HWM - Earnings call transcript Q4 2021

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Operator

Good morning, ladies and gentlemen. And welcome to the Howmet Aerospace Fourth Quarter and Full Year 2021 Results Conference Call. My name is Natalia, and I will 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. proceed. Please

Paul Luther

have Executive Good full to call. Executive year joined John Natalia. fourth Howmet I remind statements President Vice will you And and discussion contain Officer. forward-looking Executive by and that to Ken, Financial I future expectations. session. Chief Chief comments quarter by XXXX Plant, today’s question-and-answer morning. and you, and would Ken relating events John After the welcome we Aerospace a like to am Officer; Thank and and Giacobbe, Chairman results will conference

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

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

John Plant

Thanks, everyone. PT, and good morning,

move Let’s slide to four.

let environment new was for emerging challenging you. me The the the of Omicron variant quarter with frame First, after day Thanksgiving. the

picture with billion, above appears continues unclear. last was delayed well Adjusted and once an be quite million, to take build with the virus changing impacts, we $X.XXX over improved QX. Howmet of customers QX But build IGT rate sales wide-body production the the healthy these one weakening through level of of Delta line pandemic, in high at to to also XX%. and able were both production, sequentially again Defense year Despite our once variant is we of impacted XXXX. business. bring is that and recertification EBITDA and year sales the improving were of transmissible. sales EBITDA supply We of and The with the Commercial both we $XXX the reduced chain Omicron due Manufacturing well, Fortunately, albeit constrained our combined the revenues margin operations. Clearly, with both margin and nevertheless, last constraints good Truck Boeing in Commercial performed strengthening efficiency. test us narrow-body second virus and half it’s zero of understanding segment Wheels or XXX Aerospace as a to performance aircraft find nature the the at exit pleased time of to for with the with

million free sheet now of well both ahead flow Turning and with cash and of XXX% for the a adjusted and company, year was the balance to at of last record income. the cash rate flow net year $XXX the a of conversion guidance,

contributions, incremental contributions of pension XXX% have net made the free income. we cash if would quarter, adjusted also voluntary exclude conversion and We in been these flow

$XXX million three cash free $XX.XX. long-term has the our both information, your XX%. last fourth fact the quarter, of Howmet For at continued flow of balance guide in and the cash price a in $XXX flow at reflects that in million average years level was well repurchased conversion and the of cash good the year-end an conversion of shares excess The

XXXX of For diluted $XXX shares stood for million January. share purchased the share million count fourth quarter reduced shares XXX million. the million The in to repurchase average and the at continued XXX diluted early during X year-end month a of further with

we presentation. outlook Ken on provide over will and earnings section to get and have approximately share And reduced the January, $X.XX has count million the As quarter. Giacobbe. reduced rate tax the will in our to XXXX, of call hand when We look I was XXX we the finally, effect done been end I of work fourth forward was Meanwhile, to the diluted the the the commentary of by to shares. XXXX

Ken Giacobbe

Thank you, John.

an X%, segment, XX% Aerospace slide year-over-year please Products recovery and revenue sequentially. Commercial revenue total the but for up production levels of Fighter. quarter, continued Aerospace Aerospace which XX% by Fourth sequentially, inventory the Defense aluminum in driven and year-over-year Forged XX% the both and and -- up Fastening was narrow-body Commercial driven X% Wheels higher Joint recovery. the by XX%. is prices. fourth Aerospace down with short year-over-year, impacts pre-COVID corrections total Engine move the driven Strike which of sequentially, was Let’s increased and Commercial year-over-year customer revenue, five. up to sequentially, the Transportation, flat to Commercial improvement was and far quarter X% of Systems declines segment by XX% the

X% down to which chain as market production. customers, truck constraints was is commercial limiting at impacted market the supply our the be continues However, sequentially by

Finally, the and markets, IGT, other which industrial industrial is oil sequentially. year-over-year and of and general X% was gas and composed X% down

which slide year up Now, six, sums the let’s move to nicely.

Let’s start with P&L. the

an basis was fourth lower for points exit higher than they was For up rate to per are primarily margin target $XXX were quarter which line despite share $XXX tied XXX with The which as XX.X%, was EBITDA the reductions increases cost increase Structural long-term $XXX full revenue. Adjusted XX%. million, was exceeded in our year, the price agreements. XX% XXXX. of or of of expectations, year-over-year, $X.XX approximately Adjusted year-over-year year were earnings million million. and

the were reduced by improved flow was net to and at balance approximately we pension Moving expense, of and contributions million, to cash pension free adjusted exclude our liabilities as while OPEB the income debt-to-EBITDA well healthy was each contributions XXX% times. if above were million, voluntary Free well of XXX% associated was flow guidance. XX%. approximately cash free conversion pension income. flow $XXX as balance record $XXX Adjusted conversion was a was $XX cash cash by Net $XXX million, X.X million. and the cash net sheet, of which reduced Net OPEB

