Apr 26, 2012
Operator
Good day, and welcome to the Kaiser Aluminum First Quarter 2012 Earnings Conference Call. Just a reminder, today’s conference is being recorded.
I would now like to turn the conference over to your host, Ms. Melinda Ellsworth.
Please go ahead.
Melinda Ellsworth
Thank you. Good afternoon, everyone, and welcome to Kaiser Aluminum’s first quarter 2012 earnings conference call.
If you have not seen a copy of today’s earnings release, please visit the Investor Relations page on our website at kaiseraluminum.com. We have also posted a PDF version of the slide presentation for this call.
Melinda Ellsworth
Joining me on the today are Chairman, President, Chief Executive Officer, Jack Hockema; Senior Vice President and Chief Financial Officer, Dan Rinkenberger; and Vice President, Chief Accounting Officer, Neal West.
Melinda Ellsworth
Before we begin, I’d like to refer you to the first 2 slides of our presentation and remind you that the statements made by management and the information contained in this presentation that constitute forward-looking statements are based on management’s current expectations. For a summary of specific risk factors that could cause results to differ materially from those expressed in the forward-looking statements.
Please refer to the company’s earnings release and reports filed with the Securities and Exchange Commission; including the company’s Form 10-K for the full year ended December 31, 2011.
Melinda Ellsworth
The Company undertakes no duty to update any forward-looking statements to conform the statement to actual results or changes in the company’s expectations. In addition, we’ve included non-GAAP financial information in our discussion, reconciliations to the most comparable GAAP financial measures are included in the earnings release and in the appendix of this presentation.
At the conclusion of the company’s presentation, we will open the call for questions.
Melinda Ellsworth
I’d now like to turn the call over to Jack Hockema. Jack?
Jack Hockema
Thanks, Melinda. Welcome to everyone joining us on the call today.
We were very pleased with our first quarter financial results in which we saw records for value- added revenue, adjusted EBITDA and EBITDA margin driven by higher volume and improved pricing. The higher volume was enabled by a number of factors including strong aerospace demand, improving automotive, and industrial demand, service center restocking, seasonal demand strength and good throughput execution in our plants.
We also benefited from a better pricing environment compared to bottom of the cycle prices experienced in 2011 and lower contained metal costs provided an additional boost for our high value-added products. The first quarter results were a step change and reinforce the growth potential for our platform to achieve annual value-added revenue and EBITDA margins well beyond $800 million and 20% respectively under normal market conditions.
Jack Hockema
In addition to this growth potential, our platform is well positioned for further expansion to meet future demand growth and we are currently in the process of expanding our capacity to 2 of our aerospace facilities. we will begin ramping up additional capacity in the second quarter for aerospace extrusions at our Alexco plant in Chandler, Arizona and should the need rise for more aerospace extrusion capacity, we can respond with additional capital efficient expansion.
Jack Hockema
At Trentwood, we are installing Phase 4 of the expansion of heat treat plate capacity that will begin ramping up in 2013. Beyond Phase 4, we have defined a Phase 5 expansion and we will be ready to initiate that phase when additional capacity is required to meet the needs of our customers.
Jack Hockema
In addition, we envision Trentwood expansions beyond phases 4 and 5 consistent with our expectation for a significant long-term heat treat plate demand growth. While aerospace is an important driver and focus for our growth, we also anticipate growth in custom automotive extrusions.
Jack Hockema
We’ve often commented that Kalamazoo was built with additional capacity to support automotive growth and we expect to leverage that capacity with transition of certain automotive products in the Kalamazoo in 2013 and 2014. This transition will free up capacity at our London, Ontario plant, which will enable us to launch new automotive extrusion programs for bumper beams, chassis and other structural components.
Beyond the existing capacity in place at Kalamazoo, our extrusion platform is also positioned for additional capital efficient expansions that will allow us to keep pace with anticipated automotive growth for many years into the future.
