Hello, and welcome to today's Constellium Second Quarter 202 Results Call. My name is Bailey, and I'll be the moderator for today's call. All lines will be muted during the presentation portion with an opportunity for questions and answers at the end. [Operator Instructions] I would now like to pass the conference over to our host, Jason Hershiser, Director of Investor Relations. Jason, please go ahead.

Thank you, Bailey. I would like to welcome everyone to our second quarter 2023 earnings call. On the call today, we have our Chief Executive Officer, Jean-Marc Germain; and our Chief Financial Officer, Jack Guo. 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.

Thank you, Jason. Good morning, good afternoon, everyone, and thank you for your interest in Constellium. Let's begin on Slide 5 and discuss the highlights from our second quarter results. I would like to start with safety, our number one priority. After a strong first quarter performance, our recordable case rate declined in the second quarter, leading to a rate of 1.9 per million hours worked for the first half of the year. This is a humbling reminder that while we always strive to deliver best-in-class safety performance, we need to constantly maintain our focus on safety to achieve the ambitious targets we have set. It is a never-ending task for our company and one we take very seriously. Turning to our financial results. Shipments were 398,000 tons, down 6% compared to the second quarter of 2022 due to lower shipments in PARP and AS&I. Revenue of €2 billion decreased 14% compared to last year, as improved price and mix was more than offset by lower shipments and lower metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk. Our value-added revenue, which reflects our sales, excluding the cost of metal was €785 million, up 11% compared to the same period last year. Our net income of €32 million in the quarter compared to a net loss of €32 million in the second quarter last year. As you can see in the bridge on the top right, adjusted EBITDA of €209 million in the quarter was up 5% compared to last year and is a new quarterly record for the company. A&T adjusted EBITDA is a new quarterly record as well and increased €33 million compared to last year. PARP adjusted EBITDA decreased…

Thank you, Jean-Marc, and thank you, everyone, for joining the call today. Please turn now to Slide 7. Value-added revenue was €785 million in the second quarter, a new quarterly record for the company and up 11% compared to the same quarter last year. Looking at the second quarter, €156 million of this increase was due to improved price and mix in each of our segments. Volume was a headwind of €43 million due to lower shipments in PARP and AS&I. Metal impact were a headwind of €22 million compared to the same period last year. The balance of the change was largely due to unfavorable FX translation. There are two important takeaways from this slide. First, we grew our value-added revenue by 11% compared to last year. And second, we continue to have pricing power. Price and mix and price specifically is the biggest increment of our year-over-year variance and helped us offset inflationary pressures. Now turn to Slide 8. Let's focus on our part segment performance. Adjusted EBITDA of €79 million decreased 17% compared to the second quarter last year. Volume was a headwind of €13 million with higher shipments in automotive, more than offset by lower shipments in Packaging and Specialty rolled products. Automotive shipments increased 16% in the quarter versus last year as new platforms continue to ramp up and demand generally appears stronger. Packaging shipments decreased 12% in the quarter versus last year due to inventory adjustments across the supply chain in both North America and Europe and lower demand at the consumer level. Price and mix was a tailwind of €52 million, primarily on improved contract pricing, including inflation-related pass-throughs. Costs were a headwind of €53 million as a result of higher operating costs due to inflation, operating challenges at Muscle Shoals and unfavorable…

