HWM - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen, and welcome to the Howmet Aerospace Second Quarter 2021 Results. My name is Catherine, 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

Catherine. you, Thank welcome Results and Howmet Secondt Aerospace Good Call. to XXXX Conference Quarter morning, the I'm Plant, Ken by Oal, President joined John Chief Co-Chief Officer; Co-Chief and Executive Tolga Executive Officer; Officer. and Financial Giacobbe, Vice Executive Executive Chairman and Tolga After will have Ken, a comments and we session. question-and-answer by John, I and will expectations. forward-looking would you relating statements discussion to today's remind to like that contain future events

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

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

John Plant

I Thanks, to welcome PT. quarter performance. Ken start with and the plan second who overview to year our do provide a to call. in talk further And then Tolga, Then to so year also full third to ESG will I'll once we'll second quarter Good forward. the quarter guidance for of and more market. Howmet's and and about guidance an And provide pass talk the XXXX. will to going detail. financial morning, then, talk

move to let's So slide number four.

to XXXX XX.X%, addition forma was the Let with on the $XXX costs per to prepare Historically, ramp $X.XX me of share a half the and pro led EBITDA, for and QX EBITDA $XXX working control production. Howmet margin start for and ahead operating expectations. was second and in excluding our quarter Revenue million, in focus year. Earnings up and capital adjusted which exceeded Adjusted expectations. comparable our increased the half first cash was Howmet with half at of the company. EBITDA despite improve outflow while performance and second commentary XXXX for first QX first separation was margins, capital expectations, of on per earnings the of margin has par which items EBITDA aerospace with has special in share cash no numbers. was some been $X.X commercial The generated of quarter, discipline, enhanced post with million the line the billion

on cash we notes notes We transactions These by This interest XXXX approximately the million expense reduced million, have to-date, to million the shareholders approximately the shares. $XX expect by increased The share fourth million per acquisition completing program. Year with run continue continued In with the and by $XX.XX generation second and with in of share, reduced approximately basis. XXXX an we hand. flow. QX a XXXX on quarters. to million return debt in redemption quarter, annual average $XXX approximately buyback XXXX price early free weighted completion cash was XXX $XX money cash rate QX third the of in helps X.X and

$XXX balance The second million. quarter cash was and

our reduced on last to liabilities XX% Lastly, year liabilities. million. full and approximately pension Year for year. to expense expected Moreover, OpEx have continue compare and to-date, to focus $XXX legacy we approximately is we improve reducing OPEB pension

million EBITDA reduction the delivered XX%. the to to reflects issues than was revenue which On The team depreciation industrial are up quarter segment $XX levels less be expectations, of was gas wheel Structural XXX their continues as effects continues tied long-term up was expanded actions spares compared aircraft XX%. expectations to also to corrections. benefit, cost and started operating the with builds margin points a line in reductions variable components, see lingering an commercial margins move up on supply continues aerospace last fixed demand at total by revenue. strong driven of and transportation in of The approximately is reductions markets. already Commercial Truck expansion onset as management. price, expectations. was net and have and inventory cost with target lower basis driven be by grow in price, be spares. XX%.,while strong represent the partially reductions. of cost XXXX. cash offset line business source XX% amortization manage other which a builds, decline and year-over-year of less let's new a aerospace business very strength of through $XXX five. and the our expenditure from own year-over-year year. in by customers and the cost approximately customer are continue as The aerospace only of pre-COVID chain it remains decisive you agreements. basis with despite million, year-over-year XX% to The in XX% performance $XX our incremental which the in customer revenue of slide are progress continued they Capital had in to XX% good with Year-to-date with continue by margin year-over-year flexing in reduction, cost Now and QX year-over-year and markets the are XXXX rebounds year-on-year of QX through and quarter are structural aerospace less The to shutdowns margin we was expansion turbine At cash. decremental in our on achieved resulting by slide, to for the line driven X% margin year-over-year $XX can several million. pandemic the million Price of at and second essentially the short bottom increases continued supply. a commercial commercial

cash quarter, free first was a the $XXX Lastly, flow in for half. record resulting million

overcame revenue quarters last approximately million move six. the results revenue. quarter EBITDA on of both of Now at in with was the $XX and is additional couple of production slide quarter. to line consistent of coming and less meet with let's cost Adjusted for in margin The margin expectations. increasing employees XX.X% billion the low QX third demand $X.X many the the the the effects to revenue

