Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2022 Earnings Conference Call. All participants will be in a listen-only mode today. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded today.

I would now like to turn the conference over to Paul Luther, Vice President of Investor Relations. sir. ahead, go Please,

Paul Luther

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

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

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

measures presentation, items directly non-GAAP found release financial are EBITDA, In to in in EPS and measures excluding that references we've press the and mean discussion. most presentation. excluding appendix special EPS can the included Reconciliations to adjusted measures be today's These in in today's among today's adjusted our comparable the EBITDA items. financial GAAP and special

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

John Plant

and welcome, everybody, earnings P.T., Howmet the call. QX to Thanks,

with headline Let's dealing the by numbers four. on start slide

end the billion, the revenue fourth we high as the guide and For it the above at accelerated year, $X.XX year-on-year. up was XX% exited quarter, of

EBITDA items strong quarter. was couple his a that to continues to consecutive at and was be the improve below-the-line XX% Commercial sixth million, aerospace quarter. EBITDA cover sequentially the The strong up continued Ken was of in mitigated the Revenue of guide. $XXX and for commentary. EBITDA in the operating end will by high

QX items. the mitigated benefited below-the-line strong guidance at was tax at per Earnings which $X.XX, the from EBITDA which the rate, and share

of up EBITDA backlog, which the XX%. year-over-year up choppy growth earnings healthy revenue the XX%, For per XX% share despite and was drove a was year,

commercial inventory balance free to an XX%. of the aerospace guided the for as flow call, conversion inventory sheet previous earnings included within cash million move Free cash $XXX as between production be smooth flow. build, on and adds flow range Despite was at build to we cash the to strong and help Moving the commented years. continues

cash Liquidity of million after million additional was repurchases In on balance and the with of is full and healthy, an quarter, repurchased dividends. this bond million. buybacks, common year $XX was year-end stock $XXX the share and $XXX of repurchase stock was common hand

million This years over of fully count start was rate XXXX an as XXX December four is The which while exit XX million the diluted was last shares well. debt net the XXXX. share improvement of reducing shares, accomplished since approximately

also into to in $XX full There first million repurchases bonds minor end bonds of repurchase was some of QX, the program bond discount a at par. repurchased were to The small additional And XXXX. continued by of the of the year January, an quarter taking $XX million. repurchases

will be This for different it be interest continues than And ourselves interest approach set lower is plan rate up lower we of companies rising our costs costs. costs will XXXX. the where reducing most year. year-on-year. going despites Hence, interest a into this global the to coming fundamentally for XXXX, And

now two under stands of target turns. net leverage our to Howmet's at improved compared We've long-term times which EBITDA to just ratio, debt X.X

pleased $X.X billion unsecured undrawn. top with Howmet's rates. were of All at debt and fixed level, year. the the is Howmet's we At revolver is

extraordinary resiliency the Furthermore, we of year performance to again. expectations build Howmet. despite extremely And of We backlog initial of this of exceeded the an of overcome impact talks the aircraft and inflation initial EPS the faced XXXX, in its all choppy guide to expectations. case engines and for margin uptick the both compared below and

I'll performance, that. XXXX the cover detail now the after will and Ken then outlook

Ken Giacobbe

quarter products, was revenue engine engineered for XXXX, and driven narrow-body and up slide commercial Please year. XX% structures Revenue The aerospace the fourth fourth recovery. of the to XX% with up John. year-over-year markets. up X an continued the year, commercial recovery the and move aerospace full by up the XX% quarter year-over-year throughout overview you, for full for Thank XX% for

has customer quarters fourth but for and be total the XX% down grown level, stands X% pre-COVID consecutive full F-XX. of revenue, seasonality driven aerospace by up seven at Commercial the of driven year was XX% which for for Defense and revenue. short to inventory in XX% corrections was total year, of end by the continues the Aerospace quarter,

year, XX% Commercial fastening partially foreign transportation, up and by and XX% in quarter the volumes, currency. higher impacts full driven aluminum systems, was prices by which for up forged year-over-year higher fourth and wheels the offset

the industrial, was which general and for fourth oil the and and markets, the composed other is essentially IGT, year. gas and industrial Finally, for quarter flat of

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

to move let's Now X. slide

P&L profitability. the with on enhanced focus a We with will start

consecutive had quarter, in EBITDA and For per the six of we quarters fourth earnings growth share. revenue,

exceeded EBITDA and share per Revenue, earnings were guidance. with in line or

X% $X.XX improvement at XX%. XX% The revenue points an year-over-year. full year-over-year. for the Adjusting to year-over-year approximately XX.X%, basis or pass-through tax $XXX year-over-year material XXX billion flow-through of year incremental operating approximately full revenue of EBITDA was was excluding was million. EBITDA and rate up was up material the XX.X%, pass-through, For of year, strong margin EBITDA was

