HWM - Earnings call 4 2023 | Howmet Aerospace Inc.

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Operator

Hello, and welcome to the Howmet Aerospace Fourth Quarter 2023 and Full Year Earnings Conference Call. [Operator Instructions] I would now like to hand the call over to Paul Luther, Vice President, Investor Relations, Please go ahead.

Paul Luther

Thank you, MJ. Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2023 Results Conference Call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Ken Giacobbe, Executive Vice President and Chief Financial Officer. After comments by John and Ken, we will have a question-and-answer session. remind to today's future to forward-looking will like relating statements events would you discussion that contain I and expectations.

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

John Plant

everyone, year-end PT, to Thanks, the welcome, results XXXX and call.

move EBITDA, If exceeded guidance. Revenue, by results strong. very to start high earnings or share of were the indeed all fourth off end And saying, per met Howmet's I'll margin quarter you and EBITDA X, please. Slide

markets. to More of importantly, outgrow our continue respective each

XX%. margin revenue EBITDA commercial was Specifically, year-over-year XX% in was which billion, with EBITDA of was million, while and increase line aerospace at XX% $X.XX was an with $XXX XX%. of solid a up an year-on-year, QX increase

XX basis significant earnings margin greater XX%. was QX a per year half Second by and the increased EBITDA points than full share average

and a of an Earnings improve and which share, up up per record EBITDA XX%. $X.XX XX%, up increase For driven was the per usually by XX% was to year-over-year. full share on continued XX% Aerospace, year, was revenue is Commercial

the fourth and another buying sheet balance another the of end the $XXX high million. Howmet common record stock its balanced strategy guidance above million and Free paying million its we combination by of interest interest continued continued goes into yield back and and XXXX part further the $XXX allocation a rate. bonds. Moreover, improved million capital of XXXX bonds reduction improvement And refinanced be to actions at free $XX in in as $XXX quarter, This by these going we're to the flow of flow. was annualized cash cash debt reduces Moving of million of towards $XXX free cash XXXX. expense at a per The reduced earnings of share. flow

We XXXX. guidance this to for We the look in line will all forward excess wheels the improved strong his to to Lastly, margin. Ken leverage and to commentary. a a forge majority focus of Each was with EBITDA of expectations. covering segment delivering net record Having which historical XXXX in The were with will outlook today profits. contributed and with XX% XXXX. And after X.Xx, to adjust pleased section on is detail Ken. a now the going comments over in in engine covered be the of my products in pickup margins completed record healthy faster results.

Ken Giacobbe

John. you, Thank

be and year. for was with reduced of aerospace the be just XX% Defense quarter. XX% continues for X XXXX, total fourth quarter driven over the the aircraft fourth X spares for increased full fuel-efficient overview markets. positioned recovery and and in Slide to revenue growth. flat we by new, of to supported up more XX% demand. to grown carbon the quarters all Aerospace XX% quarter segments. stands future and the up in by Aerospace revenue. Growth the has Let's consecutive up year, an throughout commercial robust, well up XX with was the markets demand for Commercial emissions move for for and Revenue at continue for continued fourth aerospace full healthy, All are The XX%

However, Defense full Transportation for year-over-year and Commercial up by driven spares Aerospace higher by in fighter X% programs year, year, was driven for demand. X% full and was the up legacy volumes. the the XX% up fourth quarter

and quarter, gas, driven fourth X%. were Finally, markets oil up IGT XX% up other XX%, XX% in industrial up industrial the the and and up by

XX% other full all X%. In up the industrial gas, the year markets across another XX%, For year, XX% driven IGT up of and end industrial up markets. by summary, and year-over-year, were strong oil general up our and

will Consistent with profitability. with enhanced P&L X. the let's focus move Now prior we on and start to Slide calls,

or year, guidance. For revenue, high of exceeded margin the full EBITDA end EBITDA, met share the all per earnings and

For $X.X was revenue X,XXX growth XX% EBITDA up approximately the year-over-year, of net addition new by up being outpaced $X.XX the absorbing billion, year, XX% was year-over-year. hires. full revenue billion and while

year per EBITDA Earnings Adjusting XX% of the the the the EBITDA a incremental record for full quarter strong XX.X% rate at fourth up margin $X.XX, for revenue fourth exit approximately for with XX% quarter share in was cost a and the year. XX% approximately of to inflationary flow-through year-over-year was year-over-year. XX%. was pass-through,

