Company Quick10K Filing
Constellium
20-F 2019-12-31 Filed 2020-03-09
20-F 2018-12-31 Filed 2019-03-11
20-F 2017-12-31 Filed 2018-03-12
20-F 2016-12-31 Filed 2017-03-21
20-F 2015-12-31 Filed 2016-04-18
20-F 2014-12-31 Filed 2015-04-24
20-F 2013-12-31 Filed 2014-04-22

CSTM 20F Annual Report

Part I
Item 1. Identity of Directors, Senior Management and Advisers
Item 2. Offer Statistics and Expected Timetable
Item 3. Key Information
Item 4. Information on The Company
Item 4A. Unresolved Staff Comments
Item 5. Operating and Financial Review and Prospects
Item 6. Directors, Senior Management and Employees
Item 7. Major Shareholders and Related Party Transactions
Item 8. Financial Information
Item 9. The Offer and Listing
Item 10. Additional Information
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 12. Description of Securities Other Than Equity Securities
Part II
Item 13. Defaults, Dividend Arrearages and Delinquencies
Item 14. Material Modifications To The Rights of Security Holders and Use of Proceeds
Item 15. Controls and Procedures
Item 16.
Item 16A. Audit Committee Financial Expert
Item 16B. Code of Ethics
Item 16C. Principal Accountant Fees and Services
Item 16D. Exemptions From The Listing Standards for Audit Committees
Item 16E. Purchases of Equity Securities By The Issuer and Affiliated Purchasers
Item 16F. Change in Registrant's Certifying Accountant
Item 16G. Corporate Governance
Item 16H. Mine Safety Disclosure
Part III
Item 17. Financial Statements
Item 18. Financial Statements
Item 19. Exhibits
Note 1 - General Information
Note 2 - Summary of Significant Accounting Policies
Note 3 - Acquisition of Constellium-Bowling Green
Note 4 - Revenue
Note 5 - Operating Segment Information
Note 6 - Information By Geographic Area
Note 7 - Expenses By Nature
Note 8 - Employee Benefit Expenses
Note 9 - Other Gains / (Losses) - Net
Note 10 - Currency Gains / (Losses)
Note 11 - Finance Costs - Net
Note 12 - Income Tax
Note 13 - Earnings per Share
Note 14 - Cash and Cash Equivalents
Note 15 - Trade Receivables and Other
Note 16 - Inventories
Note 17 - Property, Plant and Equipment
Note 18 - Intangible Assets (Including Goodwill)
Note 19 - Investments Accounted for Under The Equity Method
Note 20 - Deferred Income Taxes
Note 21 - Trade Payables and Other
Note 22 - Borrowings
Note 23 - Financial Instruments
Note 24 - Financial Risk Management
Note 25 - Pensions and Other Post-Employment Benefit Obligations
Note 26 - Provisions
Note 27 - Non-Cash Investing and Financing Transactions
Note 28 - Share Capital
Note 29 - Commitments
Note 30 - Related Parties
Note 31 - Share-Based Compensation
Note 32 - Subsidiaries and Operating Segments
Note 33 - Parent Company
Note 34 - Subsequent Events
EX-10.31 ex1031.htm
EX-10.25.6 ex10256.htm
EX-10.30.5 ex10305.htm
EX-10.30.6 ex10306.htm
EX-12.1 ex121.htm
EX-12.2 ex122.htm
EX-13.1 ex131.htm
EX-13.2 ex132.htm
EX-15.1 ex151.htm
EX-15.2 ex152.htm
EX-21.1 ex211.htm

Constellium Earnings 2019-12-31

Balance SheetIncome StatementCash Flow

20-F 1 constellium20-f2019.htm 20-F Document
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________________________________
FORM 20-F
__________________________________________________________________________
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-35931
__________________________________________________________________________
Constellium SE
(Exact Name of Registrant as Specified in its Charter)
__________________________________________________________________________
Constellium SE
(Translation of Registrant’s name into English)
__________________________________________________________________________
France
(Jurisdiction of incorporation or organization)
__________________________________________________________________________
Washington Plaza,
40-44 rue Washington
75008 Paris, France
(Address of principal executive offices)
__________________________________________________________________________
Securities registered or to be registered pursuant to Section 12(b) of the Act.
Title of each class
 
Trading Symbol
 
Name of each exchange on which registered
Ordinary Shares
 
CSTM
 
New York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
_____________________________
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the period covered by the annual report:
137,867,418 Ordinary Shares, Nominal Value €0.02 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   x  Yes    ☐  No
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.     ☐  Yes     x  No
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
x   Yes     ☐   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer  x            Accelerated filer  ☐            Non-accelerated filer  ☐            Emerging growth company  ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP   ☐
 
International Financial Reporting Standards as issued by the
International Accounting Standards Board   x
 
Other   ☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:    Item 17  ☐        Item 18  ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐   Yes     x   No
 




TABLE OF CONTENTS
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


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SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F (this “Annual Report”) of Constellium SE ("Constellium" or "the Company", and when referred to together with its subsidiaries, "the Group") contains “forward-looking statements” with respect to our business, results of operations and financial condition, and our expectations or beliefs concerning future events and conditions. You can identify certain forward-looking statements because they contain words such as, but not limited to, “believes,” “expects,” “may,” “should,” “approximately,” “anticipates,” “estimates,” “intends,” “plans,” “targets,” “likely,” “will,” “would,” “could” and similar expressions (or the negative of these terminologies or expressions). All forward-looking statements involve risks and uncertainties. Many risks and uncertainties are inherent in our industry and markets. Others are more specific to our business and operations. The occurrence of the events described and the achievement of the expected results depend on many events, some or all of which are not predictable or within our control. Actual results may differ materially from the forward-looking statements contained in this Annual Report.
Important factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements are disclosed under “Item 3. Key Information—D. Risk Factors” and elsewhere in this Annual Report, including, without limitation, in conjunction with the forward-looking statements included in this Annual Report. All forward-looking statements in this Annual Report and subsequent written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements. Some of the factors that we believe could materially affect our results include:
We may not be able to compete successfully in the highly competitive markets in which we operate, and new competitors could emerge, which could negatively impact our share of industry sales, sales volumes and selling prices.
Aluminium may become less competitive with alternative materials, which could reduce our sales volumes, or lower our selling prices.
A significant portion of our revenue is derived from international operations, which exposes us to certain risks inherent in doing business globally.
The cyclical and seasonal nature of the metals industry, our end-use markets and our customers’ industries could adversely affect our financial condition and results of operations.
If we fail to implement or execute our business strategy, our financial condition and results of operations could be materially adversely affected.
Our failure to meet customer manufacturing and quality requirements, standards and demand, or changing market conditions could have a material adverse impact on our business, reputation and financial results.
We are dependent on a limited number of customers for a substantial portion of our sales and a failure to successfully renew or renegotiate our agreements with such customers may adversely affect our results of operations, financial condition and cash flows.
If we are unable to substantially pass on to our customers the cost of price increases of our raw materials, which may be subject to volatility, our profitability could be adversely affected.
We are dependent on a limited number of suppliers for a substantial portion of our aluminium supply and a failure to successfully renew or renegotiate our agreements with our suppliers may adversely affect our results of operations, financial condition and cash flows.
The price volatility of energy costs may adversely affect our profitability.
Disruptions or failures in our IT systems, or failure to protect our IT systems against cyber-attacks or information security breaches, could have a material adverse effect on our business and financial results.
The loss of certain key members of our management team may have a material adverse effect on our operating results.
Our level of indebtedness could limit cash flow available for our operations and capital expenditures and could adversely affect our net income, our ability to service our debt or obtain additional financing, and our business relationships.
We are a foreign private issuer under the U.S. securities laws and within the meaning of the New York Stock Exchange (“NYSE”) rules. As a result, we qualify for and rely on exemptions from certain corporate governance requirements and may rely on other exemptions available to us in the future.
Any inability of the Company to continue to benefit from French provisions applicable to registered intermediaries (“intermédiaires inscrits”) could adversely affect the rights of shareholders.
The other factors presented under “Item 3. Key Information-D. Risk Factors.”

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We caution you that the foregoing list may not contain all of the factors that are important to you. In addition, in light of these risks and uncertainties, the matters referred to in the forward-looking statements contained in this Annual Report may not in fact occur. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as required by law.


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PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
Item 3. Key Information
A.
Selected Financial Data
The following tables set forth our selected historical financial and operating data.
The selected historical financial information as of December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 has been derived from our audited consolidated financial statements (the “Consolidated Financial Statements”) included elsewhere in this Annual Report. The selected historical financial information as of December 31, 2017, 2016 and 2015 and for each of the two years in the period ended December 31, 2016 have been derived from our audited consolidated financial statements not included in this Annual Report.
The audited Consolidated Financial Statements included elsewhere in this Annual Report have been prepared in a manner that complies, in all material respects, with the International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (the “IASB”), and as endorsed by the European Union (“EU”).
References to “tons” throughout this Annual Report are to metric tons.
 
 
As of and for the year ended
December 31,
(€ in millions other than per share and per ton data)
 
2019
 
2018
 
2017
 
2016
 
2015
Statement of income data:
 
 
 
 
 
 
 
 
 
 
Revenue
 
5,907

 
5,686

 
5,237

 
4,743

 
5,153

Gross profit
 
602

 
538

 
555

 
535

 
468

Income / (Loss) from operations
 
255

 
404

 
338

 
267

 
(406
)
Net income / (loss) for the period
 
64

 
190

 
(31
)
 
(4
)
 
(552
)
Earnings / (loss) per share—basic
 
0.43

 
1.40

 
(0.28
)
 
(0.04
)
 
(5.27
)
Earnings / (loss) per share—diluted
 
0.41

 
1.37

 
(0.28
)
 
(0.04
)
 
(5.27
)
Weighted average number of shares outstanding (diluted)
 
142,645,619

 
138,145,914

 
110,164,320

 
105,500,327

 
105,097,442

Dividends per ordinary share (Euro)
 

 

 

 

 


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As of and for the year ended
December 31,
(€ in millions other than per share and per ton data)
 
2019
 
2018
 
2017
 
2016
 
2015
Balance sheet data:
 
 
 
 
 
 
 
 
 
 
Total assets
 
4,184

 
3,901

 
3,711

 
3,787

 
3,628

Net (liabilities)/assets or total invested equity
 
(85
)
 
(114
)
 
(319
)
 
(570
)
 
(540
)
Share capital
 
3

 
3

 
3

 
2

 
2

Other operational and financial data (unaudited):
 
 
 
 
 
 
 
 
 
 
Capital expenditure(1)
 
271

 
277

 
276

 
355

 
350

Volumes (in kt)
 
1,589

 
1,534

 
1,482

 
1,470

 
1,478

Revenue per ton (€ per ton)
 
3,717

 
3,707

 
3,534

 
3,227

 
3,486

__________________
(1)
 Represents purchases of property, plant, and equipment.
B.
Capitalization and Indebtedness
Not applicable.
C.
Reasons for the Offer and Use of Proceeds
Not applicable.
D.
Risk Factors
You should carefully consider the risks and uncertainties described below and the other information in this Annual Report. Our business, financial condition or results of operations could be materially and adversely affected if any of these risks occurs, and as a result, the market price of our outstanding securities could decline. This Annual Report also contains forward-looking statements that involve risks and uncertainties. See “Special Note About Forward-Looking Statements.” Our actual results could differ materially and adversely from those anticipated in these forward-looking statements as a result of certain factors.
BUSINESS AND OPERATIONAL RISKS
We may not be able to compete successfully in the highly competitive markets in which we operate, and new competitors could emerge, which could negatively impact our share of industry sales, sales volumes and selling prices.
We are engaged in a highly competitive industry and compete in the production and sale of rolled and extruded aluminium products with a number of other producers, some of which are larger and have greater financial and technical resources than we do. As a result, these competitors may have an advantage over us in their abilities to research and develop technology, pursue acquisition, investment and other business opportunities, market and sell their products and services, capitalize on market opportunities, enter new markets and withstand business interruptions, pricing reductions, or adverse industry or economic conditions. In addition, producers with a lower cost basis may, in certain circumstances, have a competitive pricing advantage. Further, a current or new competitor may add or build new capacity, which could diminish our profitability by decreasing prices in our markets. New competitors could emerge within aluminium, steel or other materials, that may seek to compete in our industry. Emerging or transitioning markets in regions with abundant natural resources, low-cost labor and energy, and lower environmental and other standards may pose a significant competitive threat to our business. Moreover, technological innovation is important to our customers who require us to lead or keep pace with new innovations to address their needs. If we do not compete successfully, our share of industry sales, sales volumes and selling prices may be

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negatively impacted. Changes in regulation that have a disproportionately negative effect on us or our methods of production may also diminish our competitive advantage and industry position.
Aluminium may become less competitive with alternative materials, which could reduce our sales volumes, or lower our selling prices.
Our products compete with products made from other materials-such as steel, glass, plastics and composite materials-for various applications. Higher aluminium prices relative to substitute materials tend to make aluminium products less competitive with these alternative materials. Environmental and other regulations may also make our products less competitive as compared to materials that are subject to fewer regulations. Customers in our end-markets use and continue to evaluate the further use of alternative materials to aluminium in order to reduce the weight and increase the efficiency of their products. In addition, consumer demand and preferences also impact customer selection of packaging materials. While we believe that the recyclability of aluminium, coupled with increasing consumer focus on resource conservation, may reduce the impact of competition from certain alternative packaging sources, there is no guarantee that such competition will be reduced. The willingness of customers to accept substitutions for aluminium, or the ability of large customers to exert leverage in the market to reduce the pricing for our aluminium products, could materially adversely affect our financial position, results of operations and cash flows.
A significant portion of our revenue is derived from international operations, which exposes us to certain risks inherent in doing business globally.
We are a global company with our principal headquarters in Paris, France, with operations in France, the United States, Germany, Switzerland, the Czech Republic, Slovakia, China, Spain, Canada and Mexico, and we sell our products across Europe, North America and Asia. Economic downturns in regional and global economies, or a prolonged recession in our principal industry segments, have had a negative impact on our operations in the past by reducing overall demand of our products, and could have a negative impact on our future financial condition or results of operations.
We also continue to explore opportunities to expand our international operations. We generally are subject to financial, political, economic, regulatory and business risks in connection with our global operations, including:
changes in international governmental regulations, trade restrictions and laws, including those relating to taxes, employment and repatriation of earnings;
compliance with sanctions regimes and export control laws of multiple jurisdictions;
currency exchange rate fluctuations;
tariffs and other trade barriers;
the potential for nationalization of enterprises or government policies favoring local production;
renegotiation or nullification of existing agreements;
interest rate fluctuations;
high rates of inflation;
currency restrictions and limitations on repatriation of profits;
differing protections for intellectual property and enforcement thereof;
divergent environmental laws and regulations;
uncertain political and regulatory conditions (e.g. U.K. Brexit; U.S. duties, tariffs and trade negotiations);
sustained economic downturns, social instability; and
significant supply/demand imbalances impacting our industry.
In addition, public health crises, pandemics and epidemics, such as the outbreak of the contagious 2019-Novel Coronavirus (COVID-19), could have a material adverse effect on global, national and local economies, on the markets in which we operate, and on our business operations and financial results.
The occurrence of any of these events could cause our costs to rise, limit growth opportunities or have a negative effect on our operations and our ability to plan for future periods. In certain emerging markets, the degree of these risks may be higher due to more volatile economic conditions, less developed and predictable legal and regulatory regimes and increased potential for various types of adverse governmental action.

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The cyclical and seasonal nature of the metals industry, our end-use markets and our customers’ industries could adversely affect our financial condition and results of operations.
Our end markets are cyclical and tend to directly correlate with changes in general and local economic conditions. These conditions include the level of economic growth, financing availability, the availability of affordable energy sources, employment levels, interest rates, consumer confidence and housing demand. We are particularly sensitive to cycles in the aerospace, defense, automotive, other transportation and general engineering end-markets, which are highly cyclical. During recessions or periods of low growth, these industries typically experience major cutbacks in production, resulting in decreased demand for aluminium products. This leads to significant fluctuations in demand and pricing for our products and services. Because our operations are capital intensive and we generally have high fixed costs and may not be able to reduce costs and production capacity on a sufficiently rapid basis, our near-term profitability may be significantly affected by decreased processing volumes. Customer demand is also affected by holiday seasons, seasonal slowdowns, weather conditions, economic and other factors beyond our control. Accordingly, cyclical fluctuations, reduced demand and pricing pressures may significantly reduce our profitability and materially adversely affect our financial condition, results of operations and cash flows.
Our business requires substantial capital investments that we may be unable to fulfill. We may be unable to execute and timely complete our expected capital investments, or may be unable to achieve the anticipated benefits of such investments.
Our operations are capital intensive. We may not generate sufficient operating cash flows and our external financing sources may not be available in sufficient amounts to enable us to make anticipated capital expenditures, or to complete them on a timely basis. If we are unable to, or determine not to, complete our expected investments, or such investments are delayed, we will not realize the anticipated benefits of such investments. In addition, if we are unable to make investments for upgrades, repairs or purchase new plants and equipment, our financial condition and results of operations could be materially adversely affected by higher maintenance costs, lower sales volumes due to the impact of reduced product quality, operational disruptions, reduced production capacity and other competitive factors. We may experience delays in materializing demand for our products, and we may not receive customer orders or revenue for such products as quickly as we may anticipate. Such delays could adversely affect our results of operations.
 If we fail to implement or execute our business strategy, our financial condition and results of operations could be materially adversely affected.
Our future financial performance and success depend in large part on our ability to successfully implement and execute our business strategy, including investing in high-return opportunities in our core markets, focusing on higher-margin, technologically advanced products, differentiating our products, expanding our strategic relationships with customers, fixed-cost containment and cash management, and executing on our manufacturing productivity improvement programs. Any inability to execute on our strategy could reduce our expected earnings and could adversely affect our operations overall.
In January 2019, we purchased UACJ Corporation’s ("UACJ") indirectly held stake in Constellium-UACJ ABS, LLC, our joint venture with UACJ to manufacture Auto Body Sheet ("ABS") products in the United States. Following the completion of this transaction, we refer to this facility as Bowling Green. There can be no assurance that we will be able to successfully implement our business strategy with respect to the North American ABS market. Bowling Green’s automotive line continues to ramp up production for original equipment manufacturer (“OEM”) products and our Muscle Shoals facility will continue to supply an increasing share of the cold coil needs at Bowling Green. Any significant delays incurred during the supply and production ramp up, could be detrimental to our financial performance and could adversely affect our North American ABS strategy. Similarly, we may not realize the intended benefits of the acquisition of Bowling Green, as rapidly as, or to the extent, anticipated by our management, which could have a material adverse effect on our business, results of operations and financial condition.
We may also not be able to successfully develop and implement new technology initiatives and other strategic investments in a timely manner.
Being at the forefront of technological development is important to remain competitive. We have invested in, and are involved with, a number of technology and process initiatives. Several technical aspects of certain of these initiatives are still unproven and/or the eventual commercial outcomes and feasibility cannot be assessed with any certainty. Even if we are successful with these initiatives, we may not be able to bring them to market as planned before our competitors or at all, and the initiatives may end up costing more than expected. As a result, the costs and benefits from our investments in new technologies and the impact on our financial results may vary from present expectations. In addition, we have undertaken and may continue

