- Earnings call transcript Q3 2022

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Operator

Good day, and welcome to Howmet Aerospace Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] And please note that this event is being recorded. I would now like to turn the call over to Paul Luther, Vice President of Investor Relations. Please go ahead.

Paul Luther

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

our in meaning can special most EBITDA release materially from differ find results actual to items. press presentation. With in press In the John. filings. factors measures the GAAP These You SEC that excluding EPS and earnings projections financial call today’s recent the that items today’s Reconciliations listed today's release Company’s measures and to appendix excluding and be could to in adjusted directly and financial we've in adjusted our in found cause to and the comparable references measures special presentation can these presentation, included like EBITDA, turn over in today’s are to among that, non-GAAP discussion. the would I most EPS,

John Plant

and welcome everyone. P.T., Thanks,

now we and of week third at normal Commercial Aerospace reflecting and the engine schedules, back October. seasonality the brought wheels notably which rebate $X.XX their continued EBITDA to share, grew with perform compared EBITDA revenue showed of QX X. for and factually Commercial with segments was the as and in billion fifth guidance was Howmet XX.X%. in been in quarter, to share products, lower In per production All of to move online Let's was third midpoint well transportation in of line the strong performance resolved reflecting September, at customers strong consecutive lower quarter. third site dynamics. margin two and billion. earnings per of growth has earnings Slide Revenue, the were saw the quarter. the guidance all was fully sequential effect $X.XXX aerospace the midpoint [indiscernible],

million provide to of markets the $XX.XX Firstly, a airfoil ending the than the million end. to castings. availability and the And levels, originally on due and scheduled QX X.X higher a customers. million quarterly summer was year. outlook forecasted, business lower healthy was carrying resulted end and the engine dividend. in positive line to by my shares of $XXX pension again, by for our levels progression inventory XX%. at due Free further in cash further year-to-date to $XXX $XXX secondly, I'll year approximately average cash of however, remarks. section also now impacted bringing continue million an price QX Ken envisaged, by QX of early call segment. build for cash which OPEB over was inventory and reduced, commentary after structural and repurchasing be contributions approximately paying reduced the liabilities of share a the EBITDA pass commercial rebalances per commentary narrow body flow each Legacy I'll and fall partially in of was and as aerospace customers by

Ken Giacobbe

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

for recovery. by Third quarter, and far partially offset with total at the and our and sixth third prices XX% Products XX% stands was the recovery quarter body was revenue which short of by revenue. The which XX% commercial down volumes, total X% which Forged driven up driven up revenue aerospace impacts quarter foreign the segment aerospace Transportation, to revenue expectations. in Fastening and Defense continued Commercial aluminum Wheels up inventory has Aerospace was XX% XX% by X% of customer aerospace continued of currency. both higher by was consecutive segment year-over-year, in sequentially, continues F-XX, with commercial corrections year-over-year for was narrow level, the year-over-year. but the pre-COVID the year-over-year be driven Engine and line Systems higher Commercial grown

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

and IGT general was XX%, oil Within markets, X% and down gas basis. other was on was industrial industrial year-over-year the up and a X% down

move X. to Slide let's Now

of basis EBITDA and million. healthy the and As was all the EBITDA was incremental third margin share was we the quarter usual, for higher If guidance. $XXX EBITDA million, million Revenue at revenue, line in strong material P&L higher profitability. we'll quarter, start was were pass-through, up revenue to focus XX%. year-over-year, with exclude on including EBITDA, XXX points in XX.X%. enhanced and In with EBITDA a Adjusting the approximately of per pass-through the $XX $XX margin XX% to margin pass-through, XX.X%. was material of material EBITDA the impact flow-through earnings

fasteners. significant of engines. During XX% in we by in and primarily QX, the we by share $X.XX, Year-to-date, continued In approximately was do expect we recruitment focused Adjusted earnings headcount QX, up increased XXX per employees not engines headcount approximately employees X,XXX have year-over-year. additions. headcount

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

further pension a which OPEB Discount approximately shares. million. Year-to-date, QX to pension by XX% be or were reduced and million be sheet. of contributions to reduce stock funding and primarily XXX the flow improved cash commercial quarterly the aerospace for approximately of were $XXX was net rates continue count $XXX end net an average $XXX the will recovery. exit Cash approximately million after the dividend. buying The and balance million back $XX year-to-date reduced million healthy remeasured $XX share of at including rate to $XXX hand favorable diluted million liabilities. Moving year, Free and the at on million, should cash common inventory liabilities by was build of

to million. We continue be cash approximately of annual contributions million versus expect to $XX $XX expense