represented share. $X.XX tenth of related and growth EBITDA prior we versus earnings associated benefits $X.XX revenue, tax per X favorable QX quarterly per per $X.XX rate had earnings at record with fourth the a to Additionally, per minor share impacting per earnings consecutive share. of favorable the record In QX $X.XX currency. quarter share, was in foreign the The share and the quarter, quarter

the been let's of exceeded end the Now which a balance $XXX high record cover balance was stronger. sheet year The cash Free guidance. the million, for sheet. never flow has

to target done $XXX separation, was with a we strong liquidity. have balance healthy The net XX%. long-term year since cash we year-end every million drive flow cash to continue of free income of As conversion our

an tower debt a For All interest from $XXX generation reflected strong we S&P's agencies. is in X.Xx. the of was by million expense approximately X sheet of with $XXX provide coupon upgrade which rating $XXX the with rate fixed the at we are improved approximate came unsecured of reduced record million December into EBITDA low upgrade, as investment debt this million. stability X XXXX grade the year, full to rated X.X%. Net financial the to and improved debt rating balance by to a long-term will and Howmet's of rate and were at cash BBB-, now future. refinanced fixed leverage rates,

Finally, moving to capital allocation.

approach. to in be continue balanced our We

cash expense actions approximately For on was to deployed The million $XXX the previously $XX annualized lowers down, interest the by and year, million. dividends. of hand quarterly reduction year repurchases debt stock mentioned pay debt approximately common during

repurchases. of at diluted the an common We Board count also average of the share The buyback rate authority $XX.XX share. repurchased of consecutive shares. stock QX $XXX to million This million. record XXth improved XXX low at average price common per stock quarter Share from of stands approximately a of Directors exit was $XXX million

cash the flow. dividend fourth continue to quarter, was common by to XX% stock we in quarterly be the Finally, share. free $X.XX increased In confident per

basis a new the employees for the net increased to continued XX% was let's as X and up million. EBITDA the markets IGT to increased Engine higher segment points XX.X% quarter up year. Now Revenue in XXX XXX the $XXX for XX%. up and year-over-year year-over-year new strong realized results fourth full and approximately be to spares EBITDA strong. aerospace Products to Oil quarter. and continues absorbing record cover up build to to was while defense was X,XXX increased Commercial gas employees XX% performance. was XX% year-over-year net fourth its XX% margin XX% to Both aerospace demand and Slide move growth. $XXX approximately million. rates

revenue XXXX year, accomplishment. engines EBITDA was margin EBITDA For products significant approximately basis at EBITDA was XX.X%, level. the up and records for full similar million team, was points XXX a XXXX the a $XXX when margin both from were was

XX% Fastening recover. including impact increased Commercial Now let's to XXX aerospace general to Transportation XX% the wide-body revenue was move $XXX down Systems $XX Commercial year-over-year basis year-over-year was X%. EBITDA was EBITDA industrial Slide X% XX.X%. up increased Year-over-year million. million. to points XX% of was defense X. aerospace up and higher, the margin XX%, increased to

with revenue, margin consecutive quarters are pleased fastening and the team continued the EBITDA performance We X with of EBITDA systems growth. of

was XX%, to aerospace increased by was flat up million move due wide-body was million. build gain Structures $XX let's share Aerospace was $XX X. Now Commercial timing and margin to down to prior approximately Slide partially XX.X% Russian fighter million, rates slightly year. to EBITDA points new year-over-year from F-XX by the due titanium year-over-year X% revenue the recovery. Engineered and programs. year-over-year, EBITDA driven Defense to net legacy absorbing $XXX XX% shipments. of employees. driven year-over-year decreased down at XXX basis

quarter. increased consecutive revenue, and EBITDA sequential revenue EBITDA increased X% for margin In second increased sequentially, QX, However, XX%. the EBITDA and

to making we efficiencies levels, in expect production and targeted not are continued yet progress Although recovery back XXXX. are

to move XX. Now Slide let's

decreased offset partially the revenue starting in due to million. by as Wheels in volumes transportation basis EBITDA $X flat driven year-over-year commercial market volume, EBITDA of of increased increase X% to Sequentially, softening. lower increase down Forged $XXX an were margin The timing points, revenue year-over-year was was aluminum prices. X% to XX pass-through. X% million the inflationary cost we're primarily signs see year-over-year. by