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to undertake growth, streamlining and productivity initiatives to improve performance. We cannot assure you that these initiatives will be completed or that they will have their intended benefits. Capital investments in debottlenecking or other organic growth initiatives may not produce the returns we anticipate. Even if we are able to generate new efficiencies successfully in the short- to medium-term, we may not be able to continue to reduce cost and increase productivity over the long term.
Our failure to meet customer manufacturing and quality requirements, standards and demand, or changing market conditions could have a material adverse impact on our business, reputation and financial results.
Product manufacturing in our business is a highly complex process. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards or are defective, we may be required to replace or rework the products. We have experienced product quality, performance or reliability problems and defects from time to time and similar defects or failures may occur in the future.
Some additional factors that could adversely impact our ability to meet our customer requirements and demand, or changing market conditions include:
Meeting such demand may require us to make substantial capital investments to repair, maintain, upgrade, and expand our facilities and equipment. Notwithstanding our ongoing plans and investments to increase our capacity, we may not be able to expand our production capacity quickly enough to meet our customer requirements.
Our operations may experience unplanned business interruptions caused by events such as explosions, fires, inclement weather, natural disasters, accidents, equipment failure and breakdown, IT systems and process failures, electrical blackouts or outages, transportation and supply interruptions. Any such disruption at one or more of our production facilities could cause substantial losses or delays in our production capacity, increase our operating costs and have a negative financial impact on the Company and our customers. Business interruptions may also harm our reputation among actual and potential customers, and the reputation of our customers.
The qualification of our products by many of our customers can be lengthy and unpredictable as many of these customers have extensive sourcing and qualification processes, which require substantial time and financial resources, with no certainty of success or recovery of our related expenses. Failure to qualify or re-qualify our products may result in us losing such customers or customer contracts.
As we begin manufacturing processes in our new locations or for newly introduced products, we may experience difficulties, including operational and manufacturing disruptions, delays or other complications, which could adversely affect our ability to timely launch or ramp-up productions and serve our customers.
If these or any other similar manufacturing or quality failures occur, they could result in losses or product recalls, customer penalties, contract cancellation and product liability exposure. Further, they could adversely affect product demand, result in negative publicity, damage to our reputation and could lead to a loss of customer confidence in our products, which could have a material adverse impact on our business, financial position and results of operations.
We are dependent on a limited number of customers for a substantial portion of our sales and a failure to successfully renew or renegotiate our agreements with such customers may adversely affect our results of operations, financial condition and cash flows.
Our business is exposed to customer concentration risk. A significant downturn in the business, credit or financial condition of our largest customers could expose us to the risk of default on contractual agreements.
Some of our customer contracts and related arrangements have provisions that may become less favorable to us over time, are subject to renewal, renegotiation or re-pricing at periodic intervals or upon changes in competitive and regulatory supply conditions, or provide termination rights to our customers. If we fail to successfully renew or renegotiate these contracts or arrangements, or if we are not successful in replacing business lost from such customers, then our results of operations, financial condition and cash flows could be materially adversely affected. Any material deterioration in, or termination of, these customer relationships could result in a reduction or loss in sales volume or revenue which could materially adversely affect our results of operations, financial condition and cash flows.
Relatedly, we have dedicated facilities serving certain of our customers which subjects us to the inherent risk of increased dependence on such customers with respect to these facilities. In such cases, the loss of such a customer, or the reduction of that customer’s business at these facilities, or the deterioration of such customer’s credit or financial condition, could materially adversely affect our financial condition and results of operations, and we may be unable to timely replace, or replace at all, lost order volumes and revenue.

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Customers in our end-markets, including the packaging, aerospace and automotive sectors, may consolidate and grow in a manner that could affect their relationships with us. For example, if one of our competitors’ customers acquires any of our customers, we may lose that acquired customer’s business. Additionally, if our customers become larger and more concentrated, they could exert financial pressure on all suppliers, including us. Accordingly, our ability to maintain or raise prices in the future may be limited, including during periods of raw material and other cost increases. If we are forced to reduce prices or maintain prices during periods of increased costs, or if we lose customers because of consolidation, pricing or other methods of competition, our financial position, results of operations and cash flows may be adversely affected. If as a result of consolidation in our industry, our competitors are able to exert financial pressure on suppliers, obtain more favorable terms or otherwise take actions that could increase their competitive strengths, our competitive position may be materially adversely affected.
If we are unable to substantially pass on to our customers the cost of price increases of our raw materials, which may be subject to volatility, our profitability could be adversely affected.
Prices for the raw materials we require are subject to continuous volatility and may increase from time to time. The overall price of primary aluminium consists of several components: (1) the underlying base metal component, which is typically based on quoted prices from the London Metal Exchange (“LME”); (2) the regional premium, which represents an incremental price over the base LME component that is associated with the physical delivery of metal to a particular region (e.g., the Midwest premium for metal sold in the United States or the Rotterdam premium for metal sold in Europe); and (3) the product premium, which represents a separate incremental price for receiving physical metal in a particular shape (e.g., billet, slab, rod, etc.), alloy, or purity.
Each of these three components has its own drivers of variability. The LME price is typically driven by macroeconomic factors, including the global supply and demand of aluminium. Regional premiums tend to vary based on the supply and demand for metal in a particular region, changes in tariffs and associated warehousing and transportation costs. Product premiums generally are a function of supply and demand as well as production and raw material costs for a given primary aluminium shape and alloy combination in a particular region.
Sustained high aluminium prices, increases in aluminium prices, the inability to meaningfully hedge our exposure to aluminium prices, or the inability to pass through any fluctuation in regional premiums or product premiums to our customers, could have a material adverse effect on our business, financial condition, and results of operations and cash flow.
In addition, although our sales are generally made on a “margin over metal price” basis, if metal prices increase, we may not be able to pass on the entire increase to our customers. There could also be a time lag between when changes in metal prices under our purchase contracts are effective and the point when we can implement corresponding changes under our sales contracts with our customers. As a result, we may be exposed to the effects of fluctuations in raw material prices, including metal, due to time lag. Further, although most of our contracts allow us to substantially pass through metal prices to our customers, we have certain contracts that are based on fixed metal pricing, where pass through is not available. Similarly, in certain contracts we have ineffective pass through mechanisms related to regional premium fluctuation. We attempt to mitigate these risks, through hedging, but we may not be able to successfully reduce or eliminate any resulting impact, which could have a material adverse effect on our financial results and cash flows.
We are dependent on a limited number of suppliers for a substantial portion of our aluminium supply and a failure to successfully renew or renegotiate our agreements with our suppliers may adversely affect our results of operations, financial condition and cash flows.
Our ability to produce competitively priced aluminium products depends on our ability to procure competitively priced supply of aluminium in a timely manner and in sufficient quantities to meet our production needs. We have supply arrangements with a limited number of suppliers for aluminium. Increasing aluminium demand levels have caused regional supply constraints in the industry, and further increases in demand could exacerbate these issues. We maintain long-term contracts for a majority of our supply requirements and depend on annual and spot purchases for the remainder of such requirements. There can be no assurance that we will be able to renew, or obtain replacements for, such contracts when they expire on terms that are as favorable as our existing agreements or at all. Additionally, if any of our key suppliers is unable to deliver sufficient quantities on a timely basis, our production may be disrupted, and we could be forced to purchase primary metal from alternative sources, which may not be available in sufficient quantities or may only be available on terms that are less favorable to us. An interruption in key supplies required for our operations could have a material adverse effect on our ability to produce and deliver products on a timely or cost-efficient basis and therefore on our financial condition, results of operations and cash flows. Moreover, a significant downturn in the business or financial condition of our significant suppliers exposes us to the risk of default by the supplier on our contractual agreements.

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We depend on scrap aluminium for our operations and acquire our scrap inventory from numerous sources. Our suppliers generally are not bound by long-term contracts and have no obligation to sell scrap metal to us. In periods of low prices, suppliers may elect to hold scrap until they are able to charge higher prices. In addition, a decrease in the supply of used beverage containers could negatively impact our supply of aluminium. We seek to take advantage of the lower price of scrap aluminium compared to primary aluminium to provide a cost-competitive product. To the extent the discount between the primary aluminium price and scrap price narrows, our competitive advantage may be reduced. Consequently, if the difference between the price of primary and scrap aluminium is narrow for a considerable period of time or if an adequate supply of scrap aluminium is not available to us, we would be unable to recycle metals at desired volumes and our results of operations, financial condition and cash flows could be materially adversely affected.
The price volatility of energy costs may adversely affect our profitability.
Our operations use natural gas and electricity, which, excluding depreciation, represent the third largest component of our cost of sales, after metal and labor costs. We purchase part of our natural gas and electricity on a market basis. The volatility in costs of fuel, principally natural gas, and other utility services, principally electricity, used by our production facilities affects operating costs. Fuel and utility prices are affected by factors outside our control, such as supply and demand for fuel and utility services in both local and regional markets as well as governmental regulation and imposition of taxes on energy. As a significant purchaser of energy, existing and future regulations relating to the emissions by our energy suppliers could result in materially increased energy costs for our operations, which we may be unable to pass along to our customers. Although we have secured a large part of our natural gas and electricity under fixed price commitments or long-term contracts with suppliers, future increases in fuel and utility prices, or disruptions in energy supply, may have an adverse effect on our financial position, results of operations and cash flows.
Disruptions or failures in our IT systems, or failure to protect our IT systems against cyber-attacks or information security breaches, could have a material adverse effect on our business and financial results.
We rely on our IT systems to effectively manage and operate our business, including such processes as data, accounting, financial reporting, communications, supply chain, order entry and fulfillment, other business processes, and in operating our equipment. The failure of our IT systems to perform efficiently could disrupt our business and could result in transaction errors, processing inefficiencies, limited equipment utilization, and the loss of sales and customers, causing our business and financial results to suffer. A failure in, or breach of, our IT systems as a result of cyber-attacks or information security breaches could disrupt our business, result in the disclosure or misuse of confidential or proprietary information, damage our reputation, increase our costs or cause losses. As cyber threats continue to evolve, we are expending additional resources to continue to enhance our information security measures and be able to investigate and remediate promptly any information security vulnerabilities. We experienced a few security incidents in 2019, but they were successfully detected and handled and did not have a material negative impact on the Company, our business or our operations.
We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cyber-attacks. However, given the unpredictability, nature and scope of cyber-attacks, it is possible that potential vulnerabilities could go undetected for an extended period. We could potentially be subject to production downtime, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the compromise of confidential or otherwise protected information, misappropriation, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation, any of which could have a material adverse effect on our competitive position, results of operations, cash flows or financial condition.
Some of our IT systems are nearing obsolescence, in that the software versions they were developed on are no longer fully supported or kept up-to-date by the original vendors. While day-to-day operations are not at risk, any major new compliance requirements might need manual workarounds if the current software versions do not support those new functionalities. Information security risks have increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber-attacks. We continuously perform an evaluation of our IT systems and requirements and have implemented or plan to implement upgrades to our IT systems that support our business. These upgrades involve replacing legacy systems with state-of-the-art systems, making changes to such systems or acquiring new systems with new functionality. There are inherent risks associated with replacing, changing or acquiring new systems, including accurately capturing data and system disruptions. We may experience operational disruptions with our information systems as a result of system failures, viruses, computer “hackers” or other causes. Any material disruption or slowdown of our systems, including a disruption or slowdown caused by our failure to successfully upgrade our systems could cause information

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losses, including data related to customer orders, limited utilization of our equipment, or operational outages. Such a disruption could adversely affect our business, financial condition or results of operations.
We could be required to make unexpected contributions to our defined benefit pension plans as a result of adverse changes in interest rates and the capital markets.
We have substantial pension and other post-employment benefit obligations. Most of our pension obligations relate to funded defined benefit pension plans for our employees in the United States and Switzerland, unfunded pension benefits in France and Germany, and lump sum indemnities payable to our employees in France and Germany upon retirement or termination. Our pension plan assets consist primarily of funds invested in diversified portfolios. Our estimates of liabilities and expenses for pensions and other post-retirement benefits incorporate a number of assumptions, including interest rates used to discount future benefits. Our liquidity or shareholders’ equity in a particular period could be materially adversely affected by capital market returns that are less than their assumed long-term rate of return or a decline in the rate used to discount future benefits. If the assets of our pension plans do not achieve assumed investment returns for any period, such deficiency could result in one or more charges against shareholders’ equity for that period. In addition, changing economic conditions, poor pension investment returns or other factors may require us to make unexpected cash contributions to the pension plans in the future, preventing the use of such cash for other purposes.
We also participate in various “multi-employer” pension plans in one of our facilities in the United States administered by labor unions representing some of our employees. Our withdrawal liability for any multi-employer plan would depend on the extent of the plan’s funding of vested benefits. In the ordinary course of our renegotiation of collective bargaining agreements with labor unions that maintain these plans, we could decide to discontinue participation in a plan, and in that event we could face a withdrawal liability. We could also be treated as withdrawing from participation in one of these plans if the number of our employees participating in these plans is reduced to a certain degree, or over certain periods of time. Such reductions in the number of our employees participating in these plans could occur as a result of changes in our business operations, such as facility closures or consolidations. Any withdrawal liability could have an adverse effect on our results of operations or financial condition.
We could experience labor disputes and work stoppages, or be unable to renegotiate collective bargaining agreements, which could disrupt our business and have a negative impact on our financial condition and results of operations.
A significant number of our employees are represented by unions or equivalent bodies or are covered by collective bargaining or similar agreements that are subject to periodic renegotiation. Although we believe that we will be able to successfully negotiate new collective bargaining agreements when the current agreements expire, these negotiations may not prove successful, and may result in a significant increase in the cost of labor, or may break down and result in the disruption or cessation of our operations.
From time to time, we may experience labor disputes and work stoppages at our facilities generally, and at times in connection with collective bargaining agreement negotiations. Reasons for stoppages include disapproval of governmental measures, solidarity with a dismissed employee, wage claims, protests against working conditions and/or strikes. These disruptions can have a duration ranging from hours to days. Existing collective bargaining agreements may not prevent a strike or work stoppage at our facilities. Any such stoppages or disturbances may adversely affect our financial condition and results of operations by limiting plant production, sales volumes, profitability and operating costs.
The loss of certain key members of our management team may have a material adverse effect on our operating results.
Our success depends, in part, on the efforts of our senior management and other key employees. These individuals, including our Chief Executive Officer and Chief Financial Officer, possess sales, marketing, engineering, technical, manufacturing, financial and administrative skills that are critical to the operation of our business. If we lose or suffer an extended interruption in the services of one or more of our senior officers or other key employees, our ability to operate and expand our business, improve our operations, develop new products, and, as a result, our financial condition and results of operations, may be adversely affected. Moreover, the hiring of qualified individuals is highly competitive in our industry, and we may not be able to attract and retain qualified personnel to replace or succeed members of our senior management or other key employees.


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The insurance level that we maintain may not fully cover all potential exposures.
We maintain property, casualty, business interruption, workers’ compensation and other insurance in accordance with market practice and that are pertinent to our business, but such insurance may not fully cover all risks associated with the hazards of our business and is subject to limitations, including deductibles and maximum liabilities covered. We may incur losses beyond the limits, or outside the coverage, of our insurance policies, including, but not limited to, liabilities for breach of contract, environmental compliance or remediation. In addition, from time to time and depending on market conditions, various types of insurance coverage for companies in our industry may not be available on commercially acceptable terms or, in some cases, may not be available at all. In the future, we may not be able to obtain coverage at current levels, and our premiums may increase significantly on coverage that we maintain.

