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Constellium N.V. (NYSE:CSTM)
Q4 2019 Earnings Call
Feb 20, 2020, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen and welcome to the Constellium Fourth Quarter and Full Year 2019 Results. [Operator Instructions]

I would now like to turn the conference over to your host, Mr. Ryan Wentling, Director of Investor Relations.

Ryan Wentling -- Director of Investor Relations

Thank you, operator.

I would like to welcome everyone to our fourth quarter and full year 2019 earnings call. On the call today are our Chief Executive Officer, Jean-Marc Germain; and our Chief Financial Officer, Peter Matt. 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 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 include 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 statements, 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. We undertake no obligation to update or revise any forward-looking statements 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 Jean-Marc.

Jean-Marc Germain -- Chief Executive Officer

Thank you Ryan. Good morning, good afternoon everyone and thank you for your interest in Constellium. I would like to start by thanking the Constellium team for their contributions toward making 2019 a great success. We had an excellent year and I'm excited to discuss our results and our 2020 outlook with you.

On slide 5, you will see some of our highlights from 2019. Shipments were 1.6 million metric tons, an increase of 4% compared to 2018. Revenue increased 4% to EUR5.9 billion. This was primarily driven by the consolidation of Bowling Green and improved price and mix, partially offset by lower metal prices. While our revenues are affected by changes in metal prices, we operate a pass-through business model to minimize metal risk.

Net income of EUR64 million, decreased compared to net income of EUR190 million in 2018. Remember, our net income in 2018 included two one-time benefits, a gain on the sale of the North Building at Sierre and a gain on an amendment to an OPEB plan. Adjusted EBITDA increased 13% to EUR562 million in 2019. This performance was in line with the 12% to 14% guidance we provided last quarter. 2019 represents our third consecutive year of double-digit adjusted EBITDA growth and I'm proud that we have been able to sustain this strong level of growth.

Our free cash flow of EUR175 million, came in at the upper end of our guidance of EUR125 million to EUR175 million. For those of you that have been following us for several years, you will remember we originally set the target for positive free cash flow in 2019 at our Analyst Day in March, 2017. We clearly delivered on this objective. We have come a long way and I'm confident that Constellium will continue to generate significant and sustainable free cash flow over the years to come.

As a result of the strong adjusted EBITDA and free cash flow performance in 2019, we reduced our leverage to 3.9 times. This is a notable achievement, considering the fact that 2019 included the acquisition of Bowling Green and the application of IFRS 16, which represented nearly half a turn of leverage, further deleveraging is a top priority for us. On Project 2019, our run rate cost savings increased to EUR78 million, exceeding our target of EUR75 million. Overall, I am proud of what we achieved in 2019 and I am optimistic about our prospects for 2020.

Now turning to slide 6. Let's review the highlights from our fourth quarter performance. Shipments were 368,000 metric tons, that's flat compared to the first quarter of 2018. Revenue decreased 2% to EUR1.4 billion. This was primarily due to lower metal prices and lower shipments in A&T partially offset by the consolidation of Bowling Green. Our net income of EUR22 million increased, compared to a net loss of EUR57 million in the first -- in the fourth quarter of last year. Adjusted EBITDA was EUR121 million, that is a 15% increase compared to the fourth quarter of last year. P&ARP had a very good quarter with solid operational performance and the benefit of favorable metal costs. A&T delivered another strong quarter, thanks to good aerospace demand and solid operational performance. In AS&I, we delivered strong top line growth in automotive structures, but continued to experience higher costs related to our footprint expansion and some operational challenges. However, we are making visible progress in containing these costs. Free cash flow was EUR18 million, our fourth consecutive quarter of free cash flow generation.

With that, I will now hand the call over to Peter for further details on our financial performance.

Peter Matt -- Executive Vice President and Chief Financial Officer

Thank you, Jean-Marc, and thank you, everyone, for joining the call today.

Turning now to slide 8, you will find the change in adjusted EBITDA by segment for the fourth quarter and the full-year of 2019 compared to the same periods of last year. For the fourth quarter of 2019, Constellium achieved EUR121 million of adjusted EBITDA, an increase of EUR17 million or 15% year-over-year. P&ARP adjusted EBITDA of EUR63 million increased by EUR8 million or 13% compared to last year. A&T adjusted EBITDA of EUR45 million increased by EUR7 million or 18% year-over-year. AS&I adjusted EBITDA of EUR21 million was comparable to the fourth quarter of last year. Lastly holdings and corporate costs, improved by EUR2 million year-over-year to EUR8 million.

For the full-year of 2019, Constellium earned EUR562 million of adjusted EBITDA, an increase of EUR64 million or 13% year-over-year. P&ARP adjusted EBITDA of EUR273 million, increased by EUR30 million or 12% compared to last year. A&T adjusted EBITDA of EUR204 million, increased by EUR52 million or 34% year-over-year. AS&I adjusted EBITDA of EUR106 million decreased by EUR19 million compared to last year. Holdings and corporate costs, improved by EUR1 million year-over-year to EUR21 million. We expect H&C cost of approximately EUR20 million for the full-year of 2020.

Now turn to slide 9, and let's focus on the P&ARP segment. Adjusted EBITDA of EUR63 million, increased 13% compared to the fourth quarter of last year. Volumes were comparable to the fourth quarter of 2018 as Packaging Rolled product shipments decreased 2% compared to strong for -- compared to a strong fourth quarter last year. Automotive Rolled product shipments were up 14% compared to last year as we continue to successfully execute on our automotive ramp up. Price and mix was a tailwind of EUR3 million. Costs were a tailwind of EUR10 million, due primarily to favorable metal costs. Bowling Green generated negative EUR4 million of adjusted EBITDA in the quarter. FX translation was a tailwind of EUR1 million and the application of IFRS 16 was a EUR2 million tailwind in the quarter.

