HXL - Earnings call transcript Q1 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Q1 2018 Hexcel Corporation Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to Patrick Winterlich, the Chief Financial Officer. Sir, you may begin.

Patrick Winterlich

Good morning, everyone. first earnings Corporation's call. Hexcel to quarter conference XXXX Welcome

cover Before me formalities. beginning, let the

to actual about of Such A the of variety and outcomes make estimates, factors remind provisions of in a results want by constitute be Reform website. statements cause our I First, everyone today. Act call this or press replay the any differ of could call. judgments statements may statements the assumptions, caused will Private contained course page call factors our Litigation available from materially in release. related statements the uncertainties this last involve forward-looking we of night’s the XXXX. may filings within They to during the forward-looking this that on and Relations detailed Certain of meaning to Company's forward-looking SEC are Harbor Safe Investor Securities

is It call this being and Hexcel recorded Corporation our permission. without be Lastly, rebroadcast cannot copyrighted expressed by material. recorded is or

on purpose to call quarter our Vice our With Stanage, results consent today your President; me call this the release Relations. news constitutes to first yesterday. detailed Nick request. CEO Investor The Kurt of issued that Goddard, are President and and review our our of is Chairman, in participation XXXX Your

Now let me turn the Nick. call over to

Nick Stanage

EPS Hexcel quarter. revenue year-over-year free - we year-over-year our quarterly a each joining quarter previously quarter now the XXXX XX.X% generation for will to in quarter noteworthy then quarterly and of is today. into growth delivered These across Positive year. of of you $XXX the to some off Patrick increase us is XX.X% Adjusted Thanks, cash during typically the strong first our business This the details Good three for a communicated share and of generation provide $X.XX. cycle. particularly flow results a start everyone, first sales represents I'll solid sales. Patrick. requires our cash transition investment markets as thank morning financial million, cash record million increased XXXX $X with to insight the markets. for reinforce of of an as first

currency. be year-over-year remains air usual for comparisons commercial customers. in will rates continued aerospace, two globally, constant production trends largest expressed order with traffic, strong macro commercial Beginning aircraft by including and increasing our As flow

We XX% XXXX prior about up these sales We ramping than the expected legacy to with down are year-over-year, supply of of the Neo year chain AXXX, AXXX the XXX the legacy three for the to the benefit from previously Legacy Neo. compared the strongly to AXXX programs period. programs and a us. production Max generally behind all slightly now of little the quarter are due from in transition believe continue programs first highlighted aircraft less adjustments for the to widebody slower AXXX levels

are of We of increasing a rates reiterate them. take trend and commercial want our to moment to of programs build key for many encouraged some I by the

the and increasing widebody planes per early XXXX. per to month For to in AXXX XXXX in is XXX the XX is aircraft, increasing month XX

aircraft further. with increased narrowbody be with For rate the XX per may increasing public comments is month that XXX Max to

year. mid-XXXX. growth number a in excess Regional AXXX is growth XX%. month the was and late to represents production it year-over-year of continues with strong which platforms to different trend jets per raised to that business last rate occurring While XX jet in recently by strengthen began business of continues market Particularly

not platforms. that supply a These note would some Hexcel. have in constraints I been issues with Lastly, chain also impacted have particularly whole commercial as aerospace there narrowbody well-publicized sector

and OEM aerospace programs. shipments delay to any for all to We continue timing not asked have expectations commercial production been

greater Fighter Strike strong degree year-over-year year-over-year were F-XX some a AXXXM for Joint Turning strength to military both weakened the the impact positive and Sales U.S. although to as in adjust Space & trends expect in subsequent defense The on European general to term. quarters with favorable the impact are program the and expect primarily around globe the revenues spending general programs. we in followed we would we production see medium Defense. by driven rotorcraft in downward. rate Overall, by a our encouraged

two are were sector Defense helicopters Space the the Defense. civil over quarter strongest & the reminder, & helicopter a our less we've total Space remains than first sales XX% in past As reported years. and Civil seen of in

generation wind Finally, new represented as the total industrial. strengthened customer XX% quarter the largest blades about turning begins. to Wind energy our for Vestas of energy in industrial energy the transition first quarter. by sales to sales Wind

higher expect quarter year. sales of We remain the strong XXXX second the and energy wind to continue in through