FINANCIAL RISKS
Our level of indebtedness could limit cash flow available for our operations and capital expenditures and could adversely affect our net income, our ability to service our debt or obtain additional financing, and our business relationships.
We have a significant amount of indebtedness. To service such debt, we will require a significant amount of cash. We believe that the cash provided by our operations will be sufficient to provide for our cash requirements for the foreseeable future. However, our ability to satisfy our obligations will depend on our future operating performance and financial results, which are subject, in part, to factors beyond our control, including interest rates and general economic, financial and business conditions. We cannot assure you that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs.
In addition, our level of indebtedness could adversely affect our operations. Among other things, our substantial indebtedness could:
limit our ability to obtain additional financing for working capital, capital expenditures, research and development efforts, acquisitions and general corporate purposes;
make it more difficult for us to satisfy leverage and fixed charge coverage ratios required for us to incur additional indebtedness under our existing indebtedness;
make it more difficult for us to satisfy our financial obligations;
increase our vulnerability to general adverse economic and industry conditions;
require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes;
restrict us from making strategic acquisitions, introducing new technologies and exploiting business opportunities;
adversely affect the terms under which suppliers provide goods and services to us, and under which we supply products to our customers;
limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we compete; and
place us at a competitive disadvantage compared to our competitors that have less debt.
If we are unable to meet our debt service obligations and pay our expenses, we may be forced to reduce or delay business activities and capital expenditures, sell assets, obtain additional debt or equity capital, restructure or refinance all or a portion of our debt before maturity or take other measures. Such measures may materially adversely affect our business. If these alternative measures are unsuccessful, we could default on our obligations, which could result in the acceleration of our outstanding debt obligations and could have a material adverse effect on our business, results of operations and financial condition.
A failure to comply with our debt covenants could result in an event of default. If we default under our indebtedness, we may not be able to borrow additional amounts, and our lenders could elect to declare all outstanding borrowings, plus accrued and unpaid interest and fees, to be due and payable, or take other remedial actions. Our indebtedness also contains cross-default provisions, which means that if an event of default occurs under certain material indebtedness, such event of default could

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trigger an event of default under our other indebtedness. If our debt payments were to be accelerated, we cannot assure you that our assets would be sufficient to repay such debt in full and our lenders could consequently foreclose on our pledged assets.
In addition, a deterioration in our financial position or a downgrade of our credit ratings could adversely affect our financing levels, limit access to the capital or credit markets or our liquidity facilities, or otherwise adversely affect the availability of other new financing on favorable terms or at all, result in more restrictive covenants in agreements governing the terms of any future indebtedness that we incur, increase our borrowing costs, or otherwise impair our business, financial condition and results of operations. Such deterioration or downgrade of our credit ratings could also have an adverse effect on our business relationships with customers, suppliers and hedging counterparties.
 Our results of operations, cash flows and liquidity could be adversely affected if we are unable to execute on our hedging policy, if counterparties to our derivative instruments fail to honor their agreements or if we are unable to enter into certain derivative instruments.
We purchase and sell forwards, futures and options contracts as part of our efforts to reduce our exposure to changes in currency exchange rates, aluminium prices and other raw materials and energy prices. If we are unable to enter into such derivative instruments to manage those risks due to the cost or availability of such instruments or other factors, or if we are not successful in passing through the costs of our risk management activities, our results of operations, cash flows and liquidity could be adversely affected. Our ability to realize the benefit of our hedging program is dependent upon many factors, including factors that are beyond our control. For example, our foreign exchange hedges are scheduled to mature on the expected payment date by the customer; therefore, if the customer fails to pay an invoice on time and does not warn us in advance, we may be unable to reschedule the maturity date of the foreign exchange hedge, which could result in an outflow of foreign currency that will not be offset until the customer makes the payment. We may realize a gain or a loss in unwinding such hedges. In addition, our metal-price hedging program depends on our ability to match our monthly exposure to sold and purchased metal, which can be made difficult by seasonal variations in metal demand, unplanned changes in metal delivery dates by either us or by our customers and other disruptions to our inventories. We may also be exposed to losses if the counterparties to our derivative instruments fail to honor their agreements.
To the extent our hedging transactions fix prices or exchange rates, and if primary aluminium prices, energy costs or foreign exchange rates are below the fixed prices or rates established by our hedging transactions, then our income and cash flows will be lower than they otherwise would have been. Similarly, if we do not effectively manage and adequately hedge our exposure to price and regional premium fluctuations on aluminium and other raw materials, our financial results may also be adversely affected. Further, with the exception of hedge accounting on certain long-term aerospace contracts and on our net investment in certain of our subsidiaries, we do not apply hedge accounting to our forwards, futures or option contracts. Unrealized gains and losses on our derivative financial instruments that do not qualify for hedge accounting are reported in our consolidated results of operations, or in the case of hedges relating to our indebtedness, in Finance cost, net. The inclusion of such unrealized gains and losses in earnings may produce significant period-over-period earnings volatility that is not necessarily reflective of our underlying operating performance. In addition, in certain scenarios when market price movements result in a decline in value of our current derivatives position, our mark-to-market expense may exceed our credit line and counterparties may request the posting of cash collateral which, in turn, can be a significant demand on our liquidity.
At certain times, hedging instruments may simply be unavailable or not available on terms acceptable to us. In addition, current legislation increases the regulatory oversight of over-the-counter derivatives markets and derivative transactions. The companies and transactions that are subject to these regulations may change. If future regulations subject us to additional capital or margin requirements or other restrictions on our trading and commodity positions, this could have an adverse effect on our financial condition and results of operations.
Our cash flows and liquidity could be adversely affected as a result of the maturity mismatch between certain of our derivative instruments and the underlying exposure.
We use financial derivatives to hedge the foreign currency risk associated with the repayment of a portion of our U.S. Dollar-denominated debt. These financial derivatives may have a shorter maturity than either the maturity or call date of the hedged debt instrument. This could result in an adverse impact on our cash flows and liquidity as the impact from changes in foreign exchange rates on the hedging instruments could result in a cash outflow before the corresponding favorable impact on the underlying hedged debt results in a positive cash flow.

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Changes in income tax rates or income tax laws, additional income tax liabilities due to unfavorable resolution of tax audits, and challenges to our tax position could have a material adverse impact on our financial results.
We operate in multiple tax jurisdictions and believe that we file our tax returns in compliance with the tax laws and regulations of these jurisdictions. Various factors determine our effective tax rate and/or the amount we are required to pay, including changes in or interpretations of tax laws and regulations in any given jurisdiction or global- and EU-based initiatives. Some such tax laws and regulations aim, among other things, to address tax avoidance by multinational companies, changes in geographical allocation of income and expense, the ability to use net operating loss and other tax attributes, and the evaluation of deferred tax assets that requires significant judgment. Any resulting changes to our effective tax rate could materially adversely affect our financial position, liquidity, results of operations and cash flows.
In addition, due to the size and nature of our business, we are subject to ongoing reviews by tax authorities on various tax matters, including challenges to positions we assert on our income tax and withholding tax returns. We accrue income tax liabilities and tax contingencies based upon our best estimate of the taxes ultimately expected to be paid after considering our knowledge of all relevant facts and circumstances, existing tax laws and regulations and how the tax authorities and courts view certain issues. Such amounts are included in income taxes payable or deferred income tax liabilities, as appropriate, and updated over time. Any material adverse review could impact our financial position and result of operations.

LEGAL, GOVERNANCE AND COMPLIANCE RISKS
We may be exposed to significant legal proceedings and investigations, proprietary claims, regulatory and compliance costs, including on environmental matters, which could increase our operating costs and adversely affect our financial condition and results of operations.
We may from time-to-time be involved in, or be the subject of, disputes, proceedings and investigations with respect to a variety of matters, including matters related to personal injury and product liability, intellectual property rights or defending claims of infringement, employees, taxes, contracts, anti-competitive or anti-corruption practices as well as other disputes and proceedings that arise in the ordinary course of business. It could be costly to address these claims or any investigations involving them, whether meritorious or not, and legal proceedings and investigations could divert management’s attention as well as operational resources, adversely affecting our financial position, results of operations and cash flows.
If any of the products that we sell are defective or cause harm to any of our customers, we could be exposed to product liability lawsuits and/or warranty claims. If we were found liable under product liability claims or are obligated under warranty claims, we could be required to pay substantial monetary damages. Even if we successfully defend ourselves against these types of claims, we could incur substantial litigation expenses, our management could be required to devote significant time and attention to defending against these claims, and our reputation could suffer, any of which could harm our business.
We believe that our intellectual property has significant value and is important to the marketing of our products and maintaining our competitive advantage. Although we attempt to protect our intellectual property rights both in the United States and in foreign countries through a combination of patent, trademark, trade secret and copyright laws, as well as through confidentiality and nondisclosure agreements and other measures, these measures may not be adequate to fully protect our rights. For example, we have a presence in China, which historically has afforded less protection to intellectual property rights than the United States or Europe. Our failure to obtain or maintain adequate protection of our intellectual property rights for any reason could have a material adverse effect on our business, results of operations and financial condition, we therefore may incur significant costs protecting such rights. Our operations are subject to international, national, state and local laws and regulations in the jurisdictions where we do business, which govern, among other things, air emissions, wastewater discharges, the handling, storage and disposal of hazardous substances and wastes, the remediation of contaminated sites, and employee health and safety. At December 31, 2019, we had close-down and environmental remediation costs provisions of €90 million. Future environmental regulations, requirements or more aggressive enforcement of existing regulations could impose stricter compliance requirements on us and on the industries in which we operate, such as legislative efforts to limit greenhouse gas emissions, including carbon dioxide. If we are unable to comply with these laws and regulations, we could incur substantial costs, including fines and civil or criminal sanctions, or costs associated with upgrades to our facilities or changes in our manufacturing processes in order to achieve and maintain compliance.  

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We are a foreign private issuer under the U.S. securities laws and within the meaning of the New York Stock Exchange (“NYSE”) rules. As a result, we qualify for and rely on exemptions from certain corporate governance requirements and may rely on other exemptions available to us in the future.
As a “foreign private issuer,” as such term is defined in Rule 405 under the Securities Act of 1933, as amended (the “Securities Act”), we are permitted to follow our home country practice in lieu of certain corporate governance requirements of the NYSE. Foreign private issuers are also exempt from certain U.S. securities law requirements applicable to U.S. domestic issuers, including the requirement to file quarterly reports on Form 10-Q, to distribute a proxy statement pursuant to Section 14 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), in connection with the solicitation of proxies for shareholder meetings, and Section 16 filings.
We rely on the exemptions for foreign private issuers in lieu of some of the NYSE corporate governance rules. We may change the home country corporate governance practices we follow, and, accordingly, which exemptions we rely on from the NYSE requirements. So long as we qualify as a foreign private issuer, you may not have the same protections applicable to companies that are subject to all of the NYSE corporate governance requirements.
If we were to lose our status as a foreign private issuer or otherwise not be considered a foreign private issuer, the regulatory and compliance costs to the Company could be significantly more than the costs we incur as a foreign private issuer. We would be required to file periodic reports and registration statements on U.S. domestic issuer forms with the U.S. Securities and Exchange Commission ("the SEC"), including proxy statements pursuant to Section 14 of the Exchange Act, which are more detailed and extensive than the forms available to a foreign private issuer. Furthermore, if we were not a foreign private issuer, we would be required to meet such filing requirements on a more abbreviated timetable than is applicable to our current filings with the SEC. In addition, our directors, executive officers and 10% owners would become subject to insider short-swing profit disclosure and recovery rules under Section 16 of the Exchange Act. In addition, we would lose our ability to rely upon exemptions from certain NYSE corporate governance requirements that are available to foreign private issuers. Any of these changes would likely increase our regulatory and compliance costs and expenses, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, we must meet other continuing listing requirements to maintain the listing of our ordinary shares on the NYSE. If we fail to meet certain NYSE listing standards, our ordinary shares may be subject to delisting unless any such non-compliance is remediated. There can be no assurance that our ordinary shares will remain listed on the NYSE. Any involuntary or voluntary delisting of our ordinary shares could adversely affect a shareholder’s ability to dispose, or obtain quotations as to the market value, of such shares and the market price and liquidity of such shares.
The Company may be required to appoint directors to its Board to represent employees.
If the number of permanent employees of the Company exceeds 1,000 (including its direct and indirect French subsidiaries) or 5,000 (including its direct and indirect subsidiaries worldwide) for two consecutive fiscal years following the completion of the Company's transfer of its corporate seat from the Netherlands to France, which occurred on December 12, 2019, the Board, if made up of more than eight directors, may be required to include two directors representing the employees. In such a case, the Company’s Articles of Association will be changed within six months following the end of the second year of the Company's transfer of its corporate seat to France to allow for such appointment of employees to serve in such director capacity and to indicate how they will be elected/appointed, choosing from among the methods available under French law involving election/appointment by employees, trade unions and/or works councils. The employee directors, if required, must be selected within six months following the aforementioned change in the Articles of Association.
While we do not anticipate any specific governance issues as a result of employee representation on our Board, we have not previously been subject to these requirements and cannot determine how or whether employee representation on our Board will affect our future governance or operations. Having directors representing employees may allow the interests of employees to be voiced and taken into account in Board discussions and decision-making, in addition to, and potentially in conflict with, the interests of shareholders.
Any shareholder acquiring 30% or more of our voting rights may be required to make a mandatory takeover bid or be subject to claims for damages.
According to the Articles of Association, any person, acting alone or in concert within the meaning of Article L. 233-10 of the French Commercial Code, who comes into possession, other than following a voluntary takeover bid, directly or indirectly, of more than 30% of the capital or voting rights of the Company, shall launch a takeover bid on all the shares and securities granting access to the shares or voting rights, and on terms that comply with applicable U.S. securities laws, and SEC and

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NYSE rules and regulations. The same requirement applies to persons, acting alone or in concert, who directly or indirectly own a number between 30% and half of the total number of equity securities or voting rights of the Company and who, in less than twelve consecutive months, increase the holding, in capital or voting rights, of at least 1% of the total number of equity securities or voting rights of the Company.
Provisions of our organizational documents and applicable law may impede or discourage a takeover, which could deprive our investors of the opportunity to receive a premium for their ordinary shares or to make changes in our Board.
Several provisions of the Articles of Association and the laws of France may discourage, delay or prevent a merger, consolidation or acquisition that shareholders may consider favorable, such as the obligation to disclose the crossing of ownership thresholds or the possibility for our Board to issue equity securities, including during a takeover bid. Under French law, our general meeting of shareholders may empower our Board to issue shares, or warrants to subscribe new shares, and restrict or exclude preemptive rights on those shares.
These provisions could impede the ability of our shareholders to benefit from a change in control and, as a result, may materially adversely affect the market price of our ordinary shares and your ability to realize any potential change of control premium.
The rights of our shareholders may be different from the rights of shareholders governed by the laws of U.S. jurisdictions.
Our corporate affairs are governed by the Articles of Association and by the laws governing companies incorporated in France. The rights of shareholders and the responsibilities of members of our Board may be different from the rights and obligations of shareholders in companies governed by the laws of U.S. jurisdictions. In the performance of its duties, our Board is required by French law to consider the interests of the Company, its shareholders, its employees and other stakeholders, in all cases with due consideration to the principles of reasonableness and fairness. It is possible that some of these parties could have interests that are different from, or in addition to, your interests as a shareholder.
Although shareholders have the right to approve legal mergers (fusions) or demergers (scissions), French law does not grant appraisal rights to a company’s shareholders who wish to challenge the consideration to be paid upon a domestic legal merger or demerger of a company.
In addition, if a third party is liable to a French company, under French law, shareholders generally do not have the right to bring a derivative action on behalf of a company or to bring an action on their own behalf to recover damages sustained as a result of a decrease in value, or loss of an increase in value, of their stock.
Only in the event that the cause of liability of such third party to the company also constitutes a tortious act directly against such shareholder causing him direct, personal and definite harm, may such shareholder have an individual right of action against such third party on its own behalf to recover damages.
The French Consumer Code provides for the possibility to initiate class actions (actions en représentation conjointe) to seek recovery for economic loss suffered by consumers due to one or more defendants’ breach of their legal or contractual obligations in the context of a sale of goods or provision of services or due to their infringement of competition law. However, such class action is not applicable to acts which can affect the rights of shareholders.
Approved associations of shareholders or investors are allowed to bring claims in respect of wrongful acts harming the “collective interest” of the investors or of certain categories of investors (Article L. 452-1 of the French Monetary and Financial Code). Such associations may request that the court orders the responsible person to comply with the legal provisions to end the irregularity or eliminate its effects. They may seek indemnification in the name of individual investors who have suffered individual damages if mandated by at least two such investors (Article L. 452-2 of the French Monetary and Financial Code).
The provisions of French corporate law and the Articles of Association have the effect of concentrating control over certain corporate decisions and transactions in the hands of our Board. As a result, holders of our shares may have more difficulty in protecting their interests in the face of actions by members of the Board than if we were incorporated in the United States.


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United States civil liabilities may not be enforceable against the Company.
We are incorporated under the laws of France and a substantial portion of our assets are located outside the United States. In addition, certain of our directors and officers, and experts named herein, reside outside the United States. As a result, it may be difficult for investors to effect service of process within the United States upon the Company or other persons residing outside the United States. It may also be difficult to enforce judgments obtained against persons in U.S. courts in any action, including actions predicated upon the civil liability provisions of the U.S. federal securities laws, outside the United States. In addition, it may be difficult for investors to enforce, in original actions brought in courts in jurisdictions located outside the United States, rights predicated upon the U.S. federal securities laws.
There is no treaty between the United States and France for the mutual recognition and enforcement of judgments (other than arbitration awards) in civil and commercial matters. Therefore, a final judgment for the payment of money rendered by any federal or state court in the United States based on civil liability, whether or not predicated solely upon the U.S. federal securities laws, would not be enforceable in France unless it is recognized by French courts. Moreover, an SEC decision ordering the payment of a fine would not be enforceable in France as it constitutes a foreign decision of a public law authority. However, under current practice, the courts of France may be expected to recognize and enforce a U.S. judgment, provided that such judgment (i) is a final judgment and has been rendered by a court which has established its jurisdiction on the basis of internationally accepted grounds of jurisdiction, (ii) is not the result of a fraud, and (iii) complies with French international public policy. A U.S. judgment may be found to be contrary to French international public policy in various situations, for example, if the judgment has been rendered in violation of elementary principles of a fair trial and if the judgment is incompatible with (a) a prior judgment of a French court rendered in a dispute between the same parties, or (b) a prior judgment of a foreign court rendered in a dispute between the same parties, concerning the same subject matter and based on the same cause of action, provided that such prior judgement has been recognized in France.
If the U.S. judgment is not recognized in France, the parties would have to re-litigate their dispute before a French court, provided such court has jurisdiction over the dispute.
Based on the foregoing, there can be no assurance that U.S. investors will be able to enforce any judgments obtained in U.S. courts in civil and commercial matters, including judgments under the U.S. federal securities laws, against the Company, members of our Board, officers or certain experts named herein, who are residents of France or countries other than the United States.
In addition, there is doubt as to whether a French court would impose civil liability on the Company, the members of our Board, our officers or certain experts named herein in an original action predicated solely upon the U.S. federal securities laws brought in a court of competent jurisdiction in France against us or such members, officers or experts, respectively.
Any inability of the Company to continue to benefit from French provisions applicable to registered intermediaries (“intermédiaires inscrits”) could adversely affect the rights of shareholders.
The Pacte Act, which was adopted by the French Parliament in 2019, includes in its Article 198 an amendment to existing French law, that allows an intermediary to be registered for the account of holders of shares of companies which are admitted to trading solely on a market in a non-EU country that is considered equivalent to a regulated market pursuant to paragraph (a) of Article 25(4) of Directive EC2014/65/EU (which, pursuant to the European Commission decision dated December 13, 2017, includes the NYSE). Article 198 of the Pacte Act came into full force and effect on June 10, 2019 and allows us to maintain our current shareholder ownership structure in the United States.
We use a French registered intermediary for the account of our beneficial owners (the “French Intermediary”). If the French Intermediary fails to comply with the French provisions applicable to registered intermediaries (intermédiaires inscrits), and if we are unable to find an appropriate substitute, or if the European Commission decided to abrogate its decision and no longer considered the NYSE as equivalent to a regulated market as described above, we might not be able to comply with existing French laws regarding the holding of shares in the “au porteur” (bearer) form, and shares would have to be held in “au nominatif” (registered) form. In such a case, the Company would need to maintain at all times a register with the name of (and number of shares held by) each shareholder, which could adversely affect the rights of our shareholders, including potentially the right to exercise their voting rights as Company shareholders as only shareholders registered on the register held by the Company would be entitled to vote.