see expansion, actions EBITDA in of can period. the You revenue XXX million -- pandemic solid while margin benefit since basis the the points with QX start same is the of our in a approximately less $XX

me hand let give Now overview the to an to it over Tolga markets. of

Tolga Oal

slide some Thank John. Please our details move more and you, performance. revenue to year-over-year about seven,

inventory business. less X% essentially year-over-year by XX% in in in was was of continued. transportation flat aerospace on of Defense programs of aerospace, the which year less represent which continues with aerospace the approximately are expected second was both revenue a joint projections without second as and customer fighter the we revenue year-over-year impacts commercial significantly last quarter was Commercial Second quarter. line Commercial diverse total wheels shutdowns. forged as XX% set to the driven strike XX% XX% Systems impacted quarter total of by quarter defense the corrections as segments Fastening up the approximately was being

financials. XX% market strong a the over turn markets, it up IGT and industrial oil other which was detailed a is give industrial healthy to and be the up Ken now to of and XX% general Finally, which makes year-over-year. more gas view this continues was to composed approximately IGT, and up XX%. will of I of

Kenneth Giacobbe

Tolga. Thank you,

slide Let's for the segment results. eight move to

continues aerospace XX% and in be was revenue driven inventory customer strong partially demand to less the the X% quarter than reduced which was presentation the offset approximately engine business the quarter. second Commercial expected continues. have back the Decremental second products, less XXX As we of for increase the The for margins for quarter. aerospace IGT each cleaner by by growth the energy as IGT. a XX% In year-over-year demand year. spares. for provided XX% year-over-year Commercial anticipated as was half this corrections we a were to appendix for margins schedule for or segment's decremental prepare workers incremental of shows engines hired in of

margins the was Please quarter margin customer engineered commercial was for XX%. driven the year-over-year was structures the aerospace The for we Systems less XX% quarter. revenue Decremental Now inventory was aerospace industrial commercial Systems Decremental Engineered let's were XX% continue with within less by up relatively Systems move structures. corrections as to for in the year-over-year. the were move XX% the Defense for engineered review segment the declines second markets experience Also segment, to engine slide less. approximately operating approximately XXX. revenue aerospace in and in profit on was Fastening Fastening aerospace. Systems inventory segment quarter. to corrections both for to second Fastening year-over-year. flat Commercial were slide XX% less year-over-year transportation XX% margins XX% expected XX% was XX second structures quarter. and Like Commercial Fastening production nine. Boeing

Lastly, for please wheels. XX to move slide forged

X% by year's chain customer in revenue results driven as to sequential volumes doubled year-over-year was down increase aluminum wheels shutdowns. a impacted On revenue XX% approximately customer by issues. due basis prices. sequentially essentially Reported flat Forged a supply last were were

margin profit management operating to and Please year-over-year in XX. from costs countries. Improved the see a resulting approximately slide maximizing XX%. avoid was you move by to a Although, EBITDA low-cost to incremental margin impact, higher middle Segment in passed and are percent was cost through. will through was reduction XX% customers profit continued driven pass production margin

XXXX. XXXX liquidity. the of we In completed early focus We hand. half on of unsecured structure continue billion. with is our debt debt year the capital $X.X is XXXX and approximately All at October next maturity bonds to in stands and redemption of on improving cash Gross our the the first and

Finally our $X billion remains five-year facility undrawn. credit revolving

net redemption the completed for ESG the costs to by in special the there's discuss in second early back the charge it quarter that the and point associated items covers a it of a turning $XX May. approximately would driven items John Before out with the early Special mainly in slide XXXX I of to to XXXX that were million quarter. bonds guidance, appendix like

let to me turn back it over John. Now,

John Plant

move to Thank you, slide And let's Ken. XX.

investor to read our in I'd Moving report ESG, howmet.com you at the section. found sustainability encourage to

diversity is for our in environmental, in the improving company Howmet generating about communities and more and social inclusion meaningful change we inside For a future, operate. which sustainable aerospace, governance our and

Regarding COVID-XX. and significantly continue operational to defense maintaining safety industry aerospace better through the average. attention conditions employee safety, we uncertain than be by on recordable Total are presented incidents

to had we a improvement X.XX. rate XXXX, XX% in For year-over-year

incident. workday the were to Additionally lost This our and workforce. is a without worldwide XX% our dedication testament tremendous locations focus a of of

and company. underscore We to on our recognized broad XX-XX improving our we Recently, the power of by fuel diversity continue are at of boards of our for women importance We innovation commitment viewpoints that and backgrounds employees in to were rich to expertise, we the diversity diversity, and diversity. the committed equity value inclusion all levels. and organization

