ARNC - Earnings call transcript Q4 2018

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Operator

Good morning. My name is Shelby and I will be your conference operator for today. At this time, I would like to welcome everyone to the fourth quarter 2018 Arconic earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Instructions]. [Operator like call now to turn to would over the Mr. I Director of Luther, Investor Paul Relations. sir. ahead, go Please

Paul Luther

John events After forward-looking that will today's Thank morning joined will Ken, Shelby. contain take Ken earnings Chairman you and Good Chief to Giacobbe, your conference quarter Chief Financial Arconic's and and and like call. XXXX Executive fourth Vice I Officer am you Officer. Executive questions. by President Plant, relating remind future and John to and welcome statements expectations. comments by we I would discussion to

You company's our these in can differ earnings find projections factors results from and that release most could recent and cause materially presentation press actual the SEC listed filings. today's in to

discussion. measures most comparable I turn in With In over addition, we would be have can the included presentation. to some press to our appendix GAAP directly Reconciliations release financial non-GAAP that, like in in to found today's financial today's and John. call to the the measures

John Plant

Good more thank results going you brief the and financial to to pass little am and a middle And through will take the bit that intend then joining guidance that, after forward morning I provide He bit on take in update everyone Arconic I it you begin a then an and detail. strategy will introduction the and of to questions. call going your Ken. with today. across for

per XXXX is was employed plus Director I At that to global It XXXX. been facilities to year. since automotive in top of that background that I it of to saying minus, Corporation. plan revenue suppliers. by was through $XX nearly going time, the German try XXX begin me sold billion amongst XXXX Automotive Let ranked Arconic during XX from CEO was XX,XXX call. of early a more am plan Arconic direction. explain to the TRW its people, that until TRW lead and generated have a ZF, a I new detail to My I

is director President with also in Chief extensive Elmer he and to and charting going company's the the Arconic's a current operations. Doty, serve aerospace the enhancing shareholders. as and Operating defense. he support is Officer on Elmer experience Joining to a direction and team focus Arconic me company value of markets, And me has help is and to core including new going for the He deliver will in

aluminum, it's segment X% XXXX. commenting up Demand and and adjust things for out XX% and each for for Volume five you the up products was X% fourth on year-over-year and of or full-year highlights FX the the slide organically. X% to was for like organically. quarter main end-markets Turning Revenue quarter up remain if our in up strong. the fourth Revenue all healthy. is was and

up X% X% special operating quarter unfavorable Excluding year. year. income was the in income compared The fourth year-over-year fourth $XX unfavorable the down the down prices, was full-year. for impact for was $XX price operating the Without the aluminum quarter, million items, in X% X% for the of quarter the aluminum million fourth impact to in and and

And Operational XXXX. hold of in taking to in with so XXXX are businesses. our a grow we exited improvements momentum number profits

smart optimization commercial by the scrap engines, In For example, and our increasing. In automation is driven in manufacturing transportation, is aero yields being initiatives. improving. rolled path products, utilization are flow

in X.X% operations, of on that continue sales dropped SG&A, In to XXXX. revenue to addition overhead a we our and of percentage to as and focus

enhances this the Not and capital year-over-year. proceeds $XXX days that about XXXX. million structural We for for of position have reflected our generation improvements is resulting Working million million the eight inflow improved cash cash $XXX made another optionality of year, going three in the Texarkana adjusted free in included in $XXX of flow cash improvement of times overall the forward. and million and $XXX selling

legacy and the with leverage pension pension our accrual. plans Approximately closed liability net improving attack defined ratios. XX% to billion liquidity continue associated liabilities gross and to We reducing benefit liability now future OPEB by of position, $X.X pension has cash been almost while

to XX return a through to our take going net XXXX basis in results hand Finally, on X.X%. with it us little am more assets to detail. that, the improved And points for I to across bit Ken

Ken Giacobbe

everyone. morning you John Thank and good

revenue, move aluminum the let's extrusions Organic came key Latin fourth results the a the Tennessee appendix. XX% or in year-over-year quarter of financial was adjusts $XXX organic X% basis. slide can quarter for Revenue up was divestiture XX American the to Revenue on Now million all million be of the for for reconciliation or found currency, for billion, the the driven for in The on business prices, by segments. revenue gains $XXX at up volume quarter. and slide and which in year-over-year. six $X.X packaging growth our

All the helping. up markets our fourth of Organically, as growth were quarters was experienced up wide-body first and in by of supported was and have aero In three solid commercial was The into recall will in is the production engines aero automotive in that continued airframes and volume year. tailwind wide-body aerospace and up growth airframe. markets notable be single weakness to aero go aero our XXXX. XX% defense year-over-year. the XX% these may key mix more aero organic of as the airframes a aisle quarter, in transportation offset digit decline to than we growth in we you growth X% in XX%, Double the due we