Thank you, Jack. Let's turn to Slide 15 and discuss our current end market outlook. The majority of our portfolio today is serving end markets currently benefiting from durable sustainability-driven secular growth. The important takeaway here is that aluminum is a catalyst behind this secular growth, given its sustainable attributes. Aluminum is infinitely recyclable and does not lose its properties when recycled. As a result, aluminum will play a critical role in the circular economy and will be a driver of growth in lightweighting, electrification and sustainable Packaging. So turning first to Packaging. During the quarter, the inventory adjustments continued across the supply chain in both North America and Europe. We are also seeing demand weakness in both regions as a result of the current inflationary environment, the lack of promotional activity and following a multiyear period of rapid growth during COVID. Even in today's environment, where we are seeing weaker demand in Packaging markets, aluminum cans continue to outperform other substrates like plastic and glass. We are confident in the long-term outlook for this end market, though given capacity growth plans from can makers in both regions, the greenfield investments ongoing here in North America and a growing consumer preference for the sustainable aluminum beverage can. Longer term, we expect Packaging markets to grow low to mid-single digits in both North America and Europe. We will participate in this growth in both regions as we announced at our Analyst Day last year. The company remains highly focused on stabilizing the operating challenges we have been experiencing at Muscle Shoals, so that we can take advantage of these end market dynamics here in North America. We're encouraged by the improved performance we have seen recently at Muscle Shoals and remain confident in our ability to restore the plant's profitability over…

Thank you. [Operator Instructions] Our first question today comes from the line of Katja Jannick from BMO. Katja. Please go ahead. Your line is now open.

Hi. Thank you for taking my questions. The margin in the A&T...

Good morning, Katja...

Hello. Margin in the A&T segment remains very strong. Previously, you said through the cycle margin in that business should be somewhere between €800 to €900 per ton. Is it still - does that still hold or have margins structurally increased?

Yes. Thank you for the question, Katja. So A&T you're right, in the first quarter, we mentioned a margin - a cycle average margin of €800 to €900 per ton and it will stay high in this up-cycle environment. So that's certainly what we saw in the second quarter with better price and mix and with more Aerospace as having a higher margin compared to the TID business. But also in the second quarter, we have a better mix within our Aerospace product portfolio towards some of the more technically demanding product, which obviously hold a premium. So the business also had solid cost control in the second quarter relative to the increased levels of activity. With two quarters in, we believe we can maintain attractive margin for this business, certainly for this year and that provides some upside for margin throughout the cycle. So our view today is there's €100 per ton upside to the €800 to €900 per ton guidance we gave to you last quarter.

So yes, we think structurally, margins are at around €1,000 per ton.

And in the second half of the year, should we see some easing, I'm assuming in margins?

There could be some easing just given the seasonality of the business and the cost is continuing to catch up in this business unit. But we're optimistic about the margin profile for this business.

But this year will be over the average of the cycle...

Okay. That's fair. Now your leverage is approaching your target. Can you remind us, once you reach that target, how you're going to be thinking about the capital allocation?

Yes. So look, I mean, our overall objective is to increase our financial flexibility because that will kind of help open up capital deployment options and allow us to maintain a balanced, I would say, a balanced capital allocation policy. So as we reach our leverage target, it certainly opens up more options including returning cash to shareholders.

Thank you very much.

Thank you.

Thank you. Our next question today comes from the line of Bill Peterson from JPMorgan. Bill, please go ahead. Your line is now open.

Yeah, hi. Good morning and thanks for taking the questions. It's great to see the upward guidance revisions.

Morning, Bill...

Yeah, good morning. It's great to see the upward guidance provisions. What is - I guess, what has changed since the prior outlook that gives you confidence in the revisions? And I guess given the higher free cash flow guidance, can we expect accelerated debt paydown for par [ph]