Xx, bond at Finally, expense. fixed provide net our debt of unsecured to interest stability and EBITDA which remains at debt rates, all will is rate

bond next November is maturity Our in XXXX. of

capital allocation. to Moving

the We depreciation less be on at labor to approximately and to fasteners products, be million XX% million enhance outsourcing common X.X with engines of approach. Share risk. quarter $XXX of stock continue business to automation have acquisition reduce the quality, our Productivity from share. in Year-to-date, projects Capital in we of focus $X quarter. approximately at than third approximately Directors to an $XX.XX million. million We per shares $XXX shares authority in improve and yields, average expenditures buyback balanced purchased for the the billion. common CapEx continues price X.X stands stock repurchased of in from mitigate continue Board

be confident be free payment per made Lastly, $X.XX flow. The to was quarterly first doubled we of November share cash to higher continue with in the per to dividend in quarter XXXX.

recovery. XXX quarter and XX.X%, results. was Aerospace basis XX% was and another third approximately despite the XXX up X,XXX X Year-over-year adding engine solid was third commercial Slide in revenue points net was let's Defense aerospace segment XX%, for Now was improved X%, in X% down engines. IGT QX the move was narrow to quarter. cover higher up gas XX%. business the oil down by margin with to for driven body Year-to-date headcount to employees. increased the and EBITDA year-over-year employees approximately XX% quarter additions

to unfavorably depending to the us the are growth, time cost train which the position. months required future new does on several it While aerospace additions take near-term due employees, could impact the commercial for results preparing and headcount

third improved Slide the production offset higher Aerospace aerospace narrow-body Boeing margin was was despite driven to XXX to employees. addition Systems employees EBITDA move quarter. future continued was up XXX Commercial Fasting Sequentially, basis headcount Year-over-year declines additions by by was the EBITDA in the year-over-year let's Now somewhat recovery, the fasteners X. XX%. to XX% higher XXX. X% growth. Defense revenue segment approximately of points XX%. increased for Year-to-date XX% support for

X% revenues margin pressures. of was to of the the improved F-XX, the let's driven Defense XX.X% by despite the XX.X% rate was basis revenue build down than annual X% F-XX continued for customer billion. move the cost Boeing XX% XXXX expected. aerospace impact were XX.X% of declines over and year-over-year. XXX. the and the recovery to production year-over-year, low narrow-body greater X% X. EBITDA Structures Engineered Now was inflationary higher inventory inventory Slide corrections when X increased Structures to margin QX the $X.XX down XXX down Segment as Commercial XXX in quarter. as on of was XXXX EBITDA burn Aerospace EBITDA year-over-year for the offset XXXX points

Finally, to XX. Slide let's move

XX% million Portsville's year-over-year of chain expected, Segment euro. due As to in by revenue by but demand the $XX remained was limiting third volumes impact currency, increase was year-over-year primarily higher impacted almost unfavorable continue revenue decreased entirely EBITDA by driven driven The strong, customer to quarter. the truck XX% be commercial Commercial higher in supply issues, the foreign transportation prices. aluminum production.

points. XXX of EBITDA through inflationary The on higher if include the While foreign energy aluminum than points the the to costs you prices margin impact it dollars, unfavorable unfavorably basis passing impact the impact by margin like did more EBITDA approximately impact European currency. costs margin pass-through the of and not XXX unfavorable of did impact also higher basis increases

impact Before the natural against turning to Howmet a as that hedge Wheels Aerospace foreign Forged to I the the is remind provide of it will total you over segment. minimal currency back foreign in John, segments currency

and tax reflect in our operational appendix, of the we've to into pension XX%. updated count. rate, amortization, the and Also, tax to share we liabilities, approximately translates updated approximately annual XX.X%, assumptions which have QX including CapEx an depreciation assumptions, in rate improvement net operational in Lastly, tax a rate cash annual diluted improvements

Now let John. turn me that to over back

John Plant

Thanks, Ken.

Slide So #XX. move let's to

increase. provides leading and wider also aerospace. to showing new increased its that availability, volume Recovery of being and has which Airbus build confined into Boeing load International is aircraft during result engines. aftermarket also Europe Spares and modest been XXXX in trend but throughout move increasing comment to profits year well, build XXXX. airline we narrow-body have XXX travel to issues let North not aircraft aircraft after ordered, AXXX XXXX, factors, rebounding for continued especially in more and strengthen is picture the parts especially on are the production will especially America. recertification. continue Airline notably First, This aircraft. and recent Recent the schedules the commercial rate strength, to with and the as me optimism rebounded continues are

Boeing of the do Consolidated Airbus While their levels unrestricted be builds, should that around of in we we levels XXXX. per revenue. visibility Howmet, XX% the upon other release for is do and XX commercial to envisage including and February reach on defense, per growth. immediate of commercial of up or time, XXXX XX% have we oil expected the AXXX, their and and to further be sectors cautious of refinement build minus commercial will more X% be in build this XXX aerospace be turbine, time envision to the In aerospace frame gas QX pending plus at envision – sequential month allowing reach QX, transportation MAX, its Further more month gas approximately to in revenue up XX of provided industrial earnings.