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Transactions in our ordinary shares could be subject to the European financial transaction tax, if adopted.
On February 14, 2013, the European Commission adopted a proposal for a directive on a common financial transaction tax (the “FTT”) to be implemented under the enhanced cooperation procedure by several Member States (Austria, Belgium, France, Germany, Greece, Italy, Portugal, Slovenia, Slovakia and Spain (the “Participating Member States”). The proposed FTT has a very broad scope and could, if introduced in its current form, apply to certain dealings in our ordinary shares (including secondary market transactions) in certain circumstances. The mechanism by which the tax would be applied and collected is not yet known, but if the proposed directive or any similar tax is adopted, transactions in our ordinary shares would be subject to higher costs, and the liquidity of the market for our ordinary shares may be diminished.
Under the 2013 FTT proposal, the FTT could apply in certain circumstances to persons both within and outside of the Participating Member States. Generally, it would apply to certain dealings in our ordinary shares where at least one party is a financial institution, and at least one party is established in a Participating Member State. A financial institution may be, or be deemed to be, “established” in a Participating Member State in a broad range of circumstances, including (a) by transacting with a person established in a Participating Member State, or (b) where the financial instrument which is subject to the dealings is issued in a Participating Member State.
However, the FTT proposal remains subject to negotiation between the Participating Member States. It may therefore still be altered prior to any implementation, the timing of which remains unclear. Additional EU Member States may decide to participate and/or certain of the Participating Member States may decide to withdraw. Prospective holders of our ordinary shares are advised to seek their own professional advice in relation to the consequences of the FTT.
In the case where dividends are paid by our Company, it is uncertain whether our shareholders will actually obtain the elimination or reduction of the French domestic dividend withholding tax to which they are entitled.
General comments on the French withholding tax treatment of dividends paid on our ordinary shares are set out under section “Item 10. Additional Information - E - Taxation - French Withholding Tax Treatment of Dividends Distributed by the Company” herein.
In accordance with domestic or double tax treaty provisions, shareholders may be entitled to an elimination or reduction of the default French withholding tax on dividends distributed by the Company (i.e., 30% or 75% in the case where the dividends are paid in non-cooperative States or territories within the meaning of article 238-0 A 1, 2 and 2 bis-1° of the French tax code , subject to the French paying agent of the dividends being provided with the required information and documentation relating to the tax status of the shareholders.
Numerous intermediaries would be involved in the process of transmitting the relevant information and documentation from our shareholders to the French paying agent in case of distribution of dividends by the Company. As a result, this process may potentially jeopardize the ability for our shareholders to obtain the elimination or reduction of French withholding tax to which they are entitled.
The French Ruling could be revoked if the description and legal analysis of the holding structure of the shares of the Company after the completion of the Transfer was inaccurate.
The various confirmations obtained from the French tax authorities on October 11, 2019 (the “French Ruling”) (set forth under section “Item 10. Additional Information - E - Taxation” below) are based on the description and legal analysis of the holding structure of the shares of the Company made by the Company to the French tax authorities in its ruling request. If the French tax authorities were to consider that the description or legal analysis in the ruling request with regards to the holding structure of the shares of the Company is inaccurate, notably to the extent that such description and analysis are based on US securities law notions that are foreign to French law, the French tax authorities could decide to revoke the French ruling and such decision could have adverse tax consequences to our shareholders.

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Purchases of our ordinary shares could be subject to the French financial transaction tax, if the NYSE were to be formally recognized as a foreign regulated market by the French Financial Market Authority or the applicable provisions of the French tax code are amended.
Pursuant to Article 235 ter ZD of the French tax code, purchases of equity instruments or similar securities of a French company listed on a regulated market of the EU or on a foreign regulated market formally recognized as such by the French Financial Market Authority (the “AMF”) are subject to a 0.3% French tax on financial transactions provided that the issuer’s market capitalization exceeds 1 billion euros as of December 1 of the year preceding the taxation year (See “Item 10. Additional Information - E - Taxation - French Financial Transaction Tax and Registration Duties on Disposition of our Shares”). On the date hereof, the NYSE is not formally recognized as a foreign regulated market by the AMF.
If the NYSE were to be formally recognized as a foreign regulated market by the AMF in the future, or if Article 235 ter ZD of the French tax code were amended to include the NYSE as a foreign regulated market, the French financial transaction tax could be due on purchases of ordinary shares of the Company.


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Item 4. Information on the Company
A.
History and Development of the Company
Constellium Holdco B.V. (formerly known as Omega Holdco B.V.) was incorporated as a Dutch private limited liability company on May 14, 2010 (incorporated and governed under the Dutch Civil Code). Constellium Holdco B.V. was formed to serve as the holding company for various entities comprising Alcan's Engineered Aluminum Product business unit, which Constellium acquired from affiliates of Rio Tinto on January 4, 2011 (the “Acquisition”). On May 21, 2013, Constellium Holdco B.V. was converted into a Dutch public limited liability company and renamed Constellium N.V. On May 29, 2013, we completed our initial public offering and began trading our shares as Constellium N.V., a Dutch company, on the New York Stock Exchange (the “NYSE”) under the symbol “CSTM”.
On June 28, 2019, Constellium N.V. converted its corporate form from a Dutch public limited liability company (Naamloze Vennootschap) into a Societas Europaea (SE) and changed its name to Constellium SE, with its head office remaining in Amsterdam, the Netherlands (the “Conversion”).
On December 12, 2019, Constellium SE completed its re-domicile and the relocation of its head office to Paris, France (the “Transfer”). The Conversion and the Transfer were each approved by the Company’s shareholders. Effective as of December 12, 2019, the Company’s existing Articles of Association were amended by means of a deed of amendment to reflect the Company’s re-domicile to Paris, France (“Articles of Association”).
As of the effectiveness of the Transfer, each outstanding Class A ordinary share of Constellium SE with its head office in Amsterdam, the Netherlands, automatically became an ordinary share of Constellium SE with its head office in Paris, France. The Company’s ordinary shares continue to be listed on the NYSE under the symbol “CSTM” and we began trading our shares under Constellium SE, a French company, on December 13, 2019.
Since the Transfer, any references to French law and the Articles of Association herein are references to French law and the Articles of Association of the Company, respectively, following the Conversion and Transfer.
For information on our historical capital expenditures, see “Item 5. Operating and Financial Review and Prospects—Cash Flows—Historical Capital Expenditures.” For information on our capital expenditures currently in process, see “—B. Business Overview—Our Operating Segments.” We expect to finance our capital expenditures currently in process with a combination of internal and external financing sources.
The business address (head office) of Constellium SE is Washington Plaza, 40-44 rue Washington, 75008 Paris, France, and our telephone number is +33 1 73 01 46 20. The address for our agent for service of process in the United States is Corporation Service Company, 80 State Street, Albany, New York 12207-2543, and its telephone number is + 1(302) 636-5400.
The SEC maintains an Internet website that contains reports and other information about issuers, like us, that file electronically with the SEC. The address of that site is www.sec.gov. We also make available on our website, free of charge, our annual reports on Form 20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or furnished to the SEC. Our website address is www.constellium.com. The information contained on our website is not incorporated by reference in this document.


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B.
Business Overview
The Company
Overview
We are a global leader in the design and manufacture of a broad range of innovative rolled and extruded aluminium products, serving primarily the packaging, aerospace and automotive end-markets. Our business model is to add value by converting aluminium into semi-fabricated and in some instances fabricated products. We supply numerous blue-chip customers with many value-added products for performance-critical applications. Our product portfolio generally commands higher margins as compared to less differentiated, more commoditized fabricated aluminium products, such as common alloy coils, paintstock, foilstock and soft alloys for construction and distribution.
As of December 31, 2019, we operated 28 production facilities, we had three administrative centers in Baltimore, Maryland, Paris, France and Zürich, Switzerland, and had three R&D centers. Additionally, we are building a new facility in China to serve our automotive structures customers. We believe our portfolio of flexible, integrated and strategically located facilities is among the most technologically advanced in the industry and that the significant growth investments we have made now position us well to capture expected demand growth in each of our end markets. It is our view that our established presence in Europe, North America and China combined with more than 50 years of manufacturing experience, quality and innovation, strategically position us to be a leading supplier to our global customer base. The Company had approximately 13,200 employees as of December 31, 2019.
We seek to sell to end-markets that have attractive characteristics for aluminium, including (i) stability through economic cycles as seen in our North American and European packaging businesses, (ii) rigorous and complex technical requirements as seen in global aerospace and automotive businesses, and (iii) favorable growth fundamentals supported by the vehicle lightweighting trend seen in global automotive business, and the growth in electric vehicles.
We have invested capital not only to maintain the condition of our assets which have significant replacement values, but also to grow a number of attractive opportunities including: (i) Auto Body Sheet capabilities in Muscle Shoals, Alabama, in Bowling Green, Kentucky, in Neuf-Brisach, France, and in Singen, Germany (ii) new Automotive Structures operations in Nanjing, China, in San Luis Potosi, Mexico, in White, Georgia, in Vigo, Spain, and in Zilina, Slovakia and facility expansions to produce battery enclosures for electric vehicles in Gottmadingen, Germany and advanced body structure capabilities in Dahenfeld, Germany and in Van Buren, Michigan and (iii) new cast houses and additional extrusion capability in Děčín, Czech Republic as well as a number of growth initiatives through R&D and debottlenecking efforts.
Our unique platform has enabled us to develop a stable and diversified customer base and to enjoy long-standing relationships with our largest customers. Our customer base includes market leading firms in packaging, aerospace, and automotive, such as AB InBev, Ball Corporation, Crown Holdings, Inc., Airbus, Boeing, and several premium automotive OEMs, including BMW AG, Daimler AG and Ford Motor Company. We believe that we are a critical supplier to many of our customers due to our technological and R&D capabilities as well as the long and complex qualification process required for many of our products. Our core products require close collaboration and, in many instances, joint development with our customers. We believe that this integrated collaboration with our customers for high value-added products reduces substitution risk, supports our competitive position and creates high barriers to entry.
For the years ended December 31, 2019, 2018 and 2017, the Company’s main key figures were as follows:
 
 
For the years ended December 31,
 
 
2019
 
2018
 
2017
Shipments (kT)
 
1,589

 
1,534

 
1,482

Revenue (in € millions)
 
5,907

 
5,686

 
5,237

Net income/(loss) (in € millions)
 
64

 
190

 
(31
)
Adjusted EBITDA (in € millions)
 
562

 
498

 
448

Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in “Item 5. Operating and Financial Review and Prospects—Segment Results.”


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Our Strategy
Our primary objectives are to expand our leading position as a supplier-of-choice of high value-added, technologically advanced fabricated aluminium products and to maximize the returns in our business. To achieve these objectives, we have built a business strategy centered around six core principles:
(i)
Focus on High Value-added Product Focus
We are primarily focused on our three strategic end-markets—packaging, aerospace and automotive—in which we have market leading positions and established relationships with many of the main manufacturers. These are also markets where we believe that we can differentiate ourselves through our high value-added and specialty products which make up the majority of our product portfolio. We have made substantial investments to develop unique R&D and technological capabilities, which we believe give us a competitive advantage in designs and innovations. We believe our differentiated products provide significant benefits to our customers in many areas such as weight reduction, higher strength and better formability. In addition, these products typically command higher margins than more commoditized products, and are supplied to end-markets that we believe have highly attractive characteristics and long-term growth trends. We intend to continue to invest in our R&D and technological capabilities and develop high value-added product portfolio.
(ii)
Increase Customer Connectivity
We aim to deepen our ties with our customers by consistently providing best-in-class quality products, joint product development projects, market leading supply chain integration, customer technical support and scrap and recycling solutions. We regard our relationships with our customers as partnerships in which we work closely together to utilize our unique R&D and technological capabilities to develop customized solutions in order to meet evolving customer requirements. The close collaboration to develop best-in-class and tailored solutions, as well as significant effort and investment to adhere to rigorous qualification procedures, enables us to foster long-term relationships with our customers. In addition, through supply chain integration we are able to better anticipate customer demands, optimize supply and more efficiently manage our working capital needs. We also seek to strengthen customer connectivity through customer technical support and closed-loop scrap management programs. We will aim to continue to further foster and enhance the relations with our customers and position our company as a preferred supplier to our customers.
(iii)
Optimize Margins and Asset Utilization Through Product Portfolio Management
We believe there are significant opportunities to enhance our profitability through rigorous focus on the products we choose to make and optimizing the throughput of these products in our facilities. For example, given our manufacturing configurations, there are certain products that our facilities are better equipped to manufacture. As a consequence, we can manufacture them more efficiently and at a lower cost. In addition, we are highly focused on maximizing the throughput of our facilities to increase the tons per machine hour and profitability per machine hour. We strive to achieve this through our investments in asset integrity, and through continuous improvements in our operations such as debottlenecking and optimizing equipment uptime, recovery and mill speed. 
(iv)
Harvest Returns from Recent Investments
We have invested capital in a number of attractive growth opportunities. While these investments have attractive return profiles, many of them are still in the ramp-up phase and are not yet making a significant contribution to our earnings. We are highly focused on completing these startups and realizing the expected earnings contributions. We believe these investments leave us well positioned to capture expected growth in our end markets and to enhance the returns in our business. 
(v)
Strictly Control Cost and Continuously Improve
We believe that there are significant opportunities to improve the services and quality that we provide to our customers and to reduce our operating costs by implementing manufacturing excellence initiatives and other cost reduction initiatives. We aim to establish best-in-class operations and achieve cost reductions by standardizing manufacturing processes and the associated upstream and downstream production elements where possible, while still allowing the flexibility to respond to local market demands. 

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(vi)
Increase Financial Flexibility
We are focused on increasing our financial flexibility through earnings growth, strict cost control, working capital management and disciplined capital spending, which we believe will collectively drive free cash flow generation and deleveraging. We believe having increased financial flexibility is a key pillar in achieving our long-term objective of being the supplier-of-choice of high value-added, specialized and technologically-advanced products.

Our Operating Segments
Our business is organized into three operating segments:
(i) Packaging & Automotive Rolled Products (P&ARP) includes the production of rolled aluminium products in our European and North American facilities. We supply the packaging market with canstock and closure stock for the beverage and food industry, as well as foil stock for the flexible packaging market. In addition, we supply the automotive market with a number of technically sophisticated applications such as ABS and heat exchanger materials.
(ii) Aerospace & Transportation (A&T) includes the production of rolled aluminium products in our European and North American facilities (and very limited volumes of extruded products) for the aerospace market, as well as rolled products for transport, industry and defense end-uses.
(iii) Automotive Structures & Industry (AS&I) includes the production of extruded products and technologically advanced structures for the automotive industry including crash-management systems, body structures, side impact beams and battery enclosures in our European, North American and Chinese facilities. In addition, we fabricate hard and soft aluminium alloy extruded profiles in a number of our other European facilities for a range of high demand industry applications in the automotive, engineering, rail and other transportation end markets.

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Table: Overview of Operating Segments (as of December 31, 2019)
 
 
Packaging & Automotive
Rolled Products
 
Aerospace &
Transportation
 
Automotive Structures &
Industry
 
 
 
 
 
 
 
Manufacturing Facilities
 
4 (France, Germany, U.S.)
 
6 (France, U.S., Switzerland)
 
18 (France, Germany, Switzerland, Czech Republic, Slovakia, Spain, U.S., Canada, Mexico, China)
Employees
 
4,000
 
4,000
 
4,800
Key Products
 
Can stock 
Can end stock
Closure stock
Auto Body Sheet
Rolled products for heat exchangers
Specialty reflective sheet (Bright)
 
Aerospace plates, sheets and extrusions
Aerospace wing skins
Plate and sheet for transportation, industry and defense applications
 
Automotive structures
Other extruded products including:
Soft alloys
Hard alloys
Large profiles
Key Customers
 
Packaging: AB InBev, Ball Corporation, Can-Pack, Amcor, Ardagh Group, Coca-Cola, Crown
Automotive: Audi, BMW AG, Daimler AG, Groupe PSA, Valeo, Volkswagen
 
Aerospace: Airbus, Boeing, Bombardier, Dassault
Transportation, Industry, Defense and Distribution: Amari, Nexter Systems, Ryerson, ThyssenKrupp
 
Automotive: Audi, BMW AG, Daimler AG, FCA Group, Ford, Porsche, Groupe PSA
Rail: CAF, Hitachi, Stadler
Select Key Facilities
 
Neuf-Brisach (France)
Singen (Germany)
Muscle Shoals (Alabama, U.S.)
Bowling Green (Kentucky, U.S.)
 
Issoire (France)
Ravenswood (West Virginia, U.S.)
Sierre (Switzerland)
 
Gottmadingen (Germany)
Van Buren (Michigan, U.S.)
Děčín (Czech Republic)
Singen (Germany)
% of total Revenue2
(for the twelve months ended December 31, 2019)
 
53%
 
24%
 
23%
% of Adjusted EBITDA3
(for the twelve months ended December 31, 2019)
 
49%
 
36%
 
19%
 

1 
Our 28 manufacturing facilities are located in 26 sites, two of which are shared between two operating segments.
2 
Holdings & Corporate not included.
3 
The difference between the sum of Adjusted EBITDA for our three segments and the Company’s Adjusted EBITDA is attributable to our fourth segment Holdings and Corporate which is not presented here.