Yes. So Bill, I'll get started and Jack will help me. So the visibility has improved as the year progresses. That's number one. We are extremely pleased with our performance in Aerospace. And as we mentioned in a response to Katja's question. It's not a flash in the pan. There is much more room to grow. And we - that's why we're raising also our expected average margin for this segment. And we're seeing a very good mix within Aerospace, where, as you saw, customers like us, we get some fantastic awards as best suppliers from them, and that means more business for us. So very strong fundamentals overall in Aerospace and even better for us as a supplier, as a preferred supplier to our customers. So that's definitely a strong contributor to the increased guidance. In Packaging, the first half was rough with demand being down. We expect the second half to be less rough and that's based on our order book and what we're saying. So by contrast, H1 of '22 to H1 of '23, that was difficult. We expect H2 to H2 to be much better in terms of comparison. Still not where we like it to be in the long run, but making some progress. And Automotive, as you saw, continues to be strong for us. It's a very good year. I think we're seeing both the strength in the underlying market, but also the continued penetration of aluminum and automotive. So all these are giving us good reasons for the increased guidance. Now at the same time, it is striking to see that our Specialty segment are suffering from a quasi or completely recessionary environment. Inflation continues to be strong and eating into our cost base. So it's - we're extremely pleased with the outlook we're giving and sharing with you today because there are still quite a few headwinds that are - that we are faced with. And despite this, we're increasing our guidance. So yes, the increased guidance translates into - on the EBITDA side translates into more cash flow that gives us more flexibility. And I don't know if, Jack, do you want to add anything to my comments...

I think that's good.

Okay. And as you saw, we like to pay down some debt, so we'll see what we do in the future.

Okay. Great. Thanks for that. And I guess you kind of mentioned some of the issues around inflation and I know it's - I know a lot of the mitigation efforts and inflation is captured in your full year EBITDA to you. But I guess, if we think about some of the bigger items you mentioned, like energy or metals there's still, I guess, inflationary pressure at some of the sites. But I guess what specifically is the team doing to mitigate these? And I guess can you provide an initial view on how to think about these cost headwinds as we move into next year?

Yes. So on energy, we think we have crested. And actually, at the moment, given our hedge positions, we are paying a bit higher than - paying higher than the spot prices would be on average. So as those hedges roll off and hopefully, the spot prices continue to be - what happens in the future, we should see a decrease in energy cost. I'm hopeful that's what happens. But anyway, that's what we expecting going into next year. On metals, I think we're seeing an inflation subside, but they are still much higher. I mean, magnesium is multiple times more expensive today than it was back in 2020 or 2019, right, pre-pandemic. So it is these elevated costs to continue. So in terms of mitigation measures, and I could go on and on about different pockets of costs that are going up with inflation, we all live that in our business and consumer life, I would say. So in terms of mitigation measures, the first one is making sure we are getting paid by our customers for the reality of the new costs that we are faced with. And as I said, there's been a fantastic job done by the teams to reflect the increased cost into our pricing, but there is a lag to that. So you haven't seen yet the full impact of the price increases. The second item is we've got to be much more economical in our use of resources, which is a good thing, actually. So it's forcing us to put on the front burner questions like how do we save energy, how do we better operate our plans, how do we improve our recovery so that every cost item, every use of resource is minimized. And there's - that's a lot of work grinding through every opportunity to minimize the use of resources within the plants. And then the third aspect is both strategic and longer run is we have to go and continue on our path towards more value-added products. And a big element of that is making sure we have the right product mix, but we focus on those products that have better margins that are more constructive in the long term so that the value of what we're making is more recognized in the market. And that's one of the reasons why we commented - we announced the sale of the three extrusion plants in Germany that were focused on lower-margin products. We thought this is the kind of market where it may be a little bit more difficult in the future to face increased cost base and we found a buyer that use them as a strategic asset. Well, the buyer found us actually. We were not auctioning off these assets. And that's part of the steps we take to continually make sure we got the right cost base and we participate in the right markets.

Great. Thanks for the insights. And nice job on the quarterly execution.

Thank you, Bill.

Thank you. The next question today comes from the line of Curt Woodworth from Credit Suisse. Please go ahead, Curt. Your line is now open.

Yeah, thanks. Good morning, Jean-Marc and Jack Guo. I wanted to comment already sort of A&T, hey, the A&T margin profile maybe a little bit differently. I mean as you think about going forward the next couple of quarters into next year, aerospace clearly is going to grow much faster than TID. So I would think that your mix all else equal would be improving your fixed cost absorption would be improving. And then at some point, I would think given some of the increases potentially on the wide-body side of the market that would also be accretive to mix. So is that a fair characterization, I think that your mix within that segment should be improving? And then I know Airware and some of the extremely high margin products you do can create a lot of quarter-to-quarter volatility. So was there anything that was kind of extremely unique in this quarter that you could call out that say, wouldn't repeat next quarter?

