HWM - Earnings call transcript Q1 2020

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Operator

Good morning, ladies and gentlemen, and welcome to the Howmet Aerospace First Quarter 2020 Results. My name is Shelby, and I’ll be your operator for 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

Shelby. you, Thank welcome results and Howmet first Aerospace Good call. to XXXX conference quarter morning, the I’m Plant, and by Ken joined John Giacobbe, Officer; Co-Chief Executive and Executive Vice President Chief Officer. Executive Financial Chairman and by comments session. John, a have After question-and-answer will we

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

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

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

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

John Plant

Good morning, and thank you call. the for joining

we’ll then end the move slides Moreover, April and earnings, the earnings in quarter Revenue questions. on share of get that expected your for with is through and favorable the profit first XX. of per line the were swiftly prerelease range. the prerelease to the Given at

contains the Products three If as on Co, Engineered last which we which Arconic companies. Rolled segment. Remain you Aerospace, reported products, of units primarily Xst is entity discussed Arconic and business and please. is we rolled Global the Inc., Corporation, April, Howmet units Then X on the the segment. the primarily into within aerospace the sector Products call four aluminum is business extruded SpinCo, on contains two within the and to which focused Slide Forging focused move on separated

company separation costs by The debt tax Inc., last during of despite costs $XXX were Corporate. operational of breakage. segment actually three The million, and quarter Arconic onetime March. $XXX and excluding million. divestiture includes for for for which in Onetime be costs final will CapEx to segment, guidance EP&F surfaced separation GRP the of Performance COVID-XX, slide strong the of which funded targeted the impact approximately and the the related the proceeds were combined the approximately The the leakage million. highlight separation was $XXX weeks

lower were Additionally, by MAX impacted production we reduction. XXX year-over-year rate [ph]

$X.X changes aluminum down divestiture X% the Moreover, the XXX excluding down and Operating of for currency – basis lower prices, up pass-through XXX and improved including GRP basis businesses. QX X% improvement. items, versus billion, improved and points of organically, special points. with special XX%, revenues were XXXX was basis points EP&F a XXX adjusting income,

XX% expansion. of a consecutive per We $X.XX, have margin share, year-over-year had record and now year-over-year. five up Earnings was quarters special items, excluding

separation Adjusted balance year-over-year, was of presentation. improved free flow, $X.XX quarter and delever maturity I end million the discuss improve which profile, We’ve our later debt cash excluding in to will costs, several $XX and at taken cash billion. actions the the the

a net up on return Lastly, to points XXX XX.X% assets basis return record after tax. was

Ken Now let more a of me turn it view over detailed for financials. to the

Ken Giacobbe

John. everyone. you, Thank morning, Good

Let’s Slide move X. to

were natural demand with exception were all expected. markets XX-year revenues GRP the at turbines the the up were and Also, industrial, EP&F was in aerospace So as did production up by for from up for organically Fighter. of driven year-on-year industrial X% and gas Strike aero, markets were impacted down XXX reductions which X% $X.X gas organically driven for MAX year-over-year. disruptions commercial defense driven have of other continued declines XX% are revenues which favorability in in XX% by We driven organically, XX%. by which industrial segments. demand prices for increased down both driven X% Market COVID-XX was X% transportation commercial declines, QX, billion, as our XX% Joint down by of were and by Revenues lows.

side left-hand the to this to by X. markets. Slide breaks of QX the down slide, Howmet slide we’ve provided visibility move more Aerospace On market. The Please revenue end

So commercial combined end also industrial, our XX%, is XX%. aerospace, markets transportation other is aero is total And Defense with commercial revenue. are of XX% XX%.