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The following table presents our shipments by product lines:
(in thousand metric tons)
 
For the year ended
December 31,
2019
 
2018
 
2017
Packaging rolled products
 
822

 
799

 
807

Automotive rolled products
 
234

 
196

 
158

Specialty and other thin-rolled products
 
41

 
44

 
43

Aerospace rolled products
 
120

 
111

 
106

Transportation, industry, and other rolled products
 
122

 
135

 
132

Automotive extruded products
 
123

 
114

 
109

Other extruded products
 
127

 
135

 
127

Other
 

 

 

Total shipments
 
1,589

 
1,534

 
1,482


Packaging & Automotive Rolled Products Operating Segment
In our Packaging & Automotive Rolled Products operating segment, we develop and produce customized aluminium sheet and coil solutions. For the year ended December 31, 2019:
approximately 75% of operating segment volume was in packaging rolled products, which primarily includes beverage and food canstock as well as closure stock and foil stock,
approximately 21% of operating segment volume was in automotive rolled products,
and approximately 4% of operating segment volume was in specialty and other thin-rolled products, which include technologically advanced products for the industrial sector.
We are a leading European and North American supplier of canstock and the leading worldwide supplier of closure stock. We are also a major player in automotive rolled products for ABS in both Europe and North America, and for heat exchangers in Europe. These products are subject to the exacting requirements and qualification processes of our customers which we consider to provide us with a competitive advantage and to represent a barrier to entry for new competitors. We have a diverse customer base, consisting of many of the world’s largest beverage and food can manufacturers, specialty packaging producers, leading automotive firms and global industrial companies. Our customer base includes AB InBev, Ball Corporation, Crown Holdings, Inc., Ardagh Group S.A., Can-Pack S.A., Coca-Cola, Amcor Ltd., VW Group, Daimler AG, Ford, and Groupe PSA . Our customer contracts in packaging usually have a duration of three to five years. Our customer contracts in automotive are usually valid for the lifetime of a model, which is typically five to seven years.
We have two integrated rolling operations located in Europe and one in the U.S. Neuf-Brisach, our facility on the border of France and Germany, is a fully integrated aluminium recycling, rolling and finishing facility producing both canstock and ABS. Singen, located in Germany, is specialized in high-margin niche applications and has an integrated hot/cold rolling line and high-grade cold mills with special surfaces capabilities that facilitate unique metallurgy and lower production costs. Muscle Shoals, Alabama, is a fully integrated aluminium recycling, rolling and finishing facility producing both can stock and ABS. We also operate a finishing line for ABS in Bowling Green, Kentucky.
Our Packaging & Automotive Rolled Products operating segment serves the packaging market which has historically been relatively resilient during periods of economic downturn and has had relatively limited exposure to economic cycles and periods of financial instability. See “-Our Key End-Markets- Packaging.”

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The following table summarizes our volume, revenue and Adjusted EBITDA for our Packaging & Automotive Rolled Products operating segment for the periods presented:
 
 
For the year ended December 31,
(€ in millions, unless otherwise noted)
 
2019
 
2018
 
2017
Packaging & Automotive Rolled Products:
 
 
 
 
 
 
Segment Revenue
 
3,149

 
3,059

 
2,812

Segment Shipments (kt)
 
1,097

 
1,039

 
1,008

Segment Revenue (€/ton)
 
2,871

 
2,944

 
2,789

Segment Adjusted EBITDA(1)
 
273

 
243

 
204

Segment Adjusted EBITDA(€/ton)
 
249

 
234

 
202

Segment Adjusted EBITDA margin
 
9
%
 
8
%
 
7
%
__________________
(1)
Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in “Item 5. Operating and Financial Review and Prospects—Segment Results.”

Aerospace & Transportation Operating Segment
Our Aerospace & Transportation operating segment has market leadership positions in technologically advanced aluminium and specialty material products with wide applications across the global aerospace, defense, transportation, and industrial sectors. We offer a wide range of products including plate, sheet, extrusions and a few precision cast products which allow us to offer tailored solutions to our customers. We seek to differentiate our products and act as a key partner to our customers through our broad product range, supply-chain solutions, advanced R&D capabilities, extensive recycling capabilities and portfolio of plants with an extensive range of capabilities across Europe and North America. In order to reinforce the competitiveness of our metal solutions, we design our processes and alloys with a view to optimizing our customers’ operations and costs. This includes offering services such as customizing alloys to our customers’ processing requirements, processing short lead time orders and providing vendor managed inventories or tolling arrangements.
Our most significant facilities in the Aerospace & Transportation Operating Segment are located in Issoire, France, Ravenswood, West Virginia and Sierre, Switzerland and offer a broad spectrum of products required by the aerospace industry and have strong capabilities such as producing wide and very high gauge plates required for certain civil and commercial aerospace programs.
Downstream aluminium products for the aerospace market require relatively high levels of R&D investment and advanced technological capabilities, and therefore tend to command higher margins compared to more commoditized products. We work in close collaboration with our customers to develop highly engineered solutions to fulfill their specific requirements. For example, we developed Airware®, a lightweight specialty aluminium-lithium alloy, for our aerospace customers to address increasing demand for lighter and more environmentally friendly aircraft.
Aerospace products are typically subject to long development and supply lead times and the majority of our contracts with our largest aerospace customers have a term of five years or longer, which provides visibility on volumes and profitability. In addition, we expect demand for our aerospace products to directly correlate with aircraft backlogs and build rates. As of December 2019, the backlog reported by Airbus and Boeing for commercial aircraft reached 12,888 units on a combined basis, representing approximately eight to nine years of production at current build rates.
Additionally, aerospace products are generally subject to long qualification periods. Aerospace production sites are regularly audited by external certification organizations including the National Aerospace and Defense Contractors Accreditation Program (“NADCAP”) and/or the International Organization for Standardization. NADCAP is a cooperative organization of a number of aerospace OEMs that defines industry-wide manufacturing standards. NADCAP appoints private auditors who grant suppliers like Constellium a NADCAP certification, which customers tend to require. New products or alloys are separately certified by the OEM that uses the product. Our sites have been qualified by external certification organizations and our products have been qualified by our customers. We are typically able to obtain qualification within 6

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months to one year mainly because: (i) due to our long history of working with the main aircraft OEMs, we have an existing range of qualifications including in excess of 100 specifications regarding alloy, temper or shape, which we can build on to obtain new product qualifications; and (ii) we have invested in a number of capital intensive equipment and R&D programs to be able to qualify to the current industry norms and standards.
We also serve the transportation and defense industries. Our product portfolio in these segments include both specialty products as well as standard products. Specialty products are differentiated products, which are engineered to meet specific customer needs and as such have specific properties (e.g., mechanical properties, dimensions, surface aspect, etc.). Standard products typically face higher levels of competition in the marketplace, in the regions that we serve.
The following table summarizes our volume, revenue and Adjusted EBITDA for our Aerospace & Transportation operating segment for the periods presented:
 
 
For the year ended December 31,
(€ in millions, unless otherwise noted)
 
2019
 
2018
 
2017
Aerospace & Transportation:
 
 
 
 
 
 
Segment Revenue
 
1,462

 
1,389

 
1,335

Segment Shipments (kt)
 
242

 
246

 
238

Segment Revenue (€/ton)
 
6,041

 
5,646

 
5,618

Segment Adjusted EBITDA(1)
 
204

 
152

 
146

Segment Adjusted EBITDA(€/ton)
 
843

 
619

 
614

Segment Adjusted EBITDA margin
 
14
%
 
11
%
 
11
%
__________________
(1)
Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in “Item 5. Operating and Financial Review and Prospects—Segment Results.”

Automotive Structures & Industry Operating Segment
Our Automotive Structures & Industry operating segment produces (i) technologically advanced structures for the automotive industry including crash management systems, body structures, side impact beams and battery enclosures and (ii) soft and hard alloy extrusions for automotive, road, energy and building and large profiles for rail and industrial applications. We complement our products with a comprehensive offering of downstream technology and services, which include pre-machining, surface treatment, R&D and technical support services. Approximately 49% of the segment volume for the year ended December 31, 2019 was in automotive extruded products and approximately 51% was in other extruded product applications.
In our automotive structures business, a series of aluminium extrusions are consolidated into a system for specific automotive applications. Due to the unique combination of strength and weight, aluminium extrusions are increasingly favored in this segment. We believe that we are one of the largest providers of aluminium automotive crash management systems globally. We manufacture automotive structural products for some of the largest European and North American car manufacturers supplying the global market, including Daimler AG, BMW AG, VW Group, FCA Group and Ford. Our automotive structures contracts are typically five to seven years in duration.
We are a leading supplier of hard alloys for the automotive market and of large structural profiles for rail, industrial and other transportation markets in Europe. We also produce soft alloy extrusions for customers primarily in Germany and France, with customized solutions for a diverse number of end markets. Our other extruded products business is tied to contracts that averagely last up to one year.
Eighteen of our facilities, located in Germany, North America, the Czech Republic, Slovakia, France, Switzerland, China, Spain, and Mexico manufacture products sold in our Automotive Structures & Industry operating segment. We believe our local presence, downstream services and industry leading cycle times help to ensure that we respond to our customer demands in a timely and consistent fashion. Our two integrated remelt and casting centers in Switzerland and the Czech Republic utilize

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significant amounts of recycled aluminium and help provide security of metal supply. We also operate the largest extrusion press in Western Europe at our Singen facility, in Germany, which allows us to produce specialized large profile products for our rail and transportation customers. In addition, we operate a strategic network of five soft alloys facilities with strong technical capabilities, across Europe to better serve primarily our automotive and industrial customers as well as customers in other diversified market segments.
We operate a joint venture, Astrex Inc., which produces automotive extruded profiles in Ontario, Canada, for our North American operations, and a joint venture, Engley Automotive Structures Co., Ltd., which is currently producing aluminium crash management systems in China.
We believe that we have strong market positions given our R&D and manufacturing capability in Automotive Structures. Led by our partnership with Brunel University, London we have proprietary alloy and manufacturing technology which enables us to deliver differentiated design, engineering and manufacturing capabilities to our customers, and to accelerate time to market.
The following table summarizes our volume, revenue and Adjusted EBITDA for our Automotive Structures & Industry operating segment for the periods presented:
 
 
For the year ended December 31,
(€ in millions, unless otherwise noted)
 
2019
 
2018
 
2017
Automotive Structures & Industry:
 
 
 
 
 
 
Segment Revenue
 
1,351

 
1,290

 
1,123

Segment Shipments (kt)
 
250

 
249

 
236

Segment Revenue (€/ton)
 
5,404

 
5,181

 
4,756

Segment Adjusted EBITDA(1)
 
106

 
125

 
120

Segment Adjusted EBITDA(€/ton)
 
423

 
502

 
510

Segment Adjusted EBITDA margin
 
8
%
 
10
%
 
11
%
__________________
(1)
Adjusted EBITDA is not a measure defined under IFRS. Adjusted EBITDA is defined and discussed in “Item 5. Operating and Financial Review and Prospects—Segment Results.”

Our Industry
Aluminium Sector Value Chain
The global aluminium industry consists of (i) mining companies that produce bauxite, the ore from which aluminium is ultimately derived, (ii) primary aluminium producers that refine bauxite into alumina and smelt alumina into aluminium, (iii) aluminium semi-fabricated products manufacturers, including aluminium casters, extruders and rollers, (iv) aluminium recyclers and remelters and (v) integrated companies that are present across multiple stages of the aluminium production chain.
Our business is primarily focused on rolling and extruding semi-fabricated products for a variety of value added end markets. We recycle aluminium, both for our own use and as a service to our customers. We do not smelt aluminium, nor do we participate in other upstream activities such as mining or refining bauxite.

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Constellium’s Position in the Aluminium Sector Value Chain
Aluminium value chain
constellium02.jpg
Rolled and extruded aluminium product prices are based generally on the price of aluminium (which is quoted on LME) plus a conversion margin (i.e., the cost incurred to convert the aluminium into a semi-finished product). The price of aluminium is not a significant driver of our financial performance. Instead, the financial performance of producers of rolled and extruded aluminium products, such as Constellium, is driven by the dynamics in the end markets that they serve, their relative positioning in those markets and the efficiency of their industrial operations.
The aluminium rolled products industry is characterized by economies of scale, as significant capital investments are required to achieve and maintain technological capabilities and demanding customer qualification standards. The service and efficiency demands of large customers have encouraged consolidation among suppliers of aluminium rolled products.
The aluminium extruded product industry is relatively fragmented and generally more regional. The business requires as well significant capital investments in order to achieve and maintain technological capabilities and demanding customer qualification standards.
The supply of aluminium rolled and extruded products has historically been affected by production capacity, alternative technology substitution and trade flows between regions. The demand for these products has historically been affected by economic growth, substitution trends, cyclicality and seasonality and aluminium rolled products in particular by down-gauging.
There are two main sources of input metal for our aluminium rolled or extruded products:
Slabs or billets we cast from a combination of primary and recycled aluminium. The primary aluminium is typically in form of standard ingots. The recycled aluminium comes either from scrap from fabrication processes, known as recycled process material, or from recycled end products in their end of life phase, such as used beverage cans.
Slabs or billets purchased from smelters or metal trading companies.
Primary aluminium, sheet ingot and extrusion billets can generally be purchased at prices set on the LME plus a premium that varies by geographic region on delivery, alloying material, form (ingot or molten metal) and purity.
Recycled aluminium is also tied to the LME pricing (typically sold at a discount to LME). Aluminium is infinitely recyclable and recycling aluminium requires only approximately 5% of the energy required to produce primary aluminium. As a result, in regions where aluminium is widely used, manufacturers and customers are active in setting up collection processes in which used beverage cans and other end-of-life aluminium products are collected for remelting at purpose-built plants. Manufacturers may also enter into agreements with customers who return recycled process material and pay to have it re-melted and rolled into the same product again.

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Aluminium Rolled Products Overview
The rolling process consists of passing aluminium through a hot-rolling mill and then transferring it to a cold-rolling mill, which can gradually reduce the thickness of the metal down to approximately 6 mm for plates and to approximately 0.2-6 mm for sheet.
Aluminium rolled products, including sheet, plate and foil, are semi-finished products that provide the raw material for the manufacture of finished goods ranging from packaging to automotive body panels to fuselage sheet to aircraft wing parts. The packaging industry is a major consumer of the majority of sheet and foil for making beverage cans, foil containers and foil wrapping. Sheet is also used extensively in transport for airframes, road and rail vehicles, in marine applications, including offshore platforms, and superstructures and hulls of boats and in building for roofing and siding. Plate is used for airframes, military vehicles and bridges, ships and other large vessels and as tooling plate for the production of plastic products. Foil applications outside packaging include electrical equipment, insulation for buildings and foil for heat exchangers.
The following chart illustrates expected global demand for aluminium rolled products according to CRU International Limited ("CRU"). The compound annual growth rate ("CAGR") between 2019 and 2024 for the flat rolled products market is expected to be 3.3% according to CRU.
Projected Aluminium Flat Rolled Products Demand 2019-2024 (in kt)

alfrpdemand20192024crua01.jpg
Source: CRU International Ltd.
(Asia Pacific includes Japan, China, India, South Korea, Australia, Middle East and other Asia. Other includes Central and South America, and Africa)

Aluminium Extrusions and Automotive Structures Overview
Aluminium extrusion is a technique used to transform aluminium billets into objects with a defined cross-sectional profile for a wide range of uses. In the extrusion process, heated aluminium is forced through a die. Extrusions can be manufactured in many sizes and in almost any shape for which a die can be created. The extrusion process makes the most of aluminium’s unique combination of physical characteristics. Its malleability allows it to be easily machined and cast, and yet aluminium is one-third the density and stiffness of steel so the resulting products offer strength and stability, particularly when alloyed with other metals.
Extruded profiles can be produced in solid or hollow form, while additional complexities can be applied using advanced die designs. After the extrusion process, a variety of options are available to adjust the color, texture and brightness of the aluminium’s finish. This may include aluminium anodizing or painting.
Today, aluminium extrusions are used for a wide range of purposes, including building, transportation and industrial markets. Virtually every type of vehicle contains aluminium extrusions, including cars, boats, bicycles and trains. Home appliances and tools take advantage of aluminium’s excellent strength-to-weight ratio. The increased focus on green building is also leading contractors and architects to use more extruded aluminium products, as aluminium extrusions are flexible and corrosion-resistant. These diverse applications are possible due to the advantageous attributes of aluminium, including its

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particular blend of strength and ductility its conductivity, its non-magnetic properties and its ability to be recycled repeatedly without loss of integrity. We believe that all of these capabilities make aluminium extrusions a viable and adaptable solution for a growing number of manufacturing needs.
CRU is cautiously optimistic about the consumption of aluminium extruded products in the United States in 2020, mostly driven by the construction sector. In Europe, CRU expects the demand for aluminium extruded products to remain weak with the European automotive sector's difficulties expected to continue in 2020.

Our Key End-markets
We have a significant presence in (i) the packaging end-markets, which have proved to be relatively stable and historically recession-resilient, (ii) the automotive and the aerospace end-markets, which are driven by global demand trends, and (iii) a number of niche specialty end markets including transportation (trucks, rail, space), industry, defense and bright products which diversify our exposure to economic trends.
Packaging
Aluminium beverage cans represented approximately 18% of the total European aluminium flat rolled demand by volume and 32% of total U.S. and Canada aluminium flat rolled demand in 2019. According to CRU, aluminium demand for the canstock market in Europe and North America is expected to grow by 2.7% and 2% per year between 2019 and 2024, respectively.
Aluminium is a preferred material for beverage packaging as it allows drinks to chill faster, can be stacked for transportation and storage more densely than competing formats (such as glass bottles), is highly formable for unique or differentiated branding, and offers the environmental advantage of easy, cost- and energy-efficient recycling. As a result of these benefits, aluminium is displacing tinplate, glass and may displace plastics as the preferred packaging material in certain markets. In Europe, aluminium is replacing tinplate (steel) as the standard for beverage cans and we believe that aluminium's penetration of the canstock market versus tinplate will be close to 100% by 2023. In the United States, we believe aluminium’s penetration has been at 100% for many years. In addition, we are benefiting from increased can consumption in Eastern Europe and Mexico and from growth in specialty products such as cans used for energy drinks.

Total European Rolled Products Consumption
Can Stock (Kt)
 
Total North American Rolled Products
Consumption Can Stock (Kt)
 
 
 
eufrpcanstockconsumption2019.jpg
 
nafrpcanstockconsumption2019.jpg
 
 
 
Source: CRU International Ltd., Aluminium Rolled Products Market Outlook November 2019
 
Source: CRU International Ltd., Aluminium Products Market Outlook November 2019

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In addition, demand for can sheet has been highly resilient across economic cycles. Between 2007 and 2011, the US and Europe can stock consumption was flat compared to the material decline for total flat rolled product volumes.
U.S. and Europe Metal Beverage Can Consumption
constellium06.jpg
Source: Republished under license from Global Data
Automotive
We supply the automotive sector with rolled products out of our Packaging & Automotive Rolled Products operating segment and extruded and fabricated products out of our Automotive Structures & Industry operating segment. Our automotive products are predominantly used in premium models, light trucks and sport utility vehicles manufactured by the European and North American OEMs.
In our view, the main drivers of automotive sales are overall economic growth, credit availability, consumer prices and consumer confidence. According to CRU, global vehicle production is expected to grow by approximately 1.9% per annum from 2019 to 2024.