XX year-over-year slide appendix. growth rates We XX on have and in included market the

fourth down unfavorable operating operating prices, $XX was year-over-year X% million improvement $XXX quarter items, income aerospace higher business, EP&S points. up in impact. in our and on particularly as quarter to X% impacted when as by third income Without $XX straight all million the quarter, year-over-year favorably price was aluminum due defense automotive In unfavorably the quarter, fourth and million million was represents impacted GRP. in by Aluminum of Excluding fourth margin basis exclude well the income in commercial income $XX transportation hundred operating operating by special basis operating volumes year-over-year, and of percent the which in segments, we across or the a income year-over-year. impact prices the

on than While end prices average X% resulted of aluminum prices the quarter. to prices higher continued lag aluminum were LIFO aluminum last the unfavorably impact impacts the appendix. the found the seller The Higher scrap in segment are aluminum of offset can metal aluminum as net versus aluminum an as quarter. price scrap. sequentially, at quarter as unfavorable of of the year contracts was in price in mark-to-mark well spreads still XX, by impact XX be aluminum impact decreased prices year. components Lower on unfavorable favorable us fourth impact XX the slides loss declining The we of on more in by in derivative and aluminum

unfavorable due income comprised higher year-over-year platforms. the engines, our primarily fourth In by with in excluding product engine income $XX is introductions for new of by than product million was decrease to prices. Finally, caused special mix down points was aluminum of X.X% mix the the basis operating quarter, our XXX XXX percent half new of basis aero specifically driven points items aerospace. margin more our Operating

capital fourth Two-thirds in by favorable appendix. driven mentioned, primarily operating free Compared the flow of expenditures. in of million cash eight free increase lower as flow, per improved aluminum per the pension of higher $X.XX, to Tennessee. $XXX interest capital as contributions impact or our excluding to return The included income spend Moorestown, treat items the Davenport, and engine expand a expense our and install quarter higher capacity was drove special items and operating year, earnings Days projects share $XXX offset aerospace in was lower working Iowa slide Hungary, expense the Lower also heat was generation the prices. year-over-year. at have last XXXX. aero on capital a Adjusted continue We improved fourth pension the capital special the capacity cash year-over-year. XXXX. for $XXX and Whitehall, OPEB in earnings seeking million unfavorable horizontal Diluted or in $X.XX than and wheels quarter industrial expand Michigan excluding that furnace of days in more markets reconciliation was quarter working of quarter than offset benefit million the XX the John share for fourth we

by Finally, strong largely results $X.XX. segments earnings across by share per all operational improved volumes driven

million, unfavorable due well impact on Growth growth were let's than fasteners. and aerospace and as pricing introductions of increase or defense an billion, particularly X% aluminum from EP&S' and aerospace continue was up move in results by Segment business the in X% year-over-year. revenue was aero digit markets favorable we year-over-year. fasteners down revenue share in as $XXX the to engines new in $X was to to quarter, defense. lower a impact Organic prices product fourth the our the in more profit operating double slide as seven. segment million Now $X.X of volume gain aero offset X% In

XXX were revenue year-over-year. as commercial of and profit the offset XXX the including percent fourth or the challenges aero Growth fourth markets Segment industrial points impact digit operational offset which $XXX commercial aluminum percent a transportation a revenue aluminum transportation down revenue markets in margin points we costs. by increase as Higher operating XX% Segment than an at of unfavorable unfavorable than basis repaired impacted Presses margin prices operating net operating billion, due was impact of fourth X% year-over-year. outage. down ahead points unfavorable down the impact commercial year-over-year. profit up unfavorably pricing due aluminum in $XX were and continued from to prices. from $XX prices. $X.X manufacturing transportation the down the structures weeks more million basis XX% Organic the quarter, Segment was down up automotive, revenue fourth million transportation. Additionally, was press aerospace growth million, was XX.X%, year-over-year. airframes favorable by end business $XX was Cleveland was an automotive schedule. in operating In of GRP's and in the quarter, profit XX% year-over-year, Segment or prices. and results, of in of the more savings engineered year-over-year, and $XX TCS as million double was in to quarter well basis year-over-year. four point in our in percent see decrease In was X% the building of to and aluminum margin impact along operating construction growth as Organic basis pricing profit profit $XX XX.X%, with commercial delivered XXX including was transportation including well point pressures transportation. an cost was XXX volume commercial higher impact Segment million, unfavorable as quarter, X.X%, X% basis million, XXX strong

eight. to let's key the fourth Now move on quarter slide slide achievement

was quarter and reflects digit For $X.X continues basis demand a the was over which products to aero growth up quarter for defense any fourth unprecedented revenue for in The billion a in by EP&S' our record XX% and record EP&S' revenue driven on aero history. up year-over-year customer be double volume quarter, engines XX%.

we airframe the consistently fourth offset TCS more driven In to to Regarding organically volume with organic growth revenue continues by as in smart the in initiatives. was volume. revenue commercial strong strength XX% to in was a And quarter, be and than wide-body strong weakness in continued XX% net GRP, up commercial TCS, savings, automotive by growth markets manufacturing transportation organically major improved increase X% as was in team up deliver continues single deliver year-over-year. aisle the

X% I key $X XXXX slide full-year our year-over-year. X% to or themes increased the came nine and move at for for let's year results. Organic million the billion, $XXX or will up some in revenue touch of Now $XX Revenue billion on year-over-year.

