Constellium's (CSTM) CEO Jean-Marc Germain on Q2 2016 Results - Earnings Call Transcript

| About: Constellium Holdco (CSTM)

Constellium NV (NYSE:CSTM)

Q2 2016 Earnings Conference Call

August 02, 2016, 11:00 ET

Executives

Paul Blalock - Head, IR

Jean-Marc Germain - CEO

Didier Fontaine - CFO

Analysts

Andrew Quail - Goldman Sachs

Curt Woodworth - Credit Suisse

Jorge Beristain - Deutsche Bank

Piyush Sood - Morgan Stanley

David Deterding - Wells Fargo

Christian Georges - Societe Generale

Matthew Fields - Bank of America Merrill Lynch

David Olkovetsky - CQS

Operator

Welcome to the Constellium 2016 Second Quarter Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Paul Blalock, Investor Relations. Please go ahead.

Paul Blalock

Thank you, Austin. Good day, everyone and thank you for your interest in Constellium. I would like to welcome everyone to our second quarter 2016 earnings call. On the call today for the first time is our new Chief Executive Officer, Jean-Marc Germain, our Chief Financial Officer, Didier Fontaine and 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. As usual, 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 and we undertake no obligation to update or revise any forward-looking statement 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

Thank you, Paul and good day, everyone. Thank you for your interest in Constellium. I'm obviously very honored to be here today and also very excited to rejoin the downstream aluminum industry, where I have close to 14 years of experience in a prior life. I feel the potential in the long term outlook for Constellium and I see it as both positive and improving. As I visit our facilities around the world, I am particularly pleased to rejoin many of my former colleagues, who I know are focused on making Constellium a strong global competitor.

As I am now discovering the Company from the inside, the key factors that make Constellium an exciting company for me to join are proving true. Constellium has excellent people, world-class R&D and technical capabilities, a diversified portfolio of alloys, a good balance of end markets and stable long term relationships with many global blue chip customers. We also have a solid record of shifting the mix from legacy to new innovative products, with a balanced portfolio of aerospace, automotive and packaging products. And again, I think this is a very good place to be and I expect this trend to continue across all segments.

In particular, I was directly involved at a former company in the early development of body-in-white capabilities and I can soundly say that I am more excited today about the future growth in auto body sheet development than at any time in the past. Customer demand and interest in our body-in-white expansion projects remains very active and we expect to earn our way into a broader global role in the industry. The trends we're seeing at play are clearly expected to continue and accelerate, actually, for many years to come, as they are driven by regulatory and technological developments occurring in the global auto industry.

Obviously, the exact timing of all these developments is clearly a decision that each OEM will make in their own time, but our new body-in-white finishing lines in Europe and in the U.S. with our partner UACJ continue to progress according to plan both technically and commercially. Both of these finishing lines, slated for 2016, are now in the qualification stage, with an expected two year ramp up for this committed capacity.

We have decades of business relationships with auto OEMs in Europe and we're now truly emerging as a new global player in both rolled and extruded products for the auto market in North America and in the world. Again, having formerly worked in various parts of the downstream aluminum industry, I am generally familiar with Constellium's challenges and opportunities. At the same time, I have much to learn about the Company. But I can say that I expect us to sharpen our strategic focus and improve our progress in generating and communicating the solid returns we expect from our growth initiatives.

Strategically, I believe Constellium's long term focus is correct and I expect an evolutionary approach over time without major surprises. My goal is to continue to consistently execute that strategy in a capital efficient fashion. As we make progress or have developments or challenges, I expect to keep you informed along the way, to engage with our stakeholders and to communicate with transparency and clarity.

I want everyone to know that I do not come to this job with all the answers, but I will work hard to earn your respect. I also understand your desire to meet with us and to visit our key facilities. As such, after I get my feet wet on the ground in New York, I expect to begin a regular dialogue with our present and future investors. We also plan for Paul Blalock to continue to hold plant tours with local management on a limited basis so that we can showcase our most important new developments over the coming months.

