with GDP. So I am feeling better about that side of our business.
Our packaging business, as I talked about, we can sell every pound we can make. Food business is up to the high single digits year-over-year growth. And then when I look at what is going on, I know the market corrected, felt like, wow, those 232 tariffs were going to fall off. All indications that we are getting are that what they are considering is more downstream type products and not removing the tariffs, but perhaps loosening tariffs, but addressing the full end product versus just the raw material. And at this point, we really do not see those tariffs coming off. And even if we did, we, you know, we have commented.
We are neutral to positive, slightly positive there. And we have said all along, while we appreciate and enjoy the tariffs, excuse me, some of the tailwinds we get from metal pricing, you know, we should state at any point if we saw a rapid decline, those could turn into headwinds. And so we will call those out, and that is why we remain super, uber focused on operational gains in our business, which we have highlighted here in our comments this morning. Well, I appreciate all those comments. I will pass it on. But thanks for the color, and we look forward to following the progress, and good luck on the execution ahead.
Operator: Thank you, Bill. Thank you. There are no questions in queue at this time. I would like to turn the call back to Mr. Keith A. Harvey for closing comments.
Neal E. West: Alright. Well, thank you for joining us today. We are off to a strong start of the year, and we are excited for our 2026 prospects.
Operator: And I look forward to sharing details on our continued progress in April.
Neal E. West: Have a good day.
Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
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