HWM - Earnings call transcript Q2 2022

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Operator

Good morning, ladies and gentlemen, and welcome to Howmet Aerospace Second Quarter 2022 Results Conference Call. My name is Ian, 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, Mr. Paul Luther, Vice President of Investor Relations. ahead. go Please

Paul Luther

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

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

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

John Plant

and either X% Welcome PT, continuing the QX customers of additions range. with morning, everyone. strong year-over-year and is EBITDA Inflationary each aerospace, at grew Revenue pleased XX% or billion in improvements. at high million, headcount and healthy Total and performance witnessed was year-on-year with X% Similarly, guidance sequentially revenue EBITDA top are QX was net from our was XXX and were quarter of was guidance. efficiency sequentially. approximately XX.X%, business margin Howmet's offset segment, which to employees. of sequentially. end which another commercial continuing costs and year-over-year good both year-on-year call. $XXX recovery including Moreover, up the also recovered second sequentially, the $X.XXX and XX% of particularly which quarter Thanks, to we Howmet's was the up our end in increased

$X.XX, was strong earnings share XX% at an of Finally, increase per year-over-year.

in the was of to cash Free aerospace the free build end inventory cash balance recovery. quarter, positive The primarily QX including the QX increased to pension in trending are of cash million drag cash positive QX. cash repurchases both including million, flow. and favorably stock with free expect Legacy reduce and year-to-date. at a $XXX commercial repurchases approximately improvement for a sheet bond with Share was flow of cash yield. $XXX and XX Moving the Free million interest we have $XXX an $XX and and liability and flow balance continue share flow on cash and to accommodate liabilities the and to common flow repurchases improved million. of half, first positive hand million, were $XX net OPEB of count bond to hence and expense million

last Associated are compared the in down cash contributions to first year. half XX%

year-end three to be is improved will leverage net Ken. by accelerate Lastly, move expected times by covered towards EBITDA. to to X.X times and details Segment

F-XX and However, the an I of low margin burn both of the down continuing would build Boeing the light like in and zero commendable continuing engines of the improvement of our to structures. structures was small note increase EBITDA This in business inventory in XXX. to the

Now to over Ken.

Kenneth Giacobbe

you, markets. the Slide of an Please to for Thank John. X overview move

and prices and impacts driven F-XX. with of be inventory year-over-year. revenue, up segment, Wheels year-over-year transportation, and up by XX% and an year-over-year was aluminum The commercial aerospace Second corrections aerospace in recovery was Commercial sequentially, far XXXX, for improvement of Commercial continue narrow-body the which revenue. X% volumes. short XX% to Systems from Defense continued commercial second which the driven revenue pre-COVID XX% Engine the both year-over-year was flat sequentially, total essentially aerospace continued the quarter higher sequentially, of driven revenue by we XX% total quarter, was as and XX% and segments as XX% the recovery. up Forged level, aerospace well Fastening by although higher Products customer

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

deeper XX% and up on down into essentially and market, IGT XX% flat, was gas year-over-year this oil Going was general was industrial a basis.

move to let's Slide Now X.

high XX.X%. So at margin P&L both as on it with high EBITDA Adjusted guidance $XXX increased adjusted end the the start million. focus to were of profitability. with basis In at as second and XX% EBITDA up year-over-year. quarter, were Adjusted metrics was EBITDA let's also a the enhanced revenue sequentially of guidance points XX was the end

basis material with of expectations pass-through, $XX higher XXX million at of EBITDA flow at revenue the the incremental XX.X%. material pass-through, to in-line was EBITDA XX%. higher approximately the margin year-over-year points was Excluding impact revenue for Adjusting

been strong impact maintain able additions the growth. higher pass-through of as and our material as have margins We inflation to future to despite headcount support well

XXX headcount second engines in the quarter, in fasteners. are we Adjusted per share headcount earnings preparations to as XX% by and and in X,XXX that exceeded the engines continued additions $X.XX per adding share, During QX. continued already in up growth net employees, year-over-year. the more has end we at including in have growth increased approximately made XXX the than in and the guidance recruitment high experienced Year-to-date, half, of been XXX focused of by for the approximately second fasteners of employees,

foreign of minimal. impact currency the on quarter, earnings was the For

repurchasing our of rates Free to a The XXX cash the from the associated positive to dividend. XX were hand and increased to reduce XX% first liabilities. million Annual Discount quarterly the and end pension XXX be and year, which should will cash Cash reduced of share flow bonds favorable, and at common further in buying to XXXX, leaseback estimated the funding diluted are count contributions net corporate back million million basis. million versus improved of continue on average contributions approximately by XX XXX XX our million. remeasure be XX of sheet. approximately QX sale reduced million after a million, in shares. the balance Pittsburgh. year-over-year the second we of Net exit quarter rate to which proceeds a liabilities were million to of the of by XXXX on of XX expense $XX generated the pension headquarters million excluded OPEB million half and Moving cash was stock, in approximately XX