Corporate Hispanic Council diversity, In Diversity to addition organizations sustainability. including key initiatives. to our respect gender Best we partner Practices Human and improve with continuously National With external Campaign, Rights and also the review to the

Nowhere is we in customers. this that to more products provide the evident than our

fuel by Our bottom to reduces approximately smaller Jet proprietary times Five XX% are of a than Howmet's carbon approximately Engine fuel industry's technologies Aerospace, more at increased aerospace fuel efficient Technology metallic the and on of contributing solutions slide. Commercial of emissions to Generation, composite weighting the reduces fuel goal reduce specific The consumption XX%. contributes consumption help aircraft the comparable areas are content use two as carbon light aircraft. and composite Next footprint. Moreover, left aircraft

of XX-wheeler stronger being five up an Customers of weight For to class to are lighter. X pounds can Howmet's than wheels X,XXX from aluminum times savings XX% truck while aluminum retrofitting wheels. forged steel, steel realize wheels,

Howmet's pressures, reduce higher by efficiency enable which approximately For towards XX%. turbine increase approximately in IGT, also oxide the and continue and load temperatures nitrogen emissions operating XX% products to

improved to five Howmet's strength renewables, and panels time reduce clamping and up for used insulation ten by Fastening XX%. by Lastly, in Systems to times solar

Foundation and Moving the to in opportunities careers. to Also our through and we've education and renewed grants strategic culture the education dedicated focus schools. six on is increasing Aerospace to local to community, institutions support with commitment with inclusiveness. STEM employee and resource our community STEM Howmet Howmet groups

airlines improvement XX% to travel on continue by expectation air total schedules revenue of the devastation move Howmet Growth The and for growth expected industry. XX leading managing in our XXXX are third searches to to aerospace pandemic look revenue this tickets, -- quarter aircraft X%. of assembly is guidance. now show into across quarter rapidly. me with in forward includes Howmet approximately increasing and growth the exciting The phase international and We the after the into of to beginnings structures approximately transition QX notably for leading This annual business online for indicators most the partners for beyond. third for increases in fourth of businesses commercial Let growth of third travel. growth into starting quarter, domestic XXXX. continue increases first engine for slide air and continues that world in of notably and some in Orders travel. quarter that and in The will and our expect the fasteners we followed the XXXX by sorry, sequence starting for the the is in quarter and flight

expect In the terms numbers, following. of specific we

quarter, revenue of we or million, points share plus minus or to a minus minus XX%, expect And XX minus EBITDA flow XX third $X.XX. increase the $XXX For plus to $X.XX, year, minus Earnings -- million, increased baseline XX.X%, be XX%. of or plus margin EBITDA minus or $XX XX revenue plus the $X.XX increase $X.X billion, basis minus plus of basis share EBITDA million. $X.X to or billion, $XX -- XX.X%, points $X.XX, or $XXX plus EBITDA to for plus minus plus basis cash million, plus minus to to margin XX%. or and earnings to increase of million, $XX minus plus $X.XX, points. and per to billion, baseline for minus

of the following. we the the to expect hand right Moving side slide,

revenue commercial to first approximately up the be defense IGT. by half and driven XX% versus Second half aerospace,

year-over-year approximately to XXXX. continue increases to Price $XXX some compared OPEB and already of million. margins half potential the $XXX is achieved year. Pensions incremental over million contributions of with prior will be XX% than The upside. carryover greater reduction modest cost a Second of

flow by to million based be should plan. at of $XX range $XXX contributions in CapEx million the pension compared approximately approximately free million $XXX million. in to upon cash cash the reducing of $XXX excess conversion rescue approximately of XXX%. are American We depreciation be continues net to Adjusted income

quarter. dividend starting as of stock month, in we per common the in third reinstated quarterly last Lastly, have $X.XX the

to slide for a XX let's Now summary. move

get the was excellent quarter second the cash and while was in with of through, described The wait quarter. third as it's we The and solid for operators quarter margins lift It to a this approximately continue recruit quarter expectations than the second to production flow. better have engine -- strong is In of people. course, volume cash XXX recruitment in principally and will net people, manage we business. during Liquidity half very plan phase. to another our And was we generation. healthy the recovery costs XXX we in second carefully net improved

be third $XXX approximately higher quarter outlook million quarter somewhere the between The revenue second to margins in for with XX.X% and XX.X%.