Joint We and expect due defense aerospace engine to both the demand Strike for to spares. builds new on Fighter grow to continue year-over-year strong

industrial of IGT, the gas section and pie, slices business. is the markets the Within growth other turbines industrial highest our

both and The IGT low and driven level last a increased at market was growth demand spares. expect it’s by in year, to see we XXXX builds for new

relates of previously we’ve spares the aerospace engine $XXX spares revenue. million for million, that approximately spares, IGT Regarding the aero defense annual approximately half and airfoil other XX% represent $XXX to Of and spares. communicated commercial

aero Aerospace’s aero end transparency defense in forward, increase but markets. IGT spares, commercial this an expect Going gives Hopefully, reductions spares. in slide greater we in Howmet into

the We slide a listed appendix. the Slide GRP, same have in XX is for created which

let’s Margin expansion expansion items, was margin margin to a up had XX.X% GRP profit, Slide year-over-year, points. Operating points, excluding basis basis EP&F Now, in million impacts. special XXX and $XX of or resulted XXX of margin COVID-XX increased Arconic If XX% and year-over-year, move X. XXX we total expansion back, despite points record combined had Inc. peel basis XXX that for of MAX

and special corporate to Howmet excluding is If target. our $XX into Arconic Arconic to $XX expenses which Corporate expenses Arconic million, items, of the annual is Corp. go Corp. and XX% $XX we a million estimate company to Inc.’s year-over-year XXXX corporate expenses, those with new approximately Howmet million QX split new improved on track Aerospace of

Moving to EP&F.

continues to productivity Our improve.

the $XX we for of quarter, For The ahead EP&F year-over-year target quarter. of XXXX. reductions first target annual realized and took therefore, was the from that Aerospace in net we’re million for Howmet million, actions cost $XX first

quarter. rate and charge million $XXX Additionally, million in a first restructuring after-tax reductions we’ve cost the net announced run taken have $XX another incremental of

with price. first of the expectations. quarter, was We line had increases million in our in which $X Turning price to

million had $XX year-over-year. the approximately two Moving Tennessee profitability forward, profitability the greater net returned we expect GRP the extrusions cost in reductions market to in despite in QX quarters improved good increases price also through quarter. conditions. GRP plant and by four

to approximately American Lastly, level. year a scrap the to record quarter. XX% approached North price utilization prior GRP flat was

basis move To greater even continued So Since QX, EP&F XXX converted In points, you operating we peer percent a operating approximately visibility, the despite move which of the expansion the has let’s profit EP&F points. increased margin operating segment X. the XX.X%, quickly for you pro in If XX. get to EBITDA, quartile segments let’s both has GRP’s to increased XXX top give QX year-over-year Howmet segment segment to basis adjusted we XXX segment XXXX, Slide COVID-XX and a Slide profit group. and profit impacts. of forma Aerospace of is

was company and to we’ve show where cash the Aerospace. would and give million. estimate incremental a free variable That we million quarter view due Now our also Arconic line adjusted capital let’s an of and share. be tied negative the to Adjusted earnings of $XX you free flow cash XX, Inc., tried working expectations consolidated was our to flow of per have move Howmet QX The compensation seasonal expected with Slide performance. what seasonal for for build $XXX in XXXX to capital the payments charts –

items, $XXX cash is for record the our $XX of million. a in from Free separation flow of special the $X.XX, at share, cash negative up QX best Aerospace’s and QX total Howmet XX% than XXXX. first XX% was is was Earnings per the approximately excluding flow free million of prior XXXX. since performance better year

relate productivity. primarily earnings segment and or $X.XX Howmet share to share. Approximately XX% from increased operational share per earnings due the of per expected, corporate Aerospace to per As improvements

costs approximately items tied our of realign $XX uncertainty. totaled million separation initiative to Most they by of and and million. we primarily demand period reduction severance to are million base Special of $XX severance the $XX into tax, were driven new after million $XXX the as move incremental a cost costs of costs cost

With to that, let it over me turn back John.

John Plant

health safety air top travel, to priority, prevent encouraging and of of We’ve our move Slide we’ve XX. travel, to and spread let’s home and fact employees the and where our and following in COVID-XX. work Ken, are the restricted precautions The Thanks, employees on added from appropriate. all to is

throughout are are updated We office we ensuring and And the workspaces. distancing standards implemented have that manufacturing protocols followed. social

we’re and potential to deep clean which sanitize workspaces, Lastly, exposure. continuing have

customers are to reliable partner aviation, critical a national be economy. global to to continue the commercial defense, our We and who

turn to my I’ll move to Slide the confine I’ll outlook Aerospace. comments XX. Let’s now to Howmet for which