saying have automotive, transportation and with markets year, digit and healthy year-over-year remain all key engines, double As aero in aero growth our been commercial we strong defense.

by was income $XXX product operating year-over-year. Higher down and XX Aluminum volume on between Without losses the basis markets impact higher contributed aluminum income operating The by million operating mix operating split weaker million Excluding the of income favorable aluminum special up X%. was year, billion impact margin basis losses. in for $XX while revenue introductions the million prices unfavorable million a derivative scrap impacted to unfavorable unfavorable a $XXX and $X.X of or strong income $XX aerospace mix production aluminum income in airframes new on contracts, spreads a year impact to aero X% resulted was unfavorable price points. and operating year-over-year unfavorably operational operating and items, for income. mark-to-mark evenly prices,

essentially expected year, the aluminum of each and the of For LIFO throughout which prices and lag year. other, fall the rise the given is offset metal impact

XXXX capital I day achieved capital. seeking As days adjusted of mentioned spend was improvements by reduction the flow as we cash driven for working in taxes diluted aluminum return our XXXX. or working projects. earnings earnings was share impact more $X.XX $X.XX free per for unfavorable strong share lower before, was Two-thirds prices. higher capital excluding eight per lower and of an year Lower OPEB items special and pension interest offset higher expense expense, than than

are billion. Supported revenue would and Now to see XX growth. we growth robust X% of aerospace billion put revenue our by expected experience slide let's guidance. are to growth of in markets organic our key in move approximately at to to defense to most $XX.X That XXXX. end-markets, $XX.X to The for continue XXXX expecting X%

uniquely solid revenue industrial continue markets. transportation which also are in in strong and We automotive we growth with also to growth, anticipate positioned commercial our

operational exclude special in lower product costs pricing be guidance versus offset spreads. any net to volume, well to as impact XXXX as and aluminum we items driving aluminum per would new introductions between per partially XX% in cost will share, will a impacts would per by share improvement excluding As expect be we XX% transportation continue XXXX. $X.XX from earnings focus in prices and share performance further earnings on which savings, to cost items special of repurchases. $X.XX aerospace in share scrap aerospace Favorable The reductions, excluding share represent per that favorable

million of aluminum we metal $XX in based assumption expect on ton, tailwind our XXXX, metric Regarding least a including LME at per current Midwest prices $X,XXX Premium. and

reduce drivers qualify adoption which contracts key of new significantly hedge is exposure. accounting the our which to a will accounting for mark-to-market standard the most our of of One allows hedge

based and flow, the first our on slide capital target expected the of the $XXX following. increases. annual to contributions and for cash is of usage quarter as free pension assumptions will XXXX guidance. XX, the XXX key to I payments working anticipating range reflects timing in this million. an is provided will Regarding target interest of well that cash I as XXXX we have million note derive an note On

approximately The million As of metric used growth mentioned, capture our for Midwest industrial for guidance and assumption expenditure and automotive previously for is to a operations price per including and capital aluminum sheet. $X,XXX Premium. expansion aluminum ton is demand assumption LME $XXX potential Tennessee

can turning in items have Before XX cover it let in be John, slide back special me summarized the found to quarter. On appendix, we a few fourth items four the that appendix. for

category which resulted which following $XX four the primarily first restructuring, pretax million in relates income of to consisted The of subcategories.

consideration related $XXX transaction the gain First, XX Texarkana October The income continuing million mill. to on sale in of the and $XXX additional proceeds on closed million. of plus an resulted to of of $XX cash rolling up million

of our This proceeds loss revenue. million closed December XX non-cash annual $X on and about small cash our was sale on with charge in forgings resulted plant the portfolio of Hungary. The related transaction million $XX in $XX million. of business a to of a Second, in

charge Third, quarter settlement $XX of in of U.S. plans, a million which XX-Q. for to was larger accounting related non-cash one third pension previously our our disclosed pension

quarter fourth the curtailments effective pension Finally, U.K. XXXX. a to of pension the freeze plan million in announced non-cash quarter $X of with charge is and in associated the related XXXX first

plans of As to liability John now with pension mentioned our defined earlier, accruals. future XX% associated gross are closed benefit

quarters. external legal which consistent million level Tower SG&A. costs recorded The of advisory with a special previous second This spending $X is to and in has were related charge been of category items other for Grenfell

special costs category for portfolio items million external third related the a in of which review, to is were recorded $X and charge SG&A. strategy The

Our discrete last fourth touch items category quick. is the tax these will of related I in to a on number quarter.

end enacted recorded of the at we of that of the First, million tax the the tax $XX of to reform related U.S. analysis XXXX. charge finalization our

and $XX Second, current recorded a of changes million tax-deferred rate as reversal And liability. tax another foreign finally, benefit a recorded year to the related associated listing law various well million the jurisdictions. we of tax we with benefit as $XX

All month. be XX The on detailed will appendix. is the information issued the in talk slide item XX-K, will be about this of last I would like that which in to later

$X.X provided an billion. continue approximately I debt it to and XXXX. XX% billion back our debt is have that, structure We we up quarter of as John. to billion will continues EBITDA on stands capital is Gross since our an update the net debt and at which at to sequentially. debt year of With reduce $XXX manage to times, stands with We the X.XX improve million improvement cash, finished $X.X $X.X Net turn liabilities. fourth and of

John Plant

our Thanks Ken. The allocation. now reduction, talk give And to plan involves update I on three capital cost to like you an would things plans. and to, portfolio

let So start me with cost.

cut costs the designed million basis. commenced have annual operating plan $XXX impact. We by The on maximize an rate XXXX run plans to is approximately to

we through further potential will We examine move this as XXXX.