expect we costs. half, second the extra For

XX%. the year-over-year to to incremental XXXX, over EBITDA are the metal to the margins labor for very And costs half effect However, talked questions. your about. of of increased margins XX.X% expected platform setting drag a for a from second and the take be XX.X% healthy the are expected overcoming the Consolidated you now of that much. recruitment net course Thank we'll And recoveries. be I

Operator

Instructions] Our answer begin of Copeland with And session. Melius [Operator Carter will first Research. and from the the line you. question now question Thank we comes

Carter Copeland

gentlemen. Hey, good morning

John Plant

Cater. Hey,

Carter Copeland

if the of color former the the give back of some kind or on talked lot you the quarter know productivity wanting last the are the these to get the from could adding of to expectations to start. I composition hedge John, right new. I employees you're you Are level system. us a wondered and about training some

on us give you any how back is Just can resources color that going? adding

John Plant

Yes.

in QX. add button. as essentially So And we to I add about said, talked XXX people people no these we'd recall, you

to with in revenue exactly we quarter. You that in expectations XXX recruit our would XXX the We did side. possibly from second sales people not was so can see and it the increase, that line mentioned

was of that. tight going And The keeping the quarter of third cost for that below recruited us essentially employees in we're little majority the that So we've will fact business. engine majority the the in control a be so forward. and our bit far,

new year. as say, let's majority then that we quarter. and in of to the in So previous business time. roadmap say, that we engine. we And into employees exit And next, be looking for principally expect second will looking let's XX/XX XXXX to also it's our for people employment, add has a through selectively our the for to three-quarters blend fresh I to the give be as will maybe a we've you four-quarter move come think the I far and To about QX then we'll half, first, the of from structures the change increase period be of fourth faster recalled as businesses from And be get employees. that. ready

we're for So, planning about think XXX the second half. people I

year. getting the So a for XXXX towards

Carter Copeland

stick you to for I'll Thank the one. color. Great.

John Plant

you. Thank

Operator

Your next Barclays. David question comes with of line from the Strauss

David Strauss

morning. you. Thank Good

John Plant

Good David. morning,

David Strauss

to comment could airbus you give with or that rate, narrow-body that now Thanks. could peak revenue? prior 'XX, perspective? capacitized 'XX, out. a the you kind 'XX, revenue Does that on you are they've those rates? the of you what on all billion your handle for And increases And to kind mean from how guess allow above well been John, I perspective of of proposing $X in rate grow

John Plant

Okay.

talk think total, that's or let's so. because important, in XX months most I the really the metric narrow-body next So for

by that Airbus at is XXX is Clearly, changing AXXX that so. combination two. XXX the over That and moving of mix year. about middle couple the in and XXX, be, a with maybe the Airbus January view the in was would So XX XX of -- peaked maybe aggregation to prior it of the the XXXX, is currently the the then months of XXX Boeing the fractionally and let's Max say,

still is to While over say, just to I XX. Boeing think production raise planning

at afterwards this go been in and XXXX XX to point. there Let's January has silent of

mid the XXs. in So the combo is total

on this last a XXXX, see last the And and can year. year so very still or you significant increase for indeed

envisage It we're then that you to And that increase further the the their point a XXs in still to But XXX and can know through we that on levels. don't we of time. it's confirm yet isn't XX percentage with XXXX in that XXXX if XXX at be middle increases to barrier airbus go aspirations airbus for and of the the is maybe up breaking the or at will maybe back mid enormous. by above. rate the should combined basis back So a And end right Boeing. for potential, right

basically we've we're it adding so getting XX territory roadmap the -- that. for while and the been in, already just there. that we months that's have So, same XXX, in back But puts of to us all capacity for certainly

If you wide-body then, But happening a by probably and little I early expect the up. to obviously be with XXXX what's that have to probably blend second half of in will picking say. wide-body bit it's too

fact see some XXXX. also we into that go In we'll think I as benefits

that situation about. go to see match also volume we X. a parts sell, will aircraft lift are is the we'll My to of to should expectation see been we'll to increase lift, from rate is to be we'll then because for inventory. increase just where lift Then month equivalent build of for to a going would So rate talked with that then return which example, XXX make ship its X, to production take lift from will volume that the current that parts being pace have us low set like three the all us. volume being continue see current five also have the level, rates of We that an we'll aircraft an from

