ARNC - Earnings call transcript Q4 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Arconic's Fourth Quarter 2019 and Full Year 2019 Earnings Conference Call. My name is Nicole, and I will be your operator today.

As a reminder, today's conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Paul Luther, Vice President of Investor Relations. Please proceed.

Paul Luther

Nicole. you, Thank welcome year and fourth XXXX quarter Good Earnings to Conference full XXXX Call. and morning, Arconic's I'm joined Financial by and John Plant, Chairman and Executive President Ken Chief Vice and Chief Officer. Giacobbe, Executive Officer; and Ken, After comments by we take your will questions. John

that remind statements future expectations. I and will to discussion you like contain today's would events to forward-looking relating

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

we've financial addition, financial today's in be In the some included measures most in in our non-GAAP the to appendix directly discussion. presentation. in press found measures Reconciliations release and comparable today's GAAP can

the like that, turn over to With call John. to I'd

John Plant

morning. and of to restructuring, share moving performance then and possible. I I aluminum have Good into after intend do and visibility I parts Boeing reductions, metal the MAX, assumptions, morning, as have everyone, a cover provide between ground much this welcome lots as today program, that to sales, call to we recognize cost of finally movement, the lot these count and the

priorities I discuss then outlook. plan the the major and year move and to to the we've these of on quarter performance to taken that the results XXXX approach full begin cover and the

complete. on start Slide X. been majority April effect the The we has X. to are Today, separation announcing the Let's take on targeting that we are of work

future all is separation [indiscernible] of companies X. the track public The February We future first listed is for April the with are the two two companies into operating week, on steps. planned date next the and

two for York an are on targeting XX Investor companies companies. capital Regarding New allocation, the structure, we including strategic and future both in financial February Day outlooks for priorities the capital

the share. margins performance items and at $XXX results. fourth earnings unusually effective geography tax Let's special tax per was excluding fourth to was driven results operating solid. was excluding We XX.X%. prior cover earnings. of record for million and items record to essentially move the The the the operating quarter and had were rate quarter Operating income income for Slide an X This quarters number on special and high by

maximum Forgings XXX while the by EP&F margin and quarter this year-over-year year basis basis $X.XX year-over-year. demonstrated operating every quarter. guidance year-over-year per was sequential for $X.XX points, XX% Fourth and EP&F points. GRP XX% XXX quarter range. per the the up and earnings end margin expanded quarter Products Engineered up our at [indiscernible] GRP year-over-year expanded was and progression in in share share and Earnings In of at for Both year

prior Free XX% the from conversion the achieved are a cash midpoint year-over-year guidance two and was Arconic made income. by net conversion of to free earnings a flow the time Please $XXX very XX% separate free cash and flow in provided the at cash flow exceeded million the this note cash for companies $XXX that of and million has guidance call. last free improvement up of good flow years for

repayment $X.X included of was quarter market fourth after of notes. a balance the billion million X.XX cash repurchase X.XX $XXX million The repurchases billion convertible share billion repurchases The year-end X.X share of and shares. [indiscernible] share of

over of before This company utilized not Howmet will approximately weighted repurchased $XX.XX. we year [indiscernible] carry of the open price which common into leaves $XXX For XX future million the a at authority million average shares separation. purchase if

basis year-over-year fourth an another to improvement to a record was which net from low points times. X.XX [Arconic’s] lastly, which XX.X%, return and by Net debt times on And record. was improved XXXX quarter X.XX was [ph] XXX EBITDA assets

over detailed of year. view more Ken QX a it and turn the to me provide let Now to

Kenneth Giacobbe

you, Thank John.

quarter fourth and aerospace products which aerospace financial X by flat a In growth, X%. volumes in Transportation XX% Ford had EP&F X%. the generation up the $XX growth packaging revenue XX% as while were had up had organic as organic Automotive we offset and X% strike. declined F-XXX transitioning its increases Commercial represents to let's X% Now to industrial than EP&F GRP These year-over-year organic Slide decline X% X% and for quarter. flat. was to and of GM is model due the more move GRP with million results of the next was the in lower revenue,

consecutive the million was exits We less $XXX to due softness down Operating year-over-year. and special price fourth segments delivered Europe increases million quarter and profitable X% of expect span we fourth driven by for Price to and year-over-year. Transportation in construction Industrial impact and favorable of up intentional is Aerospace, pricing all $XX XX% the Building quarter increases Commercial a excluding favorable continue. items with products. income across

aluminum net Transportation and the operating the unfavorably material including $XX Weakness $XX Commercial markets impacted of Similar of fourth price, our cost price operating income benefit in a consecutive million we reductions. raw was fourth our Automotive to cost income to quarter. Favorable in quarter quarter. by in had

driven were flow profit, cash benefit $XX improved compensation in out performance equity of higher This quarter. Net by by equity free million cost cost the and year-over-year and was by partially variable value. reductions led program on generated costs which offset which were

industrial quarter. products the fourth of the our transition improvement was impact showed plant more The in $XX year-over-year expected, profitable As to Tennessee million.