For the full-year of 2019, P&ARP performed very well, generating record annual adjusted EBITDA of EUR273 million. Strong operational performance drove higher volumes with automotive shipments, up 19% and packaging shipments, up 3%. Favorable metal costs and solid cost control were tailwinds in 2019, while Bowling Green results of negative EUR15 million and weaker price and mix were headwinds. For the full-year of 2019, FX was a tailwind of EUR8 million, while IFRS 16 was a tailwind of EUR6 million.

Now turn to slide 10 and let's focus on the A&T segment. Adjusted EBITDA of EUR45 million, increased 18% compared to the fourth quarter of last year. Volume was a headwind of EUR6 million on lower TID shipments, due to weaker end market demand, which was partially offset by strong aerospace shipments. Price and mix, improved by EUR16 million in the fourth quarter, due to a good mix in both aerospace and TID and improved TID pricing. Costs were a headwind of EUR4 million, primarily related to higher labor and energy costs. Lastly, FX translation and the application of IFRS 16 were each a EUR1 million tailwind in the quarter.

Now let's look at the full-year bridge for A&T. 2019 was an exceptional year, with record annual adjusted EBITDA of EUR204 million. A&T benefited from higher TID prices, strong aerospace demand, and a better mix in both aerospace and TID. Despite solid cost control, costs increased primarily due to labor costs and higher energy costs and an unfavorable metal input mix. For the full-year of 2019, FX was a tailwind of EUR5 million, while IFRS 16 was a tailwind of EUR2 million.

Now turn to slide 11 and let's focus on the AS&I segment. Adjusted EBITDA of EUR21 million was flat compared to the fourth quarter of 2018. Volume drove a EUR5 million improvement as we continue to show strong top line growth in automotive structures. Costs increased by EUR8 million, primarily tied to the higher costs associated with our footprint expansion, but as Jean-Marc noted, these costs represent less of a headwind than in recent quarters. Lastly, the application of IFRS 16 was a EUR3 million tailwind.

Looking now at the full year bridge for AS&I. 2019 was a challenging year as we faced elevated costs related to our footprint expansion and some operational challenges. In response to these challenges, we have purposely slowed the pace of capital deployment in this business. As a consequence, our automotive structures nominations were approximately EUR100 million in 2019. For the full-year 2019, FX was a headwind of EUR1 million, while IFRS 16 was a benefit of EUR12 million.

As we have noted before, the operational challenges we are experiencing in AS&I are largely limited to a few project platforms. Predicting the exact timing of an inflection is difficult, but the flat adjusted EBITDA we reported in the fourth quarter is a promising step toward getting this business back on track. We expect AS&I to improve in 2020. We are confident that we are on the right path and can return the profitability of this segment to its historical levels.

Now turn to slide 12 and I will provide a final update on our cash improvement initiative, Project 2019. On cost savings, we achieved an additional EUR5 million of annual run rate savings during the fourth quarter of 2019, bringing our final run rate savings to EUR78 million. I am proud to note that we exceeded our Project 2019 target of EUR75 million. And we are confident that there are further cost savings to realize over time.

Now let's move to trade working capital. We are proud of our much improved trade working capital performance in 2019, where we managed to more than offset the trade working capital growth associated with our growth initiative. Over time, we continue to expect trade working capital investment related to the substantial growth in our business. We will work hard to offset some of this investment with reductions across the business and remain confident in our ability to do so.

With respect to capital spending. Our capex of EUR271 million was slightly over our target as we saw a few opportunities to accelerate some of our operating improvements in the fourth quarter. We remain very focused on capital discipline and will continue to selectively invest for growth. As we indicated at our Analyst Day in December of 2018, there will be a successor project to Project 2019, which we are calling Horizon '22. We are confident that there are still significant costs and capital improvement opportunities across the company. Horizon '22 -- the Horizon '22 team is working on a number of initiatives to further underwrite our long-term targets. And we will periodically come back to you with upgrades on the progress of this very important initiative.

Now turn to slide 13, and let's discuss our free cash flow. We generated EUR175 million of free cash flow, a significant improvement from 2018. It is a further note that we were able to achieve positive free cash flow in every quarter of 2019. Looking forward to 2020, we are reducing our capex to EUR250 million, a EUR21 million reduction from 2019. We expect cash interest of EUR140 million to EUR150 million and cash taxes of EUR10 million to EUR20 million. For the full-year 2020, we expect to generate free cash flow in a range of EUR125 million to EUR175 million. Our top priority for free cash flow deployment continues to be deleveraging.

Now turn to slide 14, and let's discuss the balance sheet and liquidity position. At the end of the fourth quarter, our net debt was EUR2.2 billion and our leverage was 3.9 times. As noted, we remain committed to deleveraging. Based on our 2020 adjusted EBITDA and free cash flow guidance, we expect to further reduce leverage in 2020 by approximately half a turn. This leaves us well positioned to achieve -- to reach our '22 target of 2.5 times leverage. As you can see in our debt summary at the bottom left-hand side of the page, we have no bond maturities until 2021. The 2021 maturity is less than 0.4 times our LTM adjusted EBITDA. Our cash plus amounts available under our committed facilities was EUR516 million at the end of the fourth quarter. We remain very comfortable with our liquidity position.

And I will now hand the call back to Jean-Marc.

Jean-Marc Germain -- Chief Executive Officer

Thank you, Peter.

Let's turn to slide 16. I want to start by highlighting again our balanced portfolio of end market exposures. Three of our four key end markets packaging, automotive, and aerospace are secular growth market for aluminum. While we have frequently discussed the secular growth aspects of aerospace and automotive, I want to highlight that we believe that increasing customer preference and strong sustainability attributes make aluminum packaging a secular growth market, in addition to being recession-resilient. These secular growth markets represent nearly 80% of our revenue in 2019. In each of these end markets we generally have long-term agreements, typically five years with our customers. And as I mentioned earlier, we pass through metal prices so we are not exposed to commodity price fluctuations. These factors lend diversification and stability to our business, which is an exciting and underappreciated aspect of our story.