So Boeing going Airbus XX from let's to XX XX. XX to and going say, from from

inventory those to done, of has course, the this in healthy back system. And So for to bought both be be then are then, increases. very

system during back see aircraft has into these that to just the because going to of production. put guarantee rate, and we're benefits to expect above into levels be I So XXXX XXXX inventory

together be lot let's pretty next at it a obviously say, be as you all pick that will parts in XX content net equivalent David, billion aircraft. it, closer XX to any like-for-like production in we'd we've demand I of X% by market But I'll look And a mean, pick time, the to moment a maybe amongst the a the years. basically billion go is is on it's on through the significant under And things that's rate changing probably plus two or upon I reverting that are other when put on at at forward is into approximately. with got or and basis, that my very years, just all growth we increases revenue price we $X end But being expectation So above $X.X of or the three that that say, the back what the of look XXXX. equal all that of let's decade to then benefits way have built to. more the then middle time. to X% is three of normal depending a

David Strauss

color, Thanks It great. for all the John. was

John Plant

Thank you.

Operator

from comes line & Khanna question next of Gautam Cowen with Our Co. the

Unidentified Analyst

is This guys. Gautam. for Dan Hey, morning. on Good

John Plant

Dan. morning, Good

Unidentified Analyst

also benefit narrow-body least on any relevant you how actually question that would that depressed What perspective. to challenges So, And see short side I will is hey, at would allow the my production term? guess, doing? or guess be to really wanted in labor So, narrow-body ramps else the anywhere not meeting pretty on side rate utilization maybe for I term is different the or I a the from here? in in greater ask But your medium wide-body similar. greatest on, from you

John Plant

[ph] Well, number. we casting And machine tooling scrap I specific to capacity have goes the or by break the then, it between I'll let's machines. that machines say, take core like tool take down if with part essentially that mean

in certainly terms because let's place take as billion up. engine have terms of XXXX that put $X.XX of already we've we of we tools, no whatsoever we say, narrow-bodies a in machine problems investment you made, plus and capacity our [ph] business, capacity, In know, a in hundred to in

us. let's so then and -- hit capacity still us now, just say, for course, then therefore that carried it's available the the to in pandemic last, and and so XX And came of totally the we've capacity months

to plus So, rate, we narrow-body significant of rate XXX and capacity tool the increase back could terms wide-body all that. the in take above we a machine

plant have so, gives we question exact And whatsoever. year equipment terms or with it's in essentially no mix And still a To on restrictions further of operate can requirements, a into below to expenditures so confidence side. being we essentially depreciation, that is me and capital there. also we for though already that because difficult of is get the until the say the capacity that's know your tooling

those XXX So customer Boeing talking scenario some we're were XXX then that tooling terms confirmed. again, so for cope It's and I all back the if at demand. we we'd problems meeting tooling be Airbus at of took months And above problems. that combined month if of XX the no of see Airbus let's therefore we if would only to to next per you And in be at in and certainly volume be with when say, say then it parts. narrow-bodies -- die should to down to at or level were terms were a point of have let's XX add, no balance getting -- put for clearly capacity finally XX, aircraft additional if

we about apart -- plant But capacity. the So, onboard from we be machinery effectively it have the all and labor train about no terms business. couple of tool capacity side and well, softer of I thinking think have and of increasing ability to side hard do that then but of to in to limitations fully years, capacitized we're next for

Operator

JPMorgan. Beth with the comes question next line of Your [Indiscernible] from

Unidentified Analyst

and very much morning Thanks good guys. Hey.

John Plant

morning. Good

Unidentified Analyst

about Good morning. make a just you can model Wanted And how sure, understand going question I and to forged ask guess, wheels. to there, quick the things dynamic materials to forward. to QX that? of to And up the again? sequentially the pick what demand about trajectory might when happened think real talk from then it QX? about And to how of kind

John Plant

Yes.