However, $XX guidance as earlier next engine envisaged lower of $X $XX inventory or in again plus needed compared the share of starting result fourth million, of follows: million; to in small previously of More $XX in year the to snapback an results through to $X.XX, and primarily billion, or This increase bill XXXX. inventory EBITDA beyond and for we've this $X minus of my year engine areas toward of is we've in earnings plus plus year-end build share million, million $XXX sequential minus business specifically, lower products correction. accommodate customer $X.XX achieved million; engine will guide got quarter, each in end $X.XX. and $X.XX the quarter increasing offset revenue which Higher a per at another in billion million, $X.XX as earnings other revenue, of is drawdown minus approximately a once now first per as the due the annual comments. QX be the quarter inventory shown of

we've year-end million, from $XX $X.XX year, billion, this million; the million; plus previous continued narrowed reduction full plus minus or inventory $XXX of million, compared for the to aerospace of $XX XXXX the $X of and cash of Free plus For quarter. guidance plus first driven $X growth $XX into higher per million, growth minus billion, prior as $XX is share carried -- range $X.XX EBITDA the $X.XX -- flow commercial minus revenue earnings million, minus in guidance. is the driven this million, by $X.XX,

a to XXXX, We the in future. before aerospace for XX solid rates growth XXXX growth and in and does reverting with Slide summary. expected year to move of sequentially Let's also Aerospace. forward into XXXX normal is X% commercial normal for quarter more perform another revenue each building to with year XXXX profit QX. XXXX above and look continue to increases Momentum per into

questions. now let's So take your

Operator

[Operator from And come Research. our will Melius today Instructions] Spingarn first Robert question with

Robert Spingarn

to a of messaging and seems there the aero a commercial Airbus. be Boeing from John, bit disconnect in and

deliveries engine were are OEMs for says So engine the which And the But CFM to significantly. Airbus up Boeing OEMs, referred -- talks Pratt and about catching the has bottleneck, earlier. up. you

for of is difference seeing occurring we this LEAP-XA LEAP? So versus we how make volumes more do think sense are on you that the LEAP-XB,

John Plant

Okay.

basis. the So First agree commentary then broad off Howmet I But it's confusing let's confusing, talk of that everybody wider before is about let start moment. all, with you a at with me it picture think the for on and any

to is right do the So picture big to is airlines I are improving. commercial higher. grind continues trying And things. the aerospace think Everybody

manufacturers supporting whole aerospace guess builds numbers thing. doing some from the going part of are are last commentary throughputs on is also apparent seen aircraft improving their some engine not the calls and I week. of perfectly, disconnects those from as the and we've manufacturer the think their everything I of

Let prepared the and well with through year really beyond. me Howmet we've been and say, deal first last

started through quarter for second labor salient thought X,XXX year-to-date, quarter, we the the during a was the last high to, builds to last the which now as year complete not see mills, of the people like those and according requirements the arrears -- saw quarter. And rebasing XX engine of September I factor we at to the that they September recruitment had high people delivery in that down or anticipated know, think and where anticipated know, particular. end we X,XXX and Airbus of requirements not up for approaching it hired XX. we've the you something think one XX maybe then is be on us point, we engine anticipated. As is saw third should both And I the would fourth schedules of year. think, we're in then actual commenting built as almost I ourselves as compared we were most you Through as lied the And had fact the like in was as that

I'll originally that were while of that So envisaged to deliveries believes improve, be built quantity did I don't think engines built. say was the engines anybody of

there on those year as in we just to around really sometimes structural the Aviation, many the the you any COMAC. difficult whatever And leasing really the In out both provides of they How whole terms the CFM that in was mean go their between think actual have those or difficult many in a lot maybe were that. ourselves, don't judge. to enough picture from spares all deliveries, spares, restrictions how airfoils which for that. the Certainly, is note And of past probably expected were than Airbus, inventories we've they we engines, to castings confined therefore, Nevertheless, when back. by they do to they of forget though is an significantly went engines. near I also know, system, of but Boeing, had of know. for from balance what week how LEAP up customers looked where feel aircraft call were I to XC, more with and XXX end where required of about indeed, engines I is particular, is many visibility own to also splits also -- envisaged. they the you went think, -- we bit of the improved heard and which to delivered was it's XA, and cut that airlines and parts less engines not or were don't And companies that they example, those engines the year of last at in LEAP the I XB, engines maybe were they into and big received with the builds GE from to they finish a

not that quarter-on-quarter we growth is sequential still growth high despite as had as envisaged. so And