Now let's move on to the specific end market updates. I'll start with the packaging market. Packaging is a core market for Constellium and represented 37% of our revenue in 2019. We are a major supplier to the can sheet market in both North America and Europe. We see strong market demand in both of these markets, growing customer preference for aluminum cans is clear and evidenced by the increasing number of new product launches in cans and increased investment in new can lines by the can makers.

Aluminum cans are infinitely recyclable making them the most sustainable beverage packaging container. I'll remind you that Muscle Shoals is one of the largest recyclers of aluminum cans globally, recycling over 20 billion cans per year or one in every five can sold in North America. We believe the sustainability attributes of aluminum represent a meaningful opportunity for can sheet demand over time. In addition to the sustainability trend, demand for can sheet continues to grow based on substitution of aluminum for steel in Europe. in the US, we continue to expect the growth of auto body sheet demand to tighten supply to the packaging market over the medium to long term. We are optimistic about these positive trends in the packaging market.

Now let's move to automotive. Over the long term automotive remains a secular growth market for aluminum. The lightweighting of vehicles is expected to continue. Increased regulation and customer awareness will require OEMs to further lightweight vehicles to increase fuel efficiency, meet reduced emission standards, and at times avoid spectacular filings. We expect hybrid and electric vehicles to continue to win share as a result. In order to increase vehicle range, OEMs will need to take weight out of the vehicle making aluminum the logical material of choice. Constellium is well positioned to realize the benefits of this secular shift to aluminum in automotive and the electrification of the fleet.

In the near term, we continue to observe pockets of weakness in the broader automotive market. However light trucks, SUVs, luxury cars, where we are the most exposed remain the strongest parts of the market. Despite declining global automotive market in 2019, we experienced solid demand growth across our automotive portfolio and we grew our shipments by 15% year-over-year. We expect to continue this trend of outperforming the market in 2020. While we feel better about the automotive market now than we did at the same time last year, we will continue to closely monitor automotive market trends.

Let's turn now to aerospace. Aerospace represented 15% of our total revenues in 2019. We firmly believe that the long-term fundamentals driving aerospace demand growth remains intact, including growing passenger traffic and healthy backlogs at the major OEMs. While the 737 MAX grounding and production hold is an ongoing development, near term aerospace demand remain strong. Based on our current visibility, we expect the strength to continue through at least the first half of 2020.

On the 737 Max specifically, I believe that Constellium is very well positioned to navigate this uncertainty. Our diversified customer and platform portfolio minimizes the impact of any one OEM or aircraft. We have a diverse set of customers across the commercial, business, and regional jets, space, defense. As you will remember, we have also expanded our relationships in the transportation industry and defense markets over the past few years. I again highlight that Constellium's diversification is a strategic advantage both in A&T and across the entire Constellium portfolio.

In TID, we expect to continue to expand in niche products in a diversified range of markets over the long term. The current conditions in these end markets are mixed. Defense applications like [Indecipherable] [0:24:11] for instance remained strong. However, this is offset by weaker-than-expected demand and, in certain cases, excess supply in some of our industrial and transportation end markets in both North America and Europe. We expect the weakness in these markets to persist into at least the first half of 2020.

Lastly, I would like to take a moment to recognize the European Commission for launching an anti-dumping investigation into aluminum extrusions from China. We applaud this action. We support free but fair trade.

Turning to slide 17. We detail our financial guidance and outlook. On balance, I am optimistic about our prospects of 2020. We remain focused on operational execution and harvesting the benefits of our investments. Despite the uncertainty surrounding the Boeing 737 Max, the coronavirus, we expect to deliver another strong year of adjusted EBITDA growth of 6% to 9% in 2020. This follows a strong year of adjusted EBITDA growth and free cash flow generation in 2019. I believe our track record of consistent performance is a strong validation of our strategy.

We are targeting EUR125 million to EUR175 million of free cash flow in 2020. Our '22 targets are over EUR700 million of adjusted EBITDA and a leverage ratio of 2.5 times. We remain committed to delivering on these targets and, underpinned by a rise in '22, we look at them with increasing confidence.

We remain committed to shareholder value creation. And with that, operator, we'll now open the Q&A session. Thank you.

Questions and Answers:

Operator

[Operator Instructions] Your first question is from the line of Chris Terry with Deutsche Bank.

Christopher Terry -- Deutsche Bank -- Analyst

Hi, Jean-Marc and Peter, and congrats on a good end to the year. A couple of questions for me. Just starting with the 2020 guidance. It's quite a wide range, so 6% to 9%. I just wondered if you could comment on what would need to go wrong to get to the bottom end of that and right to get to the top end of that, and just whether that's around -- whether that's Boeing or the AS&I as you work through some of the headwinds near-term on that that division. Thank you.

Jean-Marc Germain -- Chief Executive Officer

Yeah, good morning, Chris, and thanks for your congratulations and thanks for your question. It's a good one. So, I mean, we are early in the year, obviously. And in our process of looking at where we should land during the year and fixing our own targets, you've got to recognize the uncertainties that are out there in the market.

So, clearly, as you mentioned the 6% would be things go as per the plan overall, right. But we have a negative -- very negative news on the 737 Max. So let's assume they don't build it -- they don't start rebuilding it throughout 2020. And the coronavirus creates more disruptions in the supply chains in automotive and some of our customers need to take prolonged outages, that kind of stuff, right. So we look at it as there are some uncertainties out there, because the 6% to be the reality.

And on the other end of the spectrum, I mean, if we continue to see what we're seeing in the first half of the year, it's pretty good. Our operational execution is very strong. We have turned the corner we believe in auto structures. You're not seeing it that much yet in Q4. But we're cautiously optimistic about 2020. So, strong operational execution, good market outlook in the first half. If that continues, that will carry us toward the higher end of the range. So on balance, we're trying to weigh the pluses and minuses. It's more difficult at the beginning of the year than it is at the end of the year. So that's why the range is 1 point wider than we gave it last year -- middle of the year.