So saw. demand me and demand break then the market it we and that down let fundamental between

So X for been Class some take trail has truck extraordinary at order time. in level the for an

so, backlog truly And the is extraordinary.

for whole one transportation in confidence business fact balance the so, really such XXXX high. in of there of commercial the demand is is over year And our sense,

So it's outlook. a great like

large amount of demand in position different that we parts I think or fact, a were or customer, we end complete strong. is despite of In ever end of we course because supply, was one the took missing to where down in tires issue seen familiar and the issue it they it to components quarter missing windshields, was market to don't not we've had we because was by of other days a so extraordinary recall, whether assembly semiconductors. trucks unable I but were supply, actually unable second that and essentially that not did The very structural it the were with due everybody's electronics we

And And have in so, are Europe. and can some and we obtained back of partially until U.S. retrofit which are even are them. the they dealers that the a there, lot missing in trucks built around of those fields go both delivered with parts

picture reduction we in to days to because parts. just by great resulted were short-term market constraints down end because for them we trying was QX supply do market, And us X% got couldn't customers can't delivered because but one That is They I'm they think here you no build. there QX. to get haven't us the product taking what just So Got volume end where a build or part. anymore. in for place we stick don't compared ship of couldn't

to which of then happened million made repricing up let's be it volume, So for call revenue metal. basically $XX worth by

metal escalators for shortfall. the have volume that covered So the up we

basis can if take our Then impact. totally margin hundred QX percentage -- points says, and take a that the counts by those it our you and that divided few of see for by EBITDA take basis you on XX. a if essentially, you you So revenues about of you margin flex it

want if such actually you for way adjust the to a call second metals tend things very so respectable. we wheels out. extrapolate for quarter X% we to call two it bit the the you impact. little basically margin further, was and not you And about if volume didn't a because So drop those And should also a out was we think had it

that, for pass adjust let's been call through to alone have our the then $XX just $XX at EBITDA wheels metal Howmet were million would you of million, if on fact, In XX%. basically in over fact just margins level it,

improvement the basis, up masked numerator on like-for-like all by fact on up QX that because be significant metal. goes way recover a So the and just of denominator the we goes

through wheels So that for you Howmet. both and walks

Unidentified Analyst

this Thanks. half, of down, I see to because kind level volumes the continuing kind and wait to be continue? in then, might demand as customers And that can Or handle to guess, second can to That's these able of at we the increase look go show very volumes stabilize -- your the the just bottlenecks up helpful. you in XXXX? you the for

John Plant

Yes.

going side, there. I that QX QX we're similar have thought think on would to truck be my a to the

the that eased do that part going see to best haven't we're back think end really I year. I to towards ease shortages begin can the as some those because guess yet. And Just of the of will

a fairly fourth So on I'm robust quarter hoping for wheels.

then the Although the manufacturers truck and hope the satisfy really be that at good just moment. backlog's and thought order just say, market getting XXXX, but I strategy. is a books because is I should increasing demand is, can just the better the it's inability the for like my it's But answer to a the there, it because there not

Unidentified Analyst

much, very Thanks Great. John.

John Plant

Thank you.

Operator

with Our comes the Robert line from Spingarn next question of Suisse. Credit

Robert Spingarn

despairs since supplier get a Hi. especially Good to understand airfoils trended are very ask sequential bit commercial supply defense the have about downtick surprised XXXX? to or And issues? and airfoils. that's both both through trend seeing with and know spares as just probe March defense for another wise a But if quarters you June little sense relevant And those John, go commercial how I isn't a wanted spares we big. and us I I the what here. don't on chain business you But downtick, morning.

Tolga Oal

So, material of we you in the actually know, quarter in second that a as saw Howmet us. have the for guestimate context all. aftermarket the number biggest isn't to nothing But airfoils at small uptick for demand in we the being

& airfoil We going in through of we have an second aftermarket Whitney. are will that half [Indiscernible] and planning our and scheduling Pratt customers increased

numbers, we can't pleasing Again, and I all - percentage think next is I percentage, well it's year. well make see but certain again increase. double in But digits we that goes the demand as year huge not while certainly into this one. exit that to So then it's it's into the

IGT up that in continued the the at when through no spares all defense we strength with So real let side and saw bifurcated way has all. that I on

terms And certainly XXXX. in so, the But commercial we're increase and growth increases. seeing XXXX. in XXXX dollar small very QX it's fairly has a it in aerospace strong higher been But become business don't very, QX, until percentage muted continued material in

Robert Spingarn

other bottlenecks be could areas a be the chain Are disruptive? the that any ago. on few mentioned And there minutes we in business that than you supply anywhere focused should just

Tolga Oal

six we all. problematic That what year, we of we see base lead month. give times. as of area we for the system, metal scanned believe beyond last of nine certainly clearly know trying to input and think been to twelve schedules be constraint see for the we late lead for XXXX. we or don't which to our tightening. some the that market metal months because it's customers in world that to [ph] go as had significant nothing times XX of thinking at to turn by is go encouraging amount And that's for we in I their about start our product supply one greater as parts, securing those best Howmet as of forthcoming availability the into I are in last for for expect more concern will There's to currently we year, we range supply No. any those any important out It the the move And disappeared supply months the We're demand has our plants. was see visibility fall basically and our a

covers So we those. for of the have that's we part we that to have times. product But lead really where extended plan make really only those

Robert Spingarn

or pressure LTAs are these As under so not any should all and issue? those an tighten margin expect we

Tolga Oal

issue, an Not yes.