Our motive solid of in Growth both markets than spectrum. our also in industrial sectors though smaller growth are broad was both posted across base other energy. wind customer they markets market these

to expansions over call to our and the provide Kemah. Morocco France turn with on updates specifically initiative and recently announced a I’d like I Patrick, Before

team facility officials Hexcel the Moroccan month. by of joined last was of Our dedication be our leadership to high-ranking Casablanca government honored team engineered core

plan and and the a number are for to is customers supporting both aero structure we We thrilled able operating been and high recruit at facility. by we've this talent The of growth applications. staffed caliber have of engine Casablanca for

to continues in progress. France Our Roussillon, new facility

cross-training We we're be of fiber should following have summer Construction the then PAN the applications. line carbon and for and of line qualifying production aerospace extensive completed this will begun qualification. carbon line process undergo the aerospace initial that fiber in of

in and support the the As program other used a reminder, Roussillon be capacity will growth Europe. to AXXX

During partnership of range our fiber existing will to to us additional thermoplastic secular first will Hexcel delivered We product in sales tapes. strong carbon was flow. provide enable with record quarter confirms announce our remainder reinforced well delighted market positive once earnings technology summary, further materials. the This develop penetration the range growth and Enhancing positioning I our material complement to and composite strengthen to partnership were of our also advanced our Kemah portfolio combined for first year. quarter results broad a In quarterly position cash free leader us our advanced opportunities with as for the the space.

growth a growth, different our operational is of return remain least of supported across of and deployment of priorities applications. XX% and driving We number innovation including key to and achieving year our net financial now color three committed the platforms, our will excellence, income are the turn to Our guidance. as We enhancing on capital to repurchases. it customers XXXX to strategic of Patrick more numbers. the disciplined With we remain that, for stockholders Patrick reaffirming over through and share provide dividends optimistic discuss, and I'll at

Patrick Winterlich

I a of going with begin am Nick. our you, to Thank markets. review

I'll discuss usual, currency. As constant year-over-year comparisons in

not we our As movements of dollars, euros significant Europe. be presence as and reminder, of a pound influence revenue dollars, intuitive. currency manufacturing results The our denominated this of majority British however, our is in impact the and may have is in some cost mix reported base a

British dollar. they prefer for acting also As year a been we Accordingly result, when sales over now, to the a higher doing and translate but our dollar pounds to margins. weakens a higher strong weak translate dollar euro headwind as costs against as have the the our

that lays quarter of we currency horizon. hedging and hedges disciplined hedging, terms a over a In strategy utilize XX

second this become more see changes in on smoothing EPS half a dollar impact of is a impact could in order there in result, of a headwind where a specifically and of the will we currency the a the instance, of As XXXX nickel. headwinds weaker the

$XXX.X XXXX quarter the represents million record the of year-over-year. the Hexcel. first XX.X% in quarter level for So first This up were of sales

convenience of $X.XX, an was quarter first accounting first the one was of quarter revenue $X.X EPS for new reflects certain quarter $X.XX. The the the of million first with reduction in closes. commercial reduction standard inventory the to approximately contracts revenue increase types to XXX, a The EPS half impact recognized adjusted XXXX. ASC reduction a an decrease termination Our sales XX.X% recognition compared of containing revenue associated of in to the and in of for

standard We retrospective within adoption aerospace modified defense. the of impact for with space the and the impact have a majority commercial nominal the used market and to the of approach

impact not $X.XX the impact material our do quarter-to-quarter think by will this standard share. we down the $X.XX quarter, ongoing statements vary or last financial said believe could of or I to we per and As be up

Defense demand. in quarter XXXX. drove Space sales for XX% of sales sales XX.X% $XX.X military of quarter & the Strike period aerospace markets, aerospace XX% represented year-over-year the in Commercial rates Fighter million demand sales. from increases sales benefited the aerospace program first million Defense compared our growth. the Joint the X.X% F-XX and and same sales ramp to Increasing in production increased as total jet commercial Commercial of the first from of in widebody an business XXXX. quarter XXXX AXXX $XXX.X to increasing were Turning Space production quarter aircraft increase & growth narrowbody first rotorcraft represented first

a our Space it As helicopters impact strong of AXXXM XXXX sales noted to quarter XXXX throughout to & sector revenue. over in remained saw by The production Nick quarter decreases year. Industrial Defense the for double-digit civil performance without we part a reduction a of also the expect comprised small we sales. this revenue the headwind which first is continue with a program XX% though