Jack Hockema
All of these factors reinforce why we are very optimistic about our near-term and long-term prospects. We’ve reaped significant benefit from our growth initiatives and investments, and there is still significant benefit yet to come as demand on our end markets continuous to increase.
In addition, we’re well positioned to support future capital efficient expansions as needed to keep pace with the expected robust demand growth for aerospace and automotive products.
Jack Hockema
Shifting the focus back to 2012. We were pleased with the first quarter results that illustrate the current potential for this business with the prospect for additional growth.
While the remainder of 2012 may not reflect all of the favorable conditions that came together in the first quarter, we believe that we are well positioned for step change improvements for the remainder of the year compared to the 2011 results.
Jack Hockema
Dan will now provide further insight into the first quarter and then, I will discuss our near-term and long-term outlook.
Daniel Rinkenberger
Good morning. Slide 6 shows the quarterly and annual trends in value-added revenue which represents our net sales minus the hedged cost of alloyed metal.
The first quarter 2012 showed a step change in our total value-added revenue, setting a new quarterly record for the company and establishing new records of value-added revenue for both aerospace and high strength applications and our automotive extrusions.
Daniel Rinkenberger
Reviewing each of our end market applications, aerospace and the high-strength value-added revenue in the first quarter increased 15% on a sequential basis and 35% compared to the first quarter of 2011. Strong demand, coupled with strong execution in our facilities drove higher shipments across virtually all aerospace products.
Daniel Rinkenberger
In addition, we benefited from a more favorable pricing environment in the first quarter of 2012. Value-added revenue for automotive extrusions increased 37% sequentially and 22% compared to the first quarter of 2011, reflecting higher light vehicle build rates, further increases in Kaiser contents per vehicle as we supply additional automotive aluminum extrusion programs and a normal seasonal up tick from the fourth quarter.
Daniel Rinkenberger
A stronger mix in the fourth quarter, as well as improved pricing on certain products led to higher average value-added revenue per pound for automotive extrusions. Value-added revenue for general engineering products reflected normal seasonal strength, service that are restocking and the slow, but steady growth in underlying industrial demand.
As a result, first quarter value-added revenue improved 20% sequentially and 9% compared to the first quarter of 2011. Further detail in value-added revenue by sales application can be found in the appendix on slides 20 and 21.
Daniel Rinkenberger
Slide 7 shows adjusted consolidated EBITDA, which for the first quarter was also a step change compared to prior periods. At $44 million, first quarter adjusted consolidated EBITDA was a 45% sequential improvement and nearly double our adjusted EBITDA in the first quarter of 2011.
Daniel Rinkenberger
Stronger shipments in virtually all products and an improved pricing environment from the recessionary levels we have see in the past few years drove the improvement. On the last 12 months basis, we achieved a record adjusted consolidated EBITDA of $133 million, outpacing our previous record in 2007 when we had an exceptionally strong pricing environment.
Daniel Rinkenberger
Our adjusted consolidated EBITDA margin as a percentage of value-added revenue was 22.7% for the quarter and 19.4% for the last 12 months, both significant improvements over virtually any of our historical periods. The continued improvements in both our adjusted EBITDA and EBITDA margin demonstrate the power of leveraging the capacity increases and efficiency improvements we have made over recent years as our end markets continue to grow.
Daniel Rinkenberger
On slide 8, we showed key consolidated financial metrics. Consolidated operating income as reported of $46 million in the first quarter included approximately $8 million of non-run rate gains, which are detailed in the appendix on slides 22 and 23.
Adjusted for these non-run rate gains, first quarter consolidated operating income was $38 million, up $14 million compared to the fourth quarter and more than double that of the first quarter of 2011 again, reflecting strong demand across all end use categories, solid throughput execution and an improved pricing environment.
Daniel Rinkenberger
Reported net income for the first quarter was $27 million or earnings per diluted share of $1.38. Adjusting for non-run rate items, first quarter net income was $21 million or adjusted earnings per diluted share of $1.09, which compares to $0.52 for the fourth quarter of 2011 and $0.41 for the first quarter of 2011.