Christopher Terry -- Deutsche Bank -- Analyst

Okay. Thanks for that. And then just to finish off on the 2020 guidance, the free cash flow, the EUR125 million to EUR175 million. Just wondering what's built in that in terms of working capital. I think you have a headwind as you build volumes. You had a great year last year on working capital. So just wanted some comments on that. Thanks.

Peter Matt -- Executive Vice President and Chief Financial Officer

Yeah. So thanks, Chris. Appreciate the question. What we've assumed in terms of the working capital assumption for the year is that we'll be -- working capital will be a use of cash as we go through the year in kind of the range that we talked about at the Analyst Day in 2018. So we wouldn't move off of that. We're obviously going to work to kind of improve that. But we also have some other kind of very positive drivers.

As you looked at our capex, we brought that number down to EUR250 million. We expect to obviously grow our adjusted EBITDA in the quarter. We're expecting kind of a better cash tax performance in the year based on some of our tax attributes. So there is a number of kind of other positive things that are moving with us.

Christopher Terry -- Deutsche Bank -- Analyst

Thanks, Peter. And the last one from me is just around the packaging opportunity and just broader ESG, given that it's been such a step change probably in the last three months or so in terms of investor interest in ESG. Just wondering how are you thinking about the opportunity to leverage off the ESG given you do have favorable end markets to that and how you pitch that to investors. And then also in packaging specifically, if you could just give an update on when we might expect something on customer contracts, etc. I believe it's mainly 2021. But just wondered if you could give an update. Thanks.

Jean-Marc Germain -- Chief Executive Officer

Sure. That's a very broad question. So I'll I try to get it and if I forget anything, Peter will certainly chime in. So, you're absolutely right. I mean, the ESG topics, and environmental aspects, climate change, all that is really going up and we see that in our interactions with you and all our shareholders, investors. We've really seen that starting in nearly a year ago, right, kind of spring of last year.

And I think the first thing to say about this is, we are blessed to be working with aluminum, which is a fantastic material in terms of its attributes when it is recycled, and it is recycled. I mean, 75% of all aluminum ever produced over more than 100 years is still in use today. That is quite fantastic when you compare it to some of the competing materials like plastics, for instance, that we have. So it's a fantastic material in terms of recyclability. And we intend to fully play our role in continuing to help recycling, potentially recycling more. So we're looking at how we can improve our recycling footprint and our capacities and all that, and making sure that we follow our customers in their needs for more aluminum.

So that shows in packaging. That shows also in automotive, right. That's well known. The light-weighting in automotive -- more and more will be needed. I mean, we like bigger cars with more stuff and gadgets and conveniences in it. So that means they're becoming heavier. You need to make them lighter so they become more fuel-efficient, right. And if you want to electrify them, same story; they need to be lighter. So all the attributes of aluminum are really good, and we want to really play our role and ride this wave. The things we are doing is, we focus on the right segments, can, automotive, certainly. We work with our customers. And we are willing to invest, provided we get appropriate returns.

You were mentioning the can sheet contracts. We're very excited at what's happening in can sheets. The fact that the demand is growing at a very substantial rate now is important. Now, 3% to 4% -- or some say 5% -- doesn't sound that big in itself. I actually say it is very substantial if it sustained. You think of it -- you've got five years of that, compounded. That requires a lot of capacity expansion and more debottlenecking from all of us in the industry to meet those needs.

So I'm very excited at the future here. I think it will take some time to materialize, because, as you mentioned, we've got contracts coming up in '21, really '22. So that's when things will materialize more than 2020, for sure. And over time, as we continue to be a good supplier and we become a better supplier, we should reap the rewards of this expansion in the market.

Christopher Terry -- Deutsche Bank -- Analyst

Great. Thank you. That's all for me.

Jean-Marc Germain -- Chief Executive Officer

Thanks, Chris.

Operator

Thank you. Your next response is from Curt Woodworth with Credit Suisse.

Curtis Woodworth -- Credit Suisse -- Analyst

Yes, thanks. Good morning, Jean-Marc and Peter.

Jean-Marc Germain -- Chief Executive Officer

Hey, there.

Curtis Woodworth -- Credit Suisse -- Analyst

Yeah. I guess, following up on Chris' question regarding can sheet and I think Jean-Marc, your kind of statements that this continuing shift to auto away from can, combined with the fact that can growth is sharply accelerating, kind of puts the substrate market in what appears to be a continual deficit condition. So, can you just talk about maybe potential expansion opportunities you see? And then, with respect to your existing book, how much does reprice in '21 versus '22? I think we had been under the assumption that a good chunk of the book would reprice in '21.

Jean-Marc Germain -- Chief Executive Officer

Yeah. So, on that one, I don't want to give specific numbers, but there is more repricing in '22 than in '21 and not all of it's through pricing between '21 and '22 because, as you know, they're typically five year contracts, right, both in Europe and in North America. So it's going to be progressive, right, gradual in terms of whatever happens to pricing and volumes.

In terms of the expansion capacities, the first thing to say is, we are super capital disciplined. So, as we mentioned, we've got opportunities in Muscle Shoals, and they are quite significant as we -- since we bought the company, we've put a lot of investment there. We've put a lot of focus, a lot of upgrades, a lot of injection of specific technical talent into Muscle Shoals, and you are seeing and we are seeing and we'll keep on seeing more capacity, more reliability and more throughput therefore out of Muscle Shoals. Back in 2018, [Indecipherable] was commenting on a 75,000 tons minimum improvement in Muscle Shoals' output and we certainly reiterate that and get more and more confident that the 75,000 tons is really a minimum that's going to take place at Muscle Shoals. Similarly, in the [Indecipherable] some debottlenecking opportunities, they are more limited.

So with all that said, what we do constantly is look at where can we invest a little bit more of competitive maintenance dollars, improve a little bit our operations and to expand our capacities. The other thing we do is we constantly look at what is in a strategic fashion, right, not in technical fashion, what is the best use of our capacity. Do you want to do a little bit more can, a little bit more auto, because as you know, these two product lines use essentially the same machinery and production processes. So we do that. And we do that as I say, strategically looking at three, five years what do we deliver the best thing in terms of value creation first.