April the demand pattern incomplete been currently many customers’ albeit limited, of since provide of production we’re Hence, future reducing profile flow common maturity our an costs, temporary we improving. capital have the earnings this reliable suspending preserve has to lack to on stock of the picture preliminary discussed As expenditure, the our call, is improving significantly XX find impacted. reducing at time. guidance unable dividend ourselves debt given clarity. We cash and Information

by further we Today, closed plants Turning $XXX only we COVID-XX. have a the in certain and shutdowns To took the is mitigate they’re from COVID-XX, of million last a the shifts actions carrier Europe. are three of quarter. weeks impact to plan currently from and impacts to costs of reactions commenced We customer which felt basis. suspensions smaller within three disruptions and our $XX the on them. certain run we incremental the during This within now plants, the to and rate making are million XXXX we plans reduce have

us we overhead XX driven will full estimate incremental initial capital expenditures target $XXX is expenditure are cutting from costs. Investor Moreover, annual million at The million our manufacturing by and approximately lower Cost Day. $XXX those driven February and volumes reductions. reduce primarily reductions provided our some by by the year capital of

Lastly, upon and, cash free of expect year to positive components. Slide we flow. its based after Despite to and have pension in this let’s temporarily low greater stock for XXXX, is dividend XX flexibility. move the volumes to preserve cash after To give cash in free interest free flow we additional items to provide common visibility suspended flow and fact, cash actions and these the be key all flow, cash

previous dividends We CapEx to and the an suspended. net updated will inventory with as taxes be estimates been Common corporate Working debt been consistent payments AR has accounts cash a issuance and million capital for are been reduced by are separation Pension the have of Interest temporarily new overhead, unchanged. providing payments year $XXX mentioned. and cash have results source $XXX updated final previously and million been are calculations. the annual guidance, and for reduced. stock payable amortization QX OPEB have annual and basis upon on based depreciation

maturities. three We’ve about XX Let’s April. taken and Slide in debt actions move talk to

on our action X, first of billion. The XXXX we redeemed $X that bonds April for all

of bonds. we redeemed Additionally, million $XXX XXXX the

due April for is $X.X we bond completed issuance billion, XX, on Secondly, which in XXXX. a

of bonds, Thirdly, we tender second for XXXX the bonds. million for of tender portion offers, remaining for XXXX the approximately portion a the and offer $XXX for one the initiated two million $XXX

These benefits. result actions will in following three the

XXXX of off the we bonds. all paid Firstly,

years. the we and maturities pressure balance take turning near-term Secondly, them will five reducing by a out off sheet further

million would $XXX balance forma be sheet, healthy cash balance cash approximately Moreover, our cash approximately pertaining cash $XXX add to be reduced to billion. the forma seasonal $X would pro very we The able of to A XX have April million operate of to after seasonal needs upon updated the from to pro that business build. working be add QX working we’ll balance to $XXX Thirdly, based balance as which million the we capital will the currently. had operational our cash requirements Howmet. capital

let’s XX. Finally, to move Slide

We structure a times. net of $X.XX cash approximately and forma be pro XX. have forma prepared Pro approximately April X.X as debt [ph] would would slides billion be capital

revolver Additionally, some $X.X we undrawn billion. have an of

that with Q&A. let’s to And move

Operator

[Operator comes Our first Instructions] Khanna from of question you. Thank Gautam Cowen.

Daniel Flick

on Gautam. Dan Good morning. this is guys, Hey

John Plant

Good morning, Dan.