Finally, net debt three to times. EBITDA improved to

John expect to and debt year-end net X.X times. earlier, As mentioned we by to accelerate move EBITDA towards

Moving to allocation. capital

In we repurchases approximately that depreciation mitigate We approach. million we purchased million to fasteners stock of purchased XX% common the in of in in note yields, repurchased risk. X.X to continue common stock CapEx approximately improve and XXXX, Capital of first approximately of for be stock to X.X also would less shares XX on at the our shares XXX the July, I to half million. outsourcing We million be second acquisition which in automation July $XX.XX is in shares than quarter. balanced price continues $XXX enhance X.X the increases engines for both business and quarter share authorization currently Productivity X.X share. continued of the focus for $X,XXX,XXX,XXX. common million for quality, the expenditures with per reduce year-to-date repurchases an Board labor to average million a million. be shares

million. with and repurchased We quarter XX cash debt. interest will hand, our reduce the on this bonds to million XXXX in approximately annualized cost Moving our of X by

of a dividend quarterly confident stock. continue to of free be share paid flow cash and we common per in $X.XX Lastly,

move EBITDA Commercial QX defense higher, by increased to was and margin production up down solid Products year-over-year aerospace were to Year-over-year Boeing the in gas IGT Now driven adding higher Slide the Year-to-date, recovery Both driven the XXX aerospace points while a quarter. another commercial revenue second revenue was Please narrow-body for recovery. narrow-body XXX record net cover quarter employees quarter. with year-over-year the XX% by in XX.X%, was let's by and QX the XXX despite additions Fastening X and Engine Engines for the oil last driven flat XX%. year-over-year up XXX. XX%, X. was improved declines Adjusted aerospace XX% XX%, X% basis higher headcount strong essentially somewhat to a to Slide was was approximately the Industrial but the quarter, in employees. segment. move second for continued was segments. XX% approximately System’s offset year. second by

in approximately was XXX of expect We second Segment EBITDA XX% support half. decreased addition was adjusted to the approximately and quarter impacted the growth. industrial the in for in employees employees. Year-to-date, growth Fasteners and cost additions future inflationary by headcount XXX

that burn-down quarter. I XXXX F-XX adjusted Now margin higher of was Structures' was pressures. cost inflationary margin and XXX more EBITDA Structures delivered QX to despite EBITDA Slide revenue. the the XX% Boeing in revenue narrow-body QX margin XX% adjusted performance annualized aerospace as team. for to XX.X%. let's second increased quarter's annual the Commercial impact Engineered was revenue Structures the solid on XX% zero approximately the note XXX. EBITDA the to by of recovery the Boeing This and continued a the builds down inventory offset using production was than move low year-over-year declines of higher this year-over-year The Segment being X% the X. team the would despite equal

let's Finally, Slide XX. to move

EBITDA chain volumes but was increases The revenue or commercial by second prices issues, demand the of higher unfavorable $XX supply production. continue truck of adjusted the driven was Forged Europe. million million currency, remains and strong increased expected, the As X% impacted quarter. higher XX increase primarily by despite transportation driven Commercial revenue in be volume by year-over-year XX% of impact XX to year-over-year foreign Segment million Wheels' aluminum X%. limiting in customer

did the EBITDA margins XXX by While did adjusted impact dollars, unfavorably higher it basis prices pass-through of impact aluminum points. not approximately EBITDA

guidance, a it of that to out production portion in discuss local revenue unfavorable Wheels note called turn the to has segment segment's currency cost back and foreign I in revenue as currency. will John Before that we good you

foreign the segments the For portion production while dollars. revenue costs of the currency, local is a a majority of the currency Howmet aerospace in natural have hedge, in also U.S. their provide total, in segments aerospace

than earnings For impact the overall foreign quarter, Howmet's $X million. was less currency

over turn to John. me it let Now back

John Plant

commentary we markets aircraft in production demand international a per second me outlook. AXXX production increases of The to second lead serve. Wide-body are Thanks, to we mid-XXs continue the XXX should narrow-body we will customers end half and due and let's lift about beginning move production rates improvements Ken, aircraft XX and continue the MAX spares with the half, is provide Boeing as that and in the to to see Airbus half. to the first, viewed in state travel. stable production in to the But let expect increase second approximately month month. some