bonds drawn term by mature expected rates approximately loan redeemed prepayable combined sheet The term and funded interest are and for from coupon Japanese reductions annualized rate XXXX of of term In to expense by is detail swaps bonds. actions. at XXXX. fixed a floating million X.X%, in the through interest All from of which QX to in penalties on lower draw loan annualized million $XXX reduced and is facility to of more approximately with cash loans impact reduce million facility. Finally, move quarter, actions an Slide approximately interest fourth interest dollar-denominated was debt loan balance million. of U.S. exchange million. weighted $XXX XX $XXX $XXX November average additional or let's $XX $XX the QX these from redemption into X XXXX entered facilities. was the premiums we expense than denominated million X[indiscernible] the term interest par fixed debt $XXX the QX approximately from million drawn Moreover, loans our approximately the without term interest the of $XXX million rate into yen is rates. The was We

to interest billion. We continues strength billion unsecured stands $XXX sheet. approximately balance leverage debt million. Gross the remains debt our than be debt $X.X by and gross revolver with more now fixed we've annualized our $X billion long-term paid $X.X Since at undrawn. by rates and XXXX, cost approximately on continue of and All at to our cash lowered hand down

it items. let a additional highlight Lastly, couple me back before of John, turning to

performance continue points XX% we on in Howmet's XXX improving which capital a XXXX improved has pretax net RONA, RONA, metric, approximately or basis items, by excludes on focus assets to to to special from allocation, XXXX. As XX% goodwill basis I and wanted on and our year-over-year return highlight in

the You will in presentation. appendix reconciliations the find of

XXXX included guidance completed XX%. to is Interest range have expected in we approximately a includes $XXX rate of debt our improve a rate approximately to point improvement expense XXXX. to represents all to is to assumptions. operational continue tax in of million. expected tax Lastly, The on in guidance date. operational The appendix the Slide The XX, midpoint XXX the improve actions separation XX% basis since to to

continue increase million modestly by be well OPEB operational in improvements as on Pension are further We as approximately our rate. $XX and to expense focused contributions year-over-year. to tax expected

of Finally, but of within which the the $X $XX are quarters. year, be million income volatile range very we are million other expense miscellaneous expect of in to expenses, line below to the for

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

John Plant

factors new to visit aircraft aircraft, next to made for we Demand is and strong. the led to of be to. orders in aircraft of which decade requirements bars and in systems due of improvement for and airlines Airbus neutrality farmers, Boeing. is then XX, increased the fuel of commercial at X also Thanks, aircraft to both continues to long-term XXXX drones also due and are and fuel-efficient good. to aircraft market the to new the backlog let's budgets the towards International sustained aircraft X significant efficiency narrowbody the all are and the but service, with travel this and turbines aerospace forward defense commitments move stages expected and Ken, with load and of carbon market has please. Slide strong. fighter Howmet be continues for levels of Defense also substantially Airline The to need to improved strengthen Tank over This hence higher by aerospace service the also continues growing be helicopters. in engines. due newer are to case trend a XXXX. Commercial look number shop not only and strong

of through resume any aluminum Also the adoption fleet the see fossil propulsion steel and alternate renewal to requirements due F-XX should we -- requirements compared to to means of XXXX. of to continues oil needs gas potential visit Specifically, by do turbines as shop in to due gradually gas of engine healthy. efficiency to continue We reduction wind accompanying aluminum This spare where where penetration natural is move XX% gas increased growth growth move of transportation the we're be secular mild and We or expand expect do in move as wheels transportation, envisage turbines and into markets wheels other globally. Other and to the in payloads. truck solar. that we fuel to we engines fuels, commercial of XXX%. part potential segment of commercial the natural the than to increased be a cautious for revenue market technology towards as to up The the XXXX reduction XXXX. the of view that is supported see our improved continued is

to Moving general market now numbers. from commentary specific

expect X% year-over-year EBITDA be revenue to We QX and up XX%. up approximately

excluding items, For $X.XX, minus million and $X expect QX benefits of to which of $X.X. rate minus and is share line or XXXX, earnings about EBITDA QX one-off plus of the $X.XX. or revenues the contributed after minus million, $XX This billion, plus of plus of million, $XXX below similar $X.XX or tax per we the

materializing $X.XX. $XX earnings plus Regarding billion, $XX cash at we plus $XXX EBITDA CapEx to sign a seen million. I'd like million, $X.X as million as $X.XX with this expenditures, minus $XXX full years. million, depreciation we to are future or capital opportunities very engine comment be the these minus see per high be further Essentially, and and plus XXXX, of good see or or share flow, returns $X.XXX million the minus to million, first investment due expected many for revenue Free $XXX We minus growth. or $XX on is year able of business. deploy products a capital this the time above billion, and the plus plus rapid to of or in to minus see