Robert Spingarn

you. Thank Okay.

Tolga Oal

Thank you.

Operator

comes next Stallard with the Vertical Our Research. of question from line Robert

Robert Stallard

morning. Good much. so Thanks

John Plant

Good morning, Rob.

Robert Stallard

how And aircraft what of you in could sort differ situation is wondering from you there to was John, visibility latest your model? end? what mentioned you sort de-stocking I could on this And the run aircraft it commentary. of could have if when through

John Plant

quarters And most the forward as carry. degree the some what complete it's we part to go like that terms our now Well level been of few it of we've Okay. is what true availability. depends of also in the doing last stock with to safety also would the customers also

is system -- bill be we to directly left to no in going second effect well. only chewing these whether just Because airframe that's rate and Our basically an there's no pockets. as to where in remaining Tier have in system have the of narrow-body the year the to X this see that's essentially for year through engine in half inventory it's situation end thought and manufacturer by take obviously, what engine inventory an manufacturer our situation heat the that And is that's of an isolated increases there to try any compared up we always as available. a to [ph] parts this

Tolga Oal

of if narrow-body our systems there's our trapped very essentially the the on transition each be liquidate wide-body we but with to million system but assume think we it than inventory the of think end still during in of XXXX. trapped inventory I by But as carrying which number, tightening the XX the let's left month I'm in customer So, to system. different something we some think and be year. inventory trapped about it's And left the less And will our year now way I as we'll remember for have little in struggling a any narrow-body through in there'll no about for quarter. system

Robert Stallard

great. Yes. That's you. Thank

John Plant

you. Thank

Operator

Akers of with next Your Matt comes Wells from Fargo. question line the

Matt Akers

Thank on from for the you Hi. your X% F-XX What guess of are on the thoughts you. -- quarter. here? pieces Good morning. of what moving defense comment latest rate in kind Could I decline And going there? big the were the kind

John Plant

that then here. they back the right to won't broader But -- increase year COVID mean, into availability or able defense between bring seems of ___ I a Lockheed many be not And thought. an the was is of as has maybe be XXXX. in maybe as on we're read quite supplier and been as building should that have year sure. on be we XXXX think I there to last terms perspective and impact better happened And this workforce, now, we and so

We are that seeing, or XXXX. well, about I compared slightly forecast going call XXXX think XXX something. that maybe above XXX talking down Lockheed I'm reduced to a It's to it still to previous is

XXXX, this FXXs we from say into see of or us, couple far year and reduced year, so program. if for don't be so the steady know for then would Then increase that pretty let's growing to in were be occurring year And you XXXX or be the last yet. steady by next And in the following would pretty spares when years. build engine know X%

So, for we towards the quite expect spares the aircraft decade. the as become requirements we significant move to middle of that

over next And on so, years. it Howmet as few early probably and look to a increase at we after market improve continues for FXX the say the and slightly combined

to in by order House it's quantity than defense think whether additional original the or lifted You coming was slightly a White with increase XX we're do higher in proposed actually -- of aircraft FXX I in of the that even budget. budget was senate have orders a know just the

now. fairly point at And trending time. well in on the us it's So this for here and

to lighter where orders, through second we heavier half last in seasonality the half a that -- first a they be the of year You was the pick the demand also year. tend in of And basically on filled significantly a the defense have again DOD in being saw QX on little defense to of the bit bit always budget.

XX% year. If it of towards XXXX, our year end for some that with on see have defense stable pretty some say, other some then define yet of early from and that due year, the called total city roads maybe blend too at of the through you I I'd to orbits we're slight of back sales. signs And programs for when now, looking military the to year. really increase across So healthy the healthy we a increasing fXX to still signs

need. I still So, you that's for you or don't know enough

Matt Akers

for Thanks great. color. Yes. No. That's the

John Plant

you. Thank

Operator

from Your next comes Paretosh the of Misra with question line Berenberg.

