Kaiser Aluminum (KALU 1.38%) shares went on a roller-coaster ride today. By 11:20 a.m. EDT, the aluminum stock was down 12.8% as Kaiser reported a big net loss for its second quarter. That was in sharp contrast to rival Alcoa's (AA -4.64%) recently reported quarterly earnings -- Alcoa shares soared on the day of its earnings release.
Investors, however, seem to have found green shoots in Kaiser's otherwise seemingly morbid quarterly numbers, which is why the stock regained some ground and closed Thursday down only 5.8%.
Kaiser Aluminum released its second-quarter earnings report after market close on July 21.
Kaiser's net sales surged 168.5% year over year to $741 million, with value-added products making up nearly 43% of its total sales. In April, Kaiser acquired Alcoa's Warrick rolling mill, which boosted its value-added revenue by nearly 82% in Q2. The acquisition marked Kaiser's reentry into the lucrative aluminum packaging industry (think food and beverage packaging).
However, Kaiser's net loss more than tripled to $22 million in Q2, which is why investors were miffed. But if you exclude one-time charges like a tax charge, Kaiser's adjusted net income of $16 million was a huge improvement over its adjusted net income of $6 million in the year-ago quarter.
Kaiser's outlook for the rest of the year suggests the sell-off in its shares wasn't entirely warranted. Kaiser is beginning to see a recovery in several end markets, such as aerospace and automotive thanks to the economy's reopening and the pickup in air travel.
Packaging, meanwhile, looks like a promising growth avenue, with industry experts pegging the industry to grow by mid-single digit compound annual rates over the next five years or so. Kaiser, in fact, sees packaging as a significant growth opportunity, so much so that it expects revenue from value-added products to hit $2 billion in the long term.
Kaiser expects to spend $400 million in capital expenditures over the next few years to expand its key rolling mill Westwood in Washington, and add roll coating manufacturing capacity at Warrick. That sounds like a plan, and is something long-term investors should keep in mind.