Our effective tax rate for the quarter was approximately 38%, however, given our sizable net operating loss carryforwards and other tax attributes, our cash tax rate remains in the low single digit percentages.
Daniel Rinkenberger
And turning to Slide 9, as a result of strong earnings generated during the quarter, our cash balance increased by $27 million after funding an increase in accounts receivable associated with the higher sales level and capital spending. Liquidity remained strong at quarter end at nearly $350 million comprised of $270 million of borrowing availability under our revolving credit facility and $77 million of cash.
Daniel Rinkenberger
And now, I’ll turn the call back over to Jack to discuss current industry trends and our business outlook. Jack?
Jack Hockema
Thanks, Dan. Turning to Slide 10, we continue to experience and to expect robust long-term aerospace demand growth for our products driven by a very large order backlog for commercial airframe manufacturers steadily increasing build rates, larger airframes and continued conversion to monolithic design.
While we expect the very strong demand to continue in the second quarter, we do not expect our value-added revenue to keep pace with the first quarter level, as Trentwood's throughput will be inhibited by planned outages on key equipment related to the Phase IV capacity expansion project.
Jack Hockema
Most of the production eruptions related to the Trentwood expansion should be completed by the end of the second quarter and we expect the new capacity to begin ramping up in 2013.
Jack Hockema
Turning to Slide 11, our value-added revenue for custom automotive extrusions was at a record level in the first quarter as a result of growing build rates and increasing aluminum extrusion content per vehicle. We expect this record pace to continue with industry analysts becoming increasingly optimistic regarding the short and intermediate term automotive build rate forecast.
The most recent consensus forecast has the 2012 build rate at 14.2 million vehicles, up approximately 12% from last year and the longer-term forecast has build rates returning to more than 16 million vehicles in the middle of the decade. In addition, the need for improved fuel economy continues to drive increasing aluminum extrusion content on vehicles.
As a result of these positive trends we remain very bullish about our automotive growth potential over the next several years.
Jack Hockema
Turning our attention to general engineering applications, wheel demand continues to reflect a very slow, but steady recovery in the general industrial economy. While our first quarter demand included benefit from service center restocking to replenish inventories following several quarters of destocking, we do not expect this to continue in the second quarter.
In fact, we see evidence of destocking by service centers for some general engineering and aerospace products.
Jack Hockema
Turning to Slide 12, in a summary of our near-term outlook, we expect the second quarter value-added revenue and adjusted EBITDA will be a step change compared to the second quarter of 2011. However, second quarter value-added revenue is expected to be approximately 5% to 10% lower than the first quarter as Trentwood’s throughput will be inhibited by equipment outages related to work on the capacity expansion project.
In addition, we anticipate that service center order patterns will reflect modest destocking after restocking inventories in the first quarter.
Jack Hockema
Although the second quarter is not expected to match the very strong first quarter results, we expect continued strength in market conditions and have raised our outlook for the first half value-added revenue to be up 15% to 20% from the first half 2011. This marks a 5% increase from what we indicated during our February earnings call.
We also expected the adjusted EBITDA margin for the first half of 2012 will be in the low 20s.
Jack Hockema
Summarizing our remarks today, the first quarter was a very strong start to 2012. We’re very optimistic about our near-term prospects as we expect to see continued demand strength for automotive and aerospace applications.
Longer-term, we are very well positioned to support these attractive growing markets and we have good organic investment opportunities to further expand capacity as needed. With growing demand and the benefit from our investments yet to be fully realized, we believe we have excellent long-term earnings growth potential.
Jack Hockema
We will now open the call for questions.
Operator
[Operator Instructions] And the first question comes from Timna Tanners with Bank of America.
Timna Tanners
Just wanted to ask so, strong quarter, and I guess you touched on this already that sustainability of it. You’ve hinted that may not be sustainable throughout the year and you talked about the restocking that may not continuing to Q2 and Trentwood.
But is there anything else that you can tell us about trends in the industry that can help us get a sense of how sustainable the very strong first quarter was?