a combined of XXXX. industrial. both XXXX a and of strong other energy industrial with million $XX.X Wind to in the totaled first first the strength XX.X% compared For quarter to reflecting sales contributor quarter quarter the was automated increase

increased not in year. we in the Roussillon, year will invest expense was primarily the on in segment a increased constant XXXX which wind increased this even our tooling. years. in prior year-over-year business depreciation of the - The energy reflecting Note XX% a Total and will prior The consistent with expect to As new that basis the prior gross a margin technology depreciating with currency consolidated Roussillon is we our to the the now result $X.X year-on-year previously expenditures year year-over-year constant quarter be margin decrease mentioned, period results continue operational gross from France million throughout site our we increased later expenses innovation. the in particularly France will engineered in weak the fully in first of Research in the currency in to X.X% cost performance as that of and trend are higher of of and site depreciation expense SG&A Morocco. see addition happen to was start-up reflecting associated expect commissioned Consolidated growth region the growth continue X.X% quarter related million. disclosure capital facility from for expense, year. we $XX first compared it to and business increase depreciation in mix to yet recent product XX.X% once in higher XXXX. stronger in

for solutions constantly continue and programs. our new enhance for processes Our we existing R&D as customers new position solutions investments both and internally existing advance improve and leadership and our protect are to develop

businesses the compared XXXX. in sales margin a exchange as For Products quarter Product basis of income engineered of X.X% Engineered the structures first in to to total to and as XXXX benefited of sales total margin XXXX. the rates of income operating of the offset prior mix dollar. operating first Engineered by approximately Operating core related tooling quarter our of XX for hedging quarter year first or margin XX.X% for points due the first or quarter was The XXXX as first represented The to for generated the for segment Composite XX.X% impacted of $XX.X operating by of is as a weak program period. represented our to XX.X% of XX.X% sales the Materials comprised million a a million increased which income of sales weakening to segment quarter compared income of the the currency our program. The XX.X% and compared $XX.X margin from the XXXX. currency first quarter XX.X% hedges XX.X% a impact sales XX.X% quarter generated

Engineered the range normal margin return a XX% segment to Product of expect for the to to year. the remainder XX% We

financial of effective on XX.X% based effective which be impacted tax As segment much are underlying than guidance. was of in consistent quarter of the We period accrual our period first messaging the utilizes capital expenditures compared entering our for Engineered was recent this very investment. first capital the expect $XX.X $XX.X of is level positive Materials report still lower our XX% has during a XXXX a guidance. a basis rate and our the the XXXX invested while $XX.X reminder, was rate the Free that year typically a quarter generation year year first a expenditures first Products of This in compensation rate reinforces for the million remaining in quarter. XXXX current XXXX were capital. for consistent million year. the with period $X.X period for on return million. via million under quarter common Composite at than for stock fiscal to which an We the of attractive quarter lower cash $XX.X share of quarter use million Capital of margins the are this the effective doubled were favorably we million program. have The is repurchase Capital the more which with is prior a flow greatest $XXX.X shared to our for prior cash from impact the segment as

XXXX. million around or expense and interest this was higher the level quarters interest for in XXXX expect expense quarter $X slightly First the we quote to remaining

full the earnings earnings our release year our Finally XXXX XXXX during guidance we provided call. QX, reiterates

expect by As the the market $X.X midpoint. single-digit, continue energy anticipate Space a & to where sales double-digit X% growth to driven $X.X billion growth we sales we in flat at in By commercial certain by remain to relatively in high of or primarily sales. industrial consolidated review, wind aerospace continue billion growth to Defense AXXXM we strong and in the programs offset see growth

For an of XXXX, $X.XX EPS of with expect we tax $X.XX to effective XX%. rate

of back forecast greater of be cash million. flow $XXX also income. anticipate range and dividends net reiterate I XX% continue turn CapEx returning let $XXX than to that to through We in like stock buyback we million call me to With our Free is the to greater shareholders million. the forecasted that $XXX to than would Nick. to expenditures

Nick Stanage

flow in Thanks market a solid markets. positioned create focused full team the and capacity latest in including The France and across our front favorable for cash generation strong in operational remains and Patrick. us outlook Morocco and of us investment additions results Industry year in our to trends on for value are of We well robust shareholders. excellence. technology the opportunity appeared our started positive and innovation with take advantage including product leading-edge commercial free significant

be Judy, Our questions. R&D generation to the and leader us for continues to take materials world solutions advance applications we applications. look of ahead industry-leading aircraft we and happy now beyond. team rest to Hexcel continues excited to we're with will next customer industrial to and the of and be position develop in as composite XXXX

Operator

Suisse. Rob comes [Operator from Instructions] Our first question Spingarn with Credit

is line Your open. now

Rob Spingarn

to spoke there things, why with couple you the is about it volume pains margins on just But the Is reasons anything sales why it can things first the than at more didn't A margins of some in you like currency facilities of there? speak and you the it the or other growing is is facility the new start-ups. sounds have, new like any pace else didn’t really growth.

