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Financial report summary
?Risks
- A material disruption of, or manufacturing difficulties at, Howmet’s manufacturing operations could adversely affect Howmet’s business.
- Howmet is dependent on a limited number of suppliers for materials and services essential to our operations, including raw materials, and supply chain disruptions could have a material adverse effect on our business.
- Howmet’s business depends, in part, on its ability to successfully meet program demand, production targets and commitments.
- Failure to attract and retain a qualified workforce and key personnel or to provide adequate succession planning could adversely affect Howmet’s operations and competitiveness.
- Howmet could be adversely affected by the loss of key customers or significant changes in the business or financial condition of its customers.
- Information technology system failures, cyberattacks and security breaches may threaten the integrity of Howmet’s intellectual property and other sensitive information, disrupt its business operations, and result in reputational harm and other negative consequences having a material adverse effect on its financial condition and results of operations.
- Howmet faces significant competition, which may have an adverse effect on profitability.
- Howmet’s global operations expose Howmet to risks that could adversely affect its business, financial condition, results of operations, cash flows or the market price of its securities.
- A decline in Howmet’s financial performance or outlook could negatively impact its credit profile, its access to capital markets and its borrowing costs.
- An adverse decline in the liability discount rate, lower-than-expected investment return on pension assets and other factors could adversely affect Howmet’s results of operations or amount of pension funding contributions in future periods.
- Dividends and share repurchases fall within the discretion of our Board of Directors and depend on a number of factors.
- Howmet may be exposed to significant legal proceedings, investigations or changes in U.S. federal, state or foreign law, regulation or policy.
- Our business may be adversely affected if we fail to comply with government contracting regulations.
- Howmet may face challenges to its intellectual property rights which could adversely affect the Company’s reputation, business and competitive position.
- Unanticipated changes in Howmet’s tax provisions or exposure to additional tax liabilities could affect Howmet’s future profitability.
- Labor disputes and other employee relations issues could adversely affect Howmet’s business, financial condition or results of operations.
- Howmet is exposed to environmental, health and safety risks and is subject to a broad range of health, safety and environmental laws and regulations which may result in substantial costs and liabilities.
- Howmet may be affected by global climate change or by legal, regulatory, customer or supplier responses to such change.
Management Discussion
- Sales. Sales for 2023 were $6,640 compared with $5,663 in 2022, an increase of $977, or 17%. The increase was primarily due to higher sales in the commercial aerospace, defense aerospace, commercial transportation, and industrial and other markets, favorable product pricing of $105, and an increase in material cost pass through of $90. Product price increases are in excess of inflationary pass through to our customers.
- Sales for 2022 were $5,663 compared with $4,972 in 2021, an increase of $691, or 14%. The increase was primarily due to higher sales in the commercial aerospace market, an increase in material cost pass through of $225, and favorable product pricing of $67, partially offset by lower sales in the defense aerospace market. Product price increases are in excess of inflationary pass through to our customers.
- Cost of goods sold (“COGS”). COGS as a percentage of Sales was 71.9% in 2023 compared with 72.5% in 2022. The decrease was primarily due to higher volumes, favorable product pricing, and lower costs related to three plant fires, partially offset by material cost pass through and increased net headcount, primarily in the Engine Products and Fastening Systems segments, in support of expected revenue increases. The Company had total COGS insurance claims reimbursements of $19 in 2023, partially offset by charges of $7, related to fires that occurred in 2019 at a Fastening Systems plant in France (the “France Plant Fire”) and a mechanical failure resulting in substantial heat and fire-related damage to equipment at the Company’s cast house in Barberton, Ohio in the third quarter of 2022 (the “Barberton Cast House Incident”), compared to total COGS charges of $59 in 2022, offset by partial insurance claims reimbursements of $23, related to a fire at a Forged Wheels plant in Barberton, Ohio in mid-February 2020 (the “Barberton Plant Fire”) and the France Plant Fire. The insurance claims related to these three plant fires were in excess of the insurance deductible. During the fourth quarter of 2022, the Company settled the insurance claim related to the Barberton Plant Fire. The Company is negotiating resolution of the insurance claims related to the France Plant Fire and Barberton Cast House Incident.