Jack Hockema
Sure, I’d be glad to Timna. Let me just take it sector-by-sector.
From an aerospace standpoint, we expect very strong demand throughout the full-year and frankly we think that the second quarter would be very similar to the first quarter. Were it not for a little bit of destocking that will affect, but primarily the equipment outages that we’ll experience at Trentwood.
Then we’ll see a little bit of seasonality in the second half that’s typical is more pronounced in automotive and GE, but we do get some seasonality especially in some of the long products in aerospace. But in summary, we think aerospace is going to be a very, very strong throughout the year and continuing into future years.
Similarly with automotive, demand is very strong if these build rate forecast hold-up, which we expect that they will 147 build rate. We’ll see very strong shipments throughout the year with again expecting normal seasonality in the second half of the year.
And then general engineering did have impact from restocking in the first quarter. We think we’ll see a little bit of destocking and are seeing some already in the second quarter, but - and then we expect that we’ll see normal seasonality in the second half of the year.
So we’re really expecting with normal seasonality and then the aberration of a little dip, because of their Trentwood equipment outage in the second quarter. We expect very strong results through the year.
Timna Tanners
Okay. And then I didn’t understand you talked about Trentwood ramping up in 2013.
If the second half is slower, why not take Trentwood down in H2 or is it starting to ramp up already in the second half as well?
Jack Hockema
Trentwood will be strong throughout the year. I said the only thing that will happen in H2 from a demand standpoint there is an aerospace, there is some seasonality impact most of that is related to long products rather than flat-rolled products.
Timna Tanners
Okay, what I meant with your outage you talked about how the ramp up for 2013 with the ramp up in the new capacity wouldn’t be until 2013?
Jack Hockema
Yes.
Timna Tanners
So, will there be any evidence of the new capacity in the second half?
Jack Hockema
A little bit of a good start coming on late in the second half, but the biggest impact will be at 2013.
Timna Tanners
Okay. And then if I could have a final question.
I didn’t hear you mentioned of Kalamazoo. So I just wondered if there was any updates perhaps on the progress of that facility or how it’s doing?
Jack Hockema
Sure, Kalamazoo continues to make good solid, steady progress and I’d say we’re maybe 6 to 9 months behind the schedule we originally anticipated going back a year and a half or so. But we’re making good progress there.
They had a lot of benefit in the first quarter from heavy restocking in their applications. We’re seeing some of the destocking there.
So really at Kalamazoo, the biggest factor at this point is the very anemic recovery that we’ve seen in the general industrial economy. I mean we’re seeing slow and steady growth, but we’re barely at 2004 level in terms of the cycle.
We’re 15% or 20% where we should be in terms of normal demand, below normal demand.
Operator
And next question comes from Steve Levenson with Stifel, Nicolaus.
Stephen Levenson
We’ve seen a pretty steady climb in the value-added revenue per pound for aerospace material as well as others. But is there a limit on it you think, as it tried to capacity and utilization or is it more just related to general demand and the type of product you’re delivering?
Jack Hockema
Some of what you see that’s for aerospace and high strength products, there is a lot of mix involved there. So there are going to bee can be mix changes that influence that; but that being said, we have seen a steady improvement in our pricing on aerospace products really since the prices bottomed out in the first quarter of last year.
So there’s been good steady improvement. We think they’re continues to be good pricing power in those in products and we think there is still room to grow.
We don’t think we’ll get anywhere near where we were in the very abnormal favorable conditions we had in ‘07 and ’08, but we think there still is plenty of upside for pricing growth as we go through the full aerospace cycle here.
Stephen Levenson
And I know you said you’ve got expansions beyond Phase V planned. Is that pretty much all to meet demand or is any of that being built just speculatively?
Jack Hockema
Yes, well, let me take a step back. We are installing Phase IV now and I know I went through it fairly quickly in our prepared remarks here.