Engines complete. taken segments. Forged been Concurrently, capital essentially automation the and have Capital now investing and Regarding Hungary have for Fasteners balanced we are a allocation, we in at projects approach. investment in projects Wheels Mexico

paid million. $XXX we hand debt by reduced of approximately cash on year, and the approximately down annualized with gross costs interest million, During $XX

in of dividend of share QX per common stock We the $X.XX XXXX. also quarterly of reinstated

we million XX.X stock per balanced enhanced during $XX.XX of shares To we profitability, our of $XXX the average balance in it an the Lastly, share. price year, strengthened acquisition common and capital are our up, with approximately sum for million, allocation. we sheet repurchased

Aerospace by margin despite inventory employees. adding briefly X% approximately corrections by higher year-over-year revenue basis Let’s Fighter. employees quarter. added move Aerospace points, Joint cover segment the for which XX% improved XX the to QX driven driven production XX% in year-over-year narrow-body was the fourth was recovery. increased higher seven customer to slide and Engine results. Products was Commercial year-over-year, declines the Defense operating in our Strike XX% fourth brings to XXX quarter, XXX Operating employees the approximately since total profit and now down

Now slide let’s eight. to move

Fastening revenue XXX. quarter. Aerospace fourth in Systems lower able as Systems Commercial the Year-over-year, XX%. year-over-year was Commercial up operating production was lower, approximately Transportation segment to X% experience As we lower revenue. the was million $X continued of on to was Boeing Fastening for expected, XX% declines profit maintain

XX result, margin a improved As basis points. operating

Aerospace $X of operating to on slide negotiation. was and was Structures lower Year-over-year, by cost XX% for million XX% able million million generate permanent $XX flat Structures non-recurring to primarily a revenue, more in segment profit reductions a favorable to sequentially. adjustment contract related lower and to $X.X was Engine due down nine. the Now Commercial the customer let’s XXX. was quarter. production offset fourth in Defense move year-over-year was narrow-body year-over-year Aerospace Boeing declines recovery The flat, revenue as the market Engineered

As a result, margin operating XXX basis points. improved

let’s move Finally, to XX. slide

higher remained prices in and in were operating in higher flow-through on issues. operating million margin. segments incremental If the for incremental prices price chain $XX revenue impacted in of were not of impact revenue appendix. but be Forged aluminum due to profit incrementals On increase prices, fourth the was margin by increase a Pass-through impacted strong, profit XX% higher flat. Wheels adversely aluminum basis, basis aluminum was supply XXX Commercial impacted XX% impact segments, quarter. flow-through. to for comment essentially which $XX revenue unfavorably the Transportation year-over-year did dollars, and million profit operating but the the was includes flat profit Aluminum continued Approximately volumes approximately sequentially, sequential in QX to were by adjust year-over-year be pass-through. aluminum can XX%. sequential resulting operating The a points. profit found the we above the One profit minimal XX% XX% final customer year-over-year, demand prices

move XX. Now to let’s slide

cash on focus debt down unsecured by of our cash the and $XXX debt through Gross million remains and In took X.X actions gross also refinancing lower Net to share improving liquidity. refinancing, debt on higher improved despite $XX We of interest costs $X.X and lower debt. our XXXX, paying approximately and a maturity for combination with annualized debt-to-EBITDA million structure to times, October to hand capital by with All approximately dividends. cost debt cost continue debt in XXXX. is at is billion. buybacks next used we

credit billion $X our facility undrawn. revolving remains Finally,

guidance, like in to it Before to point find discuss a you items I’d few appendix. turning back the John to the out that can

quarter. that associated Special plan appendix $XX charges. quarter million, a of with the the charge driven pension by items were covers a First, non-cash net in costs in items slide there’s mainly for special the approximately settlement fourth

share that repurchases as occurred the in in January in XXXX. of sits slide common billion a share XXXX. summarizes the of X, XXXX, there’s as stock Second, the February repurchase repurchases as $X.XX at appendix authority Remaining well that share

sold of Finally, will free cash you from fourth zero receipt is in the the reconciliation in notice dollars cash quarter. flow, adjusted the receivables

will been cash of flow less our in in has funding a cash the that the zero cash will restructuring and be with accounts be sold receipts of $XXX program Therefore, will of the receivable result net neither of XXXX, receivables or and sale which note been XXXX, from entire XXXX. XXXX that beyond, receivables use sale a of starting from operations. in from QX source forward accounts be and of the impact the from As of cash has CapEx. receivables free cash accounts since of cash definition simplified a from means securitization going accounts be sale receivable QX Please cash the million of QX operations

now to John. me turn let over that, back with it So,

John Plant

Ken. Thanks,

travel. continue slide notably domestic to improvement, guidance XX for The travel move Let’s indicators leading for for show for air to XXXX.

the Structures half starting XXXX, of the show in delays XXXX, in will business with the to growth first compared view course Products acceleration hold Engine an we led to will following a the growth the fairly continue flat the QX. of and expected the that revenue is first first XXX. in year, Fastening the the revenue continued due business half we of to Engineered Systems has to-date see see We during the recovery The lower expect now to QX in quarter.