Vehicle Production(1)  

vehicleproduction20192024cru.jpg
Source: CRU International Ltd
Global & Economic Outlook December 2019
(1) Represents both car and commercial vehicle production, includinglight trucks, heavy trucks and, except in the U.S. and Canada, coaches
Within the automotive sector, the demand for aluminium has been increasing faster than the underlying demand for light vehicles due to recent growth in the use of aluminium products in automotive applications. We believe the main reasons for this are aluminium’s high strength-to-weight ratio in comparison to steel and a need for increased energy efficiency. This lightweighting facilitates better fuel economy, improves emissions performance and enhances vehicle safety. As a result,

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manufacturers are seeking additional applications where aluminium can be used in place of steel and an increased number of cars are being manufactured with aluminium panels and crash management systems.
We believe that the vehicle lightweighting trend will continue as increasingly stringent EU and U.S. regulations relating to reductions in carbon emissions will force the automotive industry to increase its use of aluminium to “lightweight” vehicles. In Europe, European Union legislation has set mandatory emission reduction targets for new cars such that by 2021, the fleet average to be achieved by all new cars is 95 grams of CO2 emissions per kilometer compared to an average target of 130g/km in 2015. In the United States, we expect that U.S. regulations requiring reductions in carbon emissions and fuel efficiency, as well as fluctuating fuel prices, will continue to drive aluminium demand in the automotive industry.
In the longer term, to the extent electric vehicles become more prevalent, we believe the demand for aluminium in the automotive industry will increase due to the greater importance of lightweighting. Aluminium thermal conductivity is a significant inherent advantage for battery boxes and aluminium also has superior energy absorption as compared to steel. Whereas growth in aluminium use in vehicles has historically been driven by increased use of aluminium castings, we anticipate that future growth will be primarily in the kinds of extruded and rolled products that we supply to the OEMs.
According to CRU, the consumption of ABS between 2019 and 2024 will grow 9% per annum in Europe, 9% per annum in North America and 23% per annum in China.

Automotive Body Sheet Flat Rolled Products Consumption (kt)
absfrp20192024cru.jpg
Source: CRU International Ltd.,
Aluminium Rolled Products Market Outlook November 2019

Aerospace
Demand for aerospace plates is primarily driven by the build rate of aircraft, which we believe will be supported for the foreseeable future by (i) necessary replacement of aging fleets by airline operators, particularly in the United States and Western Europe, and (ii) increasing global passenger air traffic (the aerospace industry publication The Airline Monitor estimates that global revenue passenger miles will grow at a compound annual growth rate of approximately 6% from 2019 to 2025). In 2019, Boeing and Airbus predicted respectively approximately 44,040 and 39,210 new aircraft over the next 20 years across all categories of large commercial aircraft. Boeing estimates that between 2019 and 2038, 39% of sales of new airplanes will be to Asia Pacific, 41% to Europe and North America and the remaining 20% delivered to the Middle East, Latin America, the Commonwealth of Independent States and Africa. Demand for aluminium aerospace plates is also influenced by alternative materials becoming more mature in the aerospace market (e.g., composites). According to CRU, aluminium demand for the aerospace rolled products markets in North America and Europe is expected to grow by 3.3% per year between 2019 and 2024.


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World’s Commercial Aircraft Fleet (thousands) 
 
Fleet Development Driven by Passenger Demand and Aging Fleet (units) 
 
 
 
worldscommercialaircraftflee.jpg
 
fleetdevelopmentboeing.jpg
 
 
 
Source: Boeing 2019 current market outlook
 
Source: Boeing 2019 current market outlook

Aerospace Flat Rolled Products Consumption (kt)
aerospacefrp20192024cru.jpg
Source: CRU International Ltd.,
Aluminium Rolled Products Market Outlook November 2019


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Our Business Operations
Our business model is to add value by converting aluminium into semi-fabricated products. It is our policy not to speculate on metal price movements.
Managing Our Metal Price Exposure
For all contracts, we seek to minimize the impact of aluminium price fluctuations in order to protect our cash flows against variations in the LME price and regional premiums that we buy and sell, with the following methods:
In cases where we are able to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into back-to-back arrangements with our customers.
When we are unable to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into derivative financial instruments to pass through the exposure to financial institutions at the time the price is set.
For a small portion of our volumes, the aluminium we process is owned by our customers and we bear no aluminium price risk.
The price of the aluminium that we buy includes other premiums on top of the LME price. These premiums relate to specific features of the metal being purchased, such as its location, purity, shape, etc.
Where possible, we align premium formulas in order to pass through the vast majority of our premium exposure to our customers, and in certain instances we enter into over-the-counter hedge instruments with third-parties to mitigate our exposure. We seek to apply the same policy and methods to minimize the impact of geographical premium price fluctuations that we do for the LME aluminium price variations.
Sales and Marketing
Our sales force is based in Europe (France, Germany, Czech Republic, United Kingdom and Switzerland), the United States and Asia (Tokyo, Shanghai and Seoul). We serve our customers either directly or through distributors.
Raw Materials and Supplies
Approximately 72% of our rolling slab demand and 52% of our billet demand is produced in our own internal cast-houses. In addition, our external rolling slab supply is secured through long-term contracts with several upstream companies. All of our top 10 overall metal suppliers (covering rolling slabs, extrusion billets, primary, high purity, scrap and hardeners) have been long-standing suppliers to our plants (in many cases for more than 10 years) and, in aggregate, accounted for approximately 55% of our total metal purchases (in terms of volumes) for the year ended December 31, 2019. We typically enter into multi-year contracts with these metal suppliers pursuant to which we purchase various types of metal, including:
Primary metal from smelters or metal traders in the form of ingots, rolling slabs or extrusion billets.
Remelted metal in the form of rolling slabs or extrusion billets from external cast-houses, as an addition to our own internal cast-houses.
Production scrap from customers and scrap traders.
End-of-life scrap (e.g., used beverage cans) from customers, collectors and scrap traders.
Specific alloying elements and primary ingots from producers and metal traders.
Our operations use natural gas and electricity, which represents the fourth largest component of our cost of sales, after metal, labor costs and depreciation. We purchase natural gas and electricity from the market and typically secure a large part of our natural gas and electricity needs pursuant to fixed-price commitments. To reduce the risks associated with our natural gas and electricity requirements, we use forward contracts or financial futures with our suppliers to fix the commodity component of the energy costs. Furthermore, in our longer-term sales contracts, we try to include indexation clauses on energy prices.

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Our Customers
Our customer base includes some of the largest leading manufacturers in the packaging, aerospace and automotive end-markets. We have a relatively diverse customer base with our 10 largest customers representing approximately 50% of our revenue for year ended December 31, 2019. We generally have long-term relationships with our significant customers, many of which span decades.
A substantial portion of our volumes is sold under multi-year contracts, as we generally have three- to five-year terms in contracts with our packaging customers, five-year terms in contracts with our largest aerospace customers, and five- to seven-year terms in our “life of a car platform/car model” contracts with our automotive customers. This provides us with significant visibility into our future volumes and earnings.
We see our relationships with our customers as partnerships where we work together to find customized solutions to meet their evolving requirements. In addition, we collaborate with our customers to complete a rigorous process for qualifying our products in each of our end-markets, which requires substantial time and investment and creates high switching costs, resulting in longer-term, mutually beneficial relationships with our customers. For example, in the packaging industry, where qualification occurs on a plant-by-plant basis, we are currently one of the qualified suppliers to several facilities of our customers.
Our product portfolio is predominantly focused on high value-added products, which we believe are particularly well-suited to developing and manufacturing for our customers. These products tend to require close collaboration with our customers to develop tailored solutions, as well as significant effort and investment to adhere to rigorous qualification procedures, which enables us to foster long-term relationships with our customers. Our customized products typically command higher margins than more commoditized products, and are supplied to end-markets that we believe have highly attractive characteristics and long-term growth trends.
Competition
The worldwide rolled and extruded aluminium industry is highly competitive and we expect this dynamic to continue for the foreseeable future. We believe the most important competitive factors in our industry are: product quality, price, timeliness of delivery and customer service, geographic coverage and product innovation. Aluminium competes with other materials such as steel, plastic, composite materials and glass for various applications. Our key competitors in our Packaging & Automotive Rolled Products operating segment are Novelis Inc., Norsk Hydro ASA, Alcoa Corporation, Arconic Inc. and Tri-Arrows Aluminum Inc. Our key competitors in our Aerospace & Transportation operating segment are Arconic Inc., Aleris International, Inc., Kaiser Aluminum Corp., Austria Metall AG, and Universal Alloy Corporation. Our key competitors in our Automotive Structures & Industry operating segment are Norsk Hydro ASA, Sankyo Tateyama, Inc., Eural Gnutti S.p.A., Gestamp, Otto Fuchs KG, Impol Aluminium Corp., Benteler International AG, Whitehall Industries, Step-G, and Metra Aluminum.
Seasonality
Customer demand in the aluminium industry is seasonal due to a variety of factors, including holiday seasons, weather conditions, economic and other factors beyond our control. Our volumes are impacted by the timing of the holiday seasons in particular, with the lowest volumes typically delivered in August and December and highest volumes delivered in January to June. Our business is also impacted by seasonal slowdowns and upturns in certain of our customers’ industries. Historically, the can industry is strongest in the spring and summer seasons and the automotive and aerospace sectors encounter slowdowns in both the third and fourth quarters of the calendar year.
Research and Development (“R&D”)
We believe that our research and development capabilities coupled with our integrated, longstanding customer relationships create a distinctive competitive advantage versus our competition. Our three R&D centers are based in Voreppe, France; Plymouth, Michigan, and Brunel University, London, United Kingdom.
Our R&D center based in Voreppe, France provides services and support to all of our facilities, focusing on product and process development, providing technical assistance to our plants and working with our customers to develop new products. In developing new products, we focus on increased performance that aims to lower the total cost of ownership for the end users of our products, for example, by developing materials that decrease maintenance costs of aircraft or increase fuel efficiency in cars.Within the Voreppe facility, we also work on the development, improvement, and testing of processes used in our plants

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such as melting, casting, rolling, extruding, finishing and recycling. We also develop and test technologies used by our customers, such as friction stir welding, and provide technological support to our customers.
The key contributors to our success in establishing our R&D capabilities include:
Close interaction with key customers, including through formal partnerships or joint development teams—examples include Strongalex®, Formalex® and Surfalex®, which were developed with automotive customers (mainly Daimler and Audi) and the Fusion bottle, a drawn and ironed technology created in partnership with Ball Corporation.
Technologically advanced equipment—for example, full-size casthouse for rapid prototyping of new Airware® low density alloys, innovative joining technologies for aerospace alloys (friction stir welding), forming technologies for automotive body sheets.
Long-term partnerships with universities worldwide. For example Michigan University in the U.S., Stuttgart University in Germany or Manchester University in the United Kingdom which generate significant innovation opportunities and foster new ideas.
Our R&D center located in Plymouth, Michigan opened in 2016 in order to improve our support to North American automotive customers by addressing specific market requirements related to our aluminium based light weighting solutions.
Additionally, in the Constellium University Technology Center inaugurated in 2016 at Brunel University London, a dedicated team of R&D engineers and project managers translate technology from the lab to new customer programs and to our plants for production. The facility features industrial scale casting and extrusion equipment, forming technology and extensive joining methods, enabling us to leverage on our proprietary alloys and strong manufacturing innovation capabilities to develop engineered solutions adapted to customer needs, and accelerate time to market.
As of December 31, 2019, the research and development center in Voreppe employed 248 people, of which 201 are scientists and technicians. The research and development center in Plymouth employed 8 people. The research technology center in Brunel employed 35 people. We invested €48 million in R&D in the year ended December 31, 2019, €40 million in R&D in the year ended December 31, 2018 and €36 million in R&D in the year ended December 31, 2017.
Trademarks, Patents, Licenses and IT
We actively review intellectual property arising from our operations and our research and development activities and, when appropriate, apply for patents in the appropriate jurisdictions. We currently hold approximately 200 active patent families and regularly apply for new ones. While these patents and patent applications are important to the business on an aggregate basis, we do not believe any single patent family or patent application is critical to the business.
We are from time to time involved in opposition and re-examination proceedings that we consider to be part of the ordinary course of our business, in particular at the European Patent Office and the U.S. Patent and Trademark Office. We believe that the outcome of existing proceedings would not have a material adverse effect on our financial position, results of operations or cash flows.
In connection with our collaborations with universities and other third parties, we occasionally obtain royalty-bearing licenses for the use of third-party technologies in the ordinary course of business.
Insurance
We have implemented a corporate-wide insurance program consisting of both corporate-wide master policies with worldwide coverage and local policies where required by applicable regulations. Our insurance coverage includes: (i) property damage and business interruption; (ii) general liability including operation, professional, product and environment liability; (iii) aviation product liability; (iv) marine cargo (transport); (v) business travel and personal accident; (vi) construction all risk; (vii) automobile liability; (viii) trade credit; (ix) cyber risk; (x) workers' compensation in the U.S.; and (xi) other specific coverages for executive and special risks.

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We believe that our insurance coverage terms and conditions are customary for a business such as Constellium and are sufficient to protect us against catastrophic losses.
We also purchase and maintain insurance on behalf of our directors and officers.
Governmental Regulations and Environmental, Health and Safety Matters
Our operations are subject to a number of international, national, state and local regulations relating to the protection of the environment and to workplace health and safety. Our operations involve the use, handling, storage, transportation and disposal of hazardous substances, and accordingly we are subject to extensive laws and regulations governing emissions to air, discharges to water emissions, the generation, storage, transportation, treatment or disposal of hazardous materials or wastes and employee health and safety matters. In addition, prior operations at certain of our properties have resulted in contamination of soil and groundwater which we are required to investigate and remediate pursuant to applicable environmental, health and safety (“EHS”) laws and regulations. Environmental compliance at our key facilities is supervised by the Direction Régionale de l’Environnement de l’Aménagement et du Logement in France, the Umweltbundesamt in Germany, the Service de la Protection de l’Environnement du Canton du Valais in Switzerland, the United States Environmental Protection Agency, West Virginia Department of Environmental Protection, the Alabama Department of the Environmental Management, the Kentucky Department for Environmental Protection, Georgia Environmental Protection Division and Michigan Department of Environment, Great Lakes and Energy in the United States, the Regional Authority of the Usti Region in the Czech Republic, the Slovenká Insvpekcia zvivotného prostredia in Slovakia, Secretaria de Medio Ambiente y Recursos Naturales in Mexico,the Environmental Monitoring Agency in China, Consellería de Medioambiente, Territorio y Vivienda in Spain and Enforcement Branch Ontario region in Canada. Violations of EHS laws and regulations, and remediation obligations arising under such laws and regulations, may result in restrictions being imposed on our operating activities as well as fines, penalties, damages or other costs. Accordingly, we have implemented EHS policies and procedures to protect the environment and ensure compliance with these laws, and incorporate EHS considerations into our planning for new projects. We perform regular risk assessments and EHS reviews. We closely and systematically monitor and manage situations of noncompliance with EHS laws and regulations and cooperate with authorities to redress any noncompliance issues. We believe that we have made adequate reserves with respect to our remediation and compliance obligations. Nevertheless, new regulations or other unforeseen increases in the number of our non-compliant situations may impose costs on us that may have a material adverse effect on our financial condition, results of operations or liquidity.
Our operations also result in the emission of substantial quantities of carbon dioxide, a greenhouse gas that is regulated under the EU’s Emissions Trading System (“ETS”). Although compliance with ETS to date has not resulted in material costs to our business, compliance with ETS requirements currently being developed for the 2021-2030 period, and increased energy costs due to ETS requirements imposed on our energy suppliers, could have a material adverse effect on our business, financial condition or results of operations. We may also be liable for personal injury claims or workers’ compensation claims relating to exposure to hazardous substances. In addition, we are, from time to time, subject to environmental reviews and investigations by relevant governmental authorities.
E.U. Directive 2010/75 titled “Industrial Emissions” regulates some of our European activities as recycling or melting/casting. With the revision of the Best Available Technics Reference of Non Ferrous Metals in 2016, which defines associated emissions limits values for these activities applicable in 2020 at the latest, staying in compliance with the law, could require significant expenditures to tune our processes or implement abatement installations.
Additionally, some of the chemicals we use in our fabrication processes are subject to REACH in the EU. Under REACH, we are required to register some of the substances contained in our products with the European Chemicals Agency, and this process could cause significant delays or costs. We are currently compliant with REACH, and expect to stay in compliance, but if the nature of the regulation changes in the future, or if the perimeter of REACH is changing (e.g. Brexit) or if substances we use currently in our process, considered as Substances of Very High Concern, fall under need of authorization for use, we may be required to make significant expenditures to reformulate the chemicals that we use in our products and materials or incur costs to register such chemicals to gain and/or regain compliance. Future noncompliance could also subject us to significant fines or other civil and criminal penalties. Obtaining regulatory approvals for chemical products used in our facilities is an important part of our operations.
We accrue for costs associated with environmental investigations and remedial efforts when it becomes probable that we are liable and the associated costs can be reasonably estimated. The aggregate close down and environmental remediation costs provisions at December 31, 2019 were €90 million. All accrued amounts have been recorded without giving effect to any possible future recoveries. With respect to ongoing environmental compliance costs, including maintenance and monitoring, we expense the costs when incurred.

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We have incurred, and in the future will continue to incur, operating expenses related to environmental compliance. As part of the general capital expenditure plan, we expect to incur capital expenditures for other capital projects that may, in addition to improving operations, reduce certain environmental impacts as energy consumption, air emissions, water releases, waste streams optimization.
Litigation and Legal Proceedings
The Company is involved, and may become involved, in various lawsuits, claims and proceedings relating to customer claims, product liability, employee and retiree benefit matters, and other commercial matters. The Company records provisions for pending litigation matters when it determines that it is probable that an outflow of resources will be required to settle the obligation, and such amounts can be reasonably estimated. In some proceedings, the issues raised are or can be highly complex and subject to significant uncertainties and amounts claimed are and can be substantial. As a result, the probability of loss and an estimation of damages are and can be difficult to ascertain. The Company is currently subject to an arbitration by a customer claiming that Constellium supplied defective products as a result of which the customer alleges it has suffered significant damages. The Company considers that the claim is without merit on both technical and legal grounds and is vigorously defending the action. For this matter and in respect of others which the Company considers are without merit, while it is possible that an unfavorable outcome may result, after assessing the information available, the Company has concluded that it is not probable that a loss has been incurred. From time to time, asbestos-related claims are also filed against us, relating to historic asbestos exposure in our production process. We have made reserves for potential occupational disease claims for a total of €4 million as of December 31, 2019. It is not anticipated that any of our currently pending litigation and proceedings will have a material effect on the future results of the Company.