for is into production XXX with combine deliveries. and restarting forecast the given again the Airbus that by Our of with improves XXXX through I best build XXXX, the view increases the is as Boeing call to of we quarter's to production FAA wide-body aircraft XXX and clearance we the the now the at that restart especially are last about AXXX. move the AXXX of XX aircraft as in in the earnings although cut XX optimistic from our talked future, estimate, about The

continue, have more previously which and half, at to seeing to we improvements muted half. availability, market a the trucks supply had expected chains a the should improve, improve second of improvement During and gas Commercial burn-off in the expect signaled IGT half year. to albeit inventory expected we defense first than improve production the for oil are is component revenue to as second level F-XX compared is show expected. the the modest we albeit

of but revenue execute million the XXXX added Further to expect we and as to customer quarter burn-down, only opportunities we result especially for our Ukraine as so quarter sales. situation, fourth beyond also clear during revenue the orders, have $XX and should next for production. wide-body a inventory updates secure titanium of aircraft intake become not order assess we Regarding and the or more

volume billion, energy, other the excess additive be and parts The material costs $XXX is electricity, Moving this midpoint $X.XX to in and number. are above services such increased now annual XXXX guidance. recovery commentary to expected million. as transportation, to of is to inflation, noted which revenue which production inflationary reflects Other

$X.XX, to expected X minus EBITDA million, minus minus be plus EBITDA, minus plus the basis or billion, X XX plus earnings and third or XXX XX points; million, For $X.XX. XX.X%, plus X.XX is revenue share, quarter, million; per or margin, million;

plus is or or the margin also the approximately minus prior billion, income of EBITDA at flow increase range XX at of XXX year-over-year have we we revenue Howmet's minus which conversion midpoint; plus million, year, million, of In XX midpoint of an X million, cash guidance For differentiated the at summary, prior to XX XX guidance. from be an million, from guidance and profit or unique XX.X%; have XXX%. X.XX million our out called demonstrated plus earnings minus an plus is Free from of million, XX And net and sequential EBITDA X.XX $X.XX, and share per and minus million QX increase prior $X.XX, tightened flow, of improvement $X.XX expected free guidance. continues. assets. and cash increase Howmet's million.

repurchases been total have deployed flow has has bond to consistent well to and Through on inventory strong been XXX balanced aerospace million. we strong build also bond spoke backlog. common the of XXX stock at common inventory net and cash as a plan be million, recovery. about that We making half to Liquidity free is by against dividends. is and close the In leverage has and as after QX we been end continues improving the allocation build Capital progress been repurchases. million July, the first and including XXX million the XXX do hand as stock for and and increased choppy first to so $XXX of half, approximately commercial with in for again excess have an million the year. Cash

cost recruitment net for year margin pass-through, of is be volume continue and modest but the with prepare our strong benefits to Engines pricing expect reflected XXXX. inflation Structures to in timely recovery revenue the recovery control, and reflects guidance, into raised, additions to the In the and second and business. material add inflation efficiency, begin Regarding lift healthy future in improvements. also half, the continues EBITDA we headcount headcount to the for future

dividend Howmet $X.XX of in annual this the of $X.XX to the share planned year. quarter per per quarter, Finally, $X.XX higher or doubled is payment per with to per share November first be made

to our at moving I Technology like look at encourage would howmet.com slides. the visit website to Howmet's Before Day to questions, you to your

slides I IP portfolio As introduction, beginning deep is trusted with technologies a that XX. like I Slide know-how. brief is a would rich note Howmet What highlight to differentiated with a to three brand want with and process

driven in which parts We rotating revenue with one our Approximately strong XX% On assets. aerospace by supply complemented number growing under the sorry, and spares structural markets we XX% two XX% or generated are where componentry. relationships - demand. contracts, ability mission-critical of a aero of customer revenue from XX, markets of is to engine is is differentiated Slide either position, number hold by and long-term

and Lastly market operational differentiated on grow allocation Howmet's a four XX, strategy has capital discerning strategy. Slide finally, to with discipline of pillars: products above of and commercial capital rates; the and allocation resources; disciplined prioritization

is in now full the can Investors And on in our website presentation, questions. available we which section. information Additional the move to is

Operator

ahead. question comes first Morgan Our Instructions] Please from Liwag go Kristine [Operator of Stanley.