But what I said in remarks is that we already envision Phase V. So when the customer needs are such that we see the need to implement that next expansion we will do so and we anticipate with the long-term growth that we see in aerospace that will need to expand beyond the current Phase IV and the envisioned Phase V and we already have Phase VI and VII being developed looking out to 2, 3, 4, 5 years whenever that occurs that our customers need us to install more capacity.
So it may be somewhat speculative, but we will only pull the trigger when we see a very clearly need in the marketplace for that capacity.
Stephen Levenson
And in relation to autos, are you seeing the increases coming from more content from domestic builders? Would you see foreign automakers who now have U.S.
or North American plants showing up to buy materials too?
Jack Hockema
Both, but the biggest change in behavior is in the domestic manufacturers. The foreign manufacturers both Japan and Europe have been far advanced over the U.S.
in converting steel and iron applications to aluminum applications. And it’s really the domestic industry that’s catching up.
So we’re seeing a lot more content growth in the domestic manufacturers, and a lot has already been there in the foreign manufacturers.
Operator
And moving on to our next question from Lloyd O’Carroll with Davenport.
Lloyd O'Carroll
Within value-added revenue for aerospace and high strength, are some products up more than others or are they essentially throughout the same?
Jack Hockema
No, there are a million stories in the Naked City there. The biggest change that we’ve seen in the last 3 to 6 months frankly has been in our sheet products.
We’ve seen a lot of price growth there. And in most of the rest of the sectors over the last 3 or 4 quarters, it’s been relatively steady growth a few cents at a time, but we’ve really seen the step change in the sheet portion.
Lloyd O'Carroll
I was thinking volume growth?
Jack Hockema
Oh, volume, I thought you said price.
Lloyd O'Carroll
Yes, yes, I meant to say volume, but I’ll take price too.
Jack Hockema
Volume is across the board as well. We’re running strong in virtually all the categories.
I’m just thinking of the top of my head without looking at the numbers here, but virtually every product line is doing better and is up substantially.
Lloyd O'Carroll
Okay, within zero engineering some feel for extrusions versus general engineering [price], any other sort of deconstruction? Again volume and/or price?
Jack Hockema
Well, when we look at the real service center demand on rod and bar, how much the service centers are shipping. As I’ve said an answer to one of the other questions there, the service centers are basically at a 2004 pace.
Right now, we got a boost in the first half in fact the restocking in rod and bar in the first quarter I mean. Restocking in rod and bar actually was the second highest quarter that we’ve seen since 2001.
So there was a lot of rod and bar destocking. Some of that was cold finish, but most of it was extruded rod and bar.
So we saw significant restocking there and some improvement in real demand. Sheet and plate has been pretty steady, it’s growing slowly, but not as markedly as the restocking impact that we saw on rod and bar.
Lloyd O'Carroll
Okay. Are you seeing much in the way of imports into the markets of general engineering plates?
Jack Hockema
Well, I wouldn’t say that there is more than what we’ve seen, but there is a lot there from an import standpoint in general engineering. So yes, that is a factor in that market and while we’ve seen some improvement in prices and their reasonable I guess at this stage of the cycle we think that there should be more price potential in those products, but there is a lot of import pressure.
Lloyd O'Carroll
Yes. You’re speaking or worrying a little bit about European mills and the ever present South Africa?
Jack Hockema
Yes, exactly. South Africa is a big presence and we’ve seen more presence from Europe here in the past few months.
Operator
And the next question will come from Phil Gibbs with KeyBanc Capital Markets.
Philip Gibbs
Jack, can you describe the commentary around lower contained metal costs. It’s always tough for us to differentiate between that, because there's -- I know you try to lock in that value-added revenue on a per pound basis, but any sense of how much that may have benefited you in the quarter?
Jack Hockema
Yes, well it depends what you compared to. But if you compare to where we were in the fourth quarter, the metal prices were similar.
They’re lower than where they were when we got hammered. If you remember, a year ago first quarter we were complaining about how much we got squeezed.