increased shares. aircraft guidance aircraft is flow from after as of in served. is MAX of cash cost let which another months' our plus XXX approximately with all manufacturer return X our as our see for agreement and to increased expand fact, to not does was flow XX% speaks the and engineering XXXX, that guide, an in of commitment which of investment cash segments, fact, each engine growth income. is average of you market XXX of is X% me free EBITDA excellent free in above-market In viewed XX% This plus market conversion This capital. time. customers above continued X year of net above And come the EBITDA margins of in best-in-class. We a and XX market deliver based seen investments business stream our change And XX growth business month XX% Underpinning long-term and in this can with production on on of per XX% this our all growth Boeing month. as the approximately per is continued

line Our Airbus assumptions are their with plans. in

As an are per example, aircraft XX AXXXs month. at Airbus

net a some Slide and markets. XX% by of We and were month another XXXX EBITDA explains was are the up of prepared segments we've will volumes year increased to significant margin and in in to half up with give X.Xx. average good prebuilds qualitative above the now approximately in XX% as me was strengthened long-term to increasing second in and each the let that has X% AXXX repurchases net record debt move XX be with above of numbers Cash year. was outlined sheet our of EBITDA at in XX%. flow. or year XXXX with following was low assumptions. some XX for the require The prepared balance converting But XX% you already of flow it for and the increased parts cash Howmet. leverage to Earnings can income was exceeded for increase paydown share the look per demonstrates current and and view XXXX, rate and that our Sales given. Please we're us The the cash build guidance should terms outlook aircraft the to XX. of been XXXX given. features. hand to In XXXX on next anticipating customer that do line into case or

we will further and margins interest improve to higher we be markets reduced remarks. be expect count. growth, share and cash expect buybacks shareholder-friendly revenue again I share actions we And a which further my hand continues the flow in close [indiscernible] now prepared and to dividend have take and further reduced growth. And XXXX you served. EBITDA expect and with excess proven into our expense I'll of Free further increased questions. burden, over can now of We for debt end

Operator

Instructions] Harnett question comes with Bernstein. Today's from Doug [Operator first

Douglas Harned

high at demand how And I'm product on pricing. with a X looking You're thing very the interim situation interested is seeing you're really side.

pricing what looking there strong you And what engine very engine the explain catalog couple in prices in your recently, you're can over you're increases position up Given side? years? of do see at between seeing the you're Howmet differences terms OEM of spares what from teens the on for is there, you next OEMs and the getting the

John Plant

the engine stability our term. during price prices don't have have provide in MRO our short that that for duration the into raising the We agreements. significantly. noted been opportunity, that We've Yes. In those Doug, customers of shops agreements long-term

years few into split of get let's we become call parts we ago, within the also even sophistication the noting analysis model long-term to, all volume the and the trends a and when agreement introduced parts the only, but increased variety we renewal, to service past for the with parts. different it, and when However, and service of demand at also go current that now looking

do that certainly you the at we associated as that between increased expect requirements are generally at you that expect to to service agreements And time, differentiate pricing parts. receive and the we service we renewal renew can so when can and those And the don't look those and agreements. renewed, pricing but increased at the pricing see LTA expect I about comment with the

Douglas Harned

But from at term XXXX. in standpoint, when save your you short look the

And your of inflation? think you is a margins? do how positive to pricing relative to So contributor this

John Plant

say se on XX-K, don't going trend can service when which that individual this QX. I an price per that you to that continued No, we our in issue think in is you moving is But will again price you'll expect we're you'll on once can evening, believe see XXXX. And part. I what be we see

year. So I contributions continued should you'll an equally see positive we 'XX healthy from forward. year see go healthy expect and pricing as to was 'XX that And a be

Operator

is with next The Stallard Research. from question Robert Vertical

Robert Stallard

On at And the in your Boeing XX currently shipping do you that? head month get XX to should you rate place have to XXX if to the a count assumption, sustain are line. Boeing XXX actually

John Plant

Okay.

One signals the sources. demand a from, sequencing, X for of received and manufacturers. we from from is different So our aircraft structural signals principal then demand course, on the engine the manufacturers products

rate we increase XX. saw If Boeing at you look to XXXX, schedules

to as position able when to was going delayed which to be case. And and XX, in they We talking were going now so up we that's you about saw cautious not in support the them were and rate that XX. we're were a

we're experienced month start, that thoughts around the degree quite in as assumptions build see any we've to of was to actually terms because of the we what this will stop XXXX. couple It's back course, to at What, built at to underbuild capped it and XX they production in the But [indiscernible]. be not necessarily indeed, that as is overbuild now be of another don't XXXX FIA is -- low continue QX terms built just of don't rate, last building restricted the going believe month of degree have same in of indeed, X in maybe in we've Boeing class. in various that what we not at and going they seen choppy know start is the to is be the of stop we years. issuance will by prepared in Our or be that that that also to rate for month are