Kristine Liwag

of second question per XXXX. maybe to expectation of their on John, XX could step-up with rate deferred I a mean, production half previous early I start of versus rates. XXXX AXXXneo month Airbus production a to the

Boeing per for XX MAX seeing the face are We month challenges as well. maintain to

period are production meet and how changing supply time investing in lead rate lines versus the industry where be an increases to chain, is the the your not margins? in side OEM business and production longer maintaining bottleneck of you and do structure So cost preserving a balance

John Plant

it Well, moment. a the is tough at certainly, balance

a production increases. quarter, training preparing to But so invest And half. the get for I in halted have in the pretty May, the ready seen so And continued delay tried the you year, ramp you is choppy. Airbuses XXX for have cut of in say, noted XX-days comments, and then do now XXXX. adding as last to we backlog as the from in half, next XX AXXX so, from people production for maybe maybe and to, far, my second in maybe saw second the as or the to the We

how to able we the future. pretty then anticipated sector that we aerospace. and gas fundamental particularly buoyancy deliver we premise so backlog trucks. to are, is although the So consistent is to and I of is slope having ourselves where of defense it been I recovery, hopefully in we consider in to And for recovery, of us. still in have we readdress hope say, been important the the seen against have oil you think did solid have constantly we in seen recovery, period do commercial And recent I the albeit have plus find the for more are a improving commercial will which the, it, and in say the muted

heard castings. was than think rather question your we structural more XXXX solved if largely think XXXX, you heard the focus capacity on present and that one completely airfoil in to our two engine the affecting new the the increasingly Again, for which which the then plans airfoil and point, which capacity, far what investments. So of but I given continually to one you castings in-line headcount. expenditure in capacity think forgings, we availability and not too from requirements have between at capital previous significant the didn't castings point. available particular, of about we issue, implied in But and is investments the back not of and if It of, was latent we trying was doing And trying get in in but XXXX, to is how has fundamental turbine are to we really ahead XXXX or fundamental When availability see I balancing plants is our not very period, have we questions is is mention made customers. that for this solved be addition in which adjust that sector, the the castings. thing

few time, we tens apply previous to we that of to are or have Inevitably, parts. that. At of a have have a we up few to on to say delivery thousands tried engines calls, that casting we as fundamentally structural engine so I is holding nothing been are of airframe aware same able But and also production step the And tight would manufacturer. an that of parts. to on

one be another as recovery. is look it, forward we Howmet labor give is that we ready. going year. our do are of slope to we stage training ahead readdressing see for I have principle. again broadened of be will people, the further out So the then and to trying covers And we I do to on that change that is But XXXX customers' and the are balance, what for Kristine. playing not say, essentially, fundamental plans intake guide that. that not in But I that anticipated end year keep recognize clear importantly, are if increase, towards we we equipment, it investing the growth But we early of year, will of next in it, the more, Hope be angle the that the to

Kristine Liwag

Great. you one I Thank John. to question. will stick

John Plant

Thank you.

Operator

The Noah Sachs. next comes go question Goldman ahead. from Please Poponak of

Noah Poponak

margin the Hi back the for good higher keep. implies year that and while be through the and shake business would updated morning margins you are a the the cost that out. be It actually the and in revenue on flat half down assume first, looks I corporate segment EBITDA versus D&A pricing, would you the guidance way the relatively like little, everyone. think I And passing

walk the you case. would through be why if could that just maybe So me

John Plant

have I the XXX now, I to And we it the in in up are Europe is the inflation us of points I out kicked gas and then in said, of the saying, region we on the assumptions million pricing been calling inflationary energy said of elements are on inflationary ignoring, has for you and and alone, think mean, now at costs. the I remarks think, reached. Europe fact familiar the the see I that so the remember, that our beginning XXX year it influence element think significant of all regarding is in course, utilities, if crisis major million. natural And element. of Yes. with of the I particular, And we million somewhere, just where XXX the we started just we mean, metals energy north has that

And of assumptions, more to in up for so dampening where believe of margin. offsetting there dollar-for-dollar, as And those we or we recovery Noah. that, on is has And the is effect is kick that play we it. cover are, you you a that, then if inflation see terms which we know, a that lot

adjust I see for year-on-year. the So choose not change believe will again, to. is let's like growth that, of assumptions, fundamentally, that I if But were margin that to you saying we

to of I important. important margin pleased also our and the think think consistent we thing in I quietly the are And pressures with say, is really, that rate through of I is extraordinary to answering are And referred times I it. that holding quite question. will we, choppiness margins inflationary fairly delivery Kristine's really

Kenneth Giacobbe

to us. as bring Yes. We Noah, for very did that well. I a as well. add profitable program would guide down is That XXX the

got Now margin also, you just a component mixed a But there. we sort have did of of as to so wanted clarify some I is well. replace bit with That titanium. lower