In addition, we've also made the decision to initiate a perception study to solicit the views of many of our past, present and future investors, with the goal to help align expectations. I want to listen to you. And following this first survey, I expect it will be a process of continuous improvement and we may come back to you to deepen our analysis.

Didier will take you through some key slides in a moment to comment on a strong quarter for Constellium and then I will wrap up with a few closing remarks and entertain your questions. But before I do so, I would like to share my initial priorities.

So, turning to page five, we first and foremost need to continue to improve our safety performance. The focus on safety will remain our top priority in all that we do. It must always be our first goal to create a safe and sustainable environment for our employees and our communities and our customers are expecting us to do that as well. I also believe that we have the necessity to now sharpen our strategic and commercial focus and get closer intimacy with our customers and grow our top line. We also must execute on our growth initiatives in a capital efficient fashion. We will strive to deliver consistent and sustainable operational and financial performance. And lastly but not least, we absolutely need to focus on optimizing the return on our capital investments.

Of course, executing these priorities won't always be smooth, but you can count on me to focus, execute and communicate on our challenges, opportunities and successes.

With that, I will now hand it over to Didier to cover our second quarter results.

Didier Fontaine

Thank you, Jean-Marc. Now turning to slide number seven, the highlights of the second quarter include a record adjusted EBITDA of €107 million which represents an increase of 15% over last year and 13% over Q1. This was driven by a continued strong performance in AS&I, with another record level for this growing segment, together with improved results in both A&T and P&ARP segments. Shipments were 387,000 tons, in line with last year. Revenue was €1.2 billion, down 10% compared with last year, mainly due to lower metal prices which as you know are pulled through.

On a like-for-like basis which basically excludes the impact of movements in LME, premiums and currency exchange rates, revenue was down 3%. Net income was €9 million for the period compared with a net loss of €47 million last year. Cash flows from operating activities were €182 million and adjusted free cash flow was €104 million. We achieved seasonally strong adjusted EBITDA per ton in all segments. Both A&T and AS&I were around €500 per metric ton and P&ARP was over €200 per metric ton. Specifically for Muscle Shoals which we report separately for our bondholders, we achieved $210.00 per metric ton.

On the next slide which is slide number eight, we show that all segments are doing better than last year. P&ARP grew at adjusted EBITDA by €3 million, A&T by €1 million and AS&I by €7 million. The costs from holding and corporate were consistent with our previously announced expectations of €2 million to €3 million per month. H&C improved €3 million when compared with last year, when we had some one-time costs.

Turning to slide nine, the P&ARP segment had flat shipments of 268 kt compared to last year, despite planned maintenance outages as well as the transfer of non-packaging volumes to the A&T segment which were included in Q2 2015. Total automotive rolled product shipments were up 30% and we shipped 21 kt of body-in-white, representing 28% growth over last year. The strong shipments in higher margin automotive products were offset by lower demand for foil stock, specialty and other thin rolled products.

Now at Muscle Shoals, adjusted EBITDA was $23 million on strong shipments of 110,000 metric tons. During the quarter, we also extended the Hitachi factoring facility from $100 million to $250 million and we're preparing for insourcing used beverage cans, UBC, procurement from A-BRC. Next, as Jean-Marc indicated, both our body-in-white finishing lines in the U.S. and in Europe which are scheduled to launch in 2016, are progressing well and on track. Lastly, we executed the amended JV agreement with UACJ for a body-in-white expansion in the U.S. On the right-hand side of the slide, you can see that P&ARP grew adjusted EBITDA by 4% to reach €56 million and adjusted EBITDA per ton by 5% to €209.00 per ton.

Now looking at the next slide, slide 10, A&T shipments of 62 kt were relatively flat with last year, with stable demand in North America and slight softness in Europe in orders. However, our H2 outlook remains on track, as we expect a stable order book for the remainder of the year. For the quarter, A&T continued to benefit from operational improvements. And we executed our new contract with Airbus effective January 1st, 2017 which will focus on higher value-added products. Lastly, the new pusher furnace at Ravenswood is now in place and will be in service by early next year. We believe our Ravenswood facility is well positioned for another year of solid performance. Similarly, on the right-hand side of the page, you can see that A&T grew adjusted EBITDA by 6% to reach €31 million and adjusted EBITDA per ton by 7% to €496.00.