the And is we're that therefore, thinking get flow-through We we've we be out still at or QX given for our of indeed, willing that Boeing, choppy out than for free continue given and And balance provided depending flow the sheet I go have if with rate see, demand some our mean, it parts allowed to CHOP that's is the our no Boeing. that XXXX this for also sustain to may made I'll And we've you. that capital actually could provide take the higher allowance that there a to or idea. the compared therefore, similarly, working allowance to that, building. And minus cash we are guidance of they choppiness building all in scheduled they XX%, that such margin within things don't plus at XX%. or how is on some saw

Operator

question Baird. Peter Arment Next from comes with

Peter Arment

roughly growth there. assumes was expectations I'll around in your if John, guidance about of kind what head yes, that it you have maybe correct. think, I I count leave 'XX. just X,XXX employees wondering I in added, And XXXX,

John Plant

depending X,XXX, year. the between for upon what finally were We the exit rate expecting X,XXX be should people,

labor So last reduced a continuing over last rate that recruit albeit the we the the ingesting XX to see can at are to numbers, we're those you net from year months.

that again, that's planning make. operators the the to of bringing and been who've now to those able the productivity we do with experience that improvement to retain during are also of recruitment of in some process some And

those in coming the blend about on of we've plus the of some a all so that stream. of past automation things, And talked

is us labor. further important improve year retention to to XXX gain So plus that and trying of to people it last than really time, stability less minus recruitment took on let's our we which very while at statistics, or same call and the

Operator

from Walton Myles Research. The with is Wolfe next question

Myles Walton

John. Hoping leader the on Is it wide-body fastening growth. The if versus could, distribution fasting it could recovery any pre-COVID? is then color was of there you Fastening as systems, where Is relates to products to obviously maybe with where growth 'XX? you just focus sits pretty And top in engine on your systems? much and there provide a

John Plant

our I've of of X improvements things the And been A a we X with dedicated that OE amalgamated ago and been pleased within now, that outsized way maybe distribution market, has to Fastening particularly business. Yes. with management We seen again the provided inside separate a SRLs years to that indeed XXXX. it ago, couple in the continued distribution business relative Systems. in years business. we've have And significant growth business created

for proven that's be very good So to us.

of say of In the relative at moment, growth I It's engine XXXX say, in terms of where for . contributions versus expect final like land very from the score part terms to difficult both. [indiscernible] does positive

in growth demand to and We actually especially that, built then initial at actually went repetity grow have should say, demands higher of LEAP growth is year see that engines something come show really I we demand little relative because for from, has to that I'll be lower narrow something example, was that body, actual dropped the as XX' to a with for that say, back have the, the of good. At I'll that time, to the in the slightly be we the for wide-body that. XXXX bit, been is XXXX is looking to of, ago, that both we recognize reduced range compared wide-body a have to be capped saw build take the still know mix now X,XXX like engines range a going XXXX, because to should improvements Boeing is I -- think, XXXX given note and and like segment same it's

OE that to those and what service to out versus see for demand indeed, [indiscernible] got build engines. how we've So all goes settles

mean the most engines I and good. fasteners both is important are So thing

at be that having it handicap want will be don't this for good to -- year but it expect point, I I So a both. we'll

Operator

with comes question Sheila Kahyaoglu Next from Jefferies.

Sheila Kahyaoglu

about John, I an just you to margins. that from there's and a kind little QX no still sub-XX% wanted could full QX the And of your ask incrementals. at about I'm XX%. on pointing you're margins, really exit looking you're talk guess XXXX surprised rate I and to year, the improvement maybe

that you a think maybe and contracts too. and well us, long-term how also, you you're So in something the pricing as could how maybe engine long-term just getting with about volumes you regards F-XX, that's into aero the obviously, better else and if as and shape that for to out troughing mentioned locked contract, in --

do percentage margins you So how think what LTA? in about because of of your are locked