When all that is said and done, then if we're still in the deficit, then we got more opportunities then we will not decide to invest. So that means, we will be sure we get appropriate returns above our hurdle rate for whatever investment we'd make. Otherwise, the cash flow will go to paying down the debt rather than increasing the capacities.

Curtis Woodworth -- Credit Suisse -- Analyst

Okay. That makes sense. And then I guess the follow-up with respect to the guidance. When you look at A&T for this year, you talked about having very good line of sight on demand. But you had pretty significant mix and price benefits. I think you outlined EUR65 million benefit in 2019. Can you talk about how you see price and mix continuing this year? I mean, clearly TID pricing is weaker and you had very rich mix in aero, but just in general, how do you see A&T kind of EBITDA this year versus last year? Thank you.

Jean-Marc Germain -- Chief Executive Officer

Sure. Well, I mean, I'll start to say that we're very impressed and pleased and proud of our A&T team. They did a fantastic job in 2019, which doesn't make for an easy comparable going into 2020. And as I mentioned, we got pretty good visibility for the first half of the year, including the price and mix and all those factors. Much less so for the second half of the year.

And aerospace is just one part of the equation and we got TID as well where there the visibility is less, because it's less contracted, much more diverse, and things can change quite rapidly in TID. I mean, as you saw, volumes were down 10%, I think this year. I mean this past year in 2019 compared to 2018.

So with all that said, I think I look at -- the operations will continue to perform well and they've really stepped up in terms of execution and reliability of the operations. Aerospace will be strong and will -- should have good, solid price and mix this year in the first half, but the second half is more open. And on TID, it's a little bit more difficult to ascertain.

Peter Matt -- Executive Vice President and Chief Financial Officer

The only thing I'd maybe jump in and add is, so we've historically said that on an EBITDA per ton basis, that's EUR700 million to EUR800 million is probably a good range for 2020. And I guess as we kind of look at it right now, we're probably more leaning toward the top end of that range in terms of where the margins per ton would come out.

Curtis Woodworth -- Credit Suisse -- Analyst

Great. Thank you very much. Congrats.

Jean-Marc Germain -- Chief Executive Officer

Thanks.

Operator

Thank you. Your next response is from Matthew Korn of Goldman Sachs.

Matthew Korn -- Goldman Sachs -- Analyst

Hey, good morning, gentlemen. Good to see the optimism on 2020, given all the idiosyncratic events that that we've seen over the last few months. A couple left for me. First, on Bowling Green. Is that facility as you'd anticipated? Is it running at effectively full capacity now? And what kind of remaining start-up costs you think we need to burn off from the facility as the year starts? And I think, Peter you said that on the net, it contributed negative EUR4 million last quarter. How do you expect that pace of change over the rest of the year there?

Jean-Marc Germain -- Chief Executive Officer

So I'll start. So we're super pleased with the Bowling Green performance this year. EUR15 million negative EBITDA for the year as we had guided to. That's not that what makes us the most happy. The performance in terms of speed, recovery, quality, customer satisfaction is really impressive, and it is beyond our expectation on all these barometers of industrial KPIs and customer satisfaction.

Going into 2020, Bowling Green will be positive, we will not [Indecipherable] by how much, but it will be positive and we're really now at the inflection point and we are very comfortable that Bowling Green will be a contributor to EBITDA for the Company. So we'll look at it in a very positive side. And at the end of the year, we're running very close to 90,000 -- 100,000 tons rate. Now, obviously, this will be impacted by how the auto market performs, if it's weak, it's going to be a little bit lower, if it's strong, it's going to be a little bit higher, but we're really in good shape now.

Matthew Korn -- Goldman Sachs -- Analyst

Looking back, do you feel the consolidation of that facility really was major difference in how it ended up operating?

Jean-Marc Germain -- Chief Executive Officer

Yeah, I think it did help. The team at -- I think one boss is enough than having two bosses. I guess you could spend more time to running the plant as opposed to being in meetings with the principals. But, no, I think the groundwork was done very well. The simplification of having just one owner and a very clear sight has helped. And I think over time what it does is, it allows us to remove some costs, simplify the business, integrate it fully with Muscle Shoals and all that is going to make for a very efficient processes for us.

So I'm really happy, not only of the fact that we made the acquisition, but also the timing of the acquisition. If you remember, we really invert some velocities in the beginning and the first '17 -- 2017, 2018 and we bought it just when it started to turn good. So it was good to have a partner in the bad times and to be alone in the good times.

Peter Matt -- Executive Vice President and Chief Financial Officer

And Matt, just then -- sorry, just responding in terms of your cadence. Remember, what we've always said is that, kind of 2019 was a year to get the plan fully operational and then 2020 was a year to optimize the profitability. So, 2020 will be kind of a year of improvement there, it'll be kind of gradual improvement. And as Jean-Marc said, we should be able to get the plan kind of certainly into the block. And that'll be the goal for the year. So Q1 maybe is a little bit softer, but obviously as you get to the back end of the year, you'll see better results there.

Matthew Korn -- Goldman Sachs -- Analyst

Got it. Thanks, Peter. Let me just then rotate from the last segment then. The issue with AS&I -- unfortunately they've kept stubbornly persistent to an extent. And do you regard this as being a moving target? Has it been equipment downtime, has it been yields? What can you share if anything more about the key issues? What kind of remains that still need to be done there?

Jean-Marc Germain -- Chief Executive Officer

Yeah, Matt, a legitimate question. It's been a bit of a moving target in 2019. We were a little bit optimistic of our ability to turn it around soon in the year. We have addressed the issues one by one. We still have a couple remaining in North America, specifically in the US. And we're running well in Europe, we're running well in Canada, we're running well in Mexico and we still have a few issues to address in the US.

And actually, we've made some progress also on these -- we see some flattening year-on-year. We see the first bucket becoming a much lesser than it has been in the last few quarters in terms of variance, right, the right variance. And you're seeing the top line developing, which is important, because once we're able to meet the customer needs then we are delivering, then it's a matter of first streamlining, because which we know how to do even though it's picking up longer than we thought. So I'm cautiously optimistic about 2020 for the auto structures.