Earnings improved up XXX per $X.XX exit share for of shares. average QX XX% the rate year-over-year. to diluted a million count was share and The year

foreign market The comp conditions. was strong fluctuate these the the in on based the impact favorable pretax items items mentioned, John rate of As fourth tax by million charge, mitigated as deferred $X EBITDA and and were below quarter few currency operating line. a

essentially and year, impact of the comp was foreign was currency favorable. breakeven the For deferred

note earnings. Final on

not headcount in did we expected, quarter. As have net additions the fourth significant

absorbed new to and costs. and employees training X,XXX approximately hired QX offset we production However, attrition incremental

aerospace $XXX build primarily sheet. Moving was balance a million, approximately for an the million, record Free of commercial cash to including the flow year the for $XXX inventory recovery.

cash since free net in achieved in For of of of income well XX%. separation, flow long-term we every excess our conversion target year XXXX, as as

capital Year-end XXXX pension approximately million by healthy reduced by quarterly were OPEB to a million $XX stock $XXX were cash bond and liabilities net $XXX allocation the common of million, repurchases approximately million. Year-over-year dividends. approximately or XX% and contributions and reduced balance repurchases, was $XXX cash after

Since of XXXX, gross stand OPEB net than pension now $X.X and OPEB million and and by liabilities and been pension market approximately pension liabilities have by less liabilities capitalization. $XXX at X% Howmet's approximately OPEB billion. Net reduced

a times, future. all of stability which to in X.X debt net EBITDA and will fixed rate expense improved the at provide low Finally, rates, record to unsecured debt is of bond interest

in and $X the is revolver XXXX, undrawn. maturity bond is October billion next of Our

Moving capital allocation. to

depreciation. seventh continue installed aerospace expenditures in We were the prior us million for expected quarter very COVID-XX puts Fourth were repurchases. in position the to our be balanced commercial growth. to was and of XX% strong to the stock approach. common of year consecutive approximately a Capital support quarter Capital $XXX

common the For million at per with year, we repurchased share. of $XXX average $XXX million. stock XX.X Share price for acquisition $XX.XX of approximately an buyback shares million authority stands

par. we January, will hand. bonds with with hand. We costs bonds $XX approximately a on interest repurchased million last $XX another with year cash to slight Moving XXXX on of were Repurchases million. our cash in our by continue at lower annualized made of Moreover, repurchases $X million These discount XXXX repurchase to repurchases to debt.

Lastly, flow. XXXX. dividend $XX the quarterly share, $X.XX approximately XXXX common quarter, increase we we was to to million, and to were free continue In dividends in cash million doubled in fourth per confident in the be to $XX stock expect

was cover XX% to fourth now for X slide QX aerospace another narrow-body XX%, the to with driven in move higher by the was the quarter solid Let's Year-over-year segment products. quarter revenue commercial results. recovery. up engine

associated was XX%. margin oil X%, improved to EBITDA increased costs. IGT was addition Defense training near-term production of and basis XX.X% gas new up despite Aerospace XXX up and XX% and was and XX%, employees the points up and year-over-year the

near-term to new to costs. and quarter, added XXX to Fastening employees was segment slide Industrial and fourth year-over-year recovery. Aerospace new XX% addition Systems by revenue the offset the fourth X. EBITDA XX%. was due the decreased in quarter. move narrow-body Fasteners was higher, Defense Year-over-year XXX the approximately production X% down up XX% aerospace hires was higher of exits. driven XX% Commercial and training the Let's In

Structures Now up offset by was approximately million production was move gain. in commercial with to Russian $XX Boeing aerospace quarter, were for X. fourth year-over-year revenue XXX. narrow-body up share the recovery titanium XX% partially let's slide by the the Engineered of of declines the driven XX%, impact Gains

revenue F-XX, the XXX. and was despite burn XXXX year levels inventory the low was of to the was XXXX down the Segment higher. Boeing build continued XX.X%, XX% with margin when EBITDA of full zero and XX% EBITDA par Structures on year-over-year increased

let's to move slide XX. Finally,

the volumes in to higher The higher transportation increase entirely truck by revenue prices. production. aluminum was year-over-year year-over-year Forged chain million continue was impacted XX% Wheels supply revenue almost remained demand quarter. $XX commercial Commercial but issues, customer limiting strong, by fourth driven be in

year-over-year Segment EBITDA of was and offset the by foreign driven by were the volumes euro. higher primarily unfavorable as impact currency, flat

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

XXXX. the we've on some in assumptions around appendix included slide Lastly, XX,

approximately per We which to asset mainly earnings to will increase impacting costs, per low expense share OPEB The to by is non-service approximately million impact expect and non-cash. increase $XX and unfavorably $X.XX $XX million. pension share year-over-year year-over-year are non-service due approximately returns

of expense million, we the volatile which In to $X line addition at are for in within million the but pension miscellaneous approximately continue expenses, $XX the other minimal be can to be increase expect quarters. below year,

million resulting year. to million net CapEx million, to cash which amortization, $XX in OPEB $XXX are less in depreciation be in be of and XXXX and expected range the contributions continues should for a to of and source flat Pension approximately be with cash. $XXX the