QX to down on XX. in mid slide we the And low XXX high $X.XX said to high, there. million. just want and $X.XX we or clarify. minus want clarify, all I share, on X on per earnings the million, then is is have the So million EBITDA, just That million but the on up Slide it the the to QX. It down for X $X.XX the on side is up XXX for

Noah Poponak

into you end. Ken, titanium how much add did the back

John Plant

stream. And also to and then titanium is of customers, guide contracts with the process balance as million the next inventory not fourth against in supplies XXXX for quarter. this a at the I acquisition. out on even is part revenue for new chose we of completion point because acquisition the provide are XX order to still to that added We

stocks is inventory So they from, again, of we accurate are say, customers trying get held to as what security VSMPO. at bank a picture more

you assess number. to when have confident I a I one wouldn't you so. XXXX we feel in that. if so gave provide And And today, got doing with we And

Noah Poponak

it from We really shouldn't like? million, extrapolate XX anything that sounds

John Plant

the the is important thing mean, we I gaining orders. are No. fact that

in the will to that early - to game. the We sorted the XXXX, just for of but all be next year, year. is more than clearly, And that get discussion it clearly, more are of before end well in we it want a of and

Noah Poponak

Thank you.

John Plant

you. Thank

Operator

Our Gautam of next ahead. question comes from Khanna go Cowen. Please

Gautam Khanna

Yes. to a trying the comment multipart But on I have stick question, one. with your -.

John Plant

are those Gautam. tricky, Those multipart ones,

Gautam Khanna

I But is Yes, the is question on It kind of gain share unfair. know. broadly and opportunity. the

is one you urgency that the referenced, Safran across the did and pinch several So of and quarter forging benefit guys And seeing seem the XX on don't sanction on you you any Are point. taken side, was the be And lead to million demand for or have given in source, share emergent off titanium the Airbus to bookings, opportunity, change a you it that times? you OEM, that seen given is there? just VSMPO? secondly, just

John Plant

Okay.

It several latter part mind. let the me in manufacturer. also is is while get both an first engine it airframe and OEMs, So fresh my manufacturers

So long-term begun with even them. to book surprisingly, VSMPO. and placed to so and Airbus European say, not not upon choosing though, are we have There, sanctions secure security orders source let's a

call I'm We a is the by lot other are for. urgency with completion is also, manufacturers, it, so influenced elsewhere still working it still of going to play inventories also in the and And system. to

commentary. titanium the that So I disposes think of

the of half. difficult on say the spot, always second - is in fact be feature of would is It a a it spot terms to I call LTA. feature not spot, did the it In more by

is are secured it. some We spot us that have available coming some of and and and seeing business to we

availability long of times, some because as input lead out already getting in it those see orders, And for out. is lead XX-months. go XX-months XXXX some is going of times metal going And I metal already. towards of it particularly therefore, And nine-months, into

of, in tooling little is can say, on about go and terms is point term the the the because, example, short the all castings, it. it structural very that that the In pinch be with in done for assets there industry,

we we the of time, so And is At two next on dealing there ability orders areas. years, further hands will three same ourselves. sort to have cross our that really, that limited And there over supply. be balance over that the just or full that for believe currently got the with do I those to opportunities have

the I Gautam. points think all that you I raised, think, covers

Gautam Khanna

Yes, I appreciate it. Thanks.

John Plant

you. Thank

Operator

from Stallard of Robert go question next Vertical Partners. Please Research ahead. comes Our

Robert Stallard

much to have metal we see and the terms does timing? of way John, flow margin that mathematical these pass-through started And afternoon. so good so should come down. around, basically industrial to as metal on calculation Thanks the is pass-through, reduces? you some prices other the through in of How metal you a expansion the

John Plant

notable some certainly aluminum. to like that metals in has I seen occur. which mean, would We most you improvements the have and of small been

closer to, at say, premiums U.S. and has So fallen as in let's at that price Midwest including X,XXX X,XXX, has come down, say, peaked the probably about $X,XXX moment. ton, a the

albeit it significant ton than where So significantly a less started a still XX-months above ago. at down, move $X,XXX

reset. first business But gain we some on expansion if our occur price be Assuming fairly prices what if going margin at other it the then well. where as haven't this where across as then Wheels certainly, would called those is of up. And out our when it board it those if it there way elsewhere, to you is, none tailwinds is it exactly then us point, the are of example, really down know stays stays margin for small the again, comes January, see, and on then there it of but course, stays resets happen, there, to will

Wheels has aluminum where welcome. so XXX move doubt to basis started. which Ken The we And our down And is go very I I most the talked about, of side will in other be been significant call the on the would impacted, down. by way from over that them as points clearly, business

see is Howmet benefit if would or further know we it that margin metals obviously but hoping are a they are if future so we impact to you overall And event. begin where to stay don't we which for and continue improve,

Robert Stallard

sense. makes it Thanks Yes John.