Turning to slide 11, AS&I, you can see that the shipments of AS&I represented 58 kt and were up 4% compared with last year, with continued strong demand in automotive structures where we're increasing our global market share. In Q2 2016, AS&I had record adjusted EBITDA of €29 million, representing an increase of 34% compared to last year. Adjusted EBITDA per ton reached €497, an increase of 28% over last year. Overall, this segment continues to have a significantly better product mix and good operational performance.

Our new facility in Georgia is well underway and we expect to start production in 2017. We also recently announced our plan to open a new manufacturing facility in San Luis Potosi, Mexico to add additional capacity and better serve our customers with nearby assembly lines.

Now turning to slide 12, cash flow from operating activities was €182 million, up from €152 million last year. And as said previously, adjusted free cash flow reached €104 million. Adjusted free cash flow benefitted from a €30 million increase in cash flow from operating activities and from our successful efforts in proactively factoring our receivables on a nonrecourse basis, this to offset the planned increase in working capital. Overall, the improved adjusted free cash flow reflects higher cash flow from operating activities and continued high level of capital expenditures as we invest in our growth projects.

Next slide which is slide 13 on liquidity, you can see that our liquidity remained strong at almost €800 million, including €622 million in cash and cash equivalents. As previously indicated, we have ample liquidity to fund our growth initiatives. And I should also mention that in the appendix we included a borrowings table which provides you with the accounting view of each outstanding issue, including accrued interest.

I will now hand it back to Jean-Marc.

Jean-Marc Germain

Thank you, Didier. So, on slide 14, my key takeaways as I look at these results that happened before I joined the Company, I think we have a second quarter which clearly demonstrates progress across all three segments, with record results in AS&I and improved results in both aerospace and transportation and P&ARP. And these results include record adjusted EBITDA of €107 million, cash flows from operating activities of €182 million and adjusted free cash flow of €104 million. Along that obviously is seasonally strong adjusted EBITDA per ton in all segments. So, as I look at these results, I think they are solid. I think they are strong. I think they are evidence of the progress the Company is making.

I also want to point out that, as we all know, H2 is typically seasonally softer than H1 due to increased holidays in August and December for many of our customers and also due to lower customer consumption patterns, in cans most notably. And therefore, we also are planning for more maintenance outages and scheduled maintenance during the second half. So, a strong result for the quarter, in a nutshell, from my standpoint.

Now turning to slide 15, I'd like to share with you a few thoughts about how to unlock shareholder value in Constellium. And first, I want to make it clear to everyone that I am a believer in value-based management and looking at options and I expect to continuously review our growth projects to ensure that our spending produces the expected return profile for the Company. So, my vision for unlocking the value in Constellium is to first continue to improve safety and operational performance in all segments as the foundation to everything we do. As shown in Q2, we're gaining traction in both A&T and P&ARP and AS&I continues to deliver strong performance.

Second, we need to focus on improving product sales and returns within each segment. As we're developing our capabilities and capacities, it is very important that we put that money to work and put those capabilities and capacities available to the market. Third, make sure we achieve positive cash flow which I expect will be a turning point for us and the key to unlock shareholder value. Fourth, we need to continue to de-risk our growth investments by selling and executing on the automotive expansion plants in both rolled and extruded products and make sure that our investment goes to projects which have reasonably certain sales opportunities. Fifth, as we grow our adjusted EBITDA, we expect to begin selective debt reduction, emphasis on selective and de-lever the balance sheet over time.

Lastly, as I said earlier, you can count on me to transparently communicate our expectations, opportunities and challenges.

In conclusion, again, I am very honored to be leading Constellium to the next level and I hope that you will have confidence in our ability to create value for our investors and all of our stakeholders.

With that, Austin, I think we're ready to open the lines for questions.