Now to John. it over back turn let me

John Plant

Thanks, Ken.

was Pacific are now domestic international rapid top seen. at already well. experiencing momentum as Commercial factors both look the US is for in This this is on and up and travel Asia reopened increased builds of China travel year. at which and high increasing a rate. strong Load factors Airlines Aerospace Let's Europe. now load first, growth the XX% travel are for

engine back to at twin of efficiency or clearly international further Boeing and Airbus composite-based are demand. narrow-body lower rapidly, bringing XXXs This meet solution Airbus and and demand to rate with is AXXXs highs fuel aircraft. modern are all-time for is carbon AXXXs service vastly their into footprint. Backlogs inferior demand increasing aircraft Airlines having an expected. better Wide-body are increases at

the alone The travel. demand for increased improved the huge demand mind build, secures for never emissions

air that upon see by also favorable while spares. rely we'll very demand considering does Airbus, noting conditions, rate Boeing While and Howmet travel aircraft for increases builds

XXXX build increases. Here, more we're see and conservative rate a and aircraft we until know of to cautious take view going consistent

XX to year build guidance, XX assumed full month per the for XXXX XX AXXX, the underpinning AXXX. our Airbus XXX approximately example, Boeing monthly For are rates for MAX,

have we the XXX Airbus XX for Additionally, and the build assumed XX year XX year. to AXXX builds approximately Boeing for

build the outline we Within strength These assumed improving Aerospace to these Commercial expect second in assumptions growth for XX% our the underpin year. numbers, see half.

Now high F-XX overhang to demand to now less spares engine strong further let of is increases for are inflation. other on In the F-XX and with me increased associated to before markets commenting builds decade. the inventory. in supported see This Defense, throughout XXXX requirements. remainder engines low-single-digit and Block is of we with expect XXXX X upgrades the expected turn the the by structures Demand both

I and future. aerospace, a pace, us expect these commentary the for provide increase on revenue the space in space-related very supports a more programs. for helicopters, segment is in drones lot healthy will it And this business at Our increasing which

IGT are is global to revenues and everyone expected an class at turbine Heavy, supports increase supported industrial aware of low is strong Agent which Oil growth, should single-digit GE be in, General by that balanced Power, maybe business which gas growth expected business, also the or grow our high I Siemens turbines. Power Gas very to believe double-digit at low say, down single-digit Howmet. and single-digits. Mitsubishi growth. another remain for is for

will of the in notably Finally, penetration fundamental future by which million the especially in for truck wheels wheels, improvement XXX,XXX with the commercial second in X.X steel Sector the expectation accelerate In demand of wheels demand continues wheel segment, a wheels transportation and our where sector, is aluminum Europe. more of share before reduced of wheels driven electrification improvement. take of cautious versus Europe. half view growth down in aggregate, might be we XXXX, in

material to costs. and inflationary remain volatile. These Turning

the the in material, the for expect to $XX year. to $XXX of We million combination inflationary be costs range million of

majority As XXXX, we intent is did costs. pass-through in inflationary our to of the the

minus we or Revenue, million, the Let's plus first minus of or plus numbers to $XX for million, $X.XX. $X.X turn minus plus or specific billion, year. some million, EBITDA the see $XXX $X.XX, quarter EPS $XX now at of of

For billion, plus plus minus plus of $X.XX. million or $XXX revenue $XX or or the EBITDA minus of million, $X.XX, minus EPS billion, year, of $X.X and $X.XXX

allocation Earnings per stock market repurchases, share assumes to dependent and continued capital upon conditions. bond common

Our is $XXX strong up as year plus recent our free pathway set see the will minus fundamentally further XXXX. and while caution noting cash demand XXXX flow million, our given We increases aircraft time, build into million. guide through which volatility, we -- with or $XX at fundamental plan appropriate same

XX%, from let's was XX.X%, and The were to the by extraordinary XXX inflationary is turn XXXX $XXX another for increased tax Now Howmet. million points which despite conditions. EBITDA XX%. rate a improvement an basis by XXXX. summary. to year improved above of strong effective Margins Revenue XX%,

inventory cash flow $XXX million to deployed buybacks, repurchases of you back doubled. $XXX approximately was and share of to Liquidity $XXX the million capital per dividends to for were Free dividends despite $X.XX increased Earnings increased strong. is million, Commercial XX%. by the Aerospace. very and build as and bond share know,

cash $XXX a million have of revolver. hand We $X undrawn billion on and

exceeded X.X estimate $XXX debt-to-EBITDA million unstable and Compared and X.X net aircraft employee navigating overcame We we non-metal material initial debt-to-EBITDA. to good $X.XX from rapid of while of initial our Leverage amount of to a really times guide, costs of initial XXXX million, guidance $XXX builds. times EPS pass-through above costs. the inflation new improved net headwinds.