reconciliation XX the appendix. operating excluding Slide items included of of on have We the income special

we with $XXX one the adjusted flow $XXX driver on improvement to than days with free improved flow $X cash planned our excluded separation. XX year. In million last capital related fourth to of being the fourth the $XXX unfavorable the a at in was day year-over-year or guidance, working The main basis dollars note, quarter of million. cash more year-over-year Days quarter million record have a quarter million Please consistent collections. cash was

of which per down excluding fourth Capital million share in were OPEB Diluted in earnings $X.XX on were share of million, $X.XX basis. the costs XX% material quarter, Pension lower per and items operational the share year-over-year driven of diluted the and and $XX expenditures of raw special by more $X.XX. a quarter contributions comparable XXXX. lower were higher million $XXX primarily $XX than was quarter was than payments million which counts was the $X.XX, earnings period. per share higher improvements $XXX The

operational noteworthy cost year-over-year is It reductions. points. This Now XXX improved to basis improved pricing, fourth Slide year-over-year let's improved quarter move the basis points basis improved has expansion reflects on margin while ongoing and margin X. the XXX XXX In a in improvement the margin on year-over-year Arconic's EP&F quarter GRP expansion of each that basis the improvements, and trajectory XXXX. improved points

special Now summary the The Slide in results net move items reported to special $XX primarily X. the included of a let's quarter the In related items million our three [ph] on fourth impact items. to special items. favorable quarter

which a a First, related tax liquidation we into recorded selection subsidiary's tax caused a the parent. of to U.S. our benefit assets U.S. tax foreign $XX million

the The second special item was associated a cash planned charge separation. million of with $XX

$XX closing the plant earn-out XXXX. to the received associated that of an in we was related Texarkana with cash Third, million in fourth sold quarter

details items were and XX, the Slides quarter special Tower our I related plant would France, at and XX More largely quarter incurred but by offset the to and for proceeds. other for fees XX, be advisory can the concerning fasteners related appendixes. out fire point found Grenfell in legal costs in on

of assets our items line. special businesses not do require returns been majority have with divesting consistent or stated year, investment the the of or For significant to that with focus, are bottom not the capital material unacceptable plan fit our

year for a would of expect, approximately the charges As percent were the you non-cash.

expanded was Now The million let's move results In to was XX%. was billion, operating EP&F's X%. Aerospace, for segment revenue profit operating including higher at $XXX cost resulting on favorable several volume quarter revenue XX.X%. was the lower segment segment by The driven Slide year-over-year X. operating pricing, material the up to in $X.X profit costs, quarter fourth by XXX a items reductions. Segment points and in up basis record organic increase raw the margin net growth

Segment at prices, utilization. quarter up in aluminum the favorable in improvement $XXX flat $X.X profit and revenue driven in also net improvement by was lower Commercial The was reductions, million profit the revenue Transportation the a favorable cost Industrial XX%. billion, internal was segment GRP's was organic for and operating In quarter scrap fourth the markets, fourth record year-over-year. year-over-year operating pricing

transition challenges in Products the Transportation. to helped increased extrusions aluminum XXX Industrial to Automotive and Tennessee offset Despite revenue flat The Commercial the growth, basis year-over-year organic X%. declines operating and in margin points segment GRP's

Let's Slide key achievements move XX. fourth to the quarter on

increases. fourth revenue pricing as fourth on record in continued year-over-year profit basis. segment we Aerospace quarter and in business X%. EP&F Favorable was revenue quarter operating million the price in up EP&F had organic a $XX improvements achieved Our year-over-year

segment the price $XX this in For were year, million. improvements

XXXX. rings and Aerospace ramping Finally, expansion expenditures in complete in wheels our the and up are of EP&F forged capital

segment Industrial Products XX% Our was million operating in profit. GRP industrial and Transportations drove increases. organically quarter business $XX year-over-year had price Commercial revenue GRP's record improvements year-over-year. of fourth Price up

the GRP's points in on of resulted the XX%. the million. flow of quarter XXX of flow same full-year was were price $XX utilization free basis year year. XXX $XXX basis net assets improvement last For points improved internal in cash conversion for Return scrap versus this segment cash was year million a XX.X%, Arconic's year-over-year. free

projects. CapEx projects was year CapEx A return Approximately expect was less XXXX. was of are now X% complete be we the than million as for and gross the $XXX CapEx of revenue of million on down X% to approximately year-over-year. CapEx revenue seeking percent our $XXX majority XX% of spent in a and

billion debt. outstanding $X.XX cash million was $XXX $X.X Our paid and approximately of billion after approximately down repurchased of balance we shares