Peter Matt -- Executive Vice President and Chief Financial Officer

Yeah. And just to jump in on this. I mean, if you think about what we've done there and what we've talked about in the last call, we brought kind of new resources to this to attack what originally was probably -- we probably expanded a little bit beyond our operational bandwidth at the beginning because of all the different growth opportunities that we have. So we brought new resources to it, we've reorganized the business and now we're kind of aggressively taking out costs. And so I think that's what you're starting to see as the kind of the expense delta is starting to shrink, as we're getting more and more in line with where we think the business can get to. And as we said before, we remain confident that we can get the business back to the historic levels of profitability that we've talked about, which, is kind of at 500-ish per ton.

Matthew Korn -- Goldman Sachs -- Analyst

Right. Thanks, Peter. Thanks, Jean-Marc. Good luck to you.

Jean-Marc Germain -- Chief Executive Officer

Thanks.

Operator

Thank you. Your next response is from Josh Sullivan of Benchmark Company.

Josh Sullivan -- Benchmark Company -- Analyst

Hi, good morning, Jean-Marc and Peter.

Jean-Marc Germain -- Chief Executive Officer

Good morning, Josh.

Peter Matt -- Executive Vice President and Chief Financial Officer

Hey, Josh.

Josh Sullivan -- Benchmark Company -- Analyst

Just as far as Horizon 2022. How does that contrast with Project '19? And are there any fundamental differences here in philosophy or target areas you're going after?

Jean-Marc Germain -- Chief Executive Officer

Yeah. So, Peter will complement. But I think the way we thought -- we think of it as, Project 2019 was very much about a bunch of opportunities for cost reductions scattered throughout the Company. There was plenty to do, plenty of opportunities. We think of Horizon '22 as something much more strategic, where rather than going after a 100 or 200 or 300 different micro projects, we're going to go at 10, 15 maybe, which are much more strategic, which may have more lead time in terms of between when we write the charter for easily trying to achieve when we define what it is that is going to be the solution and then we implement it.

So it's not going to be that kind of knock down one after the other on a monthly basis we'll have updates and that kind of stuff, right. It's going to be much more strategic, much more focused. But also each of these projects will be wider in terms of scope. So that's what we'll do. I mean, we'll talk more about it in the future, but maybe not as frequently as we did with Project 2019.

Peter Matt -- Executive Vice President and Chief Financial Officer

Yeah, and maybe just to jump in. I mean, an example on Project 2019, you'll remember, we have these situations where we're able to find, if we wash the sleeves in a [Indecipherable] then we could save 100,000 in the plan, right and then you multiply that by however many plants aren't actually washing their sleeves, and it turns into kind of 1 million of savings.

So here just to put a point on what Jean-Marc saying, we're going to look at things like kind of metal recovery, right. So think about our business. We spend over EUR3.5 billion on metal, right. And if we can save kind of 2% on that, you end up with some huge numbers, right. So this is -- but this is the type of thing where it does not come easily. These are things that are developed and practices that are developed over many years. So we'll work on those and we'll report on those, but we do believe that there's opportunity there.

Josh Sullivan -- Benchmark Company -- Analyst

Got it, and I appreciate that. And then just a question on AS&I. I think you mentioned $100 million of nominations in 2019. Any indication or directionally what that might look like in 2020 on how it's shaping up?

Jean-Marc Germain -- Chief Executive Officer

No, I think it's a bit early, but it's fair to say that we have substantially reduced the number of nominations in 2019, and that was a conscious choice we made. It's not because there were fewer opportunities out there. It's just that, as Peter mentioned, we're going to maybe overstretched ourselves or our capabilities given the three years of nomination at 1 [Phonetic] billion, and we thought it was time to pause, regroup, digest and execute on what we have.

And I think in 2020, you'll see quite a bit of that as well, right. We will continue to be present in the market. There are very, very attractive opportunities. We'll prosecute them, but we will be very modest in our ambition. We've got lots of investment that has been made into auto structures. Now is the time to reap the benefits of those investments. As for the teams, they're fully focused on. And once we see that, then we'll resume going after our new business. But at the moment, there's plenty of opportunity within what we already have.

Peter Matt -- Executive Vice President and Chief Financial Officer

Yeah and I just want to jump in to say that, again, the thesis behind the auto structures is absolutely 100% valid. So this has been an execution challenge, and as Jean-Marc said, as we get our execution under control and we deliver what we said we are going to deliver, then you'll start to see us kind of spread our wings a little bit more.

Josh Sullivan -- Benchmark Company -- Analyst

Thank you. Appreciate the comments.

Jean-Marc Germain -- Chief Executive Officer

Sure.

Operator

Thank you. Your next response is from David Gagliano of BMO Capital.

David Gagliano -- BMO Capital -- Analyst

Hi. Thanks for taking my questions and congrats on another solid results and outlook. I just wanted to just ask a question about 2020. So a little bit of a bridge embedded in the year-over-year growth rates. If we just take the midpoint as kind of a EUR40 million-ish year-over-year growth. It sounds like of that EUR40 million, somewhere around EUR15 million, maybe EUR20 million is Bowling Green's operating improvements, I think. And then there's also some component also of AS&I. I was wondering if you could validate that EUR15 million to EUR20 million expected improvement at Bowling Green and also, if you could give us a kind of a similar figure of what's embedded in the year-over-year improvements for operating improvements at AS&I?

Jean-Marc Germain -- Chief Executive Officer

Yeah. So, David, your assumptions are directionally correct. I will not comment specifically on each and every view going into 2020. But you're right, that Bowling Green is going to be a plus and the other thing that makes sense. We do have some improvement that we expect from our overall structures. We do believe in A&T. There can be a little bit of a challenge because of the overall situation that everybody is aware of. But that should be contained [Phonetic].