Second areas, maximize we returns. which determination The into future portfolio which that to is the products engineered two optimized global SpinCo the will business item shareholder portfolio. is will be company determined the RemainCo separate products. and and and of the fundamental rolled forgings We

engineered sale do we businesses rolled will not best into forgings of global addition, consider products or the the the In that and fit business.

these to progress. quarterly details and more with We actions you they have updates as timelines to accelerated on plan will provide our on develop. share We follow

end the the allocation, effective has the first an $XXX buyback Board this of XXXX. authorized additional of share half $XXX Regarding authorized in million year. to repurchases also The execute we million to capital intend previously of

the in your cash share. This XXXX will And wills provide I for that, prospectively in million per We top open the quarterly XXXX. will a us and $XX share dividend current questions. also line benefit and per $XX with million from $X.XX $X.XX to with the reduce

Operator

from of Instructions]. Carter [Operator And Research. Melius comes first your question Copeland

Carter Copeland

gentlemen. morning Good Hi.

couple some wide-body to the see about have EPN&S, ones. standalone in John, get the AXXX, programs, may I impact comfortable that on what years. Just relatively here, most assume last have have the with truly you of quick given the on I a soon? that split how we think do notably volatility the of would talked couple you potential shutdown seen an similar that would should you

investment the certainly more of and almost think the As a out? will about get are talking airframers in lot rates pushing a well for as, to I to Moorestown Whitehall there and years be couple

John Plant

Okay.

say, So would [indiscernible]. let I And with, the that are total Every aircraft increasing. that my understanding in deliveries we it's narrow-body me of I seen a seven anything, start airplane is have have at least builds. particular. airframe backlog which projection year build says increases, If

my So us the life. have we that aerospace future. And have think demand previously enjoyed be the while claim that expert an wouldn't in sector, the it I platform I and into the grow just tremendous to a in ability it's that's to I future profile never gives

will still guess are the just cancelled, sales, if aircraft, buying would that AXXX that people we but assuming will buy I out So work some we be and other ones lose yes, they will maybe fine.

individual, more wouldn't capital. say, think, additional too That's part about concerned I I whole was, I on And market. will get and first second the of make. airframe I the comment So the your question focus would one

in That's to XXXX. by I are reviewed we that less than we saying been spent clearly being spend that reviewed and already. pretty think in capital I going XXXX answered

to And all I what assume. required to contains have I number, the the elsewhere In given maybe, is be the tomorrow by the $XXX lighter meet say, than don't lower about after million day that ability ramp. $XXX it million Whitehall within the But or it fact, that you it day know. was of the should I And on and it's guidance after to provide I am of in drive the investments investments a envisaged. a going will think to engine job,

and the concerned your now, in through forward yields we run through have hopefully deliveries continue Does a in say, I have to which which blade customer feel clear with I fourth begin look that. work in you we that backlog backlog. aware which question? talked the plants and we that yields am made don't to if increasing already the we with hoping I and to currently are major, turbine trying investments seeing certainly but high about in are quarter seen Right I way and so come earlier. rate XXXX to And have have the beginning any the answer our the am that we that would we not we those, to that say,

Carter Copeland

new looking to I I about that the that's EBIT will program just deal structure or time the about in the when was capital pertains just will are is Yes. am and continue if as you it capital plan wondering really much have you plans structure, on the in we completely the pertains I XX room on XXXX. the to for especially for. am capital at whatnot, be wriggle it as as and need with I you higher guess we to investments impacts narrow-bodies I that, transaction talk the and smaller understand of by just it wondering capital how affect you to the closes, need what rates look spend should to that higher cash what and be But military, entity, to just

John Plant

margins I I cash eye Yes. will keener be the investment. that I have fundamental hopeful should that am a worry improve, point. There EPS that is just improve. flow mean, see I this don't will at to will

the an of ongoing being those forward. We to I that expect And improve to that. and we quarter plants background, be meet industry customer I improvements coming will should assume on sure And focused questions efficiency. one particularly see am driving OEE will up will and in in after demand be asked. quarter critical make the you invest that metrics auto going from And also

Carter Copeland

follow-up. the for just And Okay.

better in on I new helpful? trending? me, worse program EPN&S, new those would impacts, are called than EBIT it impact out you excuse missed program GRP, us can or EPN&S And but think Any how EBIT you the but I in give color there, but GRP? that were On be

John Plant

Ken question interplay them. this I that between I that's point at to so more of will ask Ken to as time in it's think and respond a

Ken Giacobbe

jumbos right. been think pretty much we it's from coming have stabilized, the GRP sheet They wide-bodies down. side the So plate, and with the and

have a We hit this the taken the now are But year. seeing wide-body. we leapfrogging single-aisle

of So that heck is lot a But single-aisle to the we QX. a more actually planes net leaving wide-body. a increase saw offset

into So the we year. and we confident business plate. feel GRP as next go That should in be for a tailwind of sheet terms

little EPN&S engines the the the on a side, XX% piece, engine new we On about are over is platforms.