Part of the pricing improvement that we’ve seen over the past 4 quarters really has been that there’s been some regression in the contained metal cost and on our high - many of our high value-added products; we don’t move prices directly with metal as we do on some of the lower value-added. So there is some impact in there, but it’s hard to measure how much that would have been.
It’s been a steady improvement over the last 4 quarters.
Philip Gibbs
So in that view, you call it strong end demand for you and relatively subdued. Your LME is a good environment as far as that relationship?
Jack Hockema
Slow, steady declines in the LME are good for us.
Philip Gibbs
Okay. That's what I was getting that.
As the volatility in the service center order entry over the last 3, 4 months surprised you and at all?
Jack Hockema
To some extent, the restock, we expected some restocking in the first quarter, but it was greater than what we anticipated in the first quarter. And so, the destocking that we’re seeing isn’t a surprise, but the reports I’m getting from the field really all around the country, and virtually all service centers that our people are talking to, indicate they’ve seen a decline in their orders over the last 3 or 4 weeks, and then we're seeing - we know that some of the service centers are also destocking.
So we're getting a little bit of the reverse effect here early in the second quarter, but it's still very early, it's difficult to determine how it will turn out in the second quarter.
Philip Gibbs
Okay. And I'd just add a couple more if I could.
Jack Hockema
Sure.
Philip Gibbs
The more favorable pricing environment you talked about in the release, I know it's already been discussed on the call in the aerospace side. It looks like GE pricing still relatively weak.
Automotive, have you seen a pickup in contract pricing there with your customers giving the demand?
Daniel Rinkenberger
Well, let me go back to the GE plate pricing, I wouldn't characterize it as weak. What I think I said in answer to that question earlier is that it’s about where it should be maybe a little bit less than what we would expect at this phase of the economic cycle, there is the business cycle.
And we think there’s room for improvement there, but it could be better, but it's not really weak, it's not terrible substantially from where we were first quarter a year ago.
Philip Gibbs
Okay.
Daniel Rinkenberger
Automotive, most of those contracts are 3-year contracts, and we haven't seen substantial changes in terms of our longer-term contracts there.
Philip Gibbs
Okay. And in your equipment plannned now at Trentwood in the second quarter, anyway to quantify that impact on a linked quarter basis.
I mean are we be talking $3 million, $4 million something like that as far as an impact on the business?
Daniel Rinkenberger
In terms of the value added revenue, it’s probably in the 3% to 5% in terms of the total for the company. it probably has an impact of 3% to 5% versus the first quarter.
Philip Gibbs
Okay. I was just thinking more along the lines of your overhead absorption and the cost of you may be running through, not absorbing.
Daniel Rinkenberger
Yes.
Philip Gibbs
Because of the downtime, because you just characterized it in value-added revenue not cost impact.
Daniel Rinkenberger
Yes. It will have the incremental margin impact on that 3% to 5% decline in value-added revenue.
Operator
And the next question is from Edward Marshall with Sidoti & Company.
Edward Marshall
Hey, quick question. The outages that you're talking about hitting kind of as we move forward into the later quarters, do you think there is any pull forward from future demand as customers are kind of wanting to get the metal before you have outages or is it not outages to that point?
Daniel Rinkenberger
No. Our order book at Trentwood from an aerospace standpoint especially on plate is pretty clear with both our OEM customers as well as our service center customers.
So we don't see any pull ahead there, and frankly, we've been running pretty much as much throughput as we can get through there in the last 3 or 4 months. So there hasn't been a lot of pull forward in the aerospace plate.
we'll have this outage and frankly, we had some of the interference from the capacity expansion in the first quarter. So have we not been expanding, we probably could have had a little more throughput even in the first quarter than we did.
So we'll have a dip here in the second quarter related to the outage, but then we think it will be pretty much clear sailing with the existing capacity through the second half of the year and then begin ramping up in 2013 with the incremental capacity expansion, if that clarifies it.