And remember, the EBITDA per ton comment that Peter made around closer to EUR800 a ton and basically is underpinned by the fact that our improvements we view them and it's being very sustainable, both from a commercial side and the operational side. And looking at P&ARP, we expect to continue to see some improvements in P&ARP because these guys are running well, [Indecipherable] doing well. Our operations are pretty solid and with all the investments we've made, making them more reliable. We don't anticipate crisis or we don't have much contingency that we think we need. So that's how I think about the business, right. It continues the good performance in the industry segment of AS&I where we see a little bit of recovery compared to what the market conditions [Indecipherable].

David Gagliano -- BMO Capital -- Analyst

Okay, that's helpful. So is it fair to characterize the EUR40 million year-over-year improvement? Is it reasonable to say about EUR30 million of that EUR40 million is kind of operating and then the other EUR10 million is market?

Jean-Marc Germain -- Chief Executive Officer

Yes, yes, it is. I mean, we are not expecting a great news from market to speak the truth. We see the market themselves. Aluminum is penetrating in automotive. That's good but automotive is pretty tepid going into 2020, right. So I'm not expecting good news on the auto side in 2020. That is certainly not embedded in our guidance, right.

And if you look at the TID market, some are good. I mean, I mentioned the defense, I didn't mention semiconductors, because it's not bad. Others aren't bad, right. So on an average, it's a mixed bag. So I'm not expecting good news from TID. And in aerospace we got to realize that the 737 Max, if they don't build it, at some point, they will buy less aluminum. So other aircraft will be bought -- will be built but that's offset but overall when we look at aerospace going into 2020, it doesn't look like the aircraft builds are going to be at the same level as where they were in 2019. So no at EBITDA. I think -- and so [Indecipherable] it could be positive, right.

The expectation I have with the market is tepid at best. But a lot of what we're delivering is, I think I'd use the word grinding through continually throughout 2020. That's all as we focused on executing on the contracts we have, making sure we run our plants well, making sure we are diligent in how we manage our costs [Indecipherable] talking about -- across corporate costs going down under the EUR1 million into 2020. So we're just grinding and grinding our way to EUR700 million and 2.5 leverage.

David Gagliano -- BMO Capital -- Analyst

Okay. Great. That's helpful. Thanks again.

Operator

Thank you. Your next response is from Martin Englert of Jefferies.

Martin Englert -- Jefferies -- Analyst

Hi, good morning, everyone.

Jean-Marc Germain -- Chief Executive Officer

Hi, Martin.

Peter Matt -- Executive Vice President and Chief Financial Officer

Hi, Martin.

Martin Englert -- Jefferies -- Analyst

So, circling back on the Max production curtailment, can you give a little bit more color? You've noted the overall aero exposure, but maybe a little bit of flavor on how much is weighted toward regional defense and then maybe where the bias is between Boeing and Airbus.

Jean-Marc Germain -- Chief Executive Officer

[Indecipherable] good question, Martin. So, as we mentioned, 15% of our revenue is in aerospace. Cut to the chase. Boeing as a company is 2% to 3% of our total sales as a company at Constellium. And the 737 Max is a very important aircraft, but it's not the only one that Boeing makes, right. So that gives you an idea of the exposure we have to the program. Now, how it pans out during the year? I mean, is it authorized to fly, when do they start production again?

Nobody knows. I mean, I don't know if nobody knows. I don't know. I'm not and I'm not going to speculate on it. What do we said in our guidance, what is embedded in our guidance is whether they make it again this year or doesn't change our guidance, the 6% to 9% range [Indecipherable] growth.

Martin Englert -- Jefferies -- Analyst

Okay. But if they would not revamp production this year that would be more of a bias toward getting toward the 6% EBITDA growth. Correct?

Jean-Marc Germain -- Chief Executive Officer

Wouldn't be helpful, for sure.

Martin Englert -- Jefferies -- Analyst

Okay. Got it. If I could, one other one. Are you seeing any negative implications from the coronavirus within the supply chain from end user demand perspective? Maybe more specifically, any issues with sourcing within packaging or the with the automotive customers?

Jean-Marc Germain -- Chief Executive Officer

No. So we are monitoring that as closely as we can. We haven't felt any direct impact of it. We have got questions from the customers about what is your exposure to the coronavirus. And directly, we don't see any. But indirectly, it's impossible to tell. If we're selling to the customer and they need 1,000 parts to make one of their products and two of them are coming from China and the supply chain is disrupted, well, they can't make their products so the [Indecipherable] and that we don't know. We haven't seen any of that happening yet. We are monitoring and we'll react as appropriate.

Martin Englert -- Jefferies -- Analyst

Okay. Within the packaging market in the US I think [Indecipherable] have to rely on some import substrates for aluminum can packaging, I believe, so maybe there is some risk around that. Would you be able to remind us of if you have any spot market available volume for 2020 for packaging?

Jean-Marc Germain -- Chief Executive Officer

Very limited. As we enter the year, typically overall as a company, we're close to 90% sold out, right, because there is always a little bit of tolerance, right. So we got to be ready for customers with more than their nominal contract and then we've got a little bit of spot rates [Phonetic]. That's what makes the 10% you go from 90% to 100%. So there is not much -- there is not much open. But if there is an opportunity to sell more, we will work very hard and maybe we can do 102%, 103%. But we'll see. We'll see.

Martin Englert -- Jefferies -- Analyst

Okay. Excellent. I appreciate all the color there and congratulations on another year of solid EBITDA growth and the free cash flow generation.

Jean-Marc Germain -- Chief Executive Officer

Thank you, Martin.

Peter Matt -- Executive Vice President and Chief Financial Officer

Thanks, Martin.

Operator

Thank you. Your next response is from Christian George of Societe Generale. Please go ahead.

Christian Georges -- Societe Generale -- Analyst

Thank you and good morning. Hi, just three quick ones. Just follow-up on the coronavirus question. have you had any of your clients maybe going back to you asking you if you could supply some of the products that potentially would be affected in the supply chain? Have you got any request for that?