Yes. So you're right that on a broad base, the more aerospace we do in the mix compared to TID, that will drive up the average margin because the aerospace margins are higher than TID. And on a go-forward basis, as we're seeing the aerospace recovery strengthening and strengthening, that's going to come into play. It's true that we've got some - within aerospace, there is also a micro mix, so to say, with some products that are extremely profitable. Remember, they required quite significant investments in the past. So it's fair that they are much more profitable. And we've had strong demand in space, in defense and the higher end of the products. We expect that to continue, but yes, there can be some fluctuation. So overall, I think Jack mentioned earlier, we're expecting for this year, margins in the A&T segment, that continues to be above the revised long-term average that we mentioned, above the €1,000 per ton, but they may come off a little bit from what we've seen in Q1 and Q2, which are seasonally strong quarters.

Yes, Curt, I would just add, I agree with everything as Jean-Marc mentioned. And certainly, more aerospace will be helpful contributed from a margin perspective. But remember, the TID business is down this year in the first half compared to the first half or first half of this year versus the first half of last year, right, down somewhere around 15%. So as that part of the A&T business rebounds, recovers, that will eat into the margin as well.

Okay. Yes. And then on packaging, are you seeing any evidence that some of the destocking is over. I mean it seemed like you were intimating that the second half would be better on a comp basis. And then with respect to the Phase 1 expansion plan, which I think was 200,000 tons by 2025, and its currently layered [ph] in. Is that - do you still feel confident that you can get that incremental volume by 2025? And just kind of update us on where you stand with that. Thanks very much.

Yes. So in the short term, we are seeing some signs of improvement in packaging, pointing towards end of destocking. So that's why we're saying the comp will be - we expect the comp to be better going into H2 than it was in H1. With regards to the 200,000 tons of additional capacity that we highlighted at the Analyst Day back in April of '22. Remember, it's a '26 really increased, right, by the end of '25, that should be the increase we have in capacity. Given the fact that the market has taken a step back, maybe it's going to be a little bit more gradual. And we always want to maintain flexibility in our capital allocation so that we can accelerate some projects or slow down some projects and within the same envelope of capital expenditures that we have mentioned. So we'll have to see how it goes. There is no fundamental reason to not meet that 200,000 tons of extra capacity. It may come a little bit more slowly than what we initially thought, but that's because the market may not need it as quickly, and we've got other opportunities elsewhere. Because we're really talking about tweaking the edges here. The fundamentals are not changing.

Okay. Great. And maybe just a quick one on PARP in the quarter. You outlined €53 million of incremental costs, which there's a pretty substantial delta and you outlined three buckets between metal cost, Muscle Shoals and then just inflation. Could you maybe add a little bit more granularity in terms of the bucket breakout? And then just update us on how you see cost progression in the back half of the year in part?

So Curt, I think you're right. The cost pressure continued to be high for our businesses, including PARP, I would say, and inflation, it really stayed high in this quarter and it was broad-based for PARP and for some of the other - for the other two BUs as well and that continued to be - have an adverse impact across a number of categories that Jean-Marc was mentioning. So I would say inflation is a big piece of that minus €53 that you mentioned. But at the same time, operating costs outside of inflation has increased as well with more labor, more maintenance, more subcontracting, if you will, and some of the other operating cost categories. But they're generally, I would say, kind of more contained relative to the higher activity levels. So I think we're okay there. Muscle Shoals maintenance. It's - while it's still high, it's more under control. This quarter, and the team is working really hard to bring the plant back to normal. And the impact, as we mentioned in the past, will continue to last throughout the rest of the year. So...

Thank you. The next question today comes from the line of Timna Tanners from Wolfe Research. Timna, please go ahead. Your line is now open.