and deployed free over to million free balance have we et flow view aircraft while, to visibility regarding the XXXX, cetera. in greater XXXX that of from to Since $XXX and rates. $XXX in we cash XXXX XXXX, reflected be growth additional in of expect similar sheet, All flow look the strong and We cash we've our dividends, until strengthened repurchases actual is expected bonds, will growth generated million and coming XXXX, cautious generation. conservative cash and profits a above-trend taken we have challenges business. forward build

very you move your now Thank questions. much, and to let's

Operator

And here We will Stallard our first Instructions] will now Research. begin the go ahead. [Operator Vertical Please with Robert question-and-answer session. come from question

Robert Stallard

Thanks morning. so Good much.

John Plant

Rob. Hey,

Robert Stallard

don't add John, quite the of would cost could perspective, these talk the obviously be elongating lot There's for Airbus a rates. OEM on was been from on your could build a about AXXX. ramp question actually wondering have that as you as I you potentially risk, I it that margins quickly reduces then labor in mean a help you get and better ultimately, you normally much in to do or as scenario? this

John Plant

quarters, build when the you significantly few think had to has drop-through seen, urgent than parts asked on we've I look compared we've over quarters scheduled. change say, where steadier demand I'll rather increases, production last where or to those been back we've schedules they have customers rapid maybe been when higher and also by changes chop and of availability meet a to positive

XX%. revenue -- compared And number if you XXs, in higher And then changes so in at I see, tracker drop-throughs below you the third it in revenue changes saw can you think the the in probably quarters, maybe look think, high call were the -- quarter, it I the our to can't -- quarters let's in know was XX%. in quarter, I fourth exactly the those the

step been because in gets increments growing, So go has extreme you saw us. have think, of steady to employment XXXX. we was, think then to At that compared the each does much the time, that we of incremental as base -- the I what easier same of demand volatility accommodate or I help the

in point but your want of convert about question one that volatility, to up and advantage demand I for question, essentially, to I'd are broadly I ourselves lot think plan steady also the us. us. that the helpful sense, to And towards we're that's and do don't when increases rate like And really we albeit of take it come should mean, miss but a I talk expand to best, setting additional hopefully more

Operator

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

Kristine Liwag

mean, production – today. India on are year-end. We just XXXX chains month of production XXXX. on I look question got rates order mean, where per gearing for other in to supply towards I is outlook their by John, at want periods the follow-up reiterated when here. obviously, per plus XX Hey, you've Rob's saw, XX Monster rates, month we Boeing I Air,

you do so the why to I see So much mean, volatility? historically, ramp the engine needs up chain before supply airframers.

And get would the would priority missing? so a per of what I would you month. and thought guys that you have support am order in orders now get I to XX in more

John Plant

quite masked and we -- try thought separate And volumes, last the out really year controls that customers. Inflation is and to Yes. with fundamental was that our I volatility we by which look schedules Howmet our lower I from significant at optimism to year, outside demand be of my when itself way recoveries. I had therefore it didn't XXXX comments that control. the full easy. to between And which got mean, going of were the in within turn which inflation started

know, because seen had you fourth inventory, carrying into and which probably of the to And cutbacks million engine for customers I the or we need the fall, as you million additional in not quarter. did those $XXX we've we ended And to quarter planned $XX business up end not the when parts. of third at for expected spoke

And that. Boeing if year able middle all of really XX you numbers. with we're be up were about back rate ourselves address to we go the last so giving the again year, in of And such talking to

mean, now great, than it. materialize. the Even is such in you October. Also, summer XX caller I we'd requirements, would that I the spirit though it's noted schedules even pleasure cetera, give that cetera, as rates. though XX say, I I'll would hearing, to, as not et XX made make that nothing of mentioned you et we're which and referred from more, engine did in benefits and say, will as there's And I think things and love us bills,

the the But example, quarter claims the be, that you quarter and we is that numbers during to -- actually we off, took high by it fourth noted from never the aircraft XXs. Boing finished being and just fourth the the And say, rates maybe in how more to back let's stated was the quarter were fourth or then for that sure et build that by was cetera. also like out XXs were inventory, many higher third time of albeit interpretably quarter, stated you're in actual sold, it