Nick Stanage

step-up really Well, the shot plus. a depreciation is one I’ll $X take first it it at million basically three was of factors

we’re as and lastly their there still and product impacted have especially a mix keep in impact mainly mind QX this in slight Second, we the facilities engineered in in grow but transfer products growing then was it new us site. did of And quarter. start-up was a some Roussillon we which in Morocco

business nothing a very little on the is So performing just operationally timing. bit well

Rob Spingarn

period, that the XXX. you stabilized think front you somewhat - looking but And years in said cash at have you your cash million It past with then and about your - suggests year seems back you've roughly as guidance enter flow, guidance. to your especially forward end for just the harvest the one in free this CapEx I flow that on for this cash be long-term flattish might this XXX and of talked in

Patrick about to right - way think the is to cash way topline as what right conversion the what's your accelerate Nick here? continues So

Nick Stanage

is there So, questions a few in there.

outlook So we and driving with respect in see growth margin profitability guided generally the expansion. to and we continued longer term

expect grow So the to sales. profitability I would the with

free gave the little those we'll incremental a On year. will secure through really talk as early. that right cash the It’s require programs. out. we flow Hopefully have But We programs we about capital now haven't looking we CapEx, guided growth exactly next see to period to rough range. CapEx

Rob Spingarn

an annual basis? On

Patrick Winterlich

to Yes, previously we five XXXX pretty cash over strong XXXX. for the XXXX to through we still and year in be have the billion XXXX us flow standby. which X deliver free about period got talked

Rob Spingarn

But number to you have want or of you conversion any kind don't number? to put that growth

Patrick Winterlich

No, haven't I period. guided We've you the we I that five in can… X those mean just billion year to numbers. put out mean

Rob Spingarn

some extent, wanted into You it to idea slope. I to can of get but back an

Patrick Winterlich

to Well, fairly XXXX in to those be deliver XXXX, it’s going and numbers. XXXX sharp

Operator

Thank you.

Goldman Poponak question with Our next from Sachs. Noah comes

Your now open. line is

Noah Poponak

from impact not is no impacting but press. chain? elaborate challenges seeing in in that’s Could that production you to what challenges in been XXX simultaneously on on discussed mentioned marketplace, for to the be the have the the there allowing for you Nick be that bottleneck just it anybody supply

Nick Stanage

give narrowbody. me let overall on so Yes, my you the view

So versus that volume no mistake we to legacy. Max incremental on make and we XX% Neo the have the XX% and communicated

very consistent and the push that our us for commitments on or their XXXX in pull there laying and sight back not worked been and our So turbo to have were anything the on transition to the There is bumps the impacts us. and the What is some the severe and with that dual dual respect for they’re a we to it’s of some with LEAP. growing customers but are the fan delays deliver engine confidence how from going gives some pains the production which rate we the materials, of LEAP beyond. ramp to problems impacts been certainly asked bumps delay fan being some turbo referring to have and

Noah Poponak

in that the structures delivered outside And is you the engine? around as to it is for engine that structures equally of the true

Nick Stanage

We our assembly that communicate us. different little have from It we may months. - a roughly six leadtime would bit be is line no for final

longer, we and six the in parts of But are we pull Some the structures, components. roughly those a do are see any some see earlier, is but deferrals little months. materials average or not

Noah Poponak

follow-up on the quarter? question, side the And in the anything was another pricing margin that changed on

Patrick Winterlich

side we in where the has all and to the costs Nick it and expected of was Pricing headwinds I be bit start-up really that mix no, called new products. out depreciation describe was engineered the a about in

Operator

McNulty question next our Markets. with from comes John BMO And Capital

line Your open. is now

John McNulty

guess numbers dealing I look importantly with headwinds me, put Roussillon in as of XXXX, you're reverse more and that it and around can headwinds headwind terms some I that on guess excuse Question or XXXX - quantify to of you much in try how to the tailwinds? we become those

Nick Stanage

large has call or other So of very speak. range just million we think as the precursor and we a co-located line Remember PAN a the on two site. in being it run product the running Roussillon up being and fiber of is a lines, being aerospace has one as is really a site little need as bit investment to for industrial qualified The fiber. carbon the this $XXX been carbon you and

to The now So finalized the being should process qualification and midyear. over that PAN is line line is start basically turned operations.