plus $XX increase revenue at minus million. minus billion, be and million, $XX $X.XX, of million, EBITDA EBITDA basis terms numbers, minus to XX.X%, plus billion, at expect plus million, In minus following, $X.X margin $XXX of minus or or cash or $XXX flow million, plus $XX we XX or QX basis or the billion, revenue of basis And guidance $X.XX. or margin plus plus points, plus and be to minus the plus expect for EBITDA $X points specific of minus million, we or EPS or to $XX to $X.XX, for XX $X.XX, minus $X.XX the $X.X of plus XX year, EBITDA EPS and million, points, minus XX%,

approximately range. points. the are the million least $XXX Commercial the impacted fall income year. CapEx to EBITDA to to XXXX, of following. margins up at more to XX%, EBITDA excluded to Transportation previously continues the that revenue for OPEB million driven $XXX-plus Moving by right-hand XX XXX%. million and Adjusting expect net year, than between of $XXX The and the million from to margins material pension is to Revenue that resulting of of nicely the amortization, IGT to XXXX And $XX versus the market, we Commercial approximately adjusted up XX% increases versus contributions the by pass-through, of than depreciation free XX% for XX% then the side be net for includes million guidance is flow expected slide in the be price $XXX Aerospace, XX% should share and source pass-through basis material $XXX pass-through incremental clarity, of in of be the approximately metal Adjusted up million and range cash. in adjusting in stated. XX% be earnings less and as approximately Incrementals per last XX% Adjusted the a cash compared XXXX, versus

$XXX shares, by the costs million million $XXX and interest reducing improving million, of flow cash the thereby well yield really exit million, by and summary company sheet the in for XX Furthermore, Howmet XXXX, the while in challenges in XX EBITDA conclusion, slide by QX pension the and In margin million, the furthermore, and step we to with OPEB or of $XX which EBITDA the also million Prices, and $XXX move net during above were rate carrying net and of let’s XXXX. the -- of increased that and improving huge So leverage reducing of million. improvement gross delivered well XX%. debt sorry, note company future I reduced overcame. costs was for pricing the buybacks free inflation and Free $XXX $XX liabilities year of the reduced $XXX is healthy liabilities was productivity excellent company. another of course cash further improved growth balance and structural share Operational flow was allowed million. of recovery. by the

and basis work by Thank let’s And to showed with XX%. performed take rate reduced improvement now you. Lastly, tax rate the the your points questions. XXX

Operator

Thank [Operator of line Spingarn is first Research. Instructions] you. Your with Robert from the Melius question

Robert Spingarn

Hi. Good morning.

John Plant

Hey, Rob.

Robert Spingarn

about have ramp that? folks capacity hearing being Could you OEMs we and from some been of bottleneck what on wanted forgings about the talk to ask with I other industry. potentially John, castings and the in a you

John Plant

to contacted give no commented Yeah. response to like at first any I’d could pipeline and most the that. I go seem between to glad a that think be, just such the manufacturers. have job at further, But engines a hard completed Boeing and have is I just publicly at and am starting it there levels concerns At also I probably cover question. what say, I’d register how mean, the are Airbus, pipeline production the levels, us two. whatsoever. what little me bit will that are. how you in think really and I your And the recognized many inventory I I of I simplest, it’s exacting probably its and products CEOs good leave just with three it’s of in engine to

to et also to these up lead commitments And with that production are the I the think level third times required. full, aircraft skylines any this chain, have no dimension. But labor would whole availability, for commentary I will be of will in now, it then back volumes be, issue say, skills, response the times, and significant recognize right commenting scheduled on a the in I supply great of as cetera. assuming recognition

Robert Spingarn

production fair a the there’s uncertainty that that’s think point I so much in rates.

other I’d John, an just, does up, this present the The for be if is might you? competition not keep to opportunity thing ask, able

John Plant

I up that’s far the go as can we that I And respond be My will it as business benefit. and the should pick the and that can this is in pick depends point, Obviously, up to our occur that Rob. expectation and are upon it same in question. the in think way spot were that able additional will always XXXX probably hopefully, XXXX in respond to we business parts at

Robert Spingarn

Fair you, enough. Thank John.

John Plant

you. Thank

Operator

the Khanna with Your is from Gautam next Cowen. line question of

Gautam Khanna

Hey. Thanks, guys.

John Plant

Hi.

Gautam Khanna

guidance if parts change rate, quantify wondering down. was QX of -- what sales XXX in call, of spell relative But the could I the from you are some to… obviously, XXX moving just rate, you out terms the embedding the now just earnings taken in

John Plant

Yeah.

Gautam Khanna

provided? previously what … had you

John Plant

Yeah.

that increase the revenue from metals volume exclude I if around XX%. is So line, then

assumption that of make customer production. XX% And reason of say, called, to quantity be hasn’t our and a we of addition, note note in that I I’d did own to F-XX, volume the of inventory during view of and we bit to overhang skyline, on that being going lack the XX% is that that So, and previously solid aircraft. close the supplied the full that build schedule an not we And of we to our any therefore, Lockheed given lower-end provided XXX there’s have while to XXXX, have that it aircraft. that at for the I visibility

is in of in improvements bit that’s be a into to first the will in no we aircraft production year. this rise in part and as great, got XXXX burn overhang and further while off an increase go have we of of to be the increase So XXXX but early the XXXX then hopefully, when volume there then bit see that XXXX longer it and we part will will overhang, going

or of So for it those need would do let’s you the that couple cover regarding the, say, be comments the early Does of part a revenues and a XXXX bit more? the year.