So, the of actual level know. what We was build? don't

And this year, take think me at we shareholders it's -- can think realize let It's that saying, so very with for about when we base guidance is start relied which guidance. from And seriously. us I which upon. a be can I look off something number a

we're where So, exceeded the the you year that we at blew we XXXX gave start achieved extraordinary if comfortably exceeded it. XXXX, year. at In XXXX and guidance passed that it COVID look of XXXX, despite our conditions, we difficult

also so which that be seem the for tissue paper wet be cautious. out may those can waving as is low. people rely the know or to extremely numbers, compared that know a quarter. below This that XXX, in something maybe we you in have they're built even the be very so very what I in -- what for deem if for outcome a were and calling XX know an we air. XX many other we the XX, XXX to fourth are those the And what low seriously. though might I a to XX few take like And and AXXX, and is though upon this not felt And take we

be And the of you that imagine couple incremental because Might is our -- be? plan let's more you our then take up great, the structure of it if hundred should XXX, of baseline then while numbers know, But might that should of those Then XXX, that, revenue. materialize? appropriately. this the set what drop-through look be, if saying, as helps something business, a like for what rate cost more sets those a incrementals towards margin And that our And that sort million mentioned just be probably cost would you you I don't might XX% structures above take couple we've be. us properly.

progressively hope then not we during that's brighter begin year, obviously, for. but what the the And things of we course know. would to That's what look

things And it. a we'll so a we set sense better, ourselves with guy which gives up turn If us actually security. of welcome

you could upon to I control rate. at good convert manufacture the and a think well Howmet operationally rely in

about then hostage more be really obviously, have we it. And which every it And they don't be, giving so et how cetera. what did want myself to build, much I on being and a that's a thought optimistic guidance, et to cetera, could worried month find

take weak great context, something to solid. will If choose ourselves I put base not build in chain. supply to we increasing, the weakest hope And better, one if the out supply every production, you gives where of then link because be of links but And is the to of aircraft only that the rates turns those it I also hostage the fundamentally to that I improving, actual good, don't for Kristine? rest match know significantly which will us. be are,

Kristine Liwag

color, great you. John. That's Thank

John Plant

Thank you.

Operator

Myles ahead. question from with Walton comes our Please next And Wolfe go Research.

Myles Walton

look John, operations? XXXX. guidance. morning. the most quick guidance your I'm sure frustration line a at conservative the of just clarification. appreciate up I'm with Good the there was through Thanks. Really does curious,

a there that can just operations go upside rates into the also are maybe to you XXXX? then And on responsiveness better, be out started responsive for out of of some your things of comment going to XXXX if how the

John Plant

Yes.

year, above. good pretty lead those way, Should we XX, about example, as to reach time, first XX? for heading it. XX to shape rates in that the set in Airbus produce are to they're able and quarter be be last So we've an it the this XX and or if well at months we people Provided six meet that we'll or of obviously, amount got know are because the of of recruited heavy up level

has been recognize We've that the but labor being good hasn't everything numbers meet particularly needs. labor been our our we'd retention, around process comfortable which We've training sometimes sure able et improved with. to I'll routine, we've to own higher that cetera. of been something have of disciplines at been getting we make recruit put a to the headline recruitment stability very level wanted, increased

I in doing things right same aerospace set all for as the a think be ourselves condition. ramp So we're in good to the way the initial we up

And demands. to I fundamentally, so believe meet that we'll those be respond able to customer

Clearly rate hit it -- to in also current knowing XX for again, example, that's customers. if than Airbus commensurate rate AXXXs highly later mid-XXXXs us still rather the number. our the for got engine a Then, builds and is from sooner beneficial

I think at were only saw parts last rate of my get able higher the cut a back, to quarter because fundamentally that, commentary chain the produce other were you to we there. supply

I that. confident, reasonably do Myles, in So to there feel

Myles Walton

Thanks. Thanks a lot.

John Plant

Thank you.

Operator

Seth ahead. Seifman Please, from JPMorgan. go will come question with next Our

Seth Seifman

good and everyone. much very thanks Hey, morning,

John Plant

Seth. Hey,

Seth Seifman

mid-XX% John, about if then, there. profitability that talk engine second would I we the in the products, of and kind half on wonder down bit in kind margin little of makes new of half you in kind of the saw come and first hires it's could sense type the weigh a and profitability

guess, in the the first right the a But, was maybe level about for I what's setting business, with guess, think a I out? there'd there margin should I and we But, long-term a from the half expansion. that think shakes that, think then on we saw thought XX% was be incrementals this some above margin growth, we when see that and perspective, where you'd about good how

John Plant

say, it turned fact the was, recruited as outline comment That let the well, half. out, thought Okay. in profitability Well, first all, of -- we'd the demand. impacted on fundamentally to by second I'll we me we right

we but not on As therefore, we those did produce you did inventory, not cutbacks, what know, much, because didn't make as produce it. some profit we of we the only of eventually

in fourth was that, labor worst even we condition Howmet, flat pretty were The quarter. though the actual in in across fact, is

So we our we where say, significantly. hire products, labor. down we down net back slightly -- we let's didn't in were But on engine were

most given not about, to which more -- required. we we labor, be the down underlying to to as demand XXX So need than unusual engine we were costs, were which think able people and because cutting did basically is produce holding what we

and we unfortunately lethal in having to stepped didn't require. scheduled customers up that then were So pretty had what of band