John Plant

Thank you.

Operator

Barclays. of Please go The next David from ahead. Strauss question comes

David Strauss

the overall if we the semiconductors feel X So how Obviously, update are backlogs business despite Class the the pretty just on backlog the in inventory past Class about terms deliver have that situation looks to X side that Thanks. starting you Wheels headed big how into what want recession, to the truck on do of in a we it? there business, macro want is or out. shrink truck And an whatever the dramatically. and business slowdown call get inventory the seen to can you

John Plant

X I U.S. don't have think I for going have truck the and to last is time, or I'm say to this certainly Yes. the think either that it in we would like And different. Europe I normal Class been times and believe XX-months. in therefore,

fuel the ring intake hollow restricted my there So availability has regulations, But of don't from is course, we for people trucks going because the in is that we fleets. fleet the which been books same when But for of clearly fundamental so fleets, because that just see don't larger because are open view of the demand Europe. particularly where XXXX is we of order putting a know. and, significant into say, and aging are system. in spike that those despite onerous up And the to also orders September, to there improve the efficiency for with, order and see cyclicality so orders low might long in have given demand

restricting commodities, of easing, across a been degree, set, trucks with built have second the year. the there they that of while tags part a complete lot is so called not a half problems, clear that thought my significant range some which this the shortages chain are still have build are red supply So to in of been are

fact our we -- coming. guidance, percentage because again X,XXX year even talked emissions this XXXX. or parts And there availability. to availability, a given ahead between and about the before I going is trimmed the as the to going of be have historically more are parts North mean, an buy have when people to assumption draw because build does and more same supply out next more wheels, I of regarding by XX,XXX year I forward and trimmed increase or sort will XXXX don't for try are America -- -- trucks opportunity, see that conservative example year, won't we build assumption build more XXXX changes in if inside that have of that truck try build to our It the think, We will next we of of

So my emissions anyway. emission calendar the even changes are trucks occur improved relevant taking that the interested in and will maybe built those Trucks that thought people in is fuel from will be XXXX. in the year

interest revenues had, overall XXXX see that that So we fundamentally in well. supply we Wheels and and what -- maybe and I'm backlog situation to in been improvement going have in improvement that deplete the an into hoping rising is coming even XXXX extreme. our macroeconomic rates are stability of as the demand business to is has despite And supply which

assumptions is it way about optimistic feel albeit I a of calmed bit the in So it, have I a XXXX. long inherently the little down -- of saying,

David Strauss

much. very Alright. Thanks

John Plant

you. Thank

Operator

Akers Matt from comes ahead. question of next go Wells Fargo. Our Please

Matthew Akers

about other and from Lockheed, the just with and thanks. I to big more guess morning the kind I defense guess, of moving business. any sort business lower ask on And destocking. of you where the within outlook kind of good defense I Hi are And broadly. stock, pieces wanted F-XX F-XX

half. there. you talked the just think improvement second about I over any half first Yes, thoughts

John Plant

Yes.

about item, half. second customer the have sales, half will continue the our second in the I is in it. same we will time, gives the say, aftermarket large XX%, relatively single F-XX - a seasonal, little that first been And is by within XX% the us, given that defense about and for which solidity. the component bit our half it some incurring confidence why then is At destocking defense as talking So a to of

recovery fall of we again, therefore, which one this And of the over situation I angle something are in they year are of again, fundamental into be we I whole the earlier. we from XXXX, we inventory aerospace places XXX this takeout, early build note do So have playing the a where XXX would to an of year. year, improved XXXX. and for are it aircraft. assumption And would expect, and little better compared say, is more part our for may upon a what we commercial just us down next or will that about picture again, the XXX, burden to, for that next. And as bit assumption of clear build cut But Lockheed's supply commented as is under-supplying

again, just revenue time. debating keep at angle in to are want So just point I and the increases that in big picture this the mind we

Matthew Akers

you. thank it, Got

John Plant

Matt. you Thank

Operator

Research. ahead. from question Shapiro And Please go our Shapiro George of next comes

George Shapiro

for how quarter, John, million to million in XX you for And pass-through, cost? increase of of material that the how of tell goes in the Wheels revenues, much the business? just was the from then this material that can increase of us $XXX much the

John Plant

of as that. quarter going minimal second segment. think I'm a to has to have to broken Ken whether going sufficient a to but the was is level aluminum. cover respond to fairly that look majority of you. able the Ken to I be say million I'm it in XXX going to relates quarter-on-quarter, to to down that between we George, I'm And XXX he But to see sequentially, detail, that million this to say to don't look

hold could you if So just second. a for

Kenneth Giacobbe

Yes.

is So not George. it material really a impact, sequentially,

to imagine, the million, given your chunk look that - is can have of haven't We as XXX big But When breakdown talked about. it. aluminum aluminum. we question, what a you of at you

of in had that. out said I material We prepared I pass-through believe we called aluminum. was far million, So quarter, in my million of XX XX about this comments,

you can kind give of a I So guide.