to for move year. let's Slide financial the the key Now, XX and results

growth was GRP Aerospace organic both Packaging. revenue growth For $XXX the year special increase year Commercial X%. driven Aerospace, $XXX by billion the with were double-digit and and organic X% income Industrial million million the and Transportation. EP&F was was up up for revenue up in split the almost year-over-year. segments. had items year across increases organic X% equally in EP&F growth $X.X Price GRP's Products and Operating in for excluding XX%

income $XX Lower raw favorable year, Net the price material by also year. plants, at $XXX aluminum was offset by our reductions impacted and costs were costs extrusion favorably volumes partially operating savings. program driven three million [ph] Higher million operating for for the Tennessee improved of approximately by income to million out our higher This Aerospace. driven including was which of led year-over-year performance. $XX challenges mainly by compensation by cost generated aluminum plant, operational one items; cost

million million was XXXX and OPEB than impact flow million $XXX pension liability XX% Adjusted net rate. of $XX free the the more approximately $XXX were $XXX by were approximately million liability was Pension contributions impacted which was $XXX approximately cash XXXX. and less U.S. and as than pension XXXX. million or payments $XXX $X.X year-end in the At billion approximately partially year-over-year these million. returns the returns discount discount rates lower up offset lower OPEB asset

million diluted airfoils, expenditures and year earnings higher significant driven million share making $X.XX lower items while XXXX count material were special operational for The in per of higher was were forged $X.XX raw products. earnings of XXXX. rings, $X.XX share the per Capital aerospace wheels lower down share $XXX and XX% of and compared per than improvements Diluted excluding were $XXX primarily industrial share investment costs to aerospace which by $X.XX.

and stands billion John, debt which stands structure the $X.X turning Net XXXX. million. $X.X year on associated to the of at cash outflow the the which and let times billion XX EBITDA improve update debt of billion. it XX% repurchases debt despite fourth X.XX net share after briefly our finished me to of Net quarter $X.XX compared debt continues is approximately approximately with an at capital $X.X in repurchases. We Slide to cash Gross an share EBITDA over of Before improvement on the is by debt provide €XXX with to billion executing back appendix. year-over-year reducing to the is

that, to will I over With it John. turn back

John Plant

which ahead were the operating full both the of EP&F million is original XX than our commitment items. and let's ken good annual $XXX move Thanks a cost results are saw commitment. costs year year of higher million. $XXX focus to million and annual our increases million Price Slide and run and be million projected key for progress GRP. I will $XXX The reductions $XXX the Operating where we $XXX were reduced for rate to the at give of you by

rings common diluted capacity expansion Tennessee expenditures capital revenue. As was expansion the are and associated expansion $X of approximately CapEx result share rolled airfoils products. of stock XXXX year-end in our engines Capital the on wheels The XX% focus which down the in was of X% repurchases expenditure $XXX detailed a European was of was industrial major year-on-year. slide, the million $XXX count share and excluding with the the million business; separation. million

proceeds of approximately and income closed XXXX transactions of impact. of in CapEx signed exceed reduce by limited operating operating quarter Divestitures $XXX million proceeds $XXX $XXX close million divestiture to Annual the the or are annual first Two costs million. with will expected approximately approximately with announced previously will revenue of cash separation.

me separation. let move to Now,

February. is XX and by for to is is and separation today planned April Corp XX. are effective to financing We the an made the to financing the January commences for X. We The filed allocation. to step XX where greater pension spin planned next be Arconic management, of Form amendment This we of on The mid entity. even targeting XXnd capital structure completion by February providing Form visibility

but for everything listed two X. entities separation into a by date companies have This legal two planned where will X, April be public companies execution is the the two The operating of important February accomplished done separation time and the separation plans. the on related will future rapid incremental item CEO does is that on trigger I One February contributions. to last, upon very any The taking not the role pension the cash plan announced in XXXX. separation from

Let's Slide XX. move to

is earnings the effecting this which debt not the call while timing know, afternoon. starting is this you in call important As the financing Boeing precedes separation and ideal

plans except hence in throughout during a I numbers. for had the and details will conversations feel those current Boeing any guide have of Arconic December January Naturally, many We their to and provide every with XXXX. exchanges reasonable late week not have

will QX view for provide insight set more numbers April much Day how in three able quarters will of flow I Arconic as plus our of Aerospace guidance and Arconic. our be February going Today, X XXXX. will for by early earnings will share we cash naturally per provide be The a which Investor is achieving to new forward. this see they hence and revenue split At into Corp interest I free did timing additional clean