Now, want specifics, the fiber We as diminish really to that line start us the into end big expect XXXX. will don’t to comes year. get would of carbon I up pretty into the to and through start and going a have PAN headwinds but flowing tailwind we through up

John McNulty

on large we in surprisingly like were question And despite sounds and a quarter. pretty defense, numbers space it then just the

lot winding half. really else MXXX get longer, is seem it and you up the the does guess back falls in would out the stronger think expected in pretty little it but a a up down have the came or or do much MXXX and I it see they like took seizing You where But maybe is harder reverse thought you than first maybe we or because things slowing quarter? it a just little

Nick Stanage

happy definitely with we’re first quarter. Well the

depending of the corner defense. turn lumpy happy events. not lot on the and part space order It’s and it We’re customer quarter-to-quarter delivery fact our welcomed Remember rotorcraft the can of programs, be a of that it's and a plus with a turned on very civil a huge rates. the and we’re a XXX patterns granted

I about we little up although but to optimistic, So really a bit. very another before midpoint, quarter want if surprised we're it see moving trends to be I think wouldn’t

Patrick Winterlich

sharply your To the question answer item than down right throughout it headwind on do year is seeing AXXXM in the that we’re the John, and expect did to really now only QX. we come more

Operator

comes & next Gautam Cowen Company. our And question with from Khanna

is line open. Your now

Gautam Khanna

month, to Hypothetically how if the have above a would XX ground it? much to month go to XXX capital incremental in to a were the put say you support XX

Nick Stanage

are $X.X are good those investment competitive and could relative Airbus its that want we on involved hope into per them current to what Gautam, really situations get because we that's road. distinguishing their I to we're problem. don’t looking want shipset very with a fruition intermittently down would our not capital million the into problem needs they’re to come I you share. close certainly hypothetical information really costs with potential have this, what tell clearly to you back don't as So, a with capital and

month know per the this you were in support the we of up. they’re year certainly communicating end coming with to line facility Roussillon XX As that and by

be which and programs bandwidth if upswings you CapEx the additional come recall Decatur created in site some which incremental in PAN We fruition. - narrowbodies drive growth we a fiber give that us again will and our if to JSF, co-low announced to potential carbon including investment they will support additional also LEAP, in will AXXX,

Gautam Khanna

the higher were to footprint all to within existing if flexibility that some have actually you be wouldn't So volume incremental, accommodate happen?

Nick Stanage

that So of we material most short. given is by sole be our can't source, definition

long. have we be to a definition, by little So

or couple another, month we it and could And plane Now against we this total that model our whether a of you that CapEx look model. at one manage we declines. tightly. very And know of we do balance per

coming AXXX down. AXXXM and is is the the coming down So still

they're utilization sure frangible make we assets we that are our utilized. capital way. So Remember footprint optimize fully and our and our

Gautam Khanna

quarter upsize up a in company. is there the And one another pipeline just for an to just a M&A, ended I'm another that is you topic, of switching type to company the your acquisition I’m acquisitions? specifics. acquisition kind anything that knocking terms But not done be on kind you've of opportunity wondered, it R&D of out technology of be interest or I all different of there would of name tuck-ins real couple significantly to bolster asking is by curious going in a

Nick Stanage

Yes.

So the as to the targets topline technology and we far secular as and attractive needle being – move the positioning and in on portfolio are focus on penetration. limited. we us our To grow like increase significantly, both opportunities

what's we're pretty I that there market much tell the looking You our technologies our space. edges at, that see portfolio leader. out certainly having within there But are We're about. and said around you interesting we're very would in excited very the

Operator

our question Greg next comes with Konrad And Jefferies. from

Your line is open. now

Greg Konrad

I are the rate you today? the up versus mean to kind you on Just mentioned of follow Airbus' where plan XX-month AXXX,

Nick Stanage

basically the per month ramping be to we we're mid-year are up So in probably in range would July/August the shipping XX and nine month And per expect certainly, timeframe. rate.