John Plant

how company. that. up LTA -- Me, the certainly govern momentarily somewhere guess [indiscernible] of the most is at our mean I of business I number say for the much And to but it's I'm going

for but can XXXX certain on to, said for structures we for agreed need for XXXX. say, here. I X up that, course, the of price as should pricing. I indeed, come to which XX% carry XX% renewal refine now agreements XX%, that have talking believe, go I are Having probably And are So there

to our XX-K, with some see so you we a you given price the will already solid commentary I've products repriced And have very within XXXX see indeed expect or mutual is QX that for healthy And of that you'll been and during to engine year, that, be already agreed. and XXXX our be expectation similar. was

also So good. that's the

level while a you a half then tend line, And you been plateau margins, second mean again. of up really for terms XX% In the get you in 'XX. move of thought little our straight to like quarter-on-quarter never that to and has I we stepped

saying, you're again how what we incremental And and in I've told versus a go think I that this And I've converted play assumption. -- you at allowance XX% assumed also so the we right to for we what choppiness see And is QX XX% Ireland. have some the should it QX. that expect? and come already well, we let's for provides

inventory. them. into and the take for taking scheduled the they've parts on out go profit not should example, Therefore, to going we So those won't be all that have

conversion. And flows so assumption to term. say, therefore, it How time. at the point of say lower a assumed out for year. balance number the absolute this near that, just for it difficult X% me, to we've a very in reasonable playing I'd And of the It's seems

of have those demand manufacturers into actually at short see. end Orders we've bodes you. we to how stronger probably the goes what back well, this to we it have numbers the imagined stronger. see economy depending time, than a that's terms are cancelable market we'll a bit takes In of little within don't had commentary, point. At the but does and and wheels been and the little behold? up-to-date already the term, know have in bit upon therefore, for year given same general wait course, of be I been really And truck the

growth For me, and 'XX. and continuing to expect demand think, the in most indeed, we not next. I to 'XX as the or what 'XX defense resume that commercial of from we aerospace quarter to gas turbine happens with, business then like strong and But that important transportation, this market thing, it's beyond for and growth good 'XX then and 'XX continued commercial continued promises going

Ken Giacobbe

Ken. is this Sheila, And

of on we can on build agreements. or long-term heavier on XX% as question process. That Just right, say, imagine, where plus on is long-term side, tied the the you agreements. John long-term the minus, your in somewhere aerospace much X% are is in be agreements. revenue around renewal the to could depending to

of of you side revenue could engine the to XX% the could on be long-term house, be that under So agreements. up

Operator

comes question from with Goldman Noah next The Sachs. Poponak

Noah Poponak

of where aerospace at aftermarket the of in wing the rate, percentage clarification you you're on are saying the quantify the baseline we MAX aerospace. incremental? what and just on medium if couldn't on growth on there X And point? this is you the decipher on how on that? engine John, to much just related side, I work doing quite that's to And now it's can expect possible elsewhere side then aftermarket can equipment term time the you're given original us

John Plant

Yes.

build large may of assumption our fairly that tended and terms I our Howmet what for in years. call is market what assumption feel they quite I guide is financial the our indeed schedule, X or in to may reasonably that Boeing feel our it's the of So Airbus of last for few course, part, and we've guide the appropriate independent --

was for Boeing very for the clear at for So year. XX% our average the assumption XXX

they to we what demand going continue actually schedule what build, our best and they're from say can schedules. rate detect as don't know say I with to going actually they Now at the at. assumption they what see as moment, XX we I'm from their

So those that's numbers. specific

commercial up stepped the our for terms In market, aviation in again. spares spares, of exit rate

and about so you from commercial defense the is million, And side point if which on is -- remember, previously. to spares compared reference used and we've about in for million the the it $XXX on side. gas XXXX, And market turbine the XXXX, $XXX revenue was

sector demand On increased that the spares the big we We're as gas $XXX to the turbine and business expect that indeed, but -- something in we'll now example, a XXXX, the And business spares and for continues be an recent for growing steady sector. in been F-XX defense side, to has and level, as million OE the an in be particular. we to as of F-XX defense and in IT increasing like growing the years. both believe see

we're we not to XXX So building think, a continues that in while that's it like to at then should expand is to And seen good. know, going that We've as is expand. the And a we and I it's segment year, currently rate. fleet, be about you XXX Lockheed it or expect building demand delivering aircraft. not been grow nor thought the originally to XX' fleet continue in increase 'XX, expecting 'XX as

fourth bit XX% degree, to be drop But and and of depths but the just in to a and little in have second compared is you these cautious. see to now some levels. In at the XXXX sub a on did then strengthening half, expect addressed case in issues you obviously, fully above $XXX wing COVID demand say, for so can third rate get, you you And the segment, million, to XXXX very And additional commercial picking to 'XX -- serviced. And increase of a bake quarters in $XXX so as the at And grown to have that's be to reported demand strong each something to and that and we that half going back the now is do with million. also expect and the a time up $XXX that, I'll quarter demand strong further 'XX. schedules the runrate that, potential million. of then then run

very is that good. we see So

you the so therefore, it billion -- business our that in the be an can And percentage of revenues that go 'XX we a 'XX, and we could is, the 'XX. about, increased say, is to let's healthy you $X and expect as year mark, into aftermarket assume to increase 'XX spares going getting for therefore, our today, expect to percentage, continue after into

it's I a -- a totally in the wing the think essentially in solve because demand engine, is issue. don't themselves the it's on overall, spares which increase intervals to wearing part I the in engines mean have which appreciated there high-pressure demand, that of engine. thing So time think service shift I so temperature a immediacy my increased yet in the pressure as and not good just said is part, you as of commentary, turbine picture the structural indeed, the newer I