in Now let expected Boeing that a expected billion the this uncertainty to increase in provide plans, $XX.X Aerospace that Boeing me but X%. growth the their MAX in than will the would $XX.X when numbers, revenue exactly MAX the guidance If of announce to we be me range be Revenue the given future turn bandwidth to to year-over-year to flat wider specific increase range which with we of firstly, and be situation. noting XXX normal. XXX exclude is billion to production organic the to year-over-year. is X% include the causes revenue of to is were to of impacts targeted Aerospace

and XXXX is truck orders into of inventory XXXX We Industrial in freight year-over-year lower by growth expect continued new the headwinds plant Products slowing Commercial driven by Airspace and in price growth, transition the in Industrial and increased driven our Tennessee levels. more increases profitable manufacturing to Transportation experience current Products. expected

by wheels products. are those market differentiated to mitigate weight margin forged our by share targeting gaining lighter our business supported for impacts We

to continue $X.XX be expansion special We leverage reduction now Moreover Hungary market with footprint. Earnings our rolled excluding headwinds The mitigate aluminum items, expected Transportation of steel in per wheels. and wheel our per we in wheels global is to $X.XX will range cost is with share, parts low-cost fully actions. Commercial will the business operational penetrate to manufacturing share. global

be increases. in midpoint rate XX% share earnings At is an driven as to plus expected reductions to of the is per $X.XX for our share by which approximately view XXXX year-over-year Year-over-year growth the run year-over-year impacts cost cost XXXX, of XXX XX% the incremental as $X.XX price growth MAX. the action quarter including the of current is reductions in Earnings approximately the be first per at well increase continued in midpoint. will

year-over-year the revenue rates. in and flow million are cash million expenditures Pension than cash is drop approximately by expected contributions X% $XXX the $XXX less XXXX, higher free discount and driven payments. to between be and capital in Adjusted of be forecast by favorable to $XXX driven than earnings, of OPEB restructuring

conversion on at to XX% flow cash be February XXth. detail expected Free with to provided Day Investor greater is be

been regarding and our changed nothing liability. Grenfell, litigation, has regarding view has the expected our the of Finally, no the matter, there stance of outcomes this nor quarter, nor towards activity

like And line to the I'd open with that, your for questions.

Operator

[Operator will David Instructions] question of Strauss Our first come the from with line Barclays.

David Strauss

good morning. Thanks,

John Plant

David. Hey,

David Strauss

John, I want to up - follow I MAX. want on the to

you would of like kind to going and assumed, So is, see it around maybe margins us you've what understand detrimental $X help but about at to volumes there? on talk all you're you on lower what looks I million can what ship-set not it's your exactly expect content

John Plant

Those really don't read to I'd I'm value aircraft, say to the by values. which in next will probably on It always any aircraft and point. in provided provide and answers the - margins I've calls, say and the feel what to want and are well are I've unwilling follow. been what ship-set And aren't next the this do I'll the, at questions ship-set analyst reluctant give that too but never because next be, the earnings the I far, of I've which specificity I aircraft any question disinclined will on. fact guestimates probably reports,

XXXX, hit say got What assumption is guidance, view in to exactly I'm to I going to conservative Boeing a fairly build million about in take the both it's is, say employment minus our a tried is sort consider. to getting only the how to especially be plus have - importance for would position things we are certainty. structures. and while shed cost it's Boeing of given is, in We've assumptions to that then, easy back light - of us the greater know can of which when actually high particular made future And and published really relatively I – to profile labor, mean really address of importantly revenue XXXX I are will we those that say because what level very in MAX. the we skills you we've the or the $XXX think all I've the – what in the be us U.S.. the for I'll important

got and Boeing so evolves see itself thing to how the position the whole And then over time. you've also

or what with view is those viewed currently you to now changes mean fairly and now nine the what FAA. six in the is statements assumptions Chairman a resulted I week a seen aircraft halted last and see made the the and the a conservative optimistic in the assumption know, to regarding FAA many to and we situation months will as as we've restart over we're what's production fairly where last fairly release the in according of has by when

greater that. point cost it, carrying why So think be to clarity I and need particularly have we confusing to itself this of I that say in what is it into the and that's is it built I'll it's in may above the we we rise mean, guidance time. and therefore, - the that that for camp at the what and pretty we that labor how at some tend critical assumptions be production difficult what is prepared optimistic And is when manage is is point, what we've to aircraft and

a our to confident I this wider account call something we going and given achieve normal guidance clearly year. of that fact you go ability and you take as feel little we're I've some I updating the neither in uncertainty did of the through bit be provided than don't to But that to out

are that to we raise earlier occur you whole and and February for we've say to this are that market color I’ll on having bit Day I'll than come tried debt fact out we And the on the emerges little afternoon just how approached you starting to hopefully effect to labeling is say further timing. Investor the XXth, give normal really to financing this a the that and the separation to meet going of the situation. in I’ve clarity We're give updates the -

guess, So thing all two but or pretty much to things most later, possible the a timing. I been separation I preferably are was earliest the have interlinked company these believe important week for the and achieve

have gives that a on view hopefully this we've we how wide pretty So been you thinking approached it, and where David. of