We labor because obviously had not new labor, scrap. be, was it carry might we does effective and as that labor excess produce

So we ended up rates the with producing that. with scrap new of combined cost higher of labor

Now, recruitment mode, do we given we future. for for we -- do a in which some back expect the actions on took, trim we're have steadier are we labor, cause that optimism the

In rate issues, first of to half chosen of terms though fundamental I rate be -- we've is those it builds no increases, even of that XXXX. margins not and the least restoring see about -- cautious to at the the first

it like word it. about it, is. the if use don't to worry like don't but worry never really about think I I so, you And

Seth Seifman

this rates flattish the a that's are very -- above your the just labor of think that's about And having to of clarify, the No, so helpful. margin, margin point 'XX, that production the at expected excess function when EBITDA Okay. company-wide we for company-wide, not guidance. margin maybe -- in sort

structure the appropriately at the of you'll for to kind time, with sized revenue And cost what's your in You're that lead the in to there extent guidance. need be able appropriate rate? to you that upside, bring that is then produce

John Plant

much. Yes, pretty

So, the certainly January. the of end labor overhang, by

continue this going The improve. our We gave in given rates So, probably to we words it, let's that's pattern call is are this you it inflation be we right believe, and guidance bring used margin to we mostly I on there. gave. there ZIP code the the about pick to scrap million to the right, about of saw still conservative demand We if year. recovered. Plus, up nonmaterial $XXX inflation

basis if our higher would of points this XXX with we less inflation than that that like last year, have call half And XX.X% it's as know, that. you Then million $XXX let's been just recovered. year,

begins go it look at inflation become an things benign on factor taking line we to in as again, cautious point begin and appropriately might where the year be better. hopefully, And will this to through very So a time.

Seth Seifman

helpful. That’s you. Great. Thank

John Plant

you. Thank

Operator

question will with go Our Strauss ahead. next Barclays. come from Please David

David Strauss

Thanks. morning. Good

John Plant

Hey David. How you? are

David Strauss

how Good, John. are you? Hey

John Plant

Good.

David Strauss

XX% that The you on But should I for look we including your commercial kind as assumptions. pass-through of in does what transportation, And next commercial revenue of terms across year, outlined guess, forecast, just commercial how I growth you aero well? volume Good. the think Thanks. that different transportation look segments?

John Plant

Yes.

tend on part Let with deal to too individual I much not the me comment latter segments thereof. because anticipation first, growth

way, my labor that of is Europe. aggregate assumption For with that half. doesn't David. I the Europe. at this and a I million it the But cautious. million being in impact to next is recession, element to in get in optimistic point it, volume $XX point have be a its year, at if be $XX about I'll an given second decline best mean, in could of wheels, say this much there an time, as strength recent in revenue the more will what It's assumption strength and time

that chain have that's ease to backlog commercial the probably they commercial business rates trailer year. thought high build than be the we issues they've truck to going healthier some can the got. healthy and now are truck able the of manufacturers build pretty because faced the beginning supply now, Right and that Maybe in that and really into

in we've no this our of assume to $XX it's in numbers, but that decline $XX got assumption, point. our revenue an million at guide can So million if more you

but be mind, the haven't percentage follow-up go my pull in by let’s of segments, actually it to got that aerospace out not with will In commercial and to we kind Ken have tend him, anyway. to a terms of

David Strauss

just perspective, that. Yes, the how -- overall in that narrow was get to expect at, I press, are there yes, would maybe getting fasteners outgrow just just still a from numbers given I you the was segment? it

John Plant

anything, increases. will have expect think If I I QX, rate higher growth as of as as engine and XX manufacturers moment, from well QX at the QX job we accomplish our actually, move probably catch-up to future revenue a commercial the forward a into show to because would rate look from of business engine

little obviously wouldn't And it engine haven't I is XX%, in very we year. again, rough we increasing stage, through So titanium business go go as the a be I bit against that through our higher, XX% see maybe lower surprised the a we level XXXX, a and at it's little into to factor think then this covered assumption elsewhere. as bit

Ken Giacobbe

Yes.

David, structures I'd then number in and the three engines put two one position, So position. in fasteners in number number

David Strauss

Great. Thanks, guys.

John Plant

you. Thank

Operator

come Khanna with Gautam open. is Gautam line Khanna, Cowen. Our from will next your go Please question ahead.

John Plant

We you, Gautam. can't hear

move next. the lets to Okay,

Operator

come Please Our Spingarn from go next ahead. Melius will question Robert with Research.

Robert Spingarn

Hey, morning. good

John Plant

Hey, Rob.

Robert Spingarn

you for long, energy and John, that XXXX, you LTAs pretty three typically XXXX going five And price. about back, were in pricing freight newer years opportunity to and costs pass-through to good any your this year years can LTAs, and given to you the could share? are opportunity pick if next And these prices? in on also XXXX talk up and build mechanisms

John Plant

Yes.