Question-and-Answer Session

Operator

[Operator Instructions]. And our first question comes from Andrew Quail with Goldman Sachs. Please go ahead.

Andrew Quail

I have a couple of questions. Just in P&ARP in specialty rolled products, volumes seem down year-to-date significantly. Can you just tell us what's driving the weakness there?

Didier Fontaine

Just the market. The market is taking us down and especially in the bright business where LED activities is taking over the market. So, it's a market which is down.

Andrew Quail

Okay. Now, next A&T, you guys in your presentation mentioned some softness in Europe in orders. Is that more aero or transport related?

Didier Fontaine

It's both.

Andrew Quail

Both. Any sort of split there on a percentage basis?

Didier Fontaine

I will say, when I said softer, it is about a couple of percentage down, both sides.

Andrew Quail

Okay. Your EBITDA per ton improvement was very good of that 15%. Is this something that -- obviously you talked about a softer second half given the holidays and with your customers. But is that -- EBITDA per ton, is this something, that improvement, we could expect going forward?

Didier Fontaine

I think today all the elements are up together to see. In AS&I, we see no reason why we should not peak at that level. I think we see the major progress compared to last year and we say we believe the growth or the improvement is really sustainable. On A&T what we said is that -- last time is that we're ahead of the recovery plan. And I think there is no expectation to increase this further, but I think we reach a reasonable plateau. On P&ARP, I think we're looking at Muscle Shoals improving on the back of the volumes and on the back of its recovery plan as far as costs are concerned.

Jean-Marc Germain

So, Didier, you are saying the EBITDA per ton in P&ARP is pretty sustainable from where we're now.

Didier Fontaine

Yes, got it.

Operator

And our next question comes from Curt Woodworth with Credit Suisse. Please go ahead.

Curt Woodworth

A couple questions on the body-in-white growth outlook. Can you comment on what the volume growth expectation is specifically in Europe for next year? I know you've got, I think, about 100 kt ramping up in France and then a small amount in Singen. What level of utilization do you think you can get on those new facilities and can you provide an estimate for what the margin per ton could look like?

Didier Fontaine

I think the new capacity which is 100,000 tons at full capacity, is going to ramp up between 30 kt and 40 kt next year. So, this year we plan to do around 80,000 tons in Europe, so next year we should be around 110,000 to 120,000 tons in Europe.

Curt Woodworth

And what's a reasonable margin per ton expectation for that volume?

Didier Fontaine

It's about what we said in the beginning, so around -- at steady state at full capacity, we should be at €500. It will not be the case at the beginning because you have to absorb the fiscals of the plan. But let's say that the average EBITDA by ton on the product at steady state is around €500.

Curt Woodworth

And then on aerospace, when you look at the capacity creep you're going to get at Ravenswood from the pusher furnace and I think you're also going to have some incremental capacity freed up just from the lower take at Airbus, can you comment on what your total capacity is going to look like next year in aero verse this year? And I guess what level of spare capacity do you think you'll be able to put into the market?

Didier Fontaine

I think for the time being the pusher furnace primary objective will be to make the plant more efficient. And I think it will depend on the market as well as the TID business more than the aerospace business. So, the capacity available today will increase, but the market capacity will be fine.

Curt Woodworth

And is the capacity creep closer to 40 kt or could it be as high at 80 kt?

Didier Fontaine

The capacity will be around 40 kt, even lower.

Curt Woodworth

Okay. And then just one quick one, if I could. Can you give us an update on phase two commitments for the UACJ facility and any update on timing of when you could look to start to construct that facility?

Jean-Marc Germain

So, we need to understand your question. Phase two will be a second CALP line in the U.S., right? And this -- so, we're getting a lot of customer interest. We're not in a position now to make a decision in terms of launching a second CALP line. The first one is pretty much sold out, but we want to make sure we have proper visibility and fidelity in the order book before we make a commitment to that substance.

Curt Woodworth

Okay. What level of commitments would you have now for that line?