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C.
Organizational Structure
The following diagram reflects our simplified corporate legal entity structure as of December 31, 2019. Percentages reflect ownership interest where ownership interest is less than 100%. The country listed for each legal entity below depicts such entity’s jurisdiction of incorporation.
orgchartay200306v2.jpg


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D.
Property, Plant and Equipment
At December 31, 2019, we operated 28 manufacturing facilities serving both global and local customers, three R&D centers, two in Europe and one in the United States. In addition, we are building a new facility in Nanjing, China. Among our production sites, we have seven major facilities (Muscle Shoals, Alabama, Neuf-Brisach, France, Issoire, France, Ravenswood, West Virginia, Singen, Germany, Déčín, Czech Republic and Sierre, Switzerland) catering to the needs of our Aerospace & Transportation, Packaging & Automotive Rolled Products and Automotive Structures & Industry operating segments:
The Muscle Shoals, Alabama facility operates one of the largest and most efficient can reclamation facilities in the world. In addition, the facility utilizes multi-station electromagnetic casting, houses the widest hot line in North America and has the fastest can end stock coating line in the world. Production capabilities include body stock, tab stock, and end stock. In addition, we are producing automotive cold coils for body sheet. The capital expenditures invested in the facility were €40 million for the year ended December 31, 2019 and €44 million in the year ended December 31, 2018.
The Neuf-Brisach, France facility is an integrated aluminium rolling, finishing and recycling facility in Europe. Our investments in a can body stock slitter and recycling furnace has enabled us to secure long-term can stock contracts. Additionally, our latest investment in a new state-of-the-art automotive finishing line has further strengthened the plant’s position as a significant supplier of aluminium Auto Body Sheet in the automotive market. The capital expenditures invested in the facility were €31 million in the year ended December 31, 2019 and €32 million in the year ended December 31, 2018.
The Issoire, France facility is one of the world’s two leading aerospace plate mills based on volumes. The plant operates two Airware® industrial casthouses and currently uses recycling capabilities to take back scrap along the entire fabrication chain. Issoire works as an integrated platform with Ravenswood, West Virginia and Sierre, Switzerland, providing a significant competitive advantage for us as a global supplier to the aerospace industry. The capital expenditures invested in the facility were €32 million in the year ended December 31, 2019 and €32 million in the year ended December 31, 2018.
The Ravenswood, West Virginia facility has significant assets for producing aerospace plates, transportation coil and is a recognized supplier to the defense industry. The facility has stretchers and wide-coil capabilities that make it one of the few facilities in the world capable of producing plates of a size needed for the largest commercial airplanes. The capital expenditures invested in the facility were €31 million for the year ended December 31, 2019 and €28 million in the year ended December 31, 2018.
The Singen, Germany rolling plant has more than 100 years’ experience, industry leading cycle times and high-grade cold mills with special surfaces capabilities to serve automotive and other markets. The extrusion part has one of the largest extrusion presses in Europe as well as advanced and highly productive integrated automotive bumper manufacturing lines. A dedicated unit allows the production of crash management applications, battery enclosures for electric vehicles as well as other automotive structural parts ready for the OEM assembly lines. The capital expenditures invested in the facility were €38 million in the year ended December 31, 2019 and €45 million in the year ended December 31, 2018.
The Děčín, Czech Republic facility is a large extrusion facility, mainly focusing on hard alloy extrusions for automotive and industrial applications, with significant recycling capabilities. It is located near the German border, strategically positioning it to supply the German, Czech and French Tier1s and OEMs. Its integrated casthouse allows it to offer high value-add customized hard alloys to our customers. The capital expenditures invested in the facility were €13 million in the year ended December 31, 2019 and €21 million in the year ended December 31, 2018.
The Sierre, Switzerland facility is dedicated to precision plates for general engineering, aerospace plates and slabs and is a leading supplier of extruded products for high-speed train railway manufacturers and a wide range of applications. The Sierre facility includes the Steg casthouse that produces automotive, general engineering and aerospace slabs and the Chippis casthouse that has the capacity to produce non-standard billets for a wide range of extrusions. Its qualification as an aerospace plate and slabs plant increases our aerospace production capabilities. The capital expenditures invested in the facility were €15 million in the year ended December 31, 2019 and €12 million in the year ended December 31, 2018.

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Our current production facilities are listed below by operating segment:
Operating Segment
 
Location
 
Country
 
Owned/
Leased
Packaging & Automotive Rolled Products
 
Biesheim, Neuf-Brisach
 
France
 
Owned
Packaging & Automotive Rolled Products
 
Singen
 
Germany
 
Owned
Packaging & Automotive Rolled Products
 
Muscle Shoals, AL
 
United States
 
Owned
Packaging & Automotive Rolled Products
 
Bowling Green, KY
 
United States
 
Owned
Aerospace & Transportation
 
Ravenswood, WV
 
United States
 
Owned
Aerospace & Transportation
 
Issoire
 
France
 
Owned
Aerospace & Transportation
 
Montreuil-Juigné
 
France
 
Owned
Aerospace & Transportation
 
Ussel
 
France
 
Owned
Aerospace & Transportation
 
Steg
 
Switzerland
 
Owned
Aerospace & Transportation
 
Sierre
 
Switzerland
 
Owned
Automotive Structures & Industry
 
Van Buren, MI
 
United States
 
Leased
Automotive Structures & Industry
 
Changchun, Jilin Province (JV)(1)
 
China
 
Leased
Automotive Structures & Industry
 
Děčín
 
Czech Republic
 
Owned
Automotive Structures & Industry
 
Nuits-Saint-Georges
 
France
 
Owned
Automotive Structures & Industry
 
Burg
 
Germany
 
Owned
Automotive Structures & Industry
 
Crailsheim
 
Germany
 
Owned
Automotive Structures & Industry
 
Neckarsulm
 
Germany
 
Owned
Automotive Structures & Industry
 
Gottmadingen
 
Germany
 
Owned
Automotive Structures & Industry
 
Landau/Pfalz
 
Germany
 
Owned
Automotive Structures & Industry
 
Singen
 
Germany
 
Owned
Automotive Structures & Industry
 
Levice
 
Slovakia
 
Owned
Automotive Structures & Industry
 
Chippis
 
Switzerland
 
Owned
Automotive Structures & Industry
 
Sierre
 
Switzerland
 
Owned
Automotive Structures & Industry
 
White, GA
 
United States
 
Leased
Automotive Structures & Industry
 
Lakeshore, Ontario (JV)(2)
 
Canada
 
Leased
Automotive Structures & Industry
 
San Luis Potosi
 
Mexico
 
Leased
Automotive Structures & Industry
 
Zilina
 
Slovakia
 
Leased
Automotive Structures & Industry
 
Vigo
 
Spain
 
Leased
(1)
Engley is a Constellium Joint Venture with Changchun Engley Auto Parts Co. Ltd.
(2)
Astrex is a Constellium Joint Venture with Can Art Aluminum Extrusion Inc.


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The production capacity and utilization rate for our main plants as of December 31, 2019 are listed below:
Plant
 
Capacity
 
Utilization Rate
Neuf-Brisach
 
450 kt
 
95-100%
Muscle Shoals
 
500-550 kt
 
80-90%
Issoire
 
110 kt
 
90%
Ravenswood
 
175 kt
 
90%
Děčín
 
92 kt
 
78%
Singen
 
290-310 kt
 
90-95%
Sierre
 
70-75 kt
 
50%
__________________
Production capacity and utilization rates presented above are estimates based in a theoretical output capacity assuming the plant operates with currently operating equipment and current staffing levels and product mix.
For information concerning the material plans to construct, expand or improve facilities, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”
Item 4A. Unresolved Staff Comments
None.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis is based principally on our audited Consolidated Financial Statements as of December 31, 2019 and 2018 and for each of the three years in the period ended December 31, 2019 included elsewhere in this Annual Report and is provided to supplement the audited Consolidated Financial Statements and the related notes to help provide an understanding of our financial condition, changes in financial condition, results of our operations, and liquidity. The following discussion is to be read in conjunction with Selected Financial Data and our audited Consolidated Financial Statements and the notes thereto, included elsewhere in this Annual Report.
The following discussion and analysis includes forward-looking statements. These forward-looking statements are subject to risks, uncertainties and other factors that could cause our actual results to differ materially from those expressed or implied by our forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this Annual Report. See in particular “Special Note about Forward-Looking Statements” and “Item 3. Key Information—D. Risk Factors.”
Company Overview
We are a global leader in the development, manufacture and sale of a broad range of highly engineered, value-added specialty rolled and extruded aluminium products to the packaging, aerospace, automotive, other transportation and industrial end-markets. As of December 31, 2019, we had approximately 13,200 employees, 28 production facilities, three administrative centers, and three R&D centers.
Our Operating Segments
We serve a diverse set of customers across a broad range of end-markets with very different product needs, specifications and requirements. As a result, we have organized our business into three segments to better serve our customer base.
Packaging & Automotive Rolled Products Segment
Our Packaging & Automotive Rolled Products segment produces aluminium sheet and coils. Approximately 75% of segment volume for the year ended December 31, 2019 was packaging rolled products, which primarily includes beverage and food can stock as well as closure stock and foil stock. Approximately 21% of the segment volume for this period was automotive rolled products and the balance of the segment volume was specialty and other thin-rolled products.

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Our Packaging & Automotive Rolled Products segment accounted for 53% of revenue and 49% of Adjusted EBITDA for the year ended December 31, 2019.
Aerospace & Transportation Segment
Our Aerospace & Transportation segment has market leadership positions in technologically advanced aluminium and specialty materials products with applications across the global aerospace, defense, transportation, and industrial sectors. We offer a wide range of products, including plate and sheet. Approximately 50% of the segment volume for the year ended December 31, 2019 was aerospace rolled products and approximately 50% was transportation industry and other rolled products. Our Aerospace & Transportation segment accounted for 24% of revenue and 36% of Adjusted EBITDA for the year ended December 31, 2019.
Automotive Structures & Industry Segment
Our Automotive Structures & Industry segment produces technologically advanced structures for the automotive industry, (including crash-management systems, body structures, side impact beams and battery enclosures), soft and hard alloy extrusions and large extruded profiles for automotive, railroad, energy, building and industrial applications. Approximately 49% of the segment volume for the year ended December 31, 2019 was automotive extruded products and approximately 51% was other extruded products. Our Automotive Structures & Industry segment accounted for 23% of revenue and 19% of Adjusted EBITDA for the year ended December 31, 2019.
Acquisitions
On January 10, 2019, pursuant to a purchase agreement with UACJ and its U.S. subsidiary, Tri-Arrows Aluminum Holding Inc. (“TAAH”), we acquired TAAH’s 49% stake in Constellium-UACJ ABS, LLC, which was renamed Constellium Bowling Green LLC, ("Bowling Green"), for $100 million plus the assumption of 49% of approximately $80 million of third party debt at Bowling Green. In connection with the agreement with UACJ and TAAH, we and TAAH agreed to certain transitional commercial arrangements connected to the continuing operations and the business, including an agreement for a multiyear supply of cold coils. Bowling Green, which was previously accounted for under the equity method, is now consolidated and its results are reflected in our 2019 consolidated results.
Discontinued Operations and Disposals
In July 2018, we completed the sale of the North Building Assets of our Sierre plant in Switzerland (which have been leased to and operated by Novelis since 2005) and we contributed the plant’s shared infrastructure to a 50-50 joint venture with Novelis, in exchange for cash consideration of €200 million. This transaction generated a €190 million net gain and also resulted in the termination of the existing lease agreement . We continue to own and operate our cast houses, plate and extrusion manufacturing plants and other manufacturing assets in Sierre. As part of this agreement, we also entered into long-term production and metal supply agreements with Novelis.
Key Factors Influencing Constellium’s Financial Condition and Results from Operations
The financial performance of our operations is dependent on several factors, the most critical of which are as follows:
Economic Conditions and Markets
We are directly impacted by the economic conditions that affect our customers and the markets in which they operate. General economic conditions such as the level of disposable income, the level of inflation, the rate of economic growth, the rate of unemployment, exchange rates and currency devaluation or revaluation—influence consumer confidence and consumer purchasing power. These factors, in turn, influence the demand for our products in terms of total volumes and prices that can be charged. In some cases we are able to mitigate the risk of a downturn in our customers’ businesses by building committed minimum volume thresholds into our commercial contracts. We further seek to mitigate the risk of a downturn by utilizing a temporary workforce for certain operations, which allows us to match our resources with the demand for our services.

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Although the metals industry and our end-markets are cyclical in nature and expose us to related risks, we believe that our portfolio is relatively resilient to these economic cycles in each of our three main end-markets of packaging, aerospace and automotive:
Can packaging tends not to be highly correlated to the general economic cycle. In addition, we believe European canstock has an attractive long-term growth outlook due to ongoing trends in (i) growth in beer, soft drinks and energy drinks consumption, (ii) increasing use of cans versus glass in the beer market, and (iii) increasing penetration of aluminium in canstock at the expense of tinplate.
We believe that the aerospace industry is currently insulated from economic cycles by a combination of growth drivers. These drivers include increasing passenger traffic and the fleet replacement towards newer and more fuel efficient aircrafts. These factors have materialized in the form of historically high backlogs for the aircraft manufacturers. The combined order backlog for Boeing and Airbus represents approximately eight- to nine-years of manufacturing at current build rates.
Although the automotive industry is a cyclical industry, its demand for aluminium has been increasing in recent years. This has been triggered by a light-weighting trend for new car models and electric vehicles, which drives substitution of heavier metals in favor of aluminium.
Aluminium Consumption
The aluminium industry is cyclical and is affected by global economic conditions, industry competition and product development. Aluminium is increasingly seen as the material of choice in a number of applications, including packaging, aerospace and automotive. Aluminium is lightweight, has a high strength-to-weight ratio and is resistant to corrosion. It compares favorably to several alternative materials, such as steel, in these respects. Aluminium is also unique in that it recycles repeatedly without any material decline in performance or quality. The recycling of aluminium delivers energy and capital investment savings relative to the cost of producing both primary aluminium and many other competing materials. Due to these qualities, the penetration of aluminium into a wide variety of applications continues to increase. We believe that long-term growth in aluminium consumption generally, and demand for those products we produce specifically, will be supported by factors that include growing populations, greater purchasing power and increasing focus on sustainability and environmental issues, globally.
Aluminium Prices
Aluminium prices are determined by worldwide forces of supply and demand and, as a result they are volatile. We operate a pass–through model and therefore to the extent possible avoid taking aluminium price risk. Significant sustained increases in the price of aluminium, however, may over time affect the demand for our products.
The price we pay for aluminium includes regional premiums, such as the Rotterdam premium for metal purchased in Europe or the Midwest premium for metal purchased in the U.S. The regional premiums, which had historically been fairly stable, have been more volatile in recent years. Although our business model seeks to minimize the impact of aluminium price fluctuations on our cash flows, we are not always able to pass through the cost of regional premiums to our customers or adequately hedge the impact of regional premium differentials. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Industry—If we are unable to substantially pass on to our customers the cost of price increases of our raw materials, which may be subject to volatility, our profitability could be adversely affected.”
We believe our cash flows are largely protected from variations in LME prices due to the fact that we hedge our sales based on their replacement cost, by matching the price paid for our aluminium purchases with the price received from our aluminium sales, at a given time, using hedges when necessary. As a result, when LME prices increase, we have limited additional cash requirements to finance the increased replacement cost of our inventory.
The average LME transaction price, Midwest Premium and Rotterdam Premium per ton of primary aluminium in the years ended December 31, 2019, 2018 and 2017 are presented below:

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Average quarterly LME per ton using U.S. dollar prices converted to Euros at the applicable European Central Bank rates:
(Euros/ton)
 
2019
 
2018
 
2017
First Quarter
 
1,637

 
1,757

 
1,737

Second Quarter
 
1,595

 
1,896

 
1,736

Third Quarter
 
1,585

 
1,769

 
1,714

Fourth Quarter
 
1,583

 
1,726

 
1,786

Average for the year
 
1,600

 
1,786

 
1,743

Average quarterly Midwest Premium per ton using U.S. dollar prices converted to Euros at the applicable European Central Bank rates:
(Euros/ton)
 
2019
 
2018
 
2017
First Quarter
 
375

 
246

 
198

Second Quarter
 
371

 
404

 
180

Third Quarter
 
355

 
390

 
144

Fourth Quarter
 
329

 
376

 
176

Average for the year
 
357

 
354

 
175

Average quarterly Rotterdam Premium per ton using U.S. dollar prices converted to Euros at the applicable European Central Bank rates:
(Euros/ton)
 
2019
 
2018
 
2017
First Quarter
 
116

 
134

 
137

Second Quarter
 
130

 
170

 
131

Third Quarter
 
137

 
135

 
120

Fourth Quarter
 
123

 
116

 
135

Average for the year
 
127

 
139

 
131

Product Price and Margin
Our products are typically priced based on three components: (i) LME, (ii) regional premiums and (iii) a conversion margin. We seek to minimize the impact of aluminium price fluctuations in order to protect our cash flows against the LME and regional price fluctuations with the following methods: 
In cases where we are able to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to customers, we enter back-to-back arrangements with our customers.
However, when we are unable to align the price and quantity of physical aluminium purchases with that of physical aluminium sales to our customers, we enter into derivative financial instruments to pass through the exposure to financial institutions at the time the price is set.
For a small portion of our volumes, the aluminium we process is owned by our customers and we bear no aluminium price risk.
Our risk management practices aim to reduce, but do not entirely eliminate, our exposure to changing primary aluminium and regional premium prices. Moreover, while we limit our exposure to unfavorable price changes, we also limit our ability to benefit from favorable price changes. As we do not apply hedge accounting for the derivative instruments entered into to hedge our exposure to changes in metal prices, mark-to-market movements for these instruments are recognized in “Other gains/(losses)—net.”