Gautam Khanna

pinch question any respect do billet you Thank the and on or Reading, helpful. And the having with PCP know. have follow-up to How upstream strike at about... pinch you seen Carpenter outage just you. given you on No. don’t I to what earlier unexpected feel outage, points That’s Have points. Rob’s nickel very the

John Plant

Yeah.

nickel. on that’s little see bit pinch a impact. matter I this think in definitely point, Carpenter that Nothing recognize we some of nothing the be far half at of dramatic this So point and I year. but first the a going having to

Gautam Khanna

you. Thank

Operator

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

David Strauss

morning. Good Thanks.

John Plant

Hi, David.

David Strauss

John. Hi,

revenue Aero guess, I market, you about, you are John, idea I Commercial you an within assuming, So, what growth, Defense, XX% ones, Transportation just that are give by big that the being assuming an and what And you talking idea to us it guess, can throw maybe Industrial, you MAX, want there? what then can in have of you produced Thanks. in XXXX? give production in if on you for us are end XXXX

John Plant

Yeah.

supply to be in in chain are wide-body business with be up be lot all would narrow-body, I really healthy be being markets, the for XXX moment going up year fairly this. at the Wheels Transportation card complete end wild we great led the and Commercial Defense on believe XXXX, I going continue by should healthy The by year. see the a weak in second to of the to ease and So the that be a our that constraints be us. up half of will happening a think in is business to Commercial Aero not -- And IGT point XXXX. and but for

I think half out haven’t on and slightly we it’s going the it. hopeful that of are call year improvement, be of too And XXXX. to at with and to flat gas, to playing point, difficult the oil in this but first for most an for planned down

half haven’t the them. for here, I I get it’s essentially, know going out year increased maybe don’t note second was, covers the got number Ken, we thrown the in numbers year of am exact I But the while but what say, XXX, markets. -- to that than recognize while So end the the numbers, chatting XX, and I seen to let’s have I last the production rather around. am

We on have growth been and to a go segment we Engine in improvement. pipeline our the thinking will us hopefully us rate you on above seen inventory am do LEAP it percentage inventory XX% aftermarket that below it’s Boeing the what XX% the again year, further more to comment base. fairly I maybe plus. as something But us increase off consider left increase that the through coming as but just for of particularly for And get going we being and revenues, when year, then a for have just low remains this But that, we the have side, be that’s again, Commercial no supplying rate as the like in off. see on Spares, confident should there’s us know, to for year XB at increase, in is Aero feel that’s the going burned the we healthy guided. and show be healthy great this that and raising of rate the to strengthening burned level

our are below So interesting beginning the to but dollars in previous be levels XXXX. still well

Ken Giacobbe

half. as Yeah. consistent probably, the look what the at and terms low XXs XX rate we first second into XXXX last we we the quarter, low said And half in were with on aircraft. of, QX, XXs in the David, about in And in exit XXX

David Strauss

for the guys. Thanks all detail Great.

John Plant

Thank you.

Operator

Stallard is Vertical with Your next of from question Research. the Robert line

Robert Stallard

so taken from can capacity Good on your accurate use that’s XXX up follow Thanks secondly, this for morning. this to you assuming much. issue, John, an other then, And have out forecast, completely guidance? stuff? the XXXX XXX revenue you

John Plant

just or what, production are a it’s ballparked number, mean, And very first zero I production quarter. we XX aircrafts sure there’s a then so just assumed, production there year. have in assuming something, for XX We not with around guess, ballpark level. limited about but it maybe the that the It’s quite

the those is aircraft. dedicated release casting I mean, In facilities, into force go capacity, clearly, -- the terms take Engines, if of while that that you production air the that to device if will it’s

the enough any fasteners. So dedicated nothing System aircraft and those to there. will customers of other most the Structures type types produce for changed And any over bulk capacity that for are be albeit to of or part, flight Titanium for Fastening there’s

So, elsewhere. use already production everything have yes, there’s for for made them but rates at elsewhere, be to provision we

certified So, aircraft would get very and lift and start that and there’s just back no to like to to helpful us. XXX be We upside production in down. being the

Robert Stallard

Yeah. Thanks, great. John. That’s

John Plant

you. Thank

Operator

the Your is next UBS. Myles question of Walton with line from

Myles Walton

in still you levels if at is, me, bar double-digit of But capital wanted conversion. in conversion Good more coming I payables likely was wondering XXXX, obviously, are cash we setting excuse and up receivables versus XX% for next and then or in pace year building the Thanks. are pretty would into coming the a you long-term I POs new aren’t growth you better working better the coming John. target? customers performance or than question historically this know the at in it’s ramping just Are year? cash elevated and why I on the Ken XXXX as or don’t morning. flow, guess --