George Shapiro

much much aerospace then it, And out how increase was just by how aftermarket? Ken. look OE and break you Okay. at one one, was Can the quick

John Plant

was but we I'm in to aftermarket, call half. numbers aftermarket don't going the out, a the first improvement small say generally

But first us. bigger a in in half a year-on-year half what will we the We supplying to the improvement XX% plus George. are can year, expecting second assume things improvement the believe of the a last of But in bigger what you half. percentage be single-digit expecting achieve, second we were within for was spares business

George Shapiro

very Thanks Okay. much.

John Plant

Thank you.

Operator

our comes Please of JPMorgan. ahead. question go from And Seifman next Seth

Seth Seifman

Good morning everyone.

to first we of the been saw the some But in Just last Fasteners out I half looking inflect this is on guess, of year the the of higher and second from half there pressure revenues start here the bottom first kind XXXX of the half. in at year. half to the business, second EBITDA,

inflationary of have incrementals additional going think it again pressures does these forward? here and the of with about Fasteners that is on how materials outside the bringing we or do to now Some people showing up growing do revenue more in

John Plant

composite certainly, of I to the is It across, sure, and going in essentially, little think think tiers the value we But were there, half, replacing think factors zero, to in that and aluminum then taken little titanium is to accretion the before, a it. part forward rate have it. on, always the which part to When multiple is begin and world are why from looking to difficult. back materials down margin. base we will the say, to, course, our inventory, us. and of second I reduced to stand the may one accurate that XXX, I at of not biggest question and Yes. a effect year XXXX it The a for a biggest of business mix bit many to trying look going bit and that that Fasteners about segment But always of we yourself. is now. aircraft basically steel you as a I that. composite certainly inflation say, is because significant of And explained aircraft I higher are of all for say, inflation albeit a there of inventory obviously, I that is two composite not inventory. I And hopefully, will let's of if say, get of don't of present, margins the believe is it know. the significant of we are therefore, some components to the from picture so. say, There which metallic deliver an of is think lot supply was so distributed, around let's when build And is and I wings the So the turn underperforming? if is because the you as build begin ask go even build they forward is will to XXX good the One don't but which aircraft pushed because Boeing come look and though, sequential

lifted forward. the And are up quarter, basically XXX you weigh thing for the guidance have which in for in half. increases revenue from the mix therefore, in go for volume we then last is in during have volume QX preparing to volume have embedded second continues. we because as improvements continue the client our business also, of see, is the on taken effect see XX further pick as QX, Fastener and taken we our did our we and guidance, And that And QX, why business XX. rate down planning of the the Fastener we we a of amount assumption is significant that So the to year on people second will in

we quarter-on-quarter, to consensus look guided when shouldn't it look need guide like XXX we you So sort or track like a pause to beat you Then of of but year we in and compared last put have not, at the to it, million at at through in of QX more XXX then consistent slight just another million beat improvement. last a year, on look XXX you average million another consistent or QX. like whether you

recruiting. is and are it we coming So

to in clearly, mix that improve in beginning QX, Fasteners going I then the prepare employees it those bigger is combine goes do issues so hiring that year, not next denominator the an start of things of And for to by the the first when more issue, plus that both and I'm really but to continued hoping then of change. will as next we in part the get also as or improve you recruitment rate because the as then we that the begins year, be to of for see heart incurred XXX effect, margin And to productive, of employee And begins margin that base. getting costs have but influenced segment. a built become

Seth Seifman

Great. very you Thank much.