David Strauss

you John. have and midpoint, Can EBIT are guidance, you've EBITDA on Yes. with your That's as you're into that that? your you savings, the maybe a Thanks. looks at pricing, And assuming EPS based helpful. the the little Thanks, bit? offsets what relatively Tennessee some it guidance, flat followup, and got up a and obviously just baked us of help walk cost the but benefit, there, like

John Plant

clearly to most where reduced XXX and start then Ken. for compared the is to we essentially it hand I'll production I start, and significant across would North say the negative Well, and thought mean Okay. be reduction the There we commercial a of - with the is associated truck the Europe. the essentially America both item. and I'll just not business in trailer some build, transportation assumption in then of

with flat then fairly ones so think drags I've how the on continue have to there's some which going both in and our on And industrial and that guidance we terms we're that on gives you of that price, countering then and currently mentioned. forward the reductions, development. the trying cost - EBITDA say ones we the volume about I'll the

that, I'll and Ken? So those to to are bridges want anything else the add you say major, that with

Kenneth Giacobbe

a items. in to little that won't XXXX aluminum bit think XXX your point, in repeat I XXXX. John, of the enjoy we tailwind is But did biggest an MAX that

an XXXX So that comp would that's flow. driven just the then improved performance in in by to a bit offset higher unfavorable, free was be cash variable and

is XXX the a MAX the driver. you of offset there. an little So biggest have But bit

David Strauss

for time. thanks the Great,

John Plant

Thank you.

Operator

line will with Seth JPMorgan. the Seifman question from next come of The

Seth Seifman

- morning. aerospace sort which the morning, is directed the of about and to degree you or kind been to expected not? and online rings of sort profitably on Thanks capacity during and ask XXXX, for good qualified very airfoils to any good coming the new be to MAX much new of that I of the wanted toward and be that which the and expect had producing timeline

John Plant

numbers. in assets, say fact for for the and significant production and in Those engine and production engine. assets shipments in in airfoil the for as were critical to many in initial half will occurred in for airfoil XX,XXX particular, of are were assets know, those California. ring for of LTE solely each going see invested the the and rings Whitehall, then I'll increased not investments and assets trials commenced we've relief [ph] you - not the there that production December, our say in of - XXXX, Morristown first has coal ton business they capacity LEAP small Okay, welcome press It's in The for which those the for provide we the the casting programs have.

assets at quantities on leaving running, running still for get in the think very to I a XXXX NOL see I expect the also the the program those our a left be And rate to during be end shipping quarter, increasing will increase everything utilization, year, of by Seth. coming high quarter I something progressively so by say of I'll we exit year capacity the productivity but time as we

Seth Seifman

Great. Thank you.

Kenneth Giacobbe

strategically in as I the big not contributions just going actually critical well we're make bottom year. the I'll as but important investments, line see So to them say just to

Seth Seifman

side that a what followup a years the was a as doing on when facility can then And sheet Great. and what Tennessee, we rolling similar think ago. side question on the few about just

in it and that or to might here either of where beyond. there sorry we're now about of impact think will to things closer in or that the in ramp positive of XXXX up capacity and from size, new kind XXXX kind have kind territory, is way to any I

John Plant

do say of XXXX. I I'll improvement those sequential the all, assets Tennessee of that the course the during first see industrial in continuing in I -- I welcome XXXX.

the quantity. deliver of will of from second the when majority saying, XXXX, the is half commentary along major there in previous impact the those assets stream. because recall be improvements be, won't when that there second begin of but is we I'm brought in half will be that to the on way not the in You'll

XXXX production here being I've about going - into to contracted in And clearly, the in of but pounds, is highly of XXX numbers the XXX industrial the my That I'm most important XXXX because I'm which with part coming distributors run Ken of capacity on with the mind, back-end so then with we've and look it's the to most million beneficial. thinking many for million year that. rate got

Seth Seifman

Great, very thank you much.

John Plant

Thank you.

Operator

The next Carter from with Melius question the come of Copeland Research. will line

Carter Copeland

John, Hey, good morning, Ken.

John Plant

Good morning, Carter.