As going through we new we are that, we got have products.

But cost the getting operational above call little takes products we improvements, learner out. have on us our has been of engines our at at through a cost the those more. share. were the products on that team Our contractual And bit working time, same most new or

incremental plants, we get commercial through the So come volume at looking look associated with are additional to the to as price teams that.

GRP. the we feel both So on optimistic

XXXX, As we price. in a go EPN&S will be into improving more along get cost the effort with structure there to commercial tailwind and

Carter Copeland

significantly EPN&S to in are be guidance, embedded just going in up headwinds, the XXXX? flip volume? you Ken, you your program So to since EBIT envision XXXX tailwind Or will new do that specific still those will plan, be there in versus in

Ken Giacobbe

as think and we year, going takes it to here, margin there net net I would but tailwind will expansion. net I a be next that puts be think

Operator

[Operator Instructions].

and follow-up asked a limit only. question one participants As one yourself you to that we reminder,

Co. next comes question Gautam Cowen Your from of and Khanna

Gautam Khanna

you. Thank

First be? synergies? you about what question the cost you Cash what can say breakup due to and would there do cash to envision timeframe? costs cost be, to actually to And over anything

John Plant

I I we fundamentally got Alcoa numbers it's quarter to number. a I can't split detail. on you next like you would would update more lower have give XXXX. that number the I for when hope than today. a in will

Gautam Khanna

like you. operational It follow the time. in. please all question, question the I put Thank just recently happened? would forgive Chip processes but Blankenship were up A What improving. the and get looked was it be

give You improving at CEO and years. going guys just fourth yet, you four next-gen I on talked about losses you. engines. can profits the around on? really context are abating what's if am we And our curious in any Thank

John Plant

think backwards. and question why I to most forward. important I see with my provides, quality say, not don't answering the that to do I of is anything Well, profits revenues look forward quality thing would going of

some commentary we past, but you in really give mapping is will what those future. driving about which were can out and things you the nothing do the I about managing, So and

that's most important the So thing.

of time looking I say, would my rearview so the And looking time X% I mirror. think is, my and maybe front spend of the approach XX% leadership. aspects I at windshield that's important my most of through And the

after And for imagine, me I will all of let in after a take the someone a to on. the battle if that of time first the as stepped fourth, So I job. great you certainly any four. XXXX aftermath with, I you are am one battle, not mean, in can into proxy shape was the issue the say, of of went directly the them period proxy someone immediately stick who immediacy in voluntarily

that search direction Board out of out appropriate is but not make about make to a it a new in to the I was leadership. terms straightforward. company, carried also I It's to carry the in process. only, only we would of appropriate the things good things it the this have is have strategic the change Chip so morning, say, the to talked to forward, felt us intent say And I did. appointed. And direction Chip to that that carry

Gautam Khanna

it. appreciate I I had to ask. Thank you.

John Plant

else. it somebody. to be you, you, just course, If not Gautam, It would expected I I happened the I guess that question. Of that mean be asked somebody

So worried don't it. or feel concerned about

Gautam Khanna

you. Thank

John Plant

welcome. You are

Operator

question Rajeev of next from comes Morgan Your Lalwani Stanley.

Rajeev Lalwani

gentlemen. morning Good Hi.

John Plant

Good morning.

Rajeev Lalwani

after am last actually going the to pick I question. up

will in I apologize too. So advance

John Plant

Okay.

Rajeev Lalwani

just logical just last some long company?? like up as couple that. of the couple forward. decision from potentially split it But know did mean it prefer ago perspective, today. you as I years. seemed John, decision a I color provide why over to to happened what come that you to take get look to Board just can the a opposed years to a to so a I was

So part that's of question. the first the

John Plant

track analyst I around before know be don't decision I And in maybe timeframe. much from Let's really XXXX the time. exactly to XXXX. thoughts, sure I say, just can't speaking through first Alcoa community, the XXXX about that that about spitting saw, or was reports formed I was how back XXXX. am mean, that going about the I

experiencing after over of it, years was it an a So easy split I entailed. to venture all and of the old will say, split was of corporation by trying and that I any place. call some I would that really, tumult the, XXX had came just the some into the put and Board full, of means, joint will given in I legacy been issues or occurring say, And wasn't relationships that's

the to that. had we so And find of of means minding all

but call let's and Alcoa it a historical company spun out new a was so name Arconic the new RemainCo. And was was