Jean-Marc Germain -- Chief Executive Officer

No, we haven't.

Christian Georges -- Societe Generale -- Analyst

Okay. And the second question is on Airware, which I think two years ago when Bombardier was fixing its problems, your Airware inventories were building up. I guess this has improved greatly. Have we seen the positive impact on increased sale of Airware throughout 2019? Or is that something which you would expect maybe a further positive in 2020 on the Bombardier contract for instance?

Jean-Marc Germain -- Chief Executive Officer

So overall our sales of Airware in 2019 were pretty good. There may be a little bit of upside going into '20, but that would be marginal. A lot of the ramp-up you've seen it already in 2018 and 2019.

Christian Georges -- Societe Generale -- Analyst

Great. So some of the improvement we're seeing in the division is normalization of your Airware products, which is higher value added, right?

Jean-Marc Germain -- Chief Executive Officer

Correct. But it was behind [Indecipherable].

Christian Georges -- Societe Generale -- Analyst

Okay. And the last question is obviously it's on the subject you can't talk too much about. But [Indecipherable] discussions going on. Obviously in the US there are still some headwinds with regards to market share. And the question is simply is that something you need to be looking at closely because [Indecipherable] which would be highly valuable for you or is it something which you find is not affecting you whatsoever?

Jean-Marc Germain -- Chief Executive Officer

I mean, we are obviously monitoring the situation. I mean, anything that happens in our space is of interest to us. But again, for us to be interested in pursuing kind of an acquisition or that kind of stuff would mean that it has to be something that fits within our strategy and therefore it has to be in line with deleveraging, reaching out 2.5 times target for 2022 and therefore it's going to be a compelling value. I cannot say more because I would be speculating. At the moment, space plan [Phonetic] is [Indecipherable] will close its acquisition of Aleris and we wish them the best.

Christian Georges -- Societe Generale -- Analyst

Great. At the same time, strategically, it may be -- would it not be ideal if a new entrant were to come to your US market and take out some of the assets for [Indecipherable] company? Or is that something which is removed risk in your view?

Jean-Marc Germain -- Chief Executive Officer

I don't know. I mean, it should be a different entity, but it wouldn't change the competitive landscape. And today you have a very [Indecipherable] somebody else, but I don't think it changes anything fundamentally.

Christian Georges -- Societe Generale -- Analyst

Okay. Thank you very much.

Operator

Thank you. Your next response is from Michael Steele from Bank of America.

Michael Steele -- Bank of America -- Analyst

Hey, everybody.

Peter Matt -- Executive Vice President and Chief Financial Officer

Hey, Mike.

Michael Steele -- Bank of America -- Analyst

Jean-Marc and Peter, how are you?

Peter Matt -- Executive Vice President and Chief Financial Officer

Very good.

Michael Steele -- Bank of America -- Analyst

Appreciate your sort of detailed commentary on all the segments. And I think I'm just trying to process what your commentary is about 2020. And when I think about kind of from 2019 to 2020 and like an EBITDA bridge, it seems like volume might be a little bit flat, price and mix might be a little bit flat and the majority of getting from 560 to the low 600s which is the middle of your range would be kind of cost savings. Is that the right way to think about the bridge from '19 to '20?

Jean-Marc Germain -- Chief Executive Officer

You're very good at [Indecipherable] triangulating toward getting that bridge for every segment and every nature of barriers. No, we're trying to work on those levers, Mike. But we still have some volumes coming, right can sheet build we are not going to ramp up the model, I mean, if you look at the year-on-your basis, right. We are not fully ramped up in auto structures, we still have lines starting. You remember we have done some press lines that are starting this year actually in [Indecipherable] so all that will create some volume increase in 2020 and I'll give you a tidbit and also carrying on into 2021.

So there's some growth in volume. We constantly try to improve the mix, so that should also be a level [Indecipherable]. On pricing, wherever we have the opportunity to reprice, we do. So you should see a little bit of that and obviously cost should be a contributor as well.

Michael Steele -- Bank of America -- Analyst

Okay. Thank you. And then my next question is on the capital structure. The 6.625% of '25 just became callable. Those are your highest coupon. How do you balance the desire to kind of reduce interest costs by addressing that issue with sort of the additional moves to chip away at the front end like you did with your '21s earlier this year?

Peter Matt -- Executive Vice President and Chief Financial Officer

Yeah. So, as you know, we've been deleveraging as the priority and one of the things that I think is really good is that we put ourselves in a position to be kind of very opportunistic. We are definitely conscious of the fact that we've got the 2021s that are kind of closer in maturity and we're confident that we have free cash flow to kind of address them in the kind of near term. But we are also confident in the fact that the markets are really strong now and there can be opportunities to kind of do some refinancing that potentially could help us dramatically and reduce interest expense and eliminate some of the near-term maturities. So we got a lot of different options and as time pans out, we'll see how it kind of transpires.

Michael Steele -- Bank of America -- Analyst

All right. Thanks, Peter.

Operator

Thank you. I'm showing no further questions at this time. I would like to turn the conference back over to Jean-Marc Germain, CEO of Constellium.

Jean-Marc Germain -- Chief Executive Officer

Thank you, operator, and thank you, everyone. As you can tell, we are very pleased with our 2019 performance. And we look at 2020 importantly with a lot of confidence. Thank you very much for your interest in Constellium and talk to you soon. Bye-bye.

Peter Matt -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Ryan Wentling -- Director of Investor Relations

Jean-Marc Germain -- Chief Executive Officer

Peter Matt -- Executive Vice President and Chief Financial Officer

Christopher Terry -- Deutsche Bank -- Analyst

Curtis Woodworth -- Credit Suisse -- Analyst

Matthew Korn -- Goldman Sachs -- Analyst

Josh Sullivan -- Benchmark Company -- Analyst

David Gagliano -- BMO Capital -- Analyst

Martin Englert -- Jefferies -- Analyst

Christian Georges -- Societe Generale -- Analyst

Michael Steele -- Bank of America -- Analyst

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