Carter Copeland

going fair? doing purposefully for in or has to on off, a and the mean, your XXXX John, a managing you're after labor but to is XXXX it it's just you staff on the you're capacity to that you're staffing? hinted production it to little plan facilities resource sounds - take like but how that in just back principle, those on you in planning staff the I costs, expand way at, bit hard that some put stranded

John Plant

that some to paid most looking assumptions going to The my then by, be we maybe it's coming the both direct other labor obviously, going it's, time, middle difficult themselves is and all production actually current commented will to that and we of going to expectation and seen a the decision, into move clarity, it. lot the at trying we're the and clarity a noise view flexing, the means as as structure cost we regarding Yes, that about greater up is production, are I've regarding flex decisions different indirect thinking and and year clearly well. how at -- patterns we because also that headcounts We're say XXXX. what vacation. shift critical labor going I of have have final have partially of whether to see deleting decision a to contain looking We're labor, greater be over it's are I'm that of indeed way Boeing we we're of when the much and reducing be

floor in to healthy production and and And upside clear, then as though, going 'XX and that to shareholders that's we the responsible going are though I'd should if we future that's the custodians feel cost that's as we're more to if just do much and -- is with we responsive potentially become now protecting But labor it's as going going the to And got even be the views not our I'm to and good trying our we're a assuming upon personally or in say our optimistic, if then say color not am die as guidance. money. are going I willingness as hold that to effects -- possible, of for while positively, we I'm to call what because very balanced necessary we're approach, planning, not. structure thinking because not

Carter Copeland

us Okay. think the perfect contributors and about $XXX XXX coming the the $XXX biggest about and what can follow-up, to given And the from? million worth of is on the that sense. not just you growth in then what's to that sense give growth the a AXXX million offset -- think you It headwind. a offset we happening embedded should where share where of lion's How as the makes of when

John Plant

that that seen I spot have We or mean then is for and cut like the big through that. is Obviously us. a Yes, decision. not does spot, bright would say, what you first there as because been XXX Airbus a we a brighter the certainty all is a is the rumor the XXXX-es, bright further is that where we've you really XXX around defense, recent really no say take also and then flight about spot and I'll and go, whether assumptions, and can know be

us spot up that our sales a into strong particularly program. very of in around XX%. And And in XXXX increasing aircraft for were defense that for and F-XX bright the fact in quarter, and levels the quick fourth see deliveries we sector as engine

Carter Copeland

Great, color, for thanks the John.

John Plant

Thank you.

Operator

question come next will of The Company. from line Khanna Cowen with Gautam the and

Gautam Khanna

given differences giving can Thanks, But couple I and the a and of was John and questions, that speak can't side the in XXX side you engine how talk rate. the the you've the to your wondering Ken. a you each, structure I on know us past? are assumptions specifics for about first, just different between have I delta on

John Plant

production to at difficult say that Yes. the build I'm In the have part while side, going a forward some structural to and it's thinking their it's early engine the and spare to aircraft, down this down the with let's to the be our move around approach engines it that GE bring on flex your have of important, up up peril. because, ability but but production on to we I'll pushing the discussion and opportunity smoother of the and the production of in is you side -- year, call

cut for the or we for if it then Arconic, try number and but will of impossible, XX of not the almost were that that back to XX whole a rebuild or to And then just to XX, become industry.

say that does production. a of side that of matter I like doesn’t This difficult. So not will anything difficulty not is side and flex. structural complexity the even flex though

believe do both building overall both seeing in is months into so of But we GE this particular but be I for engines, it for metals been world therefore how production these greater in both of wish so – ability spare that can in and about again, provide the what living the ourselves business. cushioning spares smooth those we should of I'll builds which to clearance is, it's and at skills had up that the I move the the that of a exactly the planned, and we critical view clarity as cloudy. within were are - have being help XXXX. also and back specialty will considered thinking with again And that production yes with, the we’ve year we and then the we what engine next don't some we and inputs XX move material manage obviously inhabit we beyond, moment and and we it say,

Gautam Khanna

know on That makes you on that's discussion any down shipments guys, you at GE lot of cash the cash the were in there Has to put flowing I the or make if wondering around GE rate or with I'm guys. the been XX, interim sense. terms structural now right lower

John Plant

discussions get We've that all. after that. around with been When after paid at course – and there no we of no certain has time dialogue on had we ship GE we

Gautam Khanna

downturn guidance, at your you embedded you transport on mention Can one did in sales some transport of with share on and commercial Okay decline the last what finer expectation to you're is for point and expecting a gain. the the offset commercial put EP&F?

John Plant

- to Ken it light assumptions steel all we terms with new look share bottom transpires how year-on-year new for revenue. further it to successful how Again and do is I'm management in Okay. baked both even affirmation, to line then the managers I ability at or influence take wheels. And of the memory weighted the -- into around for into about in gain how XX opportunity against due also fleet XX thinking have we cost is and that capacity in to the million of minus are our plus

actively our So working the deteriorating sales of at, we margins I'll are trying while business. say not maximize to,

Kenneth Giacobbe

that's expansion us online more is structure this year, is the 'XX rolling came going help cost much lot that a out at thing plant One Yeah. part Köfém favorable to of Hungary latter there. the into

So penetration said, steel like John that of wheels. combination

at So across only XX% look them right the if you now wheels aluminum. are approximately the globe, all of

could So triggering here we process, and there we bunch but that there events think fickle opportunity on a differentiated a team how of has depending market an be. have is

more So business. go to already to ready there's triggers up if we bundled have of out take the cost

Gautam Khanna

guys. Thanks

John Plant

Thanks.