Jean-Marc Germain

I think we've said in the past 50%ish type of -- kind of interest in the line, but I am looking at commitments. I've got a pretty high standard in terms of what I mean of commitment.

Operator

And our next question comes from Jorge Beristain with Deutsche Bank. Please go ahead.

Jorge Beristain

Well, a few questions on the automotive extrusion. You do mention that there was -- that was the primary driver of growth. We're looking at the first half numbers. It only seems to be up about 2% to about 52,000 tons for automotive extruded products. I was just wondering if you could talk -- if we're seeing some higher growth really into 2Q.

Didier Fontaine

I think you are right. The growth in terms of volumes is not impressive. The mix is very impressive. However, what we said as well is that there is a general cost improvement at segment level. We worked very hard to make our soft alloy plants much more efficient and they are making money which is was not the case years ago. And this is a combination of -- so, the AS&I performance is a combination of higher volumes, but not that high at total structure, with a better mix and a very solid cost control across the board, inclusive of soft alloys.

Jorge Beristain

And then it would -- sorry for the background noise here. I'm not sure if that's on my end or yours. But I just wanted to just talk about the run rate that you guys appear to be doing there would seem about 110,000 tons in automotive extruded and then you've got these two new plants coming up in Georgia and San Luis Potosi. I was wondering if you could just speak to what kind of order of magnitude those plants would represent on your current run rate. Is each plant sort of like a plus 10% bump or is some of that simply just transferring production that you're already doing and just moving it to Mexico?

Didier Fontaine

No, both plants are going to be accretive to our current volumes. I think in Georgia, we cannot comment on the name of the customer, but let's say it's a European customer which is selling SUVs in southern part of America. So, it will be new business. In San Luis Potosi, it's going to be new business as well. So, this is going to be extra business coming from both plants. And I think the philosophy is to be close to the customer compared to those big rolling plants where things travel, the parts. Our cash management system don't travel. They need to be close to the customer and the development in southern U.S. and in Mexico.

Jorge Beristain

Okay. And then if I could just maybe, Didier, ask a question about the pension, we did notice again a sequential increase in your unfunded pension, up around €800 million now. Could you just talk about what's been happening there over the last sort of year and a half? Is that related to the consolidation of Wise or are you having some impacts from the Brexit fallout? Is there any change in the underlying interest rate assumptions or return -- plan return assumptions? It's just we're noticing some continued growth there, if you could just speak to that.

Didier Fontaine

Jorge, you said it all. I think Brexit has no impact at all. Wise has no pension liability or a very limited one. I think the main changes are coming from the underlying assumptions on the actual rates which have been significantly decreasing. They have been dropping between 65 to 110 basis points since the beginning of the year. And this is all about it.

Jorge Beristain

Okay. And are we kind of at the tail end of where you would expect the interest rate assumptions to be dropping to or is there further downside risk there to the underlying?

Didier Fontaine

You are the banker. You should tell me.

Operator

And our next question comes from [indiscernible] with Morgan Stanley. Please go ahead.

Piyush Sood

This is Piyush Sood filling in for Evan Kurtz. Congratulations for the strong quarter. I have just one question. If we're looking at your disclosures on revenue and shipments by product line and after adjusting for aluminum pricing premiums it seems like your realizations in the aerospace and auto extrusions in the first half were much higher than the first half last year. However, performance for automotive road products seemed a bit soft compared to first half last year. So, just wondering if that's a mix shift as you produce more BIW or is there a small decline in underlying product pricing?

Didier Fontaine

No, I think on body-in-white on the road products the increase has been between 25% and 30% as expected. What you see mainly in the auto section is per real part which is called heat exchangers which is flattish or let's say doesn't have the same profile. But overall, body-in-white continues to have a 25% plus growth profile.

Operator

And our next question comes from David Deterding with Wells Fargo. Please go ahead.

David Deterding

Just in the presentation, we didn't really see anything about CapEx and the cadence. Could you just talk about 2016 and 2017 expectations and then how much CapEx we're spending on the project in Mexico?