John Plant

No have for than pension we CapEx below in year. I expect, the guided, a time, that that’s period healthy, XXXX guidance, say, just D&A when long-term to previous lower you change as let’s contributions of to be got,

of, of hope the and improve should to in that, we excited working or -- healthy see biggest inventory pro capital very terms of expecting I strength quite we use then receivables further the the So during drag the do and working say, I’d of, Having course some in momentum payables, us a part what capital and we we hit do. the from XXXX. will deal, increased back-end not increased great to going of drag for our because margin that’s into would us the to the rate is I’d the build given capital that of Working It’s our year, And improved be pro marks all rata mean and are prefer is efficiency what much revenues. the say, we helping reduce said year. revenue. rata working capital exit

flow. is there cash a half drag summary, in improve to particularly We shows to on capital strength efficiency, because higher, but love second that in that working the even of try would the be year. So, drag

Myles Walton

did… And Yeah.

Ken Giacobbe

And this Myles, add would I what to is that -- Ken.

these platforms we But As inventory, exited we XXXX, Engines burn order built ramp. some ahead in the it’s key the in capital. business John of modest some a specifically in of working said, get as cash on to

So we shape. think good are we in

Myles Walton

any Okay. fourth who liquidating supplier been you maybe inventory the from And acquire in quarter? the did

John Plant

yeah. amount, Small

Myles Walton

Great. Thanks.

John Plant

Thank you.

Operator

is with JPMorgan. line Your the Seifman Seth next of question from

Seth Seifman

morning. very Thanks Hi. much Hey. and good

John Plant

Seth. Hey,

Seth Seifman

each to, this in there to what if what kind up coming are could for maybe comment you heavier the don’t year? exact up is know, they relative year coming year, on a to this I maybe this but not deliver Is if years five years expectation three much a wonder a are I year relative sense, might number, the LTAs -- average, of of that year. be XX% you lighter able think and then on

John Plant

Yeah.

I XXXX what The and previously, third for a in year the the or as I be saw inflationary million will us was through issued So the number issue of $XX-plus that. number week excluding you quarter a And a we said well with have so our -- not book QX in today Nothing’s the time. exactly we big cumulative consistent improvement bigger said. are completed with was think price, not XXXX, again, for of as the consistent through for statements. as LTA previously through our the with negotiations, previous but and changed, is line what for I XXXX, And price XXXX, be will well expectation pass-through. but

Seth Seifman

Great. Thanks very much.

John Plant

Thank you.

Operator

question Sachs. next Noah from the Goldman is of Your Poponak with line

Noah Poponak

Hi. everybody. morning, Good

John Plant

Hey, Noah.

Noah Poponak

comments is seems pass-through John, EBITDA the that a the sort I low-end the versus you what revenue pricing little ranges versus terms don’t constrained of a like in your to. high-end incremental, guidance incremental But of the of the math of the you lot different It does to the speaking that the to on midpoint of heard year-over-year. the have just places EBITDA margin margins. of XX% the been gets of get but in

latest So maybe there’s about you your on quarter? to to to your are saying just trying But margin thinking feel last good versus revenue, you risk wanted but were get performance. just tell incremental us operating your potential what you

John Plant

X% minus we quarter, Yeah. well you approx and XX%, within gave are or that. Well, I the plus last

don’t line. think percent around for a is I in of argue think going So with exactly us. it’s all to I the of anybody variables couple

inflation, like of cost production the availability, will management containers. about the disruption, the variables Omicron, and LEAP be inventory about those XXX, So F-XX, could XB also mind container things recovery I inflation, I talk I about could talk talk of never could

within So there’s a out pan in on overall of and during just then year. the guide we I lot stuff things going exactly that context how think course will the see the and uncertainty, of line is of

Noah Poponak

Okay.

John Plant

disappointing to not myself. accustomed the most disappoint not am important to I one, and

line. the think, in at we are moment, so I And

we passing is, can through most significant these important material through, pass others. the we I are think changes and thing

not So the It’s thing. margins. that’s an important excuse me for reduce

Noah Poponak

Excellent. And is this...

John Plant

non-conversation. it, to once we -- it’s non it’s And a get

just improved margins given a as and have hopefully, where deliver, the we deliver this deliver and you range we We way in take the in in same will margins XXXX, improved have XXXX, to, you XXXX and a which would was over over you I increase we an XXX-plus-basis-point midpoint, guided be XX% XXXX. as XXXX. -- in improvement think, know, And XXXX

Noah Poponak

see And the and below didn’t is Fastening that as pre-pandemic. in much furthest XXXX

Now there, left stabilized the there’s is most upside forward? has that where that the moving revenue

John Plant

good margin a for lot business. XXX. more I about about I certainly Fastener bullish it, Well, that’s optimistic I’d more knew the because am be a our if business,

Noah Poponak

Yeah.

John Plant

going don’t, I to think I you mix if still margin was this, am cautious. the and given, while through be performance XXX of I down and slightly the you mean, and in I business. the wide-body sort But fairly but into given when when like creditable it think differential go real credible up, Fastener given, Fastener think, I a that margin for QX revenue on down, aircraft, up is and the down,

Noah Poponak

much. very Thanks Okay.