Yeah, hello. And thanks for the great detail. I wanted to dive a little bit in not taking away from the strength in auto and aerospace, but the packaging and building construction markets that have shown a bit more weakness. So starting with packaging. On the Investor Day, a little over a year ago, you talked about 4% to 5% growth. Now you're talking about low to mid-single digit. Is that a change? And if so, like is there anything structural that should give us some pause in terms of the extent of upside to packaging? I know you talked about near-term less destocking, but if we think out to the future, is the growth story a little more muted than we thought, if you can provide some more color there.

Yes. Timna, I think it's - I would qualify it as tweaking around the edges here because the 1% difference in growth rate doesn't impact so much, but certainly not a '25 outlook nor even a '28 outlook. So no, and I think it's more a reflection of the fact that because we have had that kind of set back with the reduction in volume this year, we think that the long-term growth rate may be a little bit more muted because otherwise, that would imply a very significant catch-up very soon in packaging. So it's more kind of the arithmetics of how we look at the packaging market long term. We continue to think it's a good market. The cans continue to win share, to gain share against all the substrates, but the path may be a little bit more moderate, but still very attractive to us.

Okay. Thanks. And the German sale that you detailed, what does that say about the building construction market outlook? Because it seemed to us that maybe that was near a bottom, so - but you're also exiting it. And so I'm just wondering what we should take away from that in terms of your outlook for that segment?

Well, there was an opportunity stick sales. So building and construction, as you know, is not a big market for us, right? A couple of percent of our total sales as a company. So it's certainly not an area of focus for us. What happened here is we've got these three plants. We have actually improved performance of these three plants quite fair amount in the past 5 years. And we have somebody come to us and say we're interested in buying them. We want to expand in the German market. So you've got a situation where we, as a company, don't view these plans as strategic, and we've made a nice improvement in profitability. And we've got a buyer who is interested in them and places a higher value than we do on this business. And then it's a matter of if we keep a business, we will have to put some capital expenditures in. Is it the best return for us? We don't think so. And therefore, the decision was relatively easy once it was clear that the buyer was putting a higher value on the assets than we did. It made sense to tell them. So it wasn't so much about we're afraid of the outlook in building and construction. It's just that it was the right thing to do for us at the right time.

Yes. Timna, I would just reemphasize what Jean-Marc mentioned earlier. We didn't put this business on the market, and this was not a far if you will. It was really an opportunistic transaction. It's been years in the making, right? Just the timing kind of worked out the way it did. And the business is a better fit in the buyer's portfolio than acting on our portfolio.

No, that's helpful color. Thank you. Makes a lot of sense. If I could squeeze one more in. I was interested in your talk about potentially pushing out some of the expansion to 2026. As you know, there's, what, three new mills that are kind of targeting that same time frame. So I just wanted to ask if you're seeing any evidence of them in the market starting to talk about contract extensions or if there's any influence of the new mills in your discussions with customers that far out?

No, there isn't. And as we said, we are fully contracted out, and we are through '26, and we've got contracts that go into '27, '28, '29. So it's more a matter of us looking at what do we think the long-term forecast is and how quickly do we need the extra capacity because we need it. So the question is, do we need it in January '24, '25, '26, and we don't want to spend the money sooner than we need, and we certainly don't want to spend it later than we need because otherwise, would be not meeting our contractual commitment. So it's really about talking with our customers through their expectations and getting a sense of what do we need to do when. But again, those volumes are contracted.

Got it. Okay. Thanks, again.

And as you know, there is a margin tolerance, right, typically within the contract, it's not like it's absolutely firm amount of tons, right? So there's a margin, and we're talking of playing within that margin that tolerance around the contract and looking at the markets ourselves will delay a bit if the markets are strong, we'll put it forward.

Got it.

Thank you. A - Jack Guo Thank you.

Thank you. The next question today comes from the line of Corinne Blanchard from Deutsche Bank. Corinne, please go ahead. Your line is now open.