So we've significantly. labor our right now, recruitment down drawn

end requirements do hopefully, inventory we balance So the first back aircraft at million expect be the And stop engine rest to of selective about carry in hit us to going need want a build improve, -- the fourth we're on quarter in will the the we we certainly cash go will few of as probably year. us through placed those additional that recruit and will don't Essentially, $XX we'll will to improve. X. production And into be where that areas significantly, carry production, because inventory, will to which quarter. our

And to ourselves smooth so trying we're out.

So that recruited, inventory. production, labor the we'll into carry utilize on all it we've of put with

startup So start we smooth year. next the into have of a

all So to lot we September of so balance of a of it into our holding us are will year.So in that that's But can as the customers imagine, month that of happy. hiring we of were people, you cost, keep we we does enable albeit, cost the the some eliminate big and stop than picture. the ourselves

In visits. don't best the week the rate believe and terms on a production heading picture we I side during really of off XXX what those so you to that and are most exactly placed of to AXXX, Seattle get of this people the are I clearer answer sell think the is

trying So whole that you the you, it sweep know, situation. I give covers through whether to for out but just don't rob, a

Robert Spingarn

with am And out said, John. I there others. really just That's even heading helpful, you and with the what

into insight next you do XX, shipsets year? have XX this for looking Just on the for still any you are And year?

John Plant

year. for year. have We this have for much We next a don't skyline revised

a skylines it's the the back around the XXX about improvements de inventory month production that don't look to year for in for if do then of when going at were look previously. seen return that I'll any minimis confidence I assuming the years, of cutbacks the at on I really international few probably there's demand of made know. build a per is market is that think just for the course for last My travel, during AXXXs opaque And will I for widebody demand at, system end And guess think showing the for during aircraft just that because I I there we've of have month. the pretty It's that on have that say, my higher Boeing do be wide-body, from Airbus their in XX. which support on rate be X going rate. us. there's that. clear a is year. I'm to anything, above it's memory, guess and both it's And XXXs requirement about the probably We and next to

only So are side noise how how to and is guidance demand. in have the own of I'm you that about question our actually be were towards the should where many And referred tending conservative made we and that optimistic constraints. that the then parts because is, exactly terms hear this do we fundamental of we what are

so in albeit last quarter. of we the cautious that year, first enrolling causes end factors against that given we've that little the the encountered also or month a And in bit the X just be up see to spiking us the into

Operator

Khanna next come question our with Gautam from will And Cowen.

Gautam Khanna

about you could talk to ask opportunity. share if wanted gain I

engines to on where are benefit accruing incremental engaging And anything castings points pinch your reported. are any customers on these So on titanium? of

could speak you that? If to

John Plant

the know publicized. well, mean, castings. procedures because term, pretty been to other think the are the I structural is of around certification not required. it commentary controllers castings It's opportunity short a points is we fully engine there would some and I of. us But as doesn't lots structural specific the it In aware engine -- presents an I'm really pinch really probably I that. things, the probably which widely -- to don't for think There's tooling which around but like has In biggest

case is really of from the a supplier. so getting castings relevant it the structural And

casting segment like that build flows and we'd issues ourselves, In we've short we've the been to, high-class can side us castings caused good abilities. point because nothing is in we the of medium that to see been to terms we for is longer say, to throughput for output But air term, engine structural I all. will see than that as the really, But beginning we have any and don't that of on your question, I'll in sectors us benefits those year. been significant flow during improvements believe into term, structural we improve. its across was our tighter on that that's which at titanium, continue think, let's various say, in the of while the other quite On And orders a a, as XXXX not to seeing put planning indeed industry. the nothing

of So better have, got during to and albeit orders base. supply there's really lot on which additional airframe third moved for the orders we've fourth quarter, us, inventory of for has to we in go hasn't particular, manufacturers, lease looking cut and -- because X booked a the yet that's and areas significant still still the

So on that as into next more year. to we move subject come

Operator

And will Strauss our with Barclays. next David from come question

David Strauss

rate simplify the you has at on And on a parts. And so engine currently XX you shortage the on get to month are down side, that just XX do kind to they're Are things at try this John, manufacturers the engine are given as of that other the XX to result, you to for Airbus. MAX producing building below to a this. slowed a really at? with the aligned of side everything