Jean-Marc Germain

Yes. I mean, I can confirm the communication we did in the past of €350 million for 2016, going down to €250 million for 2017. We stick to these numbers. And obviously opportunities may come and go and that may change, the outlook for 2017, but that's what we -- our planning is based on. And the plant in Mexico is--.

Didier Fontaine

The first tranche is $10 million.

Jean-Marc Germain

Yes, this tranche is $10 million.

David Deterding

And then on your priorities, it looks like one of them is de-risk growth projects. Could you just talk a little bit more about what you mean by de-risking your growth projects?

Jean-Marc Germain

Yes, certainly. Well, it's a balancing act. And I think, for instance, what the Company has achieved with the joint venture with UACJ is a good example of de-risking a project and getting to market with two strong companies that bring different -- have complementary technical expertise. It reduces, obviously, the CapEx for each company, allows us to have better access to more automakers as well. So, that's one way of de-risking a project, right?

Another way to de-risk a project is to make sure that we invest when we've got commitments that are strong enough. And I'll be very vigilant in the future to make sure that, when we invest in growth projects, we've got pretty reasonable line of sight of commitments to come, And others are also around making sure that, whenever we've got an option to grow the Company or invest into new equipment or revamping of existing equipment, that we don't only have one option. It's to have several options to pick from so that we understand which one is going to best match our risk profile.

David Deterding

And then just one last one. I saw the bullet on the procurement at Muscle Shoals, that you guys were brining that in-house from AB InBev [ph]. Can you just talk about what that means? And was there a -- did you guys have to buy that segment out of AB InBev?

Jean-Marc Germain

Yes, I can talk to that. So, it's the procurement of used beverage cans, right, that are recycled throughout North America. And basically what it entails is bringing in a few people that are the experts in terms of buying and trading that UBC product, bringing an information system to make sure we can manage all these transactions, because you are buying from hundreds of different suppliers and then physically managing the freight from the pickup locations of the traders that have title to the UBCs back into our facility at Muscle Shoals which recycles used beverage cans.

It doesn't entail buying a business from AB. And actually, we have been in a very positive and constructive dialogue with AB. They gave us notice a few months ago. But they've been working very collaboratively with us to make sure that the UBC procurement transfer happens as seamlessly as possible to us. And obviously we appreciate their help. It's also in their best interest because they want to make sure that we've got the raw material to produce the can sheet that they are going to need to back -- to fill their cans with beers and all kinds of beverages sold.

So, the impact of that is going to be at current mill prices. What's going to happen is that we're going to get to the working capital on our books. We estimate it to be around $40 million, $50 million at this stage. And obviously we'll be saving a little bit of money because we will be internalizing the cost of managing that supply chain. And the good thing is that we will have more control of a very strategic activity which is procurement of scrap, recycled units for our operations. So, that's what it is in a nutshell.

Operator

And our next question comes from the line of [indiscernible]. Please go ahead.

Unidentified Analyst

I have three questions. The first one was on deleveraging. You talked about selected debt reduction. Can you please elaborate on that and what your deleveraging plan is? Maybe another question that goes along with that is you have very expensive debt at Wise Metals level and it's part of the cash flow optimization program. Would that make sense, to do refinancing there? My third question is on sales and cash flow generation. And I understand you have a plan for growth, but do you have additional cost reduction opportunities as you're stepping into the -- to lead the Company? Thank you.

Jean-Marc Germain

Sure. So, I'll try to answer the others. So, delevering; I think at 5.3 leverage, that's a high number. I want to work on it. I want to bring that number down. And as I said, I will be looking at selective debt repayment. I don't have a plan yet. It's my fourth week in the job, but it's clearly a priority I want our finance team to be working on and propose a plan in terms of what are the moves that may make sense over time. And obviously, as you pointed out, we've got some debt that's more expensive than others. And we will be working on this one, I presume, sooner than on the one that is cheaper. So, that makes a lot of sense.