John Plant

you. Thank

Operator

is Morgan question from of next Your the line Stanley. Liwag Kristine with

Kristine Liwag

there point you on discussions John, And of for you is on industry? think you? for are pain will or potential about guys. a pan How sanctions. that this thinking Russia, again all out point titanium are How this? risk morning, Good Hey. the do

John Plant

in or -- with have long-term If note commit that then or for geopolitical I about to any and would customer titanium. impact titanium stability the did from indeed And regarding real, the got concerns that We should others. of be those to prove press we that great -- us, be anything, agreement for Boeing happy a comments because concerns material capacity. would

be it’s So if think production, then I we contractors the uncertainty, -- would there your whether aerospace for or defense take to is calls. happy geopolitical for that’s civil

Kristine Liwag

aerospace this much up how mean, industry’s capacity have following should can you about? So, that, John, you mean, titanium, the I of for how on much do demand meet, I come

John Plant

contracts it’s we offer. will the sure. Well, not locked who [ph] But the the like whole of come get it’s for and VSMPO to the are demand, those clearly able first that’s capacity

want Japan, for of myself most titanium to titanium. reuse us got for for that geopolitical And to have is also would the part access not which sponge, I reverse and the uncertainties. affected by comes I from guarantee certainly Our

Kristine Liwag

Very Thanks, helpful. John.

John Plant

you. Thank

Operator

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

Matt Akers

Good to kind this at share that additions of lot question. the morning, thoughts of of to or are covered You your Thanks there this of a ramp-up XXXX, you headcount people add guys. on lot Could in for later year? need some the you Hey. support you for point? sort added a year more are this

John Plant

headcount to sequence businesses in aerospace tried movers early will have the those the we I So that, map. in recovery say, put to

Engine see. our shortly, volume our net we ahead that Fastener We going to business. the And already we adding XXX to number business so so adding our under, in business you seen think, Fastener get have are that and think in recovery of trying just I are adds start of

In are come saying what then work things XX% we and that, things fit am okay. probably labor an we we terms and the people about of think be course if production, cost XXXX, we it be today recalled, think probably, protect additional see be And we stressed get will currently. that ramp some actually we during of we say, could some volume we is you out ahead already ahead out addition healthy we to we let’s will that, and that, think be XXX we therefore, about I work to the very from the time been the access and of we able the than training far, also recruiting could its be fresh during especially we have if up quite that as only our it’s But that expect My year. that is to if parts of where these, be similar number, to said expectation to between us. the labor cash availability meet costs and as be not I and manufacture are somewhere taking of the not, game and customer’s of downside, demand additional and will building if difficult we such expect the the and X,XXX tried have well, the we took and curve that rather those have talked adjusting want demand in the about But, for on our from of about. and so about we will of to we people coming. so keep upside those of that’s but of again, you labor, XX% effort on inventory in thoughtful

Matt Akers

Great. and Thanks helpful. that’s

John Plant

Thank you.

Operator

of with line Wolfe the question next Timna is Research. from Tanners Your

Timna Tanners

Good I Hey. Yeah. morning. follow-up… had a just

John Plant

Hi.

Timna Tanners

balanced on was … allocation, approach. capital XXXX I about mentioned know asking a that you

lot don’t needs. did CapEx You see mention you of a

So buybacks and remaining understanding just opportunities? looking you other I dividends of Thanks. how to guess versus at versus really trying an get refinancing are

John Plant

XXXX. is during healthy will our at this point flow, note still we cash Yeah. My to that, money given shareholders returning of be guess

you first we January. fact, million In in few already if of have weeks think it, about the done $XXX

in an of company. confidence cash you that our strength of the gives So idea and the flows

do see our feel clearly, be but we will also But, We fund and we sure the additional back make so. year taken to of authorization course go get things business feel we a CapEx way and first are before. in we Clearly, to as going be in we number which you May, we reporting appropriately will go. the through year, I our the to guess a view from have be quarter, of the the buying of just will how with yet through would we to if during plenty care that’s we slightly all And determined, obviously cadence sense early expect, through. being then will take that go than when we higher just as whether benefit we the of dividend not a as check lifted or and we or do though that shares

So with a things. XXXX. we improved compared in willing is company, magnitude buyback terms but of any have expect am consider to a exit balanced approach, going as of of guess probably the order to My flow for similar turns implication cash but leverage to that all are share XXXX, once more when dividend a again I of also we I

XXXX to way. really that shares, in a debt will where to have set exit we and our back good structure, dividend are going and we conversation going think up So XXXX, we improve leverage consider our improve I are buy and as another

Timna Tanners

for Thanks detail. Okay. Great. the

John Plant

must XXXX. can’t XXXX. away. only just about I believe I I start It’s be the carried getting of talked

Operator

from Your with Capital the line Phil Markets. of question Gibbs next KeyBanc is

Phil Gibbs

Good Hey. morning.