Daniel Flick

Hey.

how curious, lower and XXXX combination your kind COVID out previously does in benefits impact the laid aero been and So, that were of to pricing we production the get XXXX? rates ability OE have the of the

John Plant

are amount, increase but is, should it LTA Well, then. I to and and put need And when really need continue be rates to the year the in the at lower, total five three think timeframe capacities of what of run lower of revenues, for of valid given three an we we something rather course, the principle to believe as not or the dollar place full in be think the any necessary reachieved. an period year we increase renewals expect expectation terms of to a to look was one the specific

the years well from and very Boeing. So example, of as the in they or more. on couple that going And the also read of XXX ground will cleared for Airbus, at MAX quickly back per the we’ve are expect month be up case we build the as planes now rate XX that what a from

Daniel Flick

it. Got

already like in then And a that do production idea just inventory good at destocking that Thanks. visibility have began all something have real of the you? to quick, Okay. the from aero pressures you guys cuts? is you see channel And OE or for lacks

John Plant

and than reassessing we’d inventories. exited a when those makers. fact XXXX, tough And to that that production total thought visibility, have that in as for been own they were recently at you we had the given work return My are, now arrears plans we’ve only know, higher their still to level It’s airplane our resetting fact, own basic entered their the year. a is have

were given that so vast and inventory it part wasn’t high, pipeline. would it an guess I sort even of the be arrears And indicate so amount in specific it the But will aircraft specific. of

year, and big increase we a to down and very a the the despite even higher part as in if the But basic burn last we didn’t a and give achieve first the inventory production your answer. we arrears did So arrears of have precise it’s hard certainly massive of quarter. theme, achieved were results in that

So it’s our the have At be a carrying. we I going are what same into to exactly don’t know impact. massive time, customers don’t visibility

Operator

Your of Spingarn from comes next Credit question Robert Suisse.

Robert Spingarn

visits. a x dollar does tied Good will If and terms could you participation. morning, original on an as about do So, events have the assuming content? cycle, greatest percentage what your shop When as events? airplane you visit represent if x shop a life the see ask original one, And – that get the John, what in this you of percentage? and of life represent cycle is your a of aftermarket in the of technical your engine, I’m an I aircraft’s question to

John Plant

I think for is is you to demand has by yet I engine, recently peak the been for CFM come. which replaced, our view ranges. engine know, can best you that give the the aftermarket as example the And is

assumed around so estimate our And that’s XXXX. peak that demand is per

the And let’s seven after years would say so replaced. be, approximately that engine

say its any highest, lag, after seven-year we and So, during engine, I have yet of and therefore, spares, across spares base to while approximately peak. is demand peak therefore, have installed we the normally the life I’d its at is CFM that a say,

to pressures that and a that on lower engines aware and those carbon So cycle the of it’s by think running required engines the footprint, gives probably engine. the in And lower at for that also achieve it. you’re thrust general you influenced newer airfoils the those are a the I efficiencies But are duty direction for for emissions fuel higher temperatures.

achieve our to do the with temperatures And engine life blades. so work of similar the we to cycle But is of the higher. very and manufacturer impact best certainly, those pressure

probably But So we early have engine on duty time. an slightly evens a in it reduced then over life, cycle. out

and you wasn’t to answer to I your percentage give final about I’d can it. to what – is point what that you that best able So gives have that. answer I go get the exactly

Robert Spingarn

could maybe have to one imagine on legacy try talks do here. can trying you’re what go Investor the your opposed stuff. aircraft was that by, think and an platforms. about Slide but fleet we related. to your I When happens that we Well, But as And at Day engine basis wouldn’t thing look off-line, I new about it I to as a but back individual close XX, all your on slide, platforms you there’s which slides, the I next-generation other

if $XXX aftermarket, most right, two the in on groups? about million airplanes those does your stuff. we of how and of I airfoil $XXX million When between number You’re that populations the two old think that got divide

John Plant

engine example, have engines to there to be I’ve let’s And build will or just the as point given the be time, offset as therefore, fleet into I you AXXXs will those say, be mean CFM the, well. the – larger Obviously, going there this XXX you numbers in mainly That’s in one the range. the at on an but there.

– a back put vast well to think majority just XB. of in you grow the the come the if way – is about of that for things But there’s and of the albeit lot you’ve current engine, will we engines, over that there. demand the So if the engines pertain the took I see previous of the as to narrow-body would basically, the it – for sort LEAP-XA time current those rather spares you aftermarket,

Robert Spingarn

a what group? in saying there’s Of of is you’re NG course. lot that CO But and of lot so a

John Plant

Yes, absolutely.

Robert Spingarn

you very Thank Okay. much.