John Plant

Yes. at building rates. been We've

first communication, anticipated I'll that, were case in customers And rate month some the to and commitments, on build with the as not been let's planning were those according XX-plus XX during taken our planned say, the the in quarter Probably the the of line an and a year. and XXXX. engine verbal had from originally, we've example. of any or we fully Boeing, rise next that attempted inventory requirements to, scheduled we've airframe AXXXs manufacturers, for for say, more less increases just with So infill

we inventory airframe As increases manufacturers certainly in side, those year next know and where even, been been the back the what actually all out and have to is so would achieved requirements and the we've has that and own for, say, that meeting production levels the system towards bring I produced that, engine year-end seen the that line in taken of probably rate they're not to down inventory is the for being at engine or manufacturers their and it on been carrying. particular,

So there’s point in parts carrying say, pretty additional some air flows with the engine. It's of the when simple, go you -- other David. have to

David Strauss

you And where constraints see, see from constraints, Do John, headcount, training material, additional whether hiring you least it side do your you anything? to raw at sit, any go headcount, be up a mid-XXs to, XX is constraint Do let's going from things? XXs? Airbus that up low narrowbody to your side about say, on talking and Boeing of see you to the

John Plant

so or shape. our Not addressed being in and castings We from been tight side. in structural have good think are that's quantity our

back pull as our to hiring, again, going are said, We selectively. on I

will to hiring balance continue, labor will and at of we our for But plants. own pause stay third quarter our training at it So in with moment, and if we the the take our airfoils, example, had requirements. the the structural we just end you casting

to So a people, really our increase hasn't able and quantity impediment great far, to we've presented been it us. of

us for Sometimes the but quantity like, higher people of been issue not so of the has an far. been than labor turnover we'd has those

Operator

Myles question from next come our Walton Wolfe. will with And

Myles Walton

EBITDA on it sequentially looking the $XX million $X million growth. looks Looking of growth for you're a like XQ, sales into

that a by a like is incremental or lower labor help like it pass-through mix, Just push? something curious, FX material probably and is might driven raw be sounds

John Plant

first start if So you mind? you wouldn't the again, can sentence

Myles Walton

John. thing, Yes, sure

growth, XQ, back just pass-through minimal I'm issue? EBITDA aren't the the you've growth. XQ sales and if materials million $XX just So about pretty $X and on holding look I to if sequentially labor from raw million got the curious you

John Plant

where let midpoint regarding talked XX%which mean the previously, first. minus or for start So the really say, you strong I'll the, were said I incrementals X%. adjusted with plus we was me commentary the pass-through, material of quarter above third XX% at

we So that The quarter I are quarter think a that carrying was quarter. fourth for fourth we level into labor don't strong build. is about cautious probably why our that we're really that of that reduced reason the need now being

I'll And also production along with preparation could a drag in facilities and there's that plus of, a parts say, that. of so the labor other lot go

the reason -- level same fourth so of in mean, in I first pull-through incremental that's And the seeing not quarter. the why the you're

you is at I just for as drawn products, rebalancing plus that $XX look high-margin us. should which think as So that we a engine of million business down a ourselves have of

And I've commentary I with the given. completely line it's think in so

Myles Walton

in growth Okay. from have Fair about that enough. what think And 'XX, XX% then in should sales incremental we there? flavor do for you a margins

John Plant

last in revenue more talk February that gave we'll for call. I think I thought know I the 'XX. about year, that a guide, I it important was

important. is same the think I

more above we're aerospace, than of confidence recovery, from, XX%, the in that X% wider of should just if double So or the it's around anywhere the that angle rates debating normally or the confidence is XX% aerospace is to I only trajectory would we company. the say, rate. on having be and we're either statement we that X%, plus really normal picture the And which X% minus understand for a

so ready pretty But not And any it's to -- guidance healthy. point. not we're give at margin this

Operator

question Seifman Seth Our come with JPMorgan. next will from

Seth Seifman

rest is if -- year, aerospace the say, implies I portfolio. really outlook XX%, John, growth so in it of that's, wonder of the this base year the and for XX% XX% sales next minimal the growing growth let's the

revenue ups the the the lot a maybe energy just mean and what's markets? going could of be -- specifically, would And I then be and and in if wheels. appreciated there's and quarter pass-throughs of currency there especially we end talk But if the and dollars help in as might happening there says any what forward, numbers about help you rate. So aluminum about that what think terms the EBITDA of forged well? other between us this about downs, the pass-throughs, baseline around margin

John Plant

Okay.