Operator

ahead. Please Capital Markets. of comes Our question [Operator next Instructions] Phil go from Gibbs KeyBanc

Philip Gibbs

Within the through announced July? more you have are buybacks that, from any meaning guidance, there implied already in what

John Plant

you is times do net said to would end way guide I of have approaching of year. X.X to by the by what the What we leverage

our you whatever -- you company But so clearly reverse in note, So is the get from is reverse-engineer also you of an approach our shows to a and do it can assume the our make we it mustn't our second in hopefully in balanced addressing approaching terms with say, and better or be some of that approach any allocation and the the in It other all you you whatever it the shareholders confidence is balanced and also will I structure around or ratings an some that time, well. maybe it which thing into flow important one and debt I given that an will also hopeful that pleased hopefully, I'm for continued, stock. of also that credit X.X also than - think is which will buyback half same dividend At shareholders. have anything. between we reflect the improvement times. is, to times cash capital of can are I than flows as And assumption that, cash the wanted increase, assumption and say, three

Philip Gibbs

Thanks John.

public guys a You be several to quarters. have gotten now for company

your and good in available there key M&A? looks We like thoughts you would demand cycle opportunities doing out there the there do other the side strategically? balance Is on to Are of for is that to sheet it like any The here are clearly markets. things shape. the

John Plant

COVID on theme restored quarters, up into we is times will post within margins. but we would your pandemic, separation, picking our went the, say, Just that I

probably way shape been approaching around in leverage, consistent And really cash We then. target great two balance you flow times more have all of the putting performance in eventually sheet have our that or seen, and better. since the as

is everything progressing satisfactorily. very So

we the We capital on if Can do or and good say, any But therefore, which in It have well, a M&A of that only quarter provide the obviously hurdle high just in the any in will considering it but so to probably scale, not all, a more more so to no is got synergy of XXXX probably I years likely stock pandemic. which open with to deal to are return and is of does so only at moves. that more, for same buying back, of are such have flow Fastener the within synergy? does risk-free I we we the and But investment. any really last confident own every to in can of revenue be say, but said elsewhere. cost business consistent that. our We it, the is immediate always Engine And which is, our than the our it relative company? for it a disciplined it rather couple again, action aimed try feel about bolt-on quarter it in after going been compared almost doing over buying time, cash thoughts we go intent or to say quarter hurdles know or pass onslaught trying immediately overcome, pause but gain I nothing will back the, a strategic we if would it

Philip Gibbs

Solid. Thanks gentlemen.

Operator

Securities. Michael next ahead. question Truist go our comes of Ciarmoli Please from And

Michael Ciarmoli

afternoon taking guys. the Thanks good questions Hey for here.

planned. really give inventory into the inventories Not the go? maybe on sure than to a capital half overall on. seems guess second I about XXXX of sounds moving the parts is and a XXX Just going of much like I initially It might need just if burn how working where like we guess it slower seems little number mean, us Ken, ramping. is like about any as And we there you or of think it then to you for bit plan be F-XX much need truck's and or XXXX? with John titanium. think I Can some the going color you should

John Plant

only inventory lot of our customer we tried I of million able to satisfy pace and first before that needs. inventories. advanced work one in it goods. to will majority in our have towards deliver stage with on built finished deal a But aim exclusively finished in their we goods we of I hundred and own And customers or meet or we mean, with I can our places. And to do And have but anything two the keep have towards our so the comment ability tight of that not and half. a progress, be to to are very couple inventory Yes. to first that stock tried certainly of

improved having try in second supply trying the the is and half. Now the face we that scale will I the I in first half, that for at what hopefully the There to lift demand security put in but replicate to the that of may doubt obviously, the increase hiring of call shape nothing stock improvements level steady as judgments have in year the some again we inventory a according XXXX. for of the will final exactly is. revenues this next the into exit we much next into throughput we from plan how we of And to will what year done those carry make production year be

front. all that think I on So good

selective improvements of half. some but inventory second of more and more less pause it in is maybe a the of, So build in a

meaning of And Japan a to comment. that is is in it there we just good is our the to There increase thought feeling be or a inventory supplying have the it that. subsuppliers we in way maybe a whether that the we of there, elsewhere those In higher or pipeline. because Europe clearly, don't XXXs prove difficult world inventory inventory, around, demand, to in the the have. or we in into the see inventory compared But it aircraft build which said in second is airline know said clearly in U.S. in of could half. we assume And there customer I have terms may I XXX, is be build really will may than despite you

let's our half, be view we aircraft. And demand now. second a and QX. fact chose there. it XXX the to And safe. well aircraft is be seems all But for travel take of And I relatively back. is to that so from it is in coming great therefore, as given has previous down the been There said QX to have to clearly year the delayed calls, need International for set last

considering Skyline. they at I into Airbus think so are I improving possibly And have year wide-body that looking rates have that signaled already read we even plus in next more beyond their as go than

some have improvement but business. optimism, for our a commercial feature truck to I say will particularly of be XXXX also choose the more wide-body and So for really

I Mike. out, So that puts think it

Michael Ciarmoli

Yes, Thanks guys. got it.

John Plant

you. Thank

Operator

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

disconnect. may You now

Howmet Aerospace (HWM) 4 Aug 222022 Q2 Earnings call transcript