John Plant

little give partitioned why And today, more assumed million a detail everybody will the the business. reason we spares, bit you aerospace pertain the rather to to than the $XXX that commercial

supply also as to spares industrial and your to well. We attention draw to, obviously, want defense

Robert Spingarn

obviously, But of on the piece, during that’s the I’m likely Right, just of period course. to focusing move time. this most,

John Plant

Yes.

Robert Spingarn

very much. Yes. Thank you

John Plant

you. Thank

Operator

is question next Seifman JPMorgan. of from Your Seth

Seth Seifman

good Thanks morning. and very much

John Plant

Seth. morning, Good

Seth Seifman

product about impact transportation, with fastening happening guidance about up the and talked there? you curious engines, impact just the aerospace know we year the on segments, profits regard to of impact I and offer out when different just to there relative going on have that the stack on guys think systems, in the areas this color might product what’s we et And basis point. and Day, sales cetera. forward? at those But Investor can the is I’m on plan we for think this about any of you don’t in relative you those across how terms report do relative

John Plant

Okay.

I percentages more than we’ve that we report for been out absolute it’s the think is is highly maybe relevant. by first information end likely why markets also all, markets. growth end else, understand rates thinking give – we’ve anything of planned albeit I that the always And the segment given the

to commercial The out at I XX%, and think business it aerospace. of under we’ll say, pertains approximately see whether assess that about let’s is, So, just moment that put the way we our there. XX%

stage. of it’s quarter’s only – I’d this analysis, – just I analysis a just we’re worth coarse it’s think And level say so at very a

the Boeing for narrow-body, build take reduction by XX%. same, anticipated specific because more more bit I’d you cloudy AXXX, XX% like quantities probably say Airbus, wide-bodies it’s but a at and the wide-body about XXX. about a the about currently a around changes example, the And the of If

generalized it’s broad through point more fact, a to guesstimate a give down mean, in for at more it’s the difficult say, we I Albeit So give to be I’d at this through as really give little picture. or a clearly XX%, and need recertified. XXX picture with do time bit a take, the sweep time. be to it moment. able thought clear a But and a accurate not take in

I’m be could could see to pessimistic if production. down business XX% in markets. being us that close our We April, ultimately. On and going And I you about therefore, commercial more rather transportation, take given say of no XX% fact truck end virtually was the that see there to

change Given current an and trucks, in A as dramatic both U.S. example, Europe in Class intake the the for the in order

as On guesstimate XX% the or defense, it as be maybe but see growth. trucks, this at you I be would a up, that XX%, for so. digits. big industrial, And point mean those I’m going to that’s would XX%, then double will say sales be on XX%,

We have I than get when in I to because triangulates it of sort it’s I wish. not way giving you. go of the to albeit try this. go providing pretty going it that rather well try believe to test reforecast to that something, say, we reasonably done getting reforecast as and we just a the the test enough gave in to through I do we quarter we this point, think, as be information be to modeling So at guidance, just which trying And that’s year mean – is course it’s I you and confidence need against terms to quarter another by, each serious. to guidance,

Seth Seifman

much. very Thanks

Operator

of Benchmark. next is Your Josh Sullivan The from question

Josh Sullivan

Good morning.

John Plant

Good Josh. morning,

Josh Sullivan

free Just a on question cash.

communicated flow to in go in with just we look rates, be the the a be working positive source what other you cash You’re positive XXXX year on now, OEMs would going as here cash. have capital would XXXX XXXX capital and they as production of for way? at working stand or if But the

John Plant

and much as a same when I XXXX be was capital in is should then, that in in out. we I going different flow be mean is exactly crisis, industry. that positive the we we way it in I that went positive when than cash slimmer cash should what margin over aerospace the and albeit The capital were company. through believe financial all should the operate, flow XXXX Back the coming

I that’s we’ll number. so outflow. expectation newer where an I my be that’s important. think we’ll haven’t we XXXX mind, inflow, so because really a at guidance, bear XXXX flow see we’ll expect been positive in in And we cash And when cash see and say, be this in an to I’d given positive But start, point, when haven’t there

believe So I at wouldn’t believe be didn’t that’s time, And to really it case. I in what this the if point it. be saying I

Josh Sullivan

Got it, thank you.