Do we plan to have a refinancing of Wise? It's way too early to comment on this. And clearly it's going to be part of a holistic plan for the whole Company. And I view Wise as a very integral part to Constellium. I know it's been kind of held -- it's very strategic for us, right? That's why we bought it. But it's kind of been held at times, especially in the public eye and your eyes, as a bit of a separate entity. From my standpoint, this is Constellium and that definitely needs to be relooked at the context of what makes sense for the global Constellium.

And finally, on the cash flow generation, do we have opportunities for additional cost reductions? Definitely. I am not going to give a number in terms of what my expectations are, because quite frankly I don't have one yet. But going to the plants I have been through, I see a very motivated group of people that come up with project ideas or small ticket items that can -- and capital expenditures that can help us really improve our cost position. And it's a daily grind that's making sure we're nimble and frugal and that we improve our processes on a day-to-day basis. So, more to come later, but definitely I think we've had a good quarter where a lot of the activities that were launched in the past are now bearing fruit. We see some cost reductions underway. Is that the end? Definitely not.

Operator

And our next question comes from the line of Christian Georges with Societe Generale. Please go ahead.

Christian Georges

I have a couple of questions. The first one is could you clarify again what was the volume proportion of BIW in the U.S. and in Europe in the quarter? And I got what you are looking at for next year in Europe, but what does it look like in the U.S. as well? It is my first question. The second one is, looking at the amount of EBITDA you've given, well, for Muscle Shoals, it looks like both Muscle Shoals and the European operations are roughly on the same kind of profitability at this point. Looking forward, would you expect that the normalization of Muscle Shoals should bring that profitability level higher than what we have in Europe at a standard basis? And my last question is just if you'd clarify the high level of tax we've had in the past two quarters, whether that is going to continue in the second half. Thank you.

Didier Fontaine

Okay. So, starting with your question number one about the body-in-white in the U.S., so far we have no production in the U.S. I think we're -- the production and sales of body-in-white are coming from Neuf-Brisach in France. Next year we expect to ramp up part of the new facility in France, up to 30,000 to 40,000 kt additional. So, that will make probably in France around 110,000 to 120,000 tons, as I've mentioned previously.

On the joint venture side with UACJ, we do expect a ramp up over 40,000 tons next year. So, that can make a total next year compared to this year about 150,000 to 160,000 tons, a steel ramp of Europe being added. Your question number two is on the EBITDA by ton between Muscle Shoals and Europe. You have to know that Europe will more and more sell body-in-white as well, so the result is a recovery at Muscle Shoals that will obviously increase the EBITDA by ton in the coming years and in the coming months.

However, in Europe with the increase of sales of body-in-white, as well we do expect the EBITDA by ton to increase. So, what we do expect in the future is clearly to see the average EBITDA by ton to increase in both parts at a similar pace. And your last point about taxes, we're not focusing that much about taxes on the P&L. We should, but you have to know that all losing locations or loss making locations are not generating deferred tax assets. So, it's a little bit technical, but if you look at the cash tax, it's very low. It's remaining at €4 million for the year, so for the year -- for the quarter and the target at €15 million to €20 million for the year.

Operator

And our next question comes from Matthew Fields with Bank of America Merrill Lynch. Please go ahead.

Matthew Fields

Just want to follow up on a couple questions that were asked before and then maybe a new one. You said that, with regards to commitments for this second CALP line at the UACJ joint venture, that you'd need to be above 50% committed before you made a decision. I'm not sure I sort of understood. Just maybe I didn't hear what decision is there to be made and sort of what's the commitment process like?

Jean-Marc Germain

Matthew, I want to see some commitments than what we have at this stage before I make a decision to proceed with CALP line number two. I think that's all I can say at this stage. Lots of interest from customers; that's great. We've got make sure we make those commitments a bit further.

Matthew Fields

So, CALP line number two is not a definitive prospect at this point?

Jean-Marc Germain

Correct. I feel very optimistic about the fact that it's going to happen, the timing of which will be impacted by do we get enough level of interest and commitment, that we can look at it as being a sound investment that's going to return money reasonably quickly after start.

Matthew Fields

And that level is 50% of the line of capacity commitment -- committed?