Paretosh Misra

wondering you how Thank your businesses jet. to any if morning. and regional of have you. commercial John, business aerospace Good that I was sense much

basically or how is linked? Airbus much Boeing So not

John Plant

Yes. we've really have as helicopter. and to exposure I'm it. boost ever we jet a disclosed I mean, But significant not sure

our whether we I'm But have aware can look we they that have. this before if back and or any for So, business to products. called broken as whether actually see on down say, to I indeed call segment get comment out you'd then of call and do I'll see at whole for represented But we that you it engine jet the you. highly it's you any if faster not products structural us

Paretosh Misra

both and you could Understood. And bit you're that about seeing in second what business in talk aftermarket that for the if half segment maybe just a business? OEM the industrial the

John Plant

Yes.

new business down in this it can't oil enough of part the on is it's we where and for in that's and essentially point IGT just us actually we gas mentioned just and turbines, industrial And the gas make industrial, more provide as break which which nitrogen turbines at turbine therefore output time. fundamentally have a oxide. comment between the new earlier lower make which blade So the a I higher and situation to larger we're gas both of very and strong. both in my And emissions for carbon

And demand and significant so, a very we strong backlog. for have a that

do the also and emit they It's content we because even thing. the significant and in being are the that there turbine to the demand Well have that input as not oil And as Although turbine, you're lower easier us is strong compared large very certainly particular turbines what for engine. a all attractive. it's also though gas customers emissions for very relatively basis for new way. Zeeman, supply pretty still or aftermarket cetera. fuel combined predecessor products. our given I'll gas in fleet their called And but harder situation of compared say, worked coal big to of blades as say whether to of natural gas natural the big et very aircraft that's put trying big latest a with an [Indiscernible] not GE, the

you healthy yet. hope in demand are I seeing fungible in more IGT guess that we're is into the I But us significantly. of see aircraft say, we sort basically. turbine to an up market be indicators I also that see a an leading there. replant just as And these continues situation and it that as and instead So do of very guess where not the in increase and for for we're plants gas, general, out is increasing you'll Oil from with situation the turn going strong, therefore not will not industrial burn equipment strong currently really inventory that but very more XXXX. would it's

Paretosh Misra

Appreciate all color, the John.

John Plant

Thank you.

Operator

Your last Shapiro line question comes George with Research. from Shapiro of the

George Shapiro

John. I was sequentially Yes XX%. bit more and defense, because it a wanted engines down were Hi. down pursue to actually little XX%

So so it deteriorate much was QX? there something this odd that quarter made to relative

John Plant

we sequentially I George. were year down I all No. down as There's mean, we nothing special last well. think at -- we're

defense strong that So that defensively to it call causes very rather basically in-year we strong. than the end always so then to a year, QX aftermarket tend stronger let's have it's not seasonality. the back And middle this of

is. So at way satisfying, it But all. worries. Nothing It's but lost we've not no particular all. nothing just the - at it's in very just

George Shapiro

can And then it -- where between in difference sectors And sales the wide-body two is profitability is versus between XXXX and between narrow-body businesses? any of the Okay. there in disclose mix you two today? the

John Plant

XX% so. Okay. versus wide. numbers. been was The but wasn't moving was XX like Obviously, metrics narrow a carry or for versus wide-body on that's very Airbus XX% last just the year fractionally mine over similar narrow-body, They're is which Boeing around question,

the that similar, company out different joints. more difference in being on more underlying wide-body in but than And be our of wide, moment edge if now. look of if you give -- would be and whole of the the Obviously, facing extremes But were variety nothing you bit knocks situation. to slightly it more that margin I'd at have it as aggregate made X% narrow if wide terms we're bodies profitability, volume, but differentiability little surprised at profitable. the to terms profitable. In But a the very I'd

any a we've called metal similarly get on we're of the great that still mentioned fully I'll the account in we dollar out given out of already to nothing second to we a half is called It's terms that you that the So it's and recovery of note out is of say it's of blend changing I way the over of XXXX that margins -- a taken that's taken XX.X recovered, yet taken the forward XX. of back for served see, in your looking dollar it's a just with account And though I but haven't the worth into fully that coming margin not cost narrow-body and was input improving. seeing stronger. taking probably account differential

expected So we're that improvement despite mix still change. fractional that margin seeing

Operator

We at your questions further this this no time. Ladies are and conclude there for participation. thank And call. conference today's you does gentlemen,

disconnect. You may now

Howmet Aerospace (HWM) 4 Aug 212021 Q2 Earnings call transcript