Operator

Your next of David [Operator question Strauss is Instructions] Barclays. from

David Strauss

Good the couple right color, over if this. range down think would we any any offered morning. I late John, margins quarters? here missed you level the be Was go next for call. But would in decremental Apologies you have of joining what the of as

John Plant

decremental When debt virtual quite to talked haven’t bit doing of talked – virtue the by we’re that a We – when to given I margins. raise. you I

XX% variable. Of of that course, we our cost structure consider is

which make as are buy is, Now for you aware. don’t all instantaneously material. example, instantaneously, flex well the things which you’re the move sure it you There don’t if doesn’t I’m part,

costs, sort flex some costs, Europe, large, particularly would with as things. So I you go European Councils those said, of to would then can the adjustments more and And according in of the consultation to expect made the we usage. Works where by staff material any be be through, and to need extreme after

demand future time we we’ll that when it so that takes see. accordance flex think about a with in it believe And we outlook that, longer the to

to what And trying that’s we’re do. so

fixed. should passage a terms do accordance variables very is with versus truly the that It’s fixed of the considered the in being what’s guide philosophy because basic with time, in there’s of little permanent and all be or So variable, time. there’s to be to

David Strauss

net of comment What your the capital quick before that use at this did QX? through capital half it the in mean, working year. typically year. a happen that? on did first And happen a – working think Or follow-up, I I source you being Okay. least

John Plant

been a capital user. we’ve Typically, working

One of the achieved as previous in – the flow that rather than Inc. – very year. significantly last cash Arconic had tried years the we’ve hard we for been in fourth quarter. of company really things We for was year to all the advanced last

So, early being the and generative third And uncertainty bit have basically to driving But to that at in were a and be will too really whether quarter on have of our we that cash we were say fourth the given to quarter achieved dealing directionally believe we’re first we quarters. only that’s we the clearly that outflow. moment. And a be. with where it’s

of are input been plants I’d able therefore, say, what will a And in that receiving and flex, for respond part. management. uncertain, is and remaining flex business. of between the payables bit. to have then earlier in part closed expect also stations there, docks Part is of of happen that real-time quarters the expectation of materials I have is and some think, working – effect think a But in you year, most day to I of there’s the schedules. not we will product, would extrusion stations latest amount the I you will And we three code inventory. it machine presses with difficult I have just mean for of inventory if inventory activity is when degradation closed. – irreducible capital, be my most the the do forging the to the on Now, levels, the can’t deliver receivables The the one in of have with your already days inventory customer it’s the in increase an surprising,

down. And the go this so extent the my we as both expectation as but to see lesser is and year, a that year for we through for we will QX work

previously because go down And – So, but driving the days the and good with year. not just say, I’ll we QX, will expect than in the as I of we’ll absolute end through days they there the be will scale in that as potentially. as it inventory be demand better are of grappling contraction year, by is albeit of, dollars

So it’s it’s just time. one again, of –

we’ll quarter, of efficiency business And scale believe – that aerospace little so struggle while efficient as afterwards. on were the the dollars, we’ll diminution more in there I be that in bit of as improving terms commercial given inventory the be inefficient to terms a XXXX. in seem of as second But we to these

David Strauss

Great. Thanks all the details. for

John Plant

you. Thank

Operator

Your Copeland next Carter from question is Melius Research. of

Carter Copeland

the thanks lot time. Hey, a for

any Sorry, John, is on color commercial of helpful. if could you your would just be exposure If this, wasn’t, you if just that increasingly flowing changes Thanks. impact it the payments I your like money in that’s a situation, you’re off wondered was and working some even for just I to from capital terms if there given but second, in been the addressed military capital customers any the speak and seeing of side seems flowing. there? It on

John Plant

at from No, our in customers change Okay. no all. receipts we’ve seen

in XX no days or change. and – percentage, delinquency of achieved never We number always of exactly at days, in XXX% we’ve all of So always We’ve month, terms time. being up the everybody’s on paid there’s have and and high been looked at paying XX We terms whatever time. carefully the being exactly terms. collection tiny a terms receipts. end there’s very a of very any at receipts of a to that very is, on we’re carefully – and level But