XXXX. outcome So year. just And first are could K, file you I we pro the evening, we rata see -- if take three for one like evolve be the the our through for in where think that all, the price which you'll and almost final Qs straight, to and this of anticipating

a good it's outcome So there.

In in XXXX, a can similar expect number I increase. of think price you terms

it value to that Howmet bring ability the years part we for reflect the some I more a for was the we So to that correction products about methodology not of one-off of but the now, talked that marketplace. it and is ongoing have

XX% for Our now probably to because XX% and LTA on XXXX. is We've well are complete into XXXXs set. already the so cadence already been to pretty in we

So and increase I availability spot of resiliency of been as in started to we in an conversations to share that's it's conversation Most because it's see ability us. now And in call business of terms our have to our build. good shape. it, –

we've always again not good. call XX% clearly, that's are So in which let's elements material. protect of to sought plus And, raw those that inflation it, part recent for, times ourselves

good well, in improving an So we're there condition as – Rob.

sector So, that or you're across the whole good questions in shape.

Robert Spingarn

there Is or an the something way gain algorithm over quantify any can look to we there Is share time? to? opportunity

John Plant

aircraft felt, What so segments amount to is haven't just build call for Howmet. done we've you, is rates yet. many one I'd different the to I've a love is it this – the this higher cover. got I do rate, and out to of that day rate for should

have that day, narrowbody be And rates of into day. pattern, and felt the in of relative settle come that differential growth will Rob. pattern. many happen, One a Boeing it so Boeing there changes and widebody we'll Airbus will equanimity, that where pattern been more of And – settle future so Airbus future that of into it's fundamentally narrow-body, skew wide-body, a and particular those been volatility elements between I demand between

to for production like going and will which And that come then rates up think are golden in aerospace at and days, the yet are aerospace come Howmet, I all be steady. suppliers to particular.

what know think those not talked I'm they're to they're here don't for you in I That's coming, are clear saying, XXXX. call about, So those earlier I but things here. happen. this are to I not very conditions yet going

rate happen. able of aircraft that is narrow-body, whether you I it it that than But growth And point, percentage at stage, – you instability it be I the prior to it or to it's these or in rather XXXX XXXX? say, cetera. Boeing, muddied to like then yet. know And know, et is the to and feel back don't at fundamental these have above will by half XXXX, I'd really this giving et some of is confident Airbus, And I Howmet build. it wide-body to cetera, I give think

appropriate time, So I think Rob. the that's

Robert Spingarn

great. John. That's Thanks,

John Plant

you. Thank

Operator

with Ron from will Bank question Please next go Epstein ahead. come America. of Our

Ron Epstein

morning, Hey. Yeah. John. Good

John Plant

Good morning. Good morning.

Ron Epstein

going chain? of if what's help supply, the suppliers And there? but To a new of questions feel on the lot seeing on way. kind give is us a for focused your can out, let's supply of you that? are some go Just are there, you what the company's I health of the those mean, How other

John Plant

we business. be sure, we much stability it's And the for us. no given the back through. I in impacted metal, issues for can alloy In buy of buy else's where when ring engine about of of we affected us that way in seemed example, But end that's our heartaches to And segment XXXX. the somebody throughput, XXXX, faster and for our in it that the talk heartache where that, end that's back had was better base definitely it increased than XXXX all metal, by

We've somebody scheduled we metal of cincturing. -- have it else's fire think one It recently or in while we we've our, And had outages us of appropriate, forge I'll certain had also parts. say supplies a for competitor. say, waste

prevalent And so say more the -- metal much months. last of availability been those has I'll few in that

XXXX. condition smooth it a it's months Again, think move where low a to we today availability. we're of begins I'll no-build or because as away got before we I list out items hopefully, again, in But some into visibility. Now, get I've of say, a,

I'll which But two be also problem. you've had as to about, there's which areas through more the increasing titanium that again, the up been -- of experiencing. fasteners the a and trying And of those that rings I'd to talked revert areas is titanium say will but on look the smoothing to a I problem well, bit step majority and we're

Ron Epstein

Thank you it. Got much. very it. Got

John Plant

you. Thank

Operator

Cowen. Khanna come will Please go next question with from Our Gautam ahead.

Gautam Khanna

you hear guys Can me?

John Plant

now, you Gautam. Can hear

Gautam Khanna

Terrific.