I say, say, of of together, probably company period do what stability period the the terms have it entity that. Arconic. was arrangement. but And we had to argue say, are some And better I think what it I was a mean time place sure, not, have activity can You pretty time. will the needed itself And in will single that a that management be a I about clean, in of And really that's, which that for to is we I in was. to will and future trying to have momentous was at best or

to I feel in, that look it's the has Now will I if crafting right. is at, plan highly a when considered the Board recent over I the thoughts that was engaged months, say, I is say, entirely this and allocation different originating return there strikes on. profiles, say raw aerospace. capital requirements of in time me between And rhythms, that move not the are it fundamentally products it terms in investment

So the important that in maybe logic, it it's that done got in was think, it it most you doing could there. I argue, is but I is mean we are now. We have XXX. XXXX thing there would to before, unusual we well, and

us for think I but could could So for intent. critique you critique timing, you us maybe don't

look which what and it. look to a clock way. forward, teams achieve in. are on we of being And going The believe path are an that's let's with to again, you the windshield speed wound be organization so I is and determined And that what is up will I the higher back our believe through

Rajeev Lalwani

isn't follow-up then forward? going was was talked some is EPN&S Can run mix and that, the just specifically Ken, me use, for at about a the XQ. you outage? number press a you correct decline look wrong, it next from have trend right there of Was fronts, But And that to improving just Thanks improvement the in we like I a to am going sequential to looks margins rate year. will? on I what into XQ Ken. XQ fourth XQ? maybe Was dynamic, quarter, John. if that the the the you Cleveland in creating so if a provide comfort And weakness to if

Ken Giacobbe

That's Rajeev. Yes. right,

improvements I We better the It's we terms of very in That on as have delivering is press press business. in were talked the the Cleveland outage, going to been lot that plants other Again, work through running $XX the demand. the million good are into is operationally. There resources results. last put and rings in, volume we incremental deploying I There impacted getting has XXXX, engineers improvement timer the on about as rings move an things as continuous five of business. we on customer that So one about, there. call example got going will operational believe, that's use absorption. a a of

XXXX. We well. reducing about PPM cut have by year as XX%. as we improvement. their They past around substantial in record exited out their the quality They had They by revenue improved for XX% by seen dues

go are these you can bottlenecks we as and it sequentially we see well. next getting improved as into So year

So I see that as as margin for favorable we item expansion. move a forward

Rajeev Lalwani

Thank it there. leave will I gentlemen. you

John Plant

you. Thank

Operator

comes Your Seth next Seifman question JPMorgan. of from

Seth Seifman

much and morning. good very Thanks

which at intend a can So press CEO? about one two-parter that that if the your I release address time not of exposure months. entity which business Tower recent I secondly, the previously for potentially John, had you frequently the sale. came is portfolio. question, in specifically preside strategy the noticed and of in the I the split And mentioned businesses, wonder any but company up guess potential an selling in to on do the that BCS been during Grenfell over context you including

John Plant

because three things make to it's Okay. four rounded about you a one. I note into guess better or that

process BCS say, didn't I I the and today. because on comment on announced will previously no update So you to that's I have is underway. to that provide

put is months. time probably and be teams separation to starting do that. date when and and to to in. a that's obviously expiry us I The guess focused week, that. next a In terms plan it's I of nine do are on that on engaged agreed understand am that XX going project you all And to required I major step my timeframe, are have that the of to I going

the with to I in say, the underway certainly the my will So framed timeframe done that largely am company. or I going either envisage spin, engagement be and

outcome for you to And bit some whether will of deliberately to today transaction. than mentioned the Trust little are are asset questions. and call sale required the work in didn't implementation. developed to there's All sales. to debate. I so those form strategies Morris plans plans things You maximize of might get no Obviously any answering the financials though I be or together put obviously more have of intent I up what it's say form be Reverse and But do from may the out a advanced those, in think.

is seem is and terms Regarding is while be transaction think, Grenfell. a be press My to press in into on Grenfell and inquiry. we regrettable company of may certainly may got the there what lot you Yes, have update that an whole stuff that. then of leaked of that's are got that, the some I public a somehow to the for examining impediment it's

this claims like from I that I of outside about say, was current, will going I are obviously lawyers and one. anything we compensation company there will And neither the produced. developed believe may complete. claims a inquiry think the out engaged. that for have of to incident. had, there the or coming comes cause report will it of, is that public the specific is Phase be is guess be which X And first does from no a second Maybe say, just I the derivative it currently

We continue the think now, we reasonable to fact of right view facts. pattern. I examine will But have the a

Seth Seifman

Great. Thank you very much.

John Plant

Thank you.

Operator

Your next question comes from David Barclays. Strauss of

David Strauss

that we and cost program cost than different this today, seen might reduction Good Thanks. of any detail consists the morning. give prior you John, company undertake? you it in the terms be reduction there have programs how of what highlight can