Carter Copeland

ongoing there sized the How relative got and appropriately business to of risk uncertainty about around then about through portions areas and you’ve got whole? those what And to Thanks. the portion of sort a go the substantial the may you not? thinking fasteners I’m you’ve with that you Okay, here. comfortable get the of given the business the of okay. thinking Great. How respect that are aggregate where distribution, sales do volume rates

John Plant

We’ve looked less both distribution have visibility. – projected rates through course, at which the goes of always where, OE it’s bill we and and that

we’ve nor fasteners upside, If were to appropriately currently, believe are, neither in were that of is. we to got really that think us going And think distribution a our we Of be we high, Howmet. handle I of Albeit we while on where very be great. surprised sales course, would surprised that think, sort it’s to the the not if therefore, significant I in in of downside, overall. cautious, the context I total context don’t are the on

Carter Copeland

Okay. John. Thanks,

John Plant

you. Thank

Operator

Your of The from final a follow-up question is Sullivan Benchmark. Josh question

Josh Sullivan

Yes. on… It’s just a follow-up

John Plant

more back and come squeezed You’ve one in…

Josh Sullivan

business. is How follow-up of the talking of defense that then either commercial That are program capacity buffer the OEM advantage about available maybe taking at Can as just side that much as of defense was build any F-XX And stock talk inventories, spares exposure? matures? customers point versus inventory? or the on this the of a kind, aftermarket you about to

John Plant

has for temperature. as operating our that of as commercial is when to air decks, previous – the cycle time, So, But versions seen sort the in and capabilities the air It’s that required particular commentary. more giving because you’ve, I are, I’m X,XXX mean not F-XX essentially answer duty that engine. little military the those higher given OE far you because aircraft of And point I engine aren’t say is they give I granular less it very flow before that than certain then duty supposed to has jet. all degrees could get cycle, in I the from be was is the and hovers That��s average engine, think, spares the in through of at this it’s you to spares. it less

of exacting for achieve how the them most the within extraordinary level of market, they then turbine of critical, ones with compared more coring still the the even it I’ll then manufacture, of still the the business were going which duty were given When to the we parts been, say, air to the which a think I edge, of commercial, levels have, the its there. out it’s trailing really that sort fairly chambers critical too which us F-XX, ones limited, reduced blades the So, to about multi were have are tough difficult but it’s I’m in has comes in to make. albeit say, fairly new and the to yes, ones the cycle – spares all are

under we’ve produce but limiting and factor I were we went we with to seen to and of possible, of were think engine we plus the way with recognize also close unfulfilled is But We been sought to we the that brought believe clear given could we capacity facility sell I’ll that we dies we’re it improvement. moment, through that the that increase Whitehall has XXXX the combination were situation, online at the the to basic demand all signs and as were that that the, additional to on helpful say, we it improved make, our I we blades so capacity – and we year. through engine, the pertain And yields pressure that the more and could don’t have. that additional everything

build is in than higher trying we’re to to for the a increases XXXX, then rate rate trying higher we’re also which for So, and build prepare And additional XXXX. in a XXXX XXXX. rate build to rate,

say, increases commercial from, issue I of – mean relative the the to helpful meeting the to tooling rate has been capacity the of it. But side wasn’t us the singular terms as well. let’s So, that in alleviation

right about large that’s the spares way that is builds now, that’s as know improving a of there us is fulfill demand there we them that the We it way for do on of top think found to in well there. increase a So I rates.

us as thing very to increases plus fulfilled it also, good and rate a in the are at a going XXXX to for then, look be the future have for additional in is we required provide the that I because be, that thing fact XXXX and into Howmet. to spares so packages positive through beyond, for And going

Josh Sullivan

Got it. Thank you.

John Plant

Thank I much. that you very was And the last think question.

call, could the if close So we please.

Operator

Ladies you concludes gentlemen, today’s conference thank your for This participation. and call.

disconnect. now may You

Howmet Aerospace (HWM) 5 May 202020 Q1 Earnings call transcript