will And those will industrial gas at in maybe those. a defense higher, oil low and maybe defense growth. see business I single-digit some So turbine, and the that expecting and of still and guess is of be the all oil in but my gas growth gas point, terms this below, think

and revenue you forged to with we're segment. across Transportation lay see the if Commercial then I that the for So plan in decrease wheel for business be where the the it X think commercial segment aero, a will going

say, I'd XX,XXX really, willing next many is or to their has see say, let try think, is for probably from is, prices manufacturers the we thing input of materials. was do to mean clearer ever doesn't by therefore, So more way peak we including $X,XXX going the think its time, that as me course And Rotterdam aluminium, orders back, decline, this the for the of new prices a of trucks, of course, margin premiums into we there plus for do of ton, a those regarding about Xst were note headline the number, the what January that. couple I affect aluminum there you of like the by revenue highest premiums me by been same in that which fallen rebalance probably a year because EBITDA effects been until truck what is improvement example, affected fact they first price the inflated on that during of explain a dollars, volumes? the $X,XXX great pricing year the I expect At Midwest number take of intake, that is September, it's which then effect truck get the and the that there. is now. we because Class X haven't pass is We from rate the let will a as order of it's

So rates half should quarter on, overlaid fourth in to second is really the out And going that on next when energy see the in my quarters solid will moment particular of of it's caution bear effect the the the what's improved we've I the continue prices. in at we'll interest think year with which Europe, the economies, is second difficult higher compared except and year. to separate been, see and think first next production I that in

so and the be dampening think will of around the trader I it's there the demand. of a business. more probably distribution segment And And

correct that second be the stage because it my through the assumption the second then And is But quarters or so not year. on at how half a want a And make only be the this depending and it. does bit a will cautious performance And try recession of a year solid I think about go really anticipation into to I I speculative obviously, half of mean, comparison doing. then to X to next economy this is of planning the is tougher it's drawdown next assessment. anticipate

basis do give can stage volume -- we I this guesstimate a look maybe just my can you or at when in best the the XXX could on the of something volume. like an at on So it, that year, example is that XXX,XXX let's has moment the I wheels been I at XXX, say, thought be, down is

steel, volume think say, effect versus the continue. going volume a great, legislation that going that the 'XX albeit and aluminum additional we'll occur. and drawdown programs, optimistic net second is be the back say, think there's of will all have -- EBITDA that for by effect we will revenue And because emissions We I only of half build the be we to should pull be plus half inability to share. it will penetration drawdown don't I'll caution I'm are say to our to the of affected on in to it's there's of and it I an don't produce by another ahead. But reason bit of little a reduction, a I'll thinking net, increase aluminum probably of with

that good. on it's half of I which next so, assumption to -- going or to wheels so But second it's year this stage, put nobody guess is to way knows. there, just down out commercial the all it And at nothing be

to If the so I of range in wheeling that at if commercial, put guidance that other you you X% the XX%. can get a down -- think to single as you digit

Operator

our And come will Stanley. from question with Kristine next Morgan Liwag

Kristine Liwag

now in year. place you have clear been to up you've the John, ramp that labor next

of margins you benefit pressured have should think when said incremental how this or how actually their the about year we we labor have X early. months through? next So about margins they much And volume think get when you training, to coming so,

John Plant

come this we which X to to pause recovery, at job, some, take I'll to on that are recruited It going for rate I'll Depending the X effective hopefully, for to choosing skilled going and productivity can know from we're or to Well, that some and anywhere will and up let be, to is out Okay. the we during the X say, already beyond totally. have all out. reasonably into plants plant of to pause move network way somebody I'm say, to in the complete around areas, stage until but up continue, more be or that not we to in say, recruitment, main that X try years X,XXX additional months that balance and bring QX for we've this and let our to improve. the it will people all people X

a stabilization. benefit much, I the next it say year. think on depends this be there for will to stage. And difficult obviously So that its at growth How

quarter We recruit will it expect continue we quarter, again. January. the fourth to to commence restart in we’ll rate go out We'll people larger but again some numbers the to in January taking as to increase up and certainly of build of first recruitment then inventory, in fire

about yet margins any XXXX commentary not headcount that's for so this And I’m to give point. at ready availing.

Kristine Liwag

demand demand ahead an where be? uncertainty? castings there. also forgings that peak this could out What's aircraft And we'd the up the been $XX And very be and have I highlighted headwind inventory quarter, full balance strong for inventory shortage thought build, I the guess the you in causing that that castings on well for maybe steam and does for with clear of OEMs million the been and would product. publicized your when have And the environment in following the this have in unwind?