Operator

Korn The line next Matthew Goldman with the from Sachs. question come will of

Matthew Korn

questions. taking for everyone, morning good my thanks Hey,

XX, that a on separation free First assume the the Ken, any cost in just first flow, incorporating want should I secondly over that the over that, of for at then And question your excludes you're Like clarity cost of outlined be be for fiscal there how only? in the cash a great. number of the Any 'XX full should million over drags bottom XXXX? that that $XXX Page year exclude this quarter? Does over these actually would Is any of cash expected confirm expense? year? expenses your last million, half I'm $XXX at - these we much guidance to divestments looking is for example,

Kenneth Giacobbe

Yes.

Matt from excluded So are the calculation. the cash divestitures

the was If it on about hit cash of first rest drag quarter. hitting the $XX look and in of separation, the you XXXX in million 'XX in will at that

Matthew Korn

Got appreciate Great, that. I it.

particularly four autos thing and seeing, particularly highlighted some for transitions, regarding overall? Building into Second what's markets, and any on your the side? into for Automotive expectations mentioned Europe expectations there and state that into Are tailwinds Construction, end and the the Construction XXXX, the you of of you're Building spring the

John Plant

So roughly some business of in now you therefore, a we've low-margin for moving for out GDP BCS that we our that assuming and BCS. that about taken of talked picture lumps terms in line and with of we're gives

took achieved was So, I XXXX I I in would the previous say, calls, improvement the points of on and talked QX about the improved the year that actions that course in an we when small I than more overall, margin with growth during margin last that basis think called out. we've given it

it's and of million, truck it difficult terms more, truck let's but an and trends are mainly aimed if be markets. more you as underlying specific as look need we are wouldn't the car out the to parts $XX of say SUV of I pickup In gain versus in terms at of what order, anything know you you from called much America that, North to example, gain

GM of the notable would multi-year a is the really strike be drag and contract hopefully as a all And I one a changes areas drag why less it's in fact, I'll changeover, done, because that think another and of contract. the in well from reason can't is is, XXXX less the say at as four any

us. behind that's So

of And stream then, of increasing business coming time I don't previous think major May, commentary, with the But you may stream on won’t model around for successful business year were June on recall year. comes truck I we the next a we OEM so pickup called sort our ready have a SUV as out, in middle major name the and this of that introduction. from morning. in U.S. the late about the

So how automotive. think that we about gives you a picture of

to I'm in XXXX. fairly, it to say for that would good outlook So going I pertains say as fairly Corp -- Arconic

Matthew Korn

right, sounds it. All much. very it like Thanks

John Plant

you. Thank

Operator

will from of line Englert The next question with Martin Jefferies. the come

Martin Englert

Hi, good morning everyone.

John Plant

Hi morning. good Martin,

Martin Englert

airframe detail little the more ahead a understand come the products aero your as this engine being Can does at side lead units help and times you the maybe pull or and kind by you provide built bit side, major far the it relates when you OEMs. how commercial of look to demand for specifically us

John Plant

by of each - the it's quite But each different products. of the

aircraft per taking the towards effect reduction I that think I of was that XXX we was month the ach it when down applied just was to So think from XXXX. about XX, think XX-ish end that

the – business it in on So in starts the in of terms XXXX. first the parts the impact of of is quarter mainly

is months based let's those more say nine time there structurally So a on let's least at parts. lead of say sort

For then builds probably of engine, first for end but again it's the the XXXX. change ultimately of in the the longer year, months those than impacts see side, of they we structural will half in of this that

build. for lead I'll availability, an long then say both aircraft engine into own and scheduling, it's the whole build, material - a So our an getting processing times,

Martin Englert

Okay.

John Plant

months plus nine the think minus I or and mainly plus.

Martin Englert

aero for then plate hold heat-treat the And on structure true aero Okay. same the side? would

John Plant

Yes.

Martin Englert

one can discuss last one if potential… And here, could, you I Okay.

John Plant

can pulled more like to much but It takes don't a in, time be quickly, obviously get it long cut off deliver.