Edward Marshall
Sure. When I look at Kalamazoo, and you gave some good commentary on it already, but I was wondering, if we can quantify the EBITDA margin contribution there, incremental I guess, change due to Kalamazoo either, and I imagine it's going to be larger year-over-year.
But I was thinking more sequentially from the fourth quarter to the first quarter, and how much of that improvement that we actually saw show up on the EBITDA line.
Daniel Rinkenberger
I'm not going to get that granular in terms of the EBITDA. We're making steady improvement at Kalamazoo.
Fourth quarter is a very weak quarter in terms of seasonal demand for -- because virtually everything that Kalamazoo produces goes to service centers. So that fourth quarter is always a really weak quarter and then we see stronger demand in the first quarter, and then that got further exacerbated by the restocking.
So there was a fairly significant swing in value-added revenue and I go back to the same answer that we've given many times. It doesn't matter that much what product it is in terms of value-added revenue dollars are incremental contributions virtually the same throughout our mix of products.
So it's really just a function of the change in volume quarter-to-quarter and that will fluctuate up and down.
Edward Marshall
One of the things that really sticks out as I look through, I guess it’s page 20 of the appendix, the automotive extrusion value-added revenue per pound, is that mix, I don’t know if we address that yet. It's $0.94 versus $0.80 in the sequential...
Jack Hockema
Yes. I commented in my comments that it was both mix and also some price improvement in a few of the products.
Edward Marshall
Okay. And I mean that's the highest we've seen in, I don’t know and maybe even ever, but is that a sustainable level?
Daniel Rinkenberger
It’s probably not at that level, because the mix would probably change a little adversely as we continue through the year. But it will probably be higher than where it had been historically.
Edward Marshall
Trending higher, good. And remind me you grow faster than the automotive build rate.
What is that rate?
Daniel Rinkenberger
What is the build rate?
Edward Marshall
I know what the built rate is, but you grow faster than the build rate, there's a little bit of additional, let’s say the standards moving in your favor. So you're going to grow faster than the overall build rate as you, let's call it take share, so to speak from other heavier components.
What is that rate, I mean did you go 1.2X, 1.3X a build rate something like that?
Jack Hockema
Over the last 10 or 11 years, our compound annual growth rate in terms of dollar content per vehicle has been growing at roughly an 8% rate.
Edward Marshall
Okay.
Jack Hockema
So it'll be the 1.08 if we continue that pace in terms of our content. Industry content has been growing 4% order magnitude, we’ve been growing 8% order magnitude.
Edward Marshall
Perfect, thanks guys.
Daniel Rinkenberger
Hey, let me correct one other comment, somebody asked me the question about automotive contracts. Generally, we've seen no change in pricing there.
We did have one contract on a specific application where we did have some price improvement that did take affect in the first quarter. So that did have a little bit of impact on our results.
Operator
And the next question comes from Tony Rizutto with Dahlman Rose.
Anthony Rizzuto
I got a couple of questions here. First, I wanted to make sure with regard to the outage at Trentwood.
Are there any other planned outages overall in the company for
Anthony Rizzuto
the remainder of the year outside of the Phase IV?
Daniel Rinkenberger
Well, there are always major maintenance items going on those kinds of things. But there is nothing that I know that will have a material impact like this struck with outage well.
Anthony Rizzuto
All right. And even with that, Jack, it sounds like you're not really looking for any substantial operational disruption or anything of that magnitude.
Daniel Rinkenberger
No, no. This is actually a furnace would just be down; we’re extending one of the furnaces, adding a couple of zones.
So it will be down for a few weeks while we put those new zones in service on that furnace.
Anthony Rizzuto
All right, great. And I'm also trying to get a better handle.
You made the comments, I think you made the comment that you are also looking for the second quarter to be a step change although you indicated because of what's going on would likely be lower. But you also said that step change in the first quarter versus year-ago and that was up 91%.
So how are we just to try to not read too much into it, but to get a better sense in looking at 2Q with the step change and looking at a year ago?
Daniel Rinkenberger
Yes. That's a good question.