Hey. Good morning, everyone. I want to come back to the guidance, and I know there has been a lot of questions, but what the guidance leave mostly driven by the performance of 1Q and 2Q implying kind of relatively unchanged assumptions for the second half of the year. Is that a correct assumption of it?

No, I wouldn't say that. I would say yes, it's partially driven by the outperformance in the first half. And then when we look at the second half, we do expect some of the underlying strength of strengthening the business to continue into the second half that will drive additional outperformance in the second half.

So Corinne, aerospace continue to be strong. We expect packaging to close a bit of the gap. Our pricing is very good and that should give us some lift. And we don't - and we expect to continue to start up pain in the specialties segment, and we continue to expect automotive to be strong. So pretty much what you saw at play in the first half will continue in the second half, and we're raising our own internal expectations have been raised for the second half.

Okay. That makes sense. So what would be the likelihood for you guys to potentially increase again next quarter? Because if you assume you have significant performance again from A&T and higher margin into the second half, that is 900,000 per ton for the user cycle. Very likely, you should see an annual number that is going to be to above the guidance, right?

Well, at this stage, this is our best outlook, right? And obviously, there's plenty of very process into it. And you can have several of them turn better or several of them turn worse. And depending on how many of them done better or worse, you can be within the guidance or outside of the guidance. This is our best view of today's conditions and outlook and what it means for the company. There's some negative - some risks out there, right, which we've bake into our guidance, like the - there's lots of talk about our UAW strike and the automakers. I mean if they stop their lines, we're going not going to ship to them, right? So we try to factor that in our guidance as well. And other things, spot prices for energy, they are low. But remember, we're 90% hedged. And in some of our markets, we are actually producing 20%, 30% less than what we should. And therefore, we are - positions in energy that we have to unwind in the market that we're making losses on. So you've got all these factors at play. And today, our best view of it is 700 to 720 and up. Obviously, we're working hard to meet our targets and beat them if we can.

And Corinne, just bear in mind - sorry, just bear in mind, second half, there's seasonality impact as well, so you can just look at the outperformance in the first half and put out to the second half. So we got to take that into consideration.

Got it. And then just quickly to come back on to cash flow. Free cash flow guidance was increased. And again, you talk about the net debt target to be almost right where you want to be it. So you're going to have some cash flow there that you can invest. Is there any specific area or any specific end markets that you would give priority first?

So I think as we - well, I mean, over the short term, we want to maintain, as we mentioned, a balanced capital allocation policy. We guided 340 to 350 of CapEx. So you can count that number for the full year. And as we continue to generate free cash flow, and Jean-Marc alluded to this, we'll look at other opportunities to reduce our growth debt obligation because increasing financial flexibility is not just about the leverage target, it's also about reducing the gross debt obligation. I don't know if that's what you're asking, but...

Yes. That's helpful. Thanks. That's it for me.

Thank you.

Thank you.

Thank you. The next question today comes from the line of Josh Sullivan from the Benchmark Company. Please go ahead, Josh. Your line is now open.

Hey, good morning.

Morning, Josh.

Just regarding aerospace demand, do you think you're shipping product in concert with the current build rates communicated by aerospace OEMs?

We - well, there's a lag, obviously, Josh, as you know, between what they're building today and what they will need to build in the future year, then we tend to be 1 to 2 years ahead. So yes, I think we are - another way to answer your question would be to say that we think we've got sustained growth ahead of us that will take us higher than pre-COVID levels somewhere around 25 would be my guess. So we see continued strength because anything that we can make is needed.

So as far as the OEMs inventories, you don't think you're - you don't think that's a headwind anymore. You think you're shipping at rate with what they're communicating?

Yes. I'm not even sure there are some parts of the supply chain where restocking is complete, others where it isn't. And I think we - yes, we - everything we can - everything we can make, we can ship.

Okay. Okay. And then as we look to later in the decade, there's some aspirational build rate targets that some of the aerospace OEMs would like to get to. How should we think of Constellium's capacity to maybe address some of those out-year target?