John Plant

Phil. Hey,

Phil Gibbs

Safe something A think on already to that that, and say bit going you this evolution. probably pricing a pricing question the is year I is said year $XX than was were about fair? to that less gains be last million

John Plant

commented I second a because the part, week part is on the haven’t first Well, so Yeah. that in it’s will time. or okay be

Phil Gibbs

any would pass-through, bill But you about I you talked labor in largely that think, the Then from aside -- Okay. for business you the ago you maybe have guys higher level incremental have that or hedged something inflationary of don’t months you than Wheels factors year, Forged over other expect at three the a largely the think, course the were XXXX. that out? bit I expecting

John Plant

in costs particularly are Energy sure, for that’s Europe. high,

say So I because cetera. energy country be et security will if go towards increases renewables, is you like but say, Europe. almost of causing having in It’s the energy, that to to in will Europe, I there all higher cost nothing the also level. of in the would of than them elevated percentage And an their, U.S., policy are that any differential of to

to that’s So and I one as familiar why we are there, I -- thing, attention guess, with course, all the inflation your very for energy early. and that’s of general increase,

Phil Gibbs

second then all just And that, spot hedged your a of the brunt there made, gyration? of you are energy just part you comment exposure the you to are terms feeling in that energy or market

John Plant

the but covered be and I the within said, contained it’s are, you given. pretty hedge we is provided incurring will the costs range the our just those have energy, additional that And that as And which You pass-through. all to are for customers not course therefore, already costly we incremental say, energy within guidance let’s assume guidance during can year. our of by metal

Phil Gibbs

Thanks, John. Appreciate it.

John Plant

Thank you.

Operator

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

Paretosh Misra

On morning. Thanks. your Thanks. Good guidance… CapEx

John Plant

Hi.

Paretosh Misra

there flagging? you larger it’s in recognizing worth that depreciation but below are … undertaking project and is any XXXX, that’s

John Plant

projects I significant all. at there’s No. no mean,

So business, we had example, previously. Engine in capacity for there’s as have no our expansion,

our As and already that, capacity the Ken has commented Hungary in expansion Mexico. in business Monterrey, finished we Wheels

expect in behind as next to year. into for we customers through the benefits that also go and see that’s of particular, So and available us our capacity the year,

terms think, commit to -- from I earnings gain the And elevated spend thing, combination as productivity, we I company. our we be going while good. of have ramps years. are cases, in the further to labor that of to feel over compared and through indices probably or that there’s those projects, the along recall of toric, and three meeting I’d path started future automation years. with calls, quality costs continue stimulated that’s that going will to previous Howmet we all have additional it years. And If just It’s would ingestation in I quality have years dividends And because will to inflationary for two the an really noted terms also, that’s think for also are fact, think, I you key going and delivery willing pay managing the I our also improved going our improvement that do So those and the productivity. we that many to taking to years in so, volume are in for two of be last the previous we going products automation do where the those or one be the to us is we throughout of next three many like from in

Paretosh Misra

if sorry, last Interesting. in the how Thanks. I regarding follow-up a was that, you aftermarket, year your aftermarket XXXX? big just comments on And business then say your quick missed did but

John Plant

and to and out days. these now of million the to XXXX we narrow-body XX%-plus more the XXXX for -- in say, XXXX, about close fractional depth $XXX less. Aerospace and that spares, in improvement million the Commercial $XXX we that’s obviously, both clarity But the compared mark call, or say, to, going where, are everybody Commercial so on a million for the which not. in and was Aerospace, think year it’s pandemic I I on Defense a $XXX the did And Industrial, wide-body. believe improvement and called let’s was the of, have business, back-end million, I $XXX about the to in that in And we dropped

Paretosh Misra

Got John. Thanks, it.

John Plant

very business -- And and jet really well. going business jet business well, is as jet because

Paretosh Misra

clear. Very it. Got

John Plant

Thank you.

Operator

line the from is Shapiro question next Research. Your George Shapiro of with

George Shapiro

John. morning, Good Yeah.

John Plant

George. morning, Good

George Shapiro

have as you guiding couple margin the you better last of thought, you than revenues bit the been been than been little but what either have good quarters, a has or For to. in less

little there? out long how continue so be expected So can the slower, less do continue the if you recovery see we to that, a to bit than somewhat revenues

John Plant

can to of like have our have supply revenue want. only then what to if particular, as I’d than a instance certainly, you the everything, I say would going you know, year, out what one in But you quarter. the then disappointment. recognize us customers seen the in XXXX, But And compared of with Okay. through that back-end in we production I that, fourth all everything mean, in back-end go overshadows zero rather and the think effectively of if to call XXX been

a volume. -- quarter, look you disruption really through protection so then you also The our that the know, want it’s of all whipsawed the most production of it a you changes, guide have all will is core did So, by And been on. mandates well, adjust right at that maintain can again and going the employees thing additional containing cost if and first try go government part within and impact lot that -- yeah, say, provide disappointment. regimes our closely, if efficiency, much we not and as for that through there’s is for if and when Omicron to our XXXX. you half it top testing will you output, production, you margin on see that exited reduction half that is of pile the second line important all that and so add despite but say, revenue maybe there’s despite material on, so of you And to is that the where Plus revenue, we pass-through, of can you provide. we we and like our material, let’s of programs not

what going Aerospace way we second be the nature and lot I happens never certainly, bit when XXXX is quarter to we through then we of and will for the go -- more optimistic the as as what a And So, of are always is that’s to it loaded, we schedules. convert going -- while, say, are in round, But half. a know volume. we at interesting the quarter, you effectively, we a Commercial is in half, Even the XXXX we for when are it you think the firmness second you good feel going are to really where moment, and to more the production be in be optimistic getting year see that are a we think telling for that situation well. me, our the little bit can we waiting and to about will continue market when through it’s through, back-end way you in that though is second have recovery certainly, more but is recovery second