X, those pads wearing Blade initial bit brake car. those a So [indiscernible] parts, et X a on cetera, Blade wearable a or become like

CFMXX fleet previous shift a see those to is engine. engines replaces structural and expect can fitment you the increased in so And it as of the

additional, that's temporary shops be few see work and years. replacement think but increase going seen a to So in the demand fleet at say, engines, strong existing new CFMXX which you're costs you're structural seeing there. fundamental over just to is will service harder the around the for say, service built going And unfold these running next, I to to fleet that

Noah Poponak

I that detail. That's interesting. Okay. appreciate all really

are year? you in the now, Just sure you you above without are MAX click actually correct, to rate now that. stated right about through the that to into assume stay and any and assume breaks have there you you you and I delivering right make XX beyond XX assumption the low XXs

John Plant

fourth say, rate XX. delivered build, say, believe we So Boeing let's if while give at we rate the quarter, you, I let's XX,

So into went per let's QX, assume month in X sets that aircraft inventory.

certainly are there's wasn't that I in sitting turbine our So engine inventory majority the Because the just manufacturers talked in of for the engine XX delivery you've into side, balance what the structural of which which Boeing that but don't quite the part, the went shops necessarily estimation. it's sets the built then the on I service part, of the from let's just what into build, already think engine already say, side, parts not about reduced MRO same account on engines, structural commentary for had the on essentially the side. about. to parts

Noah Poponak

Okay

John Plant

taking gets we many we then carrying that I've ironed commented some recruit if That's about I they already that so with depending or And on commented, Allowed think you out on XX, inventory as already end people as assumption assuming [indiscernible] is, at up XX, QX choppiness how some my may thing it, that will and have that. maybe allowed what the for up, Bugging for bill -- is at is build there if final they'll why XX.

within rate this XX choppiness out And of allowance margin some that versus the in calling so to it's QX. given for XX a incremental

Operator

next question comes Robert Research. with from The Melius Spingarn

Scott Mikus

it wanted Scott relative last had market the the you had Mikus you, time market. air mentioned -- on your you in for Rob of was this, foils the closest I share competitor believe Spingarn. John, X.Xx to ask I

upgrade the GTF market? agreement relative the you foils air an where with stand thinking share just engine then about that in engine referenced, does your and also OEM customer with market So the to new the now

John Plant

Okay.

last, years. turbine X% over X share X about market grown roles have the the say, We let's a year or in

be So we that we also to continuing technology that around been believe I've within grow to, in did additional currently. of very XX% considering, we consistent I of we And that. March, say, and a that it, share would investing that say we've segment. the, on share further the and of mark indeed, without we're unequivocally knowledge that in not some referred and contracted being commensurate that I'll with And comment say, just scale also levels there let's it's clearly that see extraordinary bring

continue here, flow we that changing drive of is the our not guide as to income. it. free conversion you did net that's hopefully, So metric, And cash improve

Scott Mikus

assumption into any you do sales then spot baked did XXXX? And follow-up, pickup wanted for XXXX sales I as in Okay. guide? in a see spot any to have the And ask, you

John Plant

the further market see up in Yes, pick spot 'XX. we did

You sure. never can be

additional unknown such sheet be security we opportunity further assume indeed area did a in material again So share in up else significant not step demands and to what been it. of And we've not Somebody assumed for just we could sometimes respond to it's hadn't are that it's also able balance like because [indiscernible] But deliver. it's increased in take market and of the that previously there what of scheduled, some an played XXXX. could put that spot we our stock the

it's So that's way I more. a easy not plan. get don't assume to an number to to think We going sensible we're that say.

Operator

comes Seifman question with from next Seth The JPMorgan.