Yes. That's going to require a lot of work from us, Josh, because as I mentioned, our strategy is focus on value-added products. I mean there are several pillars to our strategy, but that's the number one, which means we are making more and more complex, complicated, high-value products, which takes more time. So if you look at the pre-COVID shipments we are making, say, 2019 and you contrast that with what we could be making in 2025, the same tons, number of tons will require much more work and will command even more value-added revenue and EBITDA. So we have challenges in terms of capacity, and the teams are working very hard to debottleneck our plants and make some smart investments, not CapEx into the plant so that we build more flexibility, more capability, more capacity. So that's going to be a challenge that we're very excited about it. It's a good challenge to have, and it creates a very nice opportunities for very high return on capital expenditures.

And then just as you look to refine the portfolio and understand the divestiture was more opportunistic. But as you're talking about some of those higher-value products in aerospace, do you think you'll move up the value chain at all? Or are there opportunities to do more complex products for your aerospace or space customers?

There is some, but it's at the margin. So I think it's a constant gradual improvement. And what you have seen is what you will continue to see. There's no - it's an evolution. There's no revolution in terms of our product positioning or our manufacturing capabilities of footprint.

Thank you for the time.

Thank you.

Thank you. The next question today comes from the line of Sean Wondrack from Deutsche Bank. Sean, please go ahead. Your line is now open.

Good morning, Sean.

Good morning. Thank you for taking my questions and congratulations to Ingrid on the promotion. Just going back and sorry to beat the dead horse here with the packaging question. Last quarter, when we spoke, you seemed a little bit down on the segment. You weren't quite sure if they were going to get into enough marketing and enough promotional activity to kind of move the process along there. It does sound like your tenures [ph] improved a little bit with respect to that. Would you say that's fair to say that maybe you're kind of seeing what you needed to see there? Maybe we're in the early innings of the recovery. Can you just comment on that a little more, please?

Yes, I think that's fair, Sean. The - the second quarter was not as bad from a comp basis on the first quarter. And what we have in our books for the third quarter is making some progress. But the comps also are getting easier because we started seeing some slowdown in the second half of last year as well. So we're getting to a more normal territory. So that's good. It's factored, obviously, in our forecast, in our guidance. And we believe as we look at the data that can continue to be the preferred package. And it was clear when they had the - when cans at the up swing, it's also very clear in the downturn. And I think that's very reassuring for the long run. So that's why that - the long-term view is covering a little bit by lenses here, which is it is a package that has a very good future, and that's good for us.

That's good to hear. And then just given your own improvement here with leverage coming down so much getting closer to that target. When you think about capital allocation, is there any chance that you would consider some form of M&A, whether it's North America or Europe? Do you either add another leg to the stool or whatnot?

Well, that's part of indeed of the capital allocation choices we've got to make. But the first thing about M&A is most of them fail. So if we were to go down that path, they fail for the buyer, by the way. If we were to go down that path, we would be highly selective that's really important - it would need to be in line with our strategy, would be highly selective. Jack, do you want to comment further?

Yes. I will just basically repeat what you just said, I mean, look, M&A is a tool in the tool kit [ph] , as I like to say, right? So I think I'm being selective, we have to be really convinced any deals we do or create access value for our shareholders. The targets will have to be a gift fit strategically and they have to be a gift fit culturally, and we will not jeopardize our financial flexibility. So if that's helpful.

All right. No, that's very helpful. I appreciate it. And thank you for taking my questions today.

Thank you.

Thank you.

Thank you. There are no additional questions waiting at this time. So I'd like to pass the conference back over to Jean-Marc Germain, CEO of Constellium, for any closing remarks.

Well, thank you very much, everybody, for attending today. As you can see, we're very pleased with the progress we're making and very pleased with our revised outlook, and we look forward to updating you on our further progress in a few months' time. Thank you. Have a good day.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.+