Martin Englert

positive wherein is one, post increased one from you potential I if content discuss revisions downstream the going stampings XXX products XXX implications plus on last can more to in like it USMCA on And understood. recent Section could, the autos. Okay, side, include metals aluminum body the

John Plant

this announcement the saw We weekend.

trade for for common Regarding it's the producer to was that obviously clear is us additional parts effects that desired been expected. inclusions of alloy some didn't really case the very and particular those the and products those of because policy welcome some of as metals effectiveness secondary a it's of as have guidance a that in protections the move

some the to those find I into in into able of countries mean, only impact, way terms were the other it it the U.S., importing of been its also had a has then secondary that short-term not metals but appears U.S. parts but

impacted fact natural production of was aluminum is the to some negatively total with administration think So, I and trying that. American North the deal actually current

give positive additional to we've difficult extruded – impact, don't but hopefully the today possible. process clarity and thought obviously part right in U.S. the therefore, of the today. now to really result a are and that you that over it's the just And We've noted, what so is in we've products quantify of those hasn't for business for may seen has tonnage guidance we it yet is it It's something rolled been not this. the listing have What what

Martin Englert

Okay. I appreciate all over separation the the on year. with the execution progress color past there. And the and congratulations

John Plant

must than I I today. should normal, much. apologize guess, thicker tone the a my to It's for Thank got be you everybody very voice cold.

Operator

And question the of will Suisse. from Credit we time Curt This come have for Woodworth line do with additional question. one

Curtis Woodworth

good Hey, morning.

John Plant

Curt. Hi

Curtis Woodworth

the that or million MAX, of more defense of comment of or impact weighting a first just much from half a net hit So assume year some the you that pivoting MAX the I a the number, can and could i.e., of then the offset impact assume into revenue by on higher cadence you revenue is gross half? negative versus the capacity Airbus second $XXX issues you

John Plant

of parts, gross Airbus like for and not very say I'll see will to tooling those. the make that while you engines don't Curt few constraints We specific alloy such that. is doesn't less and trying be The it the that flip is so then up it let's really around great. we're all, we work really oh more a specialty Airbus making these make do and of us more. It's build then and sell desire more flip to more make We to of easy it requirements see and First number. go and say suddenly can

of India. in the recently can will we know the about for Geared also which And some we Turbofan, read there, that that be issues but

So it capacity isn't is say to fungible. that

It You to move like doesn't that. work else. somewhere it

other it's many the sheet itself and Clearly, factors. I aircraft say, but constrained by rolled would a is if

go so elsewhere. it's or offset So is million, it You can say $XXX but a sell now a -- just $XXX doesn't million we can't that's by going,

gives was that of you And second one. hopefully question? your So part what that the

Curtis Woodworth

the of the Or like a others say million be would you revenue in of probably are be safe and more part cadence majority given selling that it that the first ramped FAA it's year. mid-year how the the the Just would $XXX thinking? comments to from the impact of

John Plant

talk say to for production. about a months just Boeing then, said think this And what about for which know recommence, about like going be of we probably that again, and to because pretty on then the not going that to cessation cloudy they call sure, on in that pretty sounds unacceptable I announcement at thing is to noon this they it's I'm going it's to answer because one will rate. you me I'm comment not the neither that's going

obviously end sense, a are bigger year So you going is the more when year. the quantity strictly in because they producing building certain of a impact the not be the would it logical if in first just the it impact it the think in about half to maybe when have any, back of assumption, if

not willingness by may the that we At smooth to a particularly themselves. by it or same the inventory, bit little Boeing carry is be wouldn't of - time,

part view I was provided which come management is critical situation we then is a those really my trying which exactly of management in production. dialogue the how up help with how exit the going to is the in and inventory at most XXXX be try will rate all trying be to to flows a it the this to year the the we the moment I've of to with complicated – what with probably and And - about for which in part see labor from judgment thing all and the comment, right what early, to account of so, to the what take again, see that into the aircraft talked are

profile of also management this the a not to builds course the things inventory of aircraft is consider. no-build company plus situation labor So, and just management lot each strictly the and top both to year. this all the hinder It's and line say bottom during of affecting in

Curtis Woodworth

like have quick more And fill there, it plan XXX talk you capacity on, Yes, makes or that that? seems pounds can sense. to still at least then because having Thanks of aluminum you just million deficit a now, one emerging Tennessee, are clear real your at sheet one can in it much. any there is very terms seems what's with the about can on on, suppliers, the you of in beverage discussions side And U.S. like going

John Plant

discussions in had point canning no time. at manufacturers this We've Okay. with any

and think we’ve through beneficiary movement both from agreement aluminum quarter bottle I continued particularly and doing of let's by anti-plastic In the the is fact the precluded with say, third Alcoa the can. do be which to net from a we note to is [ph] glass going to so What XXXX. movements,

them been which might in therefore the markets about not currently, we're in in by North the a others, it. taken we're then interesting. with discussions which be of - position And but has that participating But the and with ourselves American not result capacity, out might future,

assumption year about market all the the this So, can. beverage not is industrial for

Curtis Woodworth

So then, very thank you much.

John Plant

Thank you.

Operator

now conference Ladies may conclude We this you today's you does call. and gentlemen, for disconnect. thank participating and

Howmet Aerospace (HWM) 27 Jan 202019 Q4 Earnings call transcript