What I was trying to communicate with those comments is that second quarter is not going to be as strong as the first quarter in part; because of the Trentwood outage, which is a planned outage.
Anthony Rizzuto
Right.
Daniel Rinkenberger
So that’s explained, it has nothing to do with the marketplace. And then we don't think we're going to have in fact, we're pretty certain we’re not going to have the restocking benefit, service center restocking benefit that we had in the first quarter, have that in the second quarter.
So it will be a little bit of a decline, second quarter compared to first quarter, but if you look at the second quarter of ‘12 versus the second quarter of ’11, that's going to be a step change. So really, we see a very, very strong second quarter and if we didn’t have the outage at Trentwood frankly, we’d be talking about a minor change in value-added revenue quarter- to-quarter and probably be looking at similar results, maybe a little bit weaker in the second quarter than the first, but very similar results in the second quarter.
Anthony Rizzuto
That's very helpful. I appreciate that, and then one further question if I may.
I felt that comments you made about general engineering, the second strongest quarter since 2001 and granted some of that was restocking. but that’s a pretty powerful statement, and I'm wondering which end markets are -- do you think that are really driving that strengthening trend there.
And then the question about, yes, and then further on that just imports, just a rough idea of how much imports we’re taking of end market at present.
Daniel Rinkenberger
Okay, good. I’m glad you asked, because apparently my answer on rod and bar wasn’t clear.
When I said the second best quarter is since 2001 that was the amount of inventory restocking. So it was the heaviest restocking by service centers of rod and bar, second heaviest, there is only one other quarter since 2001 that had more restocking than that.
But the real demand what service center shift, what they’re shipping at right now is around the 2004 pace. So the general industrial economy continues to be very anemic.
But as far as I'm concerned, we’re a couple of years or a year and a half behind where we should be in this economic recovery or more demand should be 10% or 15% higher in rod and bar than it is right now if we were having anything close to a normal recovery.
Anthony Rizzuto
Okay. And just generally on the imports?
Daniel Rinkenberger
Yes. From an import standpoint, I don't have the share numbers at my fingertips, but we are the largest domestic supplier by a significant amount in terms of general engineering.
The imports have become a significant portion of that share, most of the domestic mills going back even 6 or 7 years since the aerospace plate impact took over. There has been very little domestic supply other than Kaiser in terms of general engineering.
So the imports have a significant portion of the share there and have had for going back to the ‘04, ‘05, ‘06 timeframe when we got into the global plate shortage.
Operator
And the next question comes from Phil Gibbs with KeyBanc Capital Markets.
Philip Gibbs
Hi, Jack, just had a quick question about the other shipments meeting the billet or maybe some of the other lower value products that you sell. Should we expect you to continue to be moving away from that as automotive gets more visible and stronger going forward?
Jack Hockema
We are not just automotive, but in general although automotive has an impact there. But yes, as the general industrial economy picks up more rod and bar and more automotive, you’ll see those continue to decline.
Philip Gibbs
Okay. And then just real quick natural gas obviously is in the tank, which is good for this country as producers, at this point, but I know you had some of that locked up in hedges.
When -- is there a point where we will see an appreciable kind of incremental benefit from lower costs here on the natural gas side?
Jack Hockema
It will take a while, because we do have the - probably 70 or greater percent of our 2012 requirements already in locked-in positions that were put in place, probably unbalanced a year ago. And probably about half of our 2013 is also locked up.
So we’re going to be lagging improvement that you would see in the spot market just because of the practice that we had in making sure that we’ve insured our reasonable price on gas.
Operator
And that does conclude the question-and-answer session; I will now turn the conference back over to Mr. Hockema for any additional or closing remarks.
Jack Hockema
Okay, thanks everyone for joining us on the call today and we look forward to updating you again on our second quarter call in July. Thank you.
Operator
Thank you. And that does conclude today’s conference you can find the webcast archive at Kaiser Aluminum’s investor relations website.
The website address is investors.kaiseraluminum.com. Again thank you for your patience today and that does conclude the call.