John Plant

we for increases buoyancy everybody did in builds. expected continued I as think

you're notable degree. think I case been as said, built they are many seems thought to of occurring. there And It's haven't correct, just I if as only that's has earnings little there's improvement last while And in in a is from lower bit and I the had a people real still probably manufacturers. be engine build, a we year going the calls and off there aircraft where a question think for. planned than it airframe aggregate,

trying and throughout And service. aircraft doing back well trying people system. mean, and and hard hard so I is the getting really into Airlines are bringing improving, whole their everybody

trying engine are the think hard. manufacturers really I

manufacturers in -- to in with and and I shortages -- in rates to starts of deal everybody’s really and just impediments Now trying ramp get up which this that factors the hard airframe freight other, supply labor yeah, the think cope materials then all had supply with chain. I'll the and availability and and COVID training of they've other with say, terms the

So there's lot been a going on.

trying think that Airbus’s all bit just narrow-body just my as probably parts right has elsewhere on we little as and trying see maybe plan I earnings haven't with in you I built So of some for calls into many to less guesstimate MAX’s envisaged, said of mean maybe is or being everybody been -- from for -- there publicly can a build the think from talking the do built thing. about is information because we the Howmet built we're assess line terms as been available brought not of is all cash companies. rates many I ambitious or what I to the visually think And where what's here that they of a our are

Operator

Our come Bank with of next Elizabeth question America. will from Grenfell

Elizabeth Grenfell

Are prioritized then customers -- first? I'll more start different the are How in with And your customers profitable prioritized queue? that.

John Plant

requirements treat equal respect. Okay. every No, we customer, with their

appropriate. prioritization, don't no I there's be So think that would

and that, of our the commitment to deliver you to very either we when a make we we best and customer You're a abilities. do

Elizabeth Grenfell

Okay.

So number of and there mismatched, the if out was terms in no to would certain prioritization what? had be got demand you a ship who

John Plant

I don't so. think No,

think we have a think I ability. again, requirement placed on the policy a plan customers have nor I should, even there's don't respect us. our nor we a that that

of the So parts few the do because extra have boxes schedule, think if about shipping to don't more people MRP they say they you ship. some a they operate demand I'll that, stick that information. customer our to profitable. and don't who they're They The docs,

which we to no, instruction So to say, profitable please that send we've and they're because more customer no now. this with committed to supply

Operator

will question Noah next come Our Poponak from with Sachs. Goldman

Noah Poponak

chain of like RFP supply to you've sourcing. us also a to happening supply maybe in update that's then engine in long-term chain efforts market And sort just maybe trying you share challenges I talked and part the give And and how seems broader where could different gain It across about contracts? titanium know that's on processes being John, your going. stand? these write curious I'm related

John Plant

Yes.

performance, capital My And job And then we to planning should the that and only a at, we then through so basically those our where So grow if view adding as round deployment. resources, we above of our to value rates, course try during set we're terms look not more is we opportunities opportunity the Howmet. each both that. is engineering to where best we our just may that grow and then the market view as lie. or content at should than in where place of place And have And than our go own be because market with run a the we a the that, more general routines in seeking in rates. executives be year. that is planning to into of grow more terms particular, through noting note, but the to take margin our we do customers of review share of

it. we've area at see for got area point, that own we according in allocate. And opportunities, once clearly, resource that then more that to So Noah. to or then decisions allocate of capital can that's And the stance point, before prospect the resource returns that our whether the the we have, of we us, this all that we then on basic at make

all how on the just bottoms are all, at leadership So just then resources, then fair that it's where a And up, is the opportunities. it process It's of our we we These gets there's to wants more. more isn't or capital the job matter a as shake determine everybody -- more not company of it. allocate. a everybody

of from in So asking, whereas the deliveries, short no, she absolutely, question term prioritize term, But we the Elizabeth, the the we last don't. and was in do. on we immediacy do long

areas markets we allocate of a we rate meeting serve. above increase those different with resource be end have to doing clear process of normal the objective and for target the to And for those so. So do the

Noah Poponak

fourth quarter that last think to and looks adding $XX related how And specifically specifically of fairly revenue year? million you this on I beyond the Any Okay. quarter, that sourcing. specified titanium update to

John Plant

talked the there's but booked really positive quarter continuing, It clearly significant that manufacturer in We've the lot yet the to engaged because about. reduced inventory titanium to more a that essentially still we where wide-body continues major the move we've with in us. improve. orders terms any build of and for that system a into the orders quarter, be in of fourth we it's in end continues moment third still and have X to of at But

XXXX. -- more assume the hopeful February. at better So if some we'll that or we come. are million assessment XXXX track it we continue achieve that on just and give for $XX the that improve quarter, moment, in fourth slightly improved just and But to to you I'm will to in