John Plant

first Well, apart I of of all, the numbers in seeing that approach. Yes. the am familiar not from terms

that on Elmer look between here are So I going say, I indirect granularity I cost look of implement like matters wave will reviewing costs the of Pittsburgh things the focus portfolio view that's obviously jus I about level over which York this efficiencies. always going am thing It later. haven't It's about material this Saturday and is programs. with on. put way spend. I in in Sunday discretionary and a The will I things say, and semi-fixed and same at right It first at that beyond going only all Meanwhile, to agenda cost a the and direct is those both am reduction normal are Pittsburgh developing going nothing dealing we that the than of rather look to in levels. sooner terms cost spend. that, It's on any be for reduction is the in plans, am I will New now is at the with staffing stuff magical of, it Cleveland stuff. There to

like and So each sets fundamental in it of just developments be each to competitor see and quarter will compared traditional efficiency at to looking year. productivity do benchmarking particular, I

the interested added employee, gets And per urgency am all nothing in It that And I things value is like So hoping else a about is will I is. be, back absolutely. word of to really the maybe of inappropriate, about don't magical required shareholders progression recognize just haven't that to of argue reduction. if what could I sense That's nice in I am them I say around improved. know seeing that it There this. that I I sufficient would it everybody you. cost believe it decade, see all really. over to seen be is and look returns that

David Strauss

companies this? this that of you. contemplated is and of follow-up, as forward separate liability What be could potentially up I a then is process sale As a left all that you maybe among pension ongoing on divvied you TCS? for Where us separate know Thank give of a little go the businesses, And bit have so construction. going that basis? building how on help could the part

John Plant

whether amongst, have given first I commercial I is that not wheel the talked Don't and the fit just have for And we enough, that best sure. rolling around It's business to two you will fundamental the words give say, destiny of The the me today segment look businesses, part part at I decide best know room the about. of it? assets yet. is for will

What So again? question. to one, your the was that's second one the answer

David Strauss

Pension.

John Plant

right. All Pension.

David Strauss

forward liability, how among be Obviously that pension might large allocated companies? a you have go the

John Plant

hopefully, strong versus emerge call will good and is to of and for. Arconic, left corporate there I thought profile of both because is them, a of has what will SpinCo terms be that in size I first would could all it, company they future RemainCo would liabilities which the intent trade at I businesses have exactly will for that with, I say, intertwined say, with straightforward reside. it's say, in there I that Well, to be lump in then best the where have the, good naturally a legacy entity belongs to yet to the have, And and to only what's into has think which to and multiples which ability going hope will determined two attached a be

of going so number I, if nor just that in the, should where part can And I been it don't will against say, I call, was let's point you terms give say, this will to am any allocate is, even corporate the in shareholder But of benefits, going the be at pension outcome there business value. to a liability able to I think I to specific to, it's I time. whatever

David Strauss

very much. you Thank

John Plant

Thank you.

Operator

of Your Korn Sachs. comes next Goldman from Matthew question

Matthew Korn

have good dire in a XXXX. qualifying risk it autos. you and How offered weak on you Hi. automotive outlook particular pretty overall? you Thanks see auto in globally production as and OEMs demand a business, your question morning. John, on for into The are the outlook

John Plant

Okay.

look So it. segments I some will into Boards I daily the of auto come some am get world. from like having understanding And on summary various, auto get I have to a industry I guess of peripheral I perspective, and still say, I

of the was the interesting. it's So that beach, if haven't thought gone it. to completely I

is of In particularly terms that is a sales auto some sustained for time. level outlook, we high America and my been are which into in production, of level, guess at here a North

putting I thing particularly is for say, the aluminum forefront magnesium than the panels that. find body structures. and I say underlying, weight a it's doing of is cheaper, putting weighting the in into at the in the I think lighter secular sheets vehicle. into therefore encouraging which metals opportunity in the And in position of growth example And light will trend think, industry. for will right probably about I direction much the I Arconic And

the cycle majority I profile So aluminum to Currently, order of will content yet. launches say, I the will the calibrate, when then and is of be myself say, trend about production will Arconic's a demand future truck something of interested way additional strength, I the level had is growth. I market I lightweight that That's think something what product aluminum pickup each that points rights the platform of by lightweighting having and of outlet versus that's haven't the characteristics spot not tensile into just time on at. at there feeling persuade is for very But the, secular underlying are the the good. can I just in of those that am looking knowledge It's quantity be might cadence vehicles. in still I them, that And in you truck and light that I sweet the think of the of of at strong. particular. look of

Matthew Korn

am potential earlier, think appreciate penetration. mentioned It's platform. It of I would consideration? I I timing what ABS, and I matter And that. a there detail there? sounds cost that heard additional a under be you expansion I correct. for you you that And that approved? and still you heard Tennessee right? there, I at more of any matter capacity Is Could it's give if Is a believe if

John Plant

we of decided not scrutiny and something am looked I But it it you, that investment, lot can profile lot made get can the even say, that of in leverage we I will Chairman from the at I sure when going And look that returns what on I have but demand envisaged, starts the which go a investments. tell and It's next off whether looked, have to the again. through. a say, at Yes. going path see as any announcements the I benefits had forward the for to Tennessee high as we a we to slow which investments we I years, December. of personally, of a am have I you degree say, contingency use, few I will

at coming authorized. of terms the a lighter But level been answer in than it's capital returns of it's So we is, agreed.

So it's ahead. going

its own and And it's going able important business. I rolled is think rolled I the a being articulate when future. great that's revenue future is stream good parts the think entity for for be to particularly products to independent

Matthew Korn

luck appreciate you. it, Good I John. to

John Plant

comment. the Yes, Thank I lat you. appreciate

Operator

comes of Your Longbow next Chris from question Olin Research.