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Our results are also impacted by differences between changes in the prices of primary and scrap aluminium. As we price our product using the prevailing price of primary aluminium but purchase large amounts of scrap aluminium to manufacture our products, we benefit when primary aluminium price increases exceed scrap price increases. Conversely, when scrap price increases exceed primary aluminium price increases, our results are negatively impacted. The difference between the price of primary aluminium and scrap prices is referred to as the “scrap spread” and is impacted by the effectiveness of our scrap purchasing activities, the supply of scrap available and movements in the terminal commodity markets.
The conversion margin is the margin we earn over the cost of our metal inputs. We seek to maximize our conversion margins based on the value-added product capabilities we provide and the supply/demand dynamics in the market.
Volumes
The profitability of our businesses is determined, in part, by the volume of tons processed and sold. Increased production volumes will generally result in lower per unit costs, while higher sold volumes of tons will generally result in additional revenue and associated margins.
Personnel Costs
Our operations are labor intensive and, as a result, our personnel costs represent 18%, 17% and 18% of our cost of sales, selling and administrative expenses and R&D expenses for the years ended December 31, 2019, 2018, and 2017, respectively.
Personnel costs generally increase and decrease proportionately with the expansion, addition or closing of operating facilities. Personnel costs include the salaries, wages and benefits of our employees, as well as costs related to temporary labor. During our seasonal peaks and especially during the summer months, we have historically increased our temporary workforce to compensate for staff on vacation and increased volume of activity.
Currency
We are a global company with operations in France, the United States, Germany, Switzerland, the Czech Republic, Slovakia, Spain, Mexico, Canada and China, as of December 31, 2019. As a result, our revenue and earnings have exposure to a number of currencies, primarily the euro, the U.S. dollar and the Swiss Franc. As our presentation currency is the euro, and the functional currencies of the businesses located outside of the Eurozone are primarily the U.S. dollar and the Swiss franc, the results of the businesses located outside of the Eurozone must be translated each period to euros. Accordingly, fluctuations in the exchange rate of the functional currencies of our businesses located outside of the Eurozone against the euro impacts our results of operations.
We engage in significant hedging activity to attempt to mitigate the effects of foreign currency transactions on our profitability. Transaction impacts arise when our businesses transact in a currency other than their own functional currency. As a result, we are exposed to foreign exchange risk on payments and receipts in multiple currencies. In Europe, a portion of our revenue is denominated in U.S. dollars while the majority of our costs incurred are denominated in local currencies. Where we have multiple-year sales agreements for the sale of fabricated metal products in U.S. dollars by euro-functional currency entities, we have entered into derivative contracts to forward sell U.S. dollars to match these future sales. With the exception of certain derivative instruments entered into to hedge the foreign currency risk associated with the cash flows of certain highly probable forecasted sales, which we have designated for hedge accounting, hedge accounting is not applied to such ongoing commercial transactions and therefore the mark-to-market impact is recorded in “Other gains/(losses)—net”.

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Results of Operations
Results of Operations for the years ended December 31, 2019 and 2018
 
 
For the year ended December 31,
 
 
2019
 
2018
 
 
(€ in millions and as a % of revenue)
 
 
 
 
%
 
 
 
%
Revenue
 
5,907

 
100
 %
 
5,686

 
100
%
Cost of sales
 
(5,305
)
 
90
 %
 
(5,148
)
 
91
%
Gross profit
 
602

 
10
 %
 
538

 
9
%
Selling and administrative expenses
 
(276
)
 
5
 %
 
(247
)
 
4
%
Research and development expenses
 
(48
)
 
1
 %
 
(40
)
 
1
%
Restructuring costs
 
(4
)
 
 %
 
(1
)
 
%
Other gains / (losses) net
 
(19
)
 
 %
 
154

 
3
%
Income from operations
 
255

 
4
 %
 
404

 
7
%
Finance costs, net
 
(175
)
 
3
 %
 
(149
)
 
3
%
Share of income / (loss) of joint ventures
 
2

 
 %
 
(33
)
 
1
%
Income before income taxes
 
82

 
1
 %
 
222

 
4
%
Income tax expense
 
(18
)
 
 %
 
(32
)
 
1
%
Net income / (loss)
 
64

 
1
 %
 
190

 
3
%
Shipment volumes (in kt)
 
1,589

 
n/a

 
1,534

 
n/a

Revenue per ton (€ per ton)
 
3,717

 
n/a

 
3,707

 
n/a

Revenue
Revenue increased by 4%, or €221 million, to €5,907 million for the year ended December 31, 2019, from €5,686 million for the year ended December 31, 2018. This increase reflects a 4% increase in shipments, improved price and a better mix, despite lower metal prices.
Sales volumes increased by 4%, or 55 kt, to 1,589 kt for the year ended December 31, 2019 compared to 1,534 kt for the year ended December 31, 2018. This increase is mostly driven by higher shipment volumes in P&ARP, in large part due to the consolidation of Bowling Green in 2019.
Average sales prices increased by €10 per ton, from €3,707 to €3,717, reflecting improved price and a better mix offset by lower metal prices.
Our revenue is discussed in more detail in the “Segment Results” section.
Cost of Sales
Cost of sales increased by 3%, or €157 million, to €5,305 million for the year ended December 31, 2019, from €5,148 million for the year ended December 31, 2018. This increase in cost of sales reflected the consolidation of Bowling Green and was primarily driven by an increase of €91 million, or 12%, in labor costs compared to the prior year, a €54 million increase in depreciation (of which €18 million was attributable to the implementation of IFRS 16) and a €23 million increase in energy costs.
Selling and Administrative Expenses
Selling and administrative expenses increased by 12% from €247 million for the year ended December 31, 2018 to €276 million for the year ended December 31, 2019 resulting from i) a €20 million increase in employee benefit expenses reflecting an increased headcount in the U.S. and Europe for €8 million and the consolidation of Bowling Green for €5 million and ii) a €9 million increase due to professional fees for process improvements and IT projects.

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Research and Development Expenses
Research and development expenses increased by 20% or €8 million, to €48 million for the year ended December 31, 2019, from €40 million for the year ended December 31, 2018. Research and development expenses are presented net of €12 million and €10 million of research and development tax credits received in France for the years ended December 31, 2019 and 2018, respectively. Research and development expenses, excluding tax credits received were €22 million, €19 million, €15 million and €4 million for the P&ARP, A&T, AS&I and Holding & Corporate segments, respectively, in the year ended December 31, 2019.
Restructuring Costs
In the year ended December 31, 2019, restructuring costs amounted to €4 million and were primarily related to restructuring activities in our AS&I segment. Restructuring costs amounted to €1 million in the year ended December 31, 2018, and were primarily incurred in connection with restructuring activities at our German operations.
Other Gains / (losses), net
 
 
For the year ended December 31,
 
 
2019
 
2018
(€ in millions)
 
 
 
 
Realized (losses) / gains on derivatives
 
(49
)
 
14

Unrealized gains / (losses) on derivatives at fair value through profit and loss—net
 
33

 
(84
)
Unrealized exchange gains / (losses) from the remeasurement of monetary assets and liabilities—net
 

 

Gains on pension plan amendments
 
1

 
36

(Losses) / gains on disposal
 
(3
)
 
186

Other—net
 
(1
)
 
2

Total other gains / (losses), net
 
(19
)
 
154

Other gains / (losses), net were €(19) million for the year ended December 31, 2019 compared to Other gains—net of €154 million for the year ended December 31, 2018. The company uses financial derivatives to hedge underlying commercial transactions. The realized gains / (losses) recognized in Other gains / (losses), net are offset by the commercial transactions accounted for in Cost of sales. In the year ended December 31, 2019, realized losses recognized upon the settlement of derivative instruments amounted to €49 million, of which realized losses on metal derivatives were €56 million and realized gains on foreign exchange derivatives were €7 million. In the year ended December 31, 2018, realized gains recognized upon the settlement of derivative instruments amounted to €14 million, of which realized gains on metal derivatives were €7 million and realized gains on foreign exchange derivatives were €7 million.
The Company uses financial derivatives to also hedge forecasted commercial transactions. These unrealized gains / (losses) recognized in Other gains / (losses), net are offset by the change in the value of forecasted transactions which are not yet accounted for. Unrealized gains on derivative instruments amounted to €33 million in the year ended December 31, 2019 and were primarily comprised of gains of €31 million related to metal derivatives and of gains of €2 million related to foreign exchange derivatives. Unrealized losses on derivative instruments amounted to €84 million in the year ended December 31, 2018 and were primarily comprised of €83 million of losses related to metal derivatives and €1 million of losses related to foreign exchange derivatives.
In the year ended December 31, 2018, we recognized a €36 million net gain relating to an OPEB plan amendment in the United States.
Gains on disposal recognized in the year ended December 31, 2018 primarily related to the sale of North Building Assets of our Sierre plant in Switzerland.

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Finance Costs, net
Finance costs, net increased by €26 million, to €175 million for the year ended December 31, 2019, from €149 million for the year ended December 31, 2018. This increase primarily reflects higher interest expense as a result of the implementation of IFRS 16 - Leases for €8 million, and the effect of a a stronger dollar. In addition, Finance costs, net in the year ended December 31, 2018 included €7 million of interest received from Bowling Green which was accounted for at the time under the equity method. There was no interest received from Bowling Green in the year ended December 31, 2019 as the entity was consolidated.
In the year ended December 31, 2019, foreign exchange net losses from the revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to €3 million and were offset by gains on derivative instruments entered into to hedge this exposure. In the year ended December 31, 2018, foreign exchange net losses from the revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to €22 million and were offset by gains on derivative instruments entered into to hedge this exposure.
Share of loss of joint-ventures
Our share of loss of joint-ventures for the year ended December 31, 2018 amounted to €33 million and was comprised primarily of our share in the net results of Bowling Green, which was accounted for under the equity method until January 10, 2019. On January 10, 2019, we acquired the 49% of Bowling Green that we did not previously own, and we began consolidating the entity as of that date.
Income Tax
Income tax expense was €18 million for the year ended December 31, 2019 compared to €32 million for the year ended December 31, 2018.
Our effective tax rate represented 22% of our income before income tax for the year ended December 31, 2019 and 14% of our income before income tax for the year ended December 31, 2018. This change in our effective tax rate primarily reflects an increase in the composite statutory tax rate applicable by tax jurisdiction (the “blended tax rate”) and the impact of significant reconciling items between the blended tax rate and the effective tax rate in both years.
Our blended tax rate increased from 24% in the year ended December 31, 2018 to 30% in the year ended December 31, 2019 primarily as a result of changes in the geographical mix of our pre-tax results.
The effective tax rate for the year ended December 31, 2019 applies to €82 million of pre-tax income and is lower than our blended statutory tax rate primarily as a result of the impact of the Swiss Tax Reform, partially offset by the effect of unrecognized deferred tax assets in jurisdictions where we believe it is more likely than not that those assets will not be used.
The effective tax rate for the year ended December 31, 2018 applies to €222 million of pre-tax income and is lower than our blended statutory tax rate primarily as a result of the favorable effect of previously unrecognized tax losses carried forward in Switzerland which were used in the year ended December 31, 2018 to offset the taxable profit generated by the sale of the North Building Assets of our Sierre plant in Switzerland.
Net Income / loss
As a result of the factors above, we recognized a net income of €64 million, in the year ended December 31, 2019 compared to €190 million in the year ended December 31, 2018.


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Results of Operations for the years ended December 31, 2018 and 2017
 
 
For the year ended December 31,
 
 
2018
 
2017
 
 
(€ in millions and as a % of revenue)
 
 
 
 
%
 
 
 
%
Revenue
 
5,686

 
100
%
 
5,237

 
100
%
Cost of sales
 
(5,148
)
 
91
%
 
(4,682
)
 
89
%
Gross profit
 
538

 
9
%
 
555

 
11
%
Selling and administrative expenses
 
(247
)
 
4
%
 
(247
)
 
5
%
Research and development expenses
 
(40
)
 
1
%
 
(36
)
 
1
%
Restructuring costs
 
(1
)
 
%
 
(4
)
 
%
Other gains net
 
154

 
3
%
 
70

 
1
%
Income from operations
 
404

 
7
%
 
338

 
6
%
Finance costs, net
 
(149
)
 
3
%
 
(260
)
 
5
%
Share of loss of joint ventures
 
(33
)
 
1
%
 
(29
)
 
1
%
Income before income taxes
 
222

 
4
%
 
49

 
1
%
Income tax expense
 
(32
)
 
1
%
 
(80
)
 
2
%
Net income / (loss)
 
190

 
3
%
 
(31
)
 
1
%
Shipment volumes (in kt)
 
1,534

 
n/a

 
1,482

 
n/a

Revenue per ton (€ per ton)
 
3,707

 
n/a

 
3,534

 
n/a

Revenue
Revenue increased by 9% or €449 million to €5,686 million for the year ended December 31, 2018, from €5,237 million for the year ended December 31, 2017. This increase reflects a 3% increase in shipments and higher average revenue per ton.
Sales volumes increased by 3%, or 52 kt, to 1,534 kt for the year ended December 31, 2018 compared to 1,482 kt for the year ended December 31, 2017. This increase is driven by higher shipment volumes across all of our three segments.
Average sales prices increased by €173 per ton, or 5%, from €3,534 to €3,707, mainly attributable to the year-over-year increase in aluminium market prices, coupled with the rise in regional premium primarily in North America.
Our revenue is discussed in more detail in the “Segment Results” section.
Cost of Sales
Cost of sales increased by 10%, or €466 million, to €5,148 million for the year ended December 31, 2018, from €4,682 million for the year ended December 31, 2017. This increase in cost of sales was primarily driven by an increase of €364 million, or 11%, in the total cost of raw material and consumables used primarily as a result of higher LME prices and regional premiums, compared to the prior year, a €24 million increase in depreciation, a €17 million increase in labor costs and a €19 million increase in freight out costs.
Selling and Administrative Expenses
Selling and administrative expenses were stable and amounted to €247 million for the years ended December 31, 2018 and December 31, 2017.
Research and Development Expenses
Research and development expenses increased by 11% or €4 million, to €40 million for the year ended December 31, 2018, from €36 million for the year ended December 31, 2017. Research and development expenses are presented net of €10 million and €11 million of research and development tax credits received in France for the years ended December 31, 2018

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and 2017, respectively. Research and development expenses, excluding tax credits received were €18 million, €21 million, and €11 million for the P&ARP, A&T, and AS&I segments, respectively, in the year ended December 31, 2018.
Restructuring Costs
In the year ended December 31, 2018, restructuring costs amounted to €1 million and were primarily related to our restructuring activities of German operations. Restructuring costs amounted to €4 million in the year ended December 31, 2017, and were primarily incurred in connection with restructuring activities at our German and Swiss operations.
Other Gains / (losses), net
 
 
For the year ended December 31,
 
 
2018
 
2017
(€ in millions)
 
 
 
 
Realized gains on derivatives
 
14

 

Unrealized (losses)/gains on derivatives at fair value through profit and loss—net
 
(84
)
 
57

Unrealized exchange (losses) from the remeasurement of monetary assets and liabilities—net
 

 
(4
)
Gains on pension plan amendments
 
36

 
20

Gains /(losses) on disposal
 
186

 
(3
)
Other—net
 
2

 

Total other gains / (losses), net
 
154

 
70

Other gains / (losses)—net were €154 million for the year ended December 31, 2018 compared to Other gains—net of €70 million for the year ended December 31, 2017. In the year ended December 31, 2018, realized gains recognized upon the settlement of derivative instruments amounted to €14 million, of which realized gains on metal derivatives were €7 million and realized gains on foreign exchange derivatives were €7 million. In the year ended December 31, 2017, realized gains recognized upon the settlement of derivative instruments amounted to €0 million, of which realized gains recognized upon the settlement of derivative instruments amounted to €16 million and realized losses on foreign exchange derivatives were €16 million.
Unrealized losses on derivative instruments amounted to €84 million in the year ended December 31, 2018 and were primarily comprised of €83 million of losses related to metal derivatives and of €1 million of losses related to foreign exchange derivatives. Unrealized gains on derivative instruments amounted to €57 million in the year ended December 31, 2017 and were primarily comprised of €41 million of gains related to metal derivatives and of €16 million of gains related to foreign exchange derivatives.
In the year ended December 31, 2018, we recognized a €36 million net gain relating to an OPEB plan amendment in the United States. In the year ended December 31, 2017, we recognized a €20 million net gain relating to benefit plan amendments in Switzerland and in the United States.
Gains on disposal recognized in the year ended December 31, 2018 primarily related to the sale of North Building Assets of our Sierre plant in Switzerland. Losses on disposal recognized in the year ended December 31, 2017 primarily related to the write-off of abandoned development projects in the A&T segment.
Finance Costs, net
Finance costs, net decreased by €111 million, to €149 million for the year ended December 31, 2018, from €260 million for the year ended December 31, 2017. Of this decrease, €91 million reflects net losses on the settlement of debt incurred in February 2017 and November 2017 in connection with refinancing transactions and €29 million reflects the benefits of lower interest rates as a result of these refinancing transactions.
In the year ended December 31, 2018, foreign exchange net losses from the revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to €22 million and were offset by gains on derivative instruments entered into to hedge this exposure. In the year ended December 31, 2017, foreign exchange net gains from the

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revaluation of the portion of our U.S. dollar-denominated debt held by Euro functional currency entities amounted to €91 million and were largely offset by losses on derivative instruments entered into to hedge this exposure.
Share of loss of joint-ventures
Our share of loss of joint-ventures for the year ended December 31, 2018 amounted to €33 million compared to €29 million for the year ended December 31, 2017 and is comprised primarily of our share in the net results of Constellium-UACJ ABS LLC, which is accounted for under the equity method. On January 10, 2019, we acquired the 49% of Constellium-UACJ ABS LLC that we did not previously own.    
Income Tax
Income tax was an expense of €32 million for the year ended December 31, 2018 compared to an income tax expense of €80 million for the year ended December 31, 2017.
Our effective tax rate represented 14% of our income before income tax for the year ended December 31, 2018 and 163% of our income before income tax for the year ended December 31, 2017. This change in our effective tax rate primarily reflects a decrease in the composite statutory tax rate applicable by tax jurisdiction (the “blended tax rate”), from 32% in 2017 to 24% in 2018 and the impact of significant reconciling items between the blended tax rate and the effective tax rate in both years.
The change in our blended rate mainly resulted from changes in the geographical mix of our pre-tax results, the decrease of the U.S. tax rate from 40% in 2017 to 26% in 2018 and decrease in the tax rate in France from 39.2% in 2017 to 34.4% for fiscal year 2018.
The effective tax rate for the year ended December 31, 2018 applied to €222 mill