Operator

question next our with Wells Fargo. Akers from And come Matt will

Matt Akers

you you and does some inventory of quarter, longer the to how saw specifically, the go the defense F-XX, that on guess, in have corrections the on? touch much decline Could I still

John Plant

Yes.

the $XXX F-XX that be is do And just an seems the is year. anything, bit to probably last a $X.XX production assumption, particularly note assumption somewhere intake probably this our will $X.XX million year. the on that Lockheed We little the if in less, which our or in produce So let's order do strong. take increase that for -- say, range

the of that should we rest decade. XXX so rates the And plus probably for think, continue,

news. good all that's so And

and the higher specifically, they part, that a they which for anticipating I the closer And XXX during the range think XXXX. schedule at for as we said know X sort For we last produced would make as therefore, produce years we of because to most did they did, XXX carry and we customer the us inventory of year, correct requirements probably rate XXXX in XXX aircraft. they XXXX, would to this for into the

particular, that it the Ken on commented that correction. on the major and seen that and defense in the sales downdraft, airframe out called for bulkheads in we've factor the of aircraft and structures QX impact on inventory is we've our affecting So again continued business, part as that the

and year, will Our in is that, we that next latest the QX and hopeful year, that we're in continue into half view is that are balance. the of QX by second next

my obviously with And the production so will for rates F-XX XXX which given that's And our rate, within match to requirements structures increase guidance you if to be particular. be will us. significant the then in that's that for coming of of our a also positive combined business up range some improvement very And see XXXX? on for for we part demand in should expectation the

Matt Akers

returns a is I know And meaningfully year-to-date, helpful. kind you when do bit next it's pension. liability, I on but more it the in if versus with year better. asset then a mentioned you But X factor I different I guess could higher That's little guess, XXXX? of rate,

John Plant

liability the as a Yes. that I'll that. pass provides that to on But interest a give color then bit essentially, across rates on little have Ken significance. to you more moved up, downdraft side

we're plus my further probably show minus. a million-ish net that a And quarter a lower we you contributions exact made, we liabilities. change is be make the the think are is meaningful fourth that year I to that liability cash along those have of put together, in situation. lighter legacy reduction I this numbers don't returns I mean, to than anticipation liability a And I with Asset for have around we'll last on will negative reduction And net or guess, X reduction. the that year, to have of the hand, and in then basis, and down $XXX when

years the assets. across different expected me X was pretty Ken it's company you number specifically So or it the X diminish pass and now, very a than on to to for ago. let liabilities comment But

Ken Giacobbe

Yes.

of the on we've and Matt, doing a lot been OPEB pension So work program.

off end are you of have to right line out liability. down. liabilities favorability we John discount about we've the taken today, we million at $XXX QX we're of $XX helping it net So going discount if from as off to last not, compare U.K. We terms buyout improved of back at. taking that's to in to the where in liability XXXX actions a end again around snap So mid-X% by right? current, of when the gross believe of programs. But where we've started or clip from lot terms But driven took year, drive the some around around the X.X% now. QX XXXX, of of that's A we’ll million at of rates moved actions, to rates mentioned, nice year get because net we

So get you're negative. they the To to a going just nice point, on XXX, S&P assets, be if the the track good even side. guy liability you will your

done the net of probably them together, you're years. to terms anticipate if liability. the end though, cash X be get will the a not we year got same, that to of but the going less, the of pushed we've to all You get based contributions in next Also, reduction over on year, work the we've nice

John Plant

you broader I'll of a give add to a just Maybe bit perspective.

that and increase where that a is funds bad basis is fixed in of this rates are essentially on our environment news net most if in rate. possible at up ourselves further of we're think mean then see interest XX when we'll debt the basis case rapidly, about rate. I So points a companies. federal all the In I for I is debt generally look our it's going week

depending only refinancing bonds down so those of on the exchange impact of well. an of what And we've paid can as it bonds

not So up X go or years. I'm the at anticipating all costs interest rate X next in that our

good. that's So

overlay and I the issues XXX. that good. of and that we've then serve, with specific C-XXX of about effects the the of pension will had And I go markets recession the time COVID liabilities had think and Our down, and think our when production that's in regarding Boeing we XXXX, XXXX already

that interest as should rate should result be years. improve our we for And maybe a balance uniquely through should as the for X of or so a And set sector -- come and for next growth X set sheet movement. growth the

and So coming it's my circumstances. a through. optimism good pretty set unique of That's

Operator

And this for and now thank call. We'd like attending disconnect presentation. session this also your will our today's at concluding And conclude you time, you may lines. today's to question-and-answer

Howmet Aerospace (HWM) 31 Oct 222022 Q3 Earnings call transcript