Seth Seifman

question, ask that understanding this could all XXX X-part I a dynamic. maybe just If about and just

airframe I side, to Boeing assume would content much maybe in other XXX how like on you how Spirit the -- then rate XXXX. guess, Can the versus on And -- how I much the the about the be spoke, and that of expected level where is and of of I You much the is goes production kind in of suppliers going talk guess, especially. And side, most so there. directly the that production fasteners? about extensively -- on on side to to airframe Boeing engine be

directly, your X demand Tier pull the that And be more -- pull supply so for Boeing but even in the, chain. that Howmet demand the would in terms not a expectation from Boeing of say, pull imply let's demand the necessarily would from

John Plant

Yes.

supply So for we in commercial subassemblies the an terms supply others of also also we to majority we to do I directly to But as Spirit providing that Boeing. and are example Boeing. say, Boeing's going do requirements, supply,

what sets. at aircraft like of And picture. an inventory that a assumption well. of It taken as it's they their clear build what never indeed another But X supplier minimum, at also also could Boeing number an might have way we and want of different it's level, And be to Boeing maximum level. so just holdings build hold again, by a we've and absolutely maybe assume to compared

just a that operate correlation. but we on times system, min-max when build, it breaks roughly as correlated So to

rate rate is so be because will lot will if So it's come say, out the to burn go there's rate be suppliers there the XX, that traveled -- avoid parts been Boeing work, in and maybe because at of the you set build and never just there, be of we've knowing quite scheduling of which up, some to I'll really are commentary it's the And XXXX. inventory straightforward, assumption unnecessary detail, don't higher is, have want therefore, so a important a best assumption be going held maybe and and Seth, at it based has has XX recently. you our to that the other but I all point, all that maybe XX been

suppliers inventory. of So could that we at And is may also will held, having really important. the be be which it they that parts adjust that. or know the And strain there's available therefore, other will the don't time, possibility that either well security is supply that same given all be the that is under all cash in Boeing

taken straight which example, conversion against that income, XX% of just the against, cautious that guide. we've of So prepared is net long-term view, for a

for. We hope You morning, see only that also but for you provides or terms they the like build are can know. mean build great rate what we should schedules and an And you we our get us hold that. we inventories bag lower little we we MAX XX% in rate It's minus expect further what they just in That's of that bit from cost have we've But if those want. the not know because We XXXX given allowance look there be we I That's for holding see from for not to prepared success that scenarios for don't expect, as some sales could good should And customers. the be a growth the our increasing natural then to schedule adjusted. We'd we really to this in just those to at of moment, increase assumption. don't of is case take the rate we're and clearly, hope having what fully that XX. play the it's an love plus quality what at schedules great go out. levels that. for and increase will then in us.

Operator

The next question comes Barclays. Strauss from with David

David Strauss

So that. John, I up following guess, on

but but this you retire correct? And usage million even working But cash that fair share coming that? know to amount million, $XXX with you've looks million you is cash got Boeing take takes. I it like the Is capital million -- are free conservatism given to X% part in the -- guidance. that, year, have guide is question so, flow deployment. So conversion, free given that, you what baked the on a it know that don't capital cash working I related looks that have room like side. the if that left capital you repurchase you of assumed how got of that I have in, And maybe use it's thinking inventory top $XXX the about flow gives it of I you've of if looks or like on to anything or other about around $XXX guess what on in build $XX

John Plant

Yes.

which you ask multipart always like questions, we here. get these can So it's

billion all, increasing, capital drag natural the a call is let's XX% there that revenues $X.X course, on that. are given first of XX% guide, of So working in it to

that the XX% which $XXX to million So let's talked math which you happen. sort much capital use the propensity terms the becomes for working might of so easier. added that you because number of in about There's we of

this for of refinancing are point, actually that's we enter going hardly we at we a So terms that assumption. in but haven't million. it's on hundred we're deploy, to And anything likely that how fixed of where a couple

'XX, those share let's drag breakage not to But buyback. the to that's can take to platform of can possible decide refi end say, a of into, assume all we probably. and on may then mean, to then fee a it's going big a do do quarter interest into a that's that around you quite be therefore, And it's we're you the just any going way TBD fourth basis, assume and which savings the retire could So but either and that's that going a bit cost. rate structure we be majority XXXX. I

a wise, shape side see was for it's all year will where on buybacks sheet put XXXX can that to XXXX, action that to of great share can you the you further So position assume the bigger debt compared currently in. into the be majority balance our the

be speaking, roughly to you despite so further we at assume the moment, leverage XXXX. improvements have to And that which going thoughts the elevated share can buyback compared are

Operator

attending Thank This concludes presentation. our today's question-and-answer session, and the has conference now concluded. you for

now may You disconnect.

Howmet Aerospace (HWM) 13 Feb 242023 Q4 Earnings call transcript