Jean-Marc Germain

Yes, I think what we've communicated so far is that we've got 50% of commitments or interest in the line. What I'm saying is I want those commitments to be a bit further. And obviously there's a gray area between is it 40%, is it 60% and all that. So, I can't comment more.

Matthew Fields

And then the next question on the UBC insourcing, you said you'd save a little money because you're internalizing the costs of the supply chain. Were you paying Anheuser-Busch for the service that they were providing you?

Jean-Marc Germain

Yes, we were.

Matthew Fields

So, net-net, you think this is a margin benefit to Wise Metals?

Jean-Marc Germain

Yes, it's going to be marginal, right? But yes, it should be a bit of upside here. But again, remember it comes at a cost -- sorry. Remember it comes at a cost in terms of working capital, right, in the $40 million to $50 million range.

Matthew Fields

Right. And then just the last question and appreciate the time. I just want to go over the timetable for the first CALP line. That's supposed to be completed this year and then you have six to nine months of qualification and then you start recognizing revenue. And that's the CALP line at Bowling Green?

Didier Fontaine

I think we're going through the qualification now. I think we're going to produce around 3k to 5k this year and next year we should start selling to end customers. So, we will start recognizing revenue next year.

Matthew Fields

Start recognizing revenue next year?

Didier Fontaine

As a joint venture, we'll start recognizing revenue next year.

Operator

And our next question comes from David Olkovetsky with CQS. Please go ahead.

David Olkovetsky

My first question, I just wanted to confirm. I thought I heard you guys say that Wise EBITDA was $23 million. Just wanted to confirm you're referring to U.S. dollars. And is that on an IFRS basis? Is that on a GAAP basis? What do you mean by that?

Didier Fontaine

It's $23 million on a GAAP basis. It's part of the bank bond which is going to released tomorrow and together with the 6-K. So, you are going to have access to all those information tomorrow.

David Olkovetsky

So, again, just to reconfirm, that's $23 million on a GAAP basis. That's the Wise reporting basis. What was it on an IFRS basis in terms of the contribution to Constellium?

Didier Fontaine

It is very similar but in euro.

David Olkovetsky

Sorry. €20 million, you said?

Didier Fontaine

No, it's very similar in euros. It's about €22 million.

David Olkovetsky

Okay, €22 million.

Didier Fontaine

And IFRS. And IFRS.

David Olkovetsky

I have a few more questions on Wise. The 110,000 kt I think you guys mentioned that you did, is that going to be sustainable in the third quarter?

Didier Fontaine

That's what we believe, yes.

David Olkovetsky

Okay. And was there any mix shift this quarter between body stock and tab and so forth?

Didier Fontaine

Marginal.

David Olkovetsky

Is there a view that you have the ability to shift it a little bit further away from body stock over the next couple of quarters or no?

Didier Fontaine

It would be difficult. I think that is basically driven by customers.

David Olkovetsky

Okay. And then the number that you're -- the $23 million GAAP number, I mean, I think it's a very strong number for the quarter. Do you believe that that is sustainable? A few quarters ago you guys had guided to -- I apologize, off the top of my head I think it was $85 million to $95 million on a U.S. GAAP basis, on a sort of run rate basis probably starting in the second quarter. So, I guess I'm just asking, is this quarter the new run rate, seasonally adjusted, of course?

Didier Fontaine

I think the performance of Muscle Shoals is linked to two main factors; factor number one, the volumes, clearly. And point number two is the cost reduction program that we have put in place in Muscle Shoals and improvement -- not only cost reduction but as well improvement in the operation's efficiency. So, I think that in Q3 you should find -- we should find the level of production that enables us to reach a similar level. Q4 will be probably a little bit softer depending on the volumes.

Operator

This concludes our question and answer session. I would like to turn the conference back over to Jean-Marc Germain for any closing remarks.

Jean-Marc Germain

All right. Well, thank you, everyone, for your interest in Constellium. Great to have you on the call today and we look forward to our -- I'll look forward to meeting some of you. And until then, have a very safe and great day. Bye-bye.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

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