Hey, that about not a I Sorry happened. couple of sure questions. earlier. had I'm what

XXXX? QX XXX, platforms have a where you for you on First, the cetera? production that on the guided et So, were where guys by you were wondering, XX, I like on in where sense rates you were do for was you

John Plant

XX%, below Boeing high platforms to let's Airbus XXs And call call to just my guess. high Okay. XXs -- XX%. mid fractionally, on the below I best We is on XX% -- were think I'm it, it going we were

guesses just point. this are these So, at

Gautam Khanna

Okay. And you were? do you imagine, like zero, two I is think XX, or where

John Plant

call Compared to half month. like one it, month, more can a you a

Gautam Khanna

there structures? by Were fasteners various the differences it. segments, Got versus big engine versus

John Plant

quarter. last all of that for picture That's me to tough going back to

lower in a fourth quarter. for the our notable I fastener number think was particularly widebody business

below know every XXX. whatever I it question. platform were in do may on memory they we be the about last from must the just built follow-up however, can't think quarter, we across I or So, it a

Gautam Khanna

as Okay. also XXX just QX well, And AXXX rate? on

John Plant

above six. been year. be well a optimistic built six. case us. between Again, much Yes, XXX, And actually that's fractionally fundamental for good and to rates I I in for think that think our We're there's five more demand below stable this

where would to they AXXXs, XXXX. And Airbus so plan they could and know of do But think I the flying finally amount desperate see around to if second from that could airline which I demand access be AXXXs, XXXs, XXXs don't rate of are will and I particularly, rating what so. half or

carbon only but based for footprint. composite for profitability, do I need I think and so really we own at aircraft. for footprint, own And And them case a those their not think their that also carbon there's looking airlines need

should see the XXXX of very in going rates. XXXX think twin engine so into reason can back wide-body And clear that demand I for and be we end optimistic higher on I

that's Boeing it's number. strong, when XX not definitely same really Airbus is talked that And that if that AXXX similarly believe the rate XXXs, XXXX? taking so about I really it and think realistic stronger. into very sort I of up

Gautam Khanna

couple Any FXXX, then of curious, RTX on GTF, with years cetera. update apologize I because impact, couple And helpful. that a will color the next you if That's several impact years in I et am know Asheville us the contract airfoils, also I facility. visibility, But terms ago, questions. in for of…? don't you some building know, or any your that's on as have there any they're had of gave

John Plant

in the fuel intimate It's say, and provide there that allow the higher engine, always What from is and do really the to part difficult we advantage to because know, that and plans content privy are more -- Raytheon. let's providing or we to efficiency. we're thrust product detailed we're not to going big sophisticated improved, know on

and spoke also We US we're We're manufacturers my the earlier deep potential of programs Block next-generation the -- I that. XXXX terms both intimating X, for on engine. into with are in engine to in in call, comments fighter

of and of than level to fuel today's well-positioned benefit we’re those flying in bringing one today increased is where taking higher time is supplier products just We're the enable is cost to is uniqueness, not talking what say, only it. path margin and of, the by, about mean, avionics further a usage think we're I I by enormous. sophistication able to every that only, to less the happen. increased upgrades do those comparison by and of and so the considerable the And I'm provided I'll And therefore, market

Gautam Khanna

QX? that reabsorbed Okay. or the of you. is year? Will million Could $XX what in through get Thank the deferred the in shipments say to you guys happened QX, of that course

John Plant

readily will of that disappear very think during part the year. I this first

we we'll some looking to and -- well begin volumes assumption be get that if our So of take hold because more given. is of chosen be maybe we'll see of Gautam. be the me the of part the we would that given at inventory by ground going in the -- at optimistic to mean, on may but and guidance be half, the some And off. optimistic, that the moment, we've to where the to -- end year, feet our it burn I a keep volume, second choose for might go give But like we rates will I've I've XXXX. you let's

Gautam Khanna

much. so Thank you

John Plant

you. Thank

Operator

Fargo. Wells question Please ahead. come Akers will from today last our And Matt with go

Matt Akers

a on looks think few and but what's are year. that it what up driving years ask of how production wanted should kind of just you guys D&A ramp step below I uptick and like It this we kind still as we about ago, up it's to below CapEx. the I know a aero expecting was here?

John Plant

Yes.

year. and $XXX say, not will coming, think, CapEx that or taken, on. because for all, be million, for increases two feel first we've pressed good I only I to was something the you outcome the a years on So, out last rate not turn three I are think can of of the sub do we

for them talked prepare some some the about. also CapEx, of the not volume, but aspects that technological we've You to provide have of changes for and

of that years. automation, and to the We're for to optimistic looking about to of of on talked to we've couple narrow-body the usage our and CapEx to that both be coming of -- let scenarios good XXXX, target then will of think be, last years to through think shape rates us us over more ZIP XXXX, us it be and as cash in out a if serve that code part I terms turns inflation also at in -- will will think just achieve of sort all we move in again, well, wide-body of it and beneficial if the for rate, be of that's rate the level. I a I and that, it proving at it's achieve we just But below of spending source utilization business couple And into that. again be up next

Matt Akers

Okay. Great. Thanks.

John Plant

you. Thank

Operator

our you much very concludes today's concludes attending for presentation. Thank today's This question-and-answer and session call. also

your lines. disconnect now may You

Howmet Aerospace (HWM) 14 Feb 232022 Q4 Earnings call transcript