So, things I’d together. hold to moment trying say, George, with all good, the

of the a market hasn’t We have of whiff we QX, been and I going while should volumes. held And think. say to hopeful I convert to little maybe we a get together, of in increase, we bit enter things then sales kind are had am by uplands then us those way like, sunny as

George Shapiro

long keep the impressive just wondering if can it revenue. I don’t am you No. get It’s been how Okay. going performance. you

John Plant

you are delivered, been and some or happen, want, Yeah. which operating looking lack, if I the it’s will guess, last keep over the had I the and headwinds and with have is it’s -- done volume point. the the we two happen strong make volume, mean, that want But that to because years, the tough. what we converted, forward have a during will that should I few I candle that at XXXX do answer we thing improvement, proud light I we Well, have mean, years might quarters

George Shapiro

Thanks very much.

John Plant

going way, will it’s being all narrow-body in I and also stuff the little of going I it’s Aerospace and think business you all increase, with, Boeing, narrow-body. mind and the will is improve, bits big picture start the important picture from that are Boeing, revenues let’s Commercial in deal whether for in hopefully, Airbus I leading aircraft from shortly to just recovery, it’s the call, hopefully, mean, China delivered volume the is, stronger keep up is consider, good. the will despite, big to

So the here. keep picture big focused on let’s

George Shapiro

Thanks very much. Very Yeah. helpful.

John Plant

Thank you.

Operator

with from Goldman of Noah Poponak Your the final question is Sachs. line

Noah Poponak

you, with to I try of going comments understand your Hey, John. surprised little wanted from them. by not are to what’s XXX. much am just I better a I sort the on hearing that you to about rate, a surprising that are of know have the lot underlying they they talking is give need the chain I mean to restarting inventory, info. but production supply presumably, that they

So starts it’s long taking what’s putting on of assessment what’s there, so it up? when what’s their and going comments happening and your aside, back there why then

John Plant

know so assessment if at count don’t much I my all.

Noah Poponak

It does.

John Plant

taken. providing FAA ahead don’t -- think, But, a past, I is get the is, is problem a in that’s think, of commentary. them. Leonardo My MPS, being therefore, is been I to think thought and behind Italian line it makes my the I want rightly of in difference. Boeing’s helpful And lot the Boeing that, it’s don’t assessment is take Omicron, the cautious the

the doors The performance the has shims And the think been solved there being through. Solutions base has which and around are been and supply were being I done. completed. of worked gaps through. supplier worked is The the are in terms audit issue of

think everybody or being And the And so bit aircraft. a prediction is my there’s making hope is bit quarter a lot that of which that is I milestones, on think are for are snake during second done -- and predictions and this its aircraft early is the for that latest then wide-body it’s the because efficiency I aircraft. give flowing aircraft clearly this a fundamental as will quarter FAA composite those be demand great recertification. and And that

of at airlines, need the cancellation look So by aircraft. some those the of if schedules just summer you they

that to get of will this numbers lift five from production, of see per five penny let’s that and we And the done a is. we month gets second being are assume so, half it going currently rates recertified year, in as those the are

I the events control of those just that’s think give plays it way trying I you I a in and not am am view… So but to all out, at

Noah Poponak

Yeah.

John Plant

a I it’s as doesn’t that, really. count view that albeit … said, much

Noah Poponak

would have No. while of I bit, may start for necessarily are need explain production helpful. that, would to to, inventory that me and And to there the It guess are of not low and given sound what rate you restart… then that’s that a the a And to communication giving be ahead surprising are pretty it now, rate, they does. going restart the that, they such because maybe schedule, the right the regulator things is if being with combine that low even sensitivity at and they don’t they going a that

John Plant

Yeah.

Noah Poponak

soon. relatively …

John Plant

are to need in do be that’s… extended I period careful, if I it’s there’s not production to back they we month, zero get five going aircraft. for difficult if going and get And we to rates mean a then time, be, that to Yeah. for up end really up overall, an believe to of

Noah Poponak

Right.

John Plant

chain, to change a that’s of system XXXX, when only off. subs it, as that the XXXX, lots will a away take build, as aircraft in, you we notes world, …it’s as change, that great where of was difficult say, around the there’s let’s far well, XXXX bit and of countries Japan probably, the other then think all as in say, inventory different the through about all a way burning and call all back combined know, And let’s the the an aircraft was fundamental with not but timeframe. technology supply

Noah Poponak

you Okay. much. very Thank

John Plant

you. Thank

Operator

you Thank call. conference today’s concludes for participating. This

may disconnect. now You

Howmet Aerospace (HWM) 2 Feb 222021 Q4 Earnings call transcript