Chris Olin

got that was were with wondering And restructuring leading would on my aerospace question? and Chip those sense business. going progress disc two efforts the a restructuring operations. report was personally guess, on to we frames the efforts I And Yes. what, basically the that be now I if the I get could

John Plant

from emanated with certainly am Rixson. to buy the familiar I Firth the Well, which issues XXXX decision

cash understanding Rings to, was There still say, what a fact, that some is case. and the for again it's little is basically In my was It's I a long that going discs, first to improved I flow scrutiny thought XXXX of to business, my pricing something was forward. such make which with I business lot different a will go. will controlling and the way to receiving at February and the improvement. to, will of exposure outcome showing bit that in view looking say, an a receive

things weekend the it one on So radar screen. that the are going to sure engine not and it's certainly I business. inside am through And I the of Elmer big get this

else like time you is at sure. would point? there We Ken, at this spending for to will be looking that add anything

Ken Giacobbe

Yes.

John. I think you on hit it,

good. revenue of it was look about up we business, were at As We X% year-over-year. the that

seeing rings the there disc We in seeing earlier mentioned doing some of I of are growth. debottlenecking. the second business we favorable they profitability. the well. terms The improvement impact well of the disc CapEx there. as half invested We are the business half comments down first exit we what in more terms are the of than the year in-source as in is to material, some Volume but

So a to resources lot be of there, team what down the deployed are work knows to the still done do. and but

Chris Olin

there's $XXX segment? the value? business then of million is or that Okay. each would is, my out within broken or And portfolio, at Forgings that guess, by then the GRP curious segments anything move? two thinking for Thanks. cost look business was, EP&S the question titanium done was And the the the terms second you would goal, to Thanks. I I if And what stay in new just I enhance when I that be was will quickly, guess

John Plant

this point that No. future. the things That in the will one of we time. the analysis I will be talk can't two in guess, about I give between the, you at

Again, investment terms of good is think very It those for forward. any going further possibly business. a uptime I I be, solid management selective I it am to be good And and terms it of trying should and as make stuff normal mills looking in can being that as In yield generative think raw do. should and throughput just on products business. cash that's

Chris Olin

Good luck. Thanks.

John Plant

Thank you.

Operator

Martin of Jefferies. from comes question Englert next Your

Martin Englert

Hi. Good morning everyone.

John Plant

Hi Martin.

Martin Englert

the cost I factored about into headwinds? touch scrap company the for as long then, there Talk to company? XXXX? the remain done guide they year? mitigate spreads bit still on scrap will the What's exit wondered a the if being remains you it the could what's headwind for a as And little

John Plant

Yes.

So scrap now still XX% basis. year-over-year spreads right were up a on

the the a utilization team job first We is GRP probably we is headwind in What as doing of have XXXX overlap will last a nice performance. to half the scrap greater start business. year's for

at XXX XXX GRP points improvement of you year. it's to basis about basis scrap look million basis and profit. team in XXX could you QX If plus $XX that points. basis about to is worth anywhere XXX QX, go Each out next utilization, opportunity between going more as we be as XXXX. into go There points sees we point for

Martin Englert

that then provide good base talk sensitivity LIFO And LIFO assumptions Okay. for and there. non-aluminum Thanks for for and your other on impact you guidance around from aluminum. impact a the metals about inputs? the detail you there Can

John Plant

million probably the should annual range of small, on to an in It million be somewhere basis. $XX $XX

Martin Englert

for detail. that Thanks Okay.

Operator

another question. has Seifman Seth

Seth Seifman

fasteners. in some much. very share that Thanks you Ken, are mentioned taking you

talk between declining intensifying earnings? trade-off a about share the about and and talk prices. Can of and also market little bit there? How competition the is You state gain price much the price

Ken Giacobbe

the share. us QX in Yes. about talked some Well, price more The we give fastener reduction. We business. offset volume prices. where advantage the more Similar increased margin to in last and of we price fasteners to about get quarter, did volume we more mentioned share the in expansion talked than

QX. seeing perspective an thing are in from the fasteners operational same We in

better So volume, as we that margin that given expansion have through more mix, price but run we business. little bit of up

next confident That's expansion. So in favorable to we are as a we year. going terms margin of

John Plant

are in looking last come well, each perspective new of as now profitability getting the Board looking is a thing is particular I an comment and important in going the to in out reported from that discipline a view of it it or obviously been we at am half weaker. give and contracts I second that have year one was and the in basically at quarter a pricing look company. And getting now of introducing stronger is terms in at

don't believe I philosophically, in business. And buying so

where the is important. rigor so We pricing right it's the to technologically earn in one have and

So wanted know from. make to that I you I come attitudinally, just sure where

Seth Seifman

you very much. Thank Okay.

John Plant

Thank you.

Operator

That's Thank time we your joining patience today. have. Thank everyone the for for all you us for you connecting.

now me disconnect. You

John Plant

you. Thank

Howmet Aerospace (HWM) 8 Feb 192018 Q4 Earnings call transcript