Greg Konrad

on M&A positioning the think quarter also. the you you briefly a rather number I strategic mean in announced Nick seems also supply throughout how the in mean your do And like saw view announcements we I maybe you market? And and the chain I and or your of on mean either then one but the touched it it in partnerships. remarks, around thermoplastics just I side opportunity opening

Nick Stanage

for in thermoplastics contributor years. been a we've key Well many player and a

the the fiber in Our thermoplastics industry. benchmark aerospace is

more for space we being are shapes secular penetration other provide that on of molding. new very them compression So parts, opportunities secondary technologies There evolving in and well. net this structures, but with many opportunities know

we're our customers out we portfolio. make So serve opportunity help we a it's as the and our continue excited to a great We a great fully to rounded have add penetration. addition to sure this it think secular portfolio see to to

Operator

question next Sison Mike from KeyBanc. comes with Our

Your open. line is now

Mike Sison

is the JSF that for of XX in year versus outlook sales growth. the with line XX year this of your type I terms In think last market’s

Nick Stanage

No, Mike, with we would that yes. agree

the numbers sounds and year and those we that rates this you increase expect to mentioned XXXX just XXXX So sensible.

Mike Sison

pretty you're JSF be was the in every even? similar growth seeing And it the quarter will

Nick Stanage

always a Well Mike. remember bit then be It's growth. mean normally carbon on that to the fairly balanced, but military lumpy, so not it fiber, gets through it's can expect supply be mean sold that we and perfectly you to steady going we supply steady I and if Lockheed. to converted fairly be spending we would I little

Mike Sison

the a the you applications follow opportunity at longer reinforce you Arkema is quick tapes. up big to fiber think carbon know do would thermoplastic this partnership Just on how that apply term? What and

Nick Stanage

Well a from a materials been technologies they've enhance collaboration really with in Arkema today. cases ours do of just them not time. collaboration little exist bit some and buy partner and a long develop we on for and It's Arkema a to that

to freeze. with develop made So constraints the materials minimal intend i.e. to process can autoclave we are near faster, need developing that and of be into more net storage out shapes

Mike, development going a very optimistic but this be early in could the growth nice opportunity that here, know forward. us it's we're you So we're for

Operator

comes Next Chris with question Capital Markets. from Loop Kapsch

is line now open. Your

Chris Kapsch

the up margin... follow on a had I

Nick Stanage

Well Chris we can’t hear you.

Chris Kapsch

hear you me Sorry about that can now?

Nick Stanage

I can hear thanks. you

Chris Kapsch

that. before cost. up bit just I'm trying costs color more associated with overhead you're little the or and on described qualified. presumably associated as it's And facility the with markets on just you you margin focused running on about a to new so get industrial start-up the fiber Are you're unabsorbed basically follow inefficiencies selling fiber that some ramping? So, into you what progression did then talking mention

results when would expect to dragging have if aerospace a that's you qualified So mix inflect? When that will you fibre on this effect there's wondering also grade? I'm as and

Nick Stanage

trained, of the So Chris it line is side. people have absorption. being I mean the on we PAN working the line, matter fact commissioning of is, lots the the

this. U.S. Alabama. the expertise from people historically The experts have indicator We that are resided in

running. a And transferring get that people working knowledge there's lot of we're lot to and a qualified and line So up of that training.

the mentioned to material the some industrial to market and remarks carbon in inflect start of carbon for lines fiber, expect into second we year. fiber and the on we in are to half of some will our running this as So sold. that we do go be And your point

Chris Kapsch

Is anticipated have half? margin there once what as can the the once in you aerospace in way any gross you is, this fibre inflex the second qualified the benefit quantify grade

Nick Stanage

Roussillon in so combination Morocco's called So far share France. a as the that way what if start-up that relates by remember lion I and you a last of we $XX indirectly of XXXX year for year will say million the Roussillon to costs out headwind about a in

So got this of we that XXXX. in about first to and impact year that's the of half probably half going

sort and the $X in is the best excise income. can the that as year thing to should by we start adjust second So or and of that half of when million advise generate I become an take once the productive line $X million

Chris Kapsch

to keep there teething just you pains delays and for is that the the the associated with on sense? the asked on step – we and just to mix per that that to is guess around And engines happening guys Neo on haven't of or you is that up should constraint platforms. which the narrowbodies continue Max to been up comp. of keep fact legacy and or the And the platforms any content the I any in defer shipments discussion follow the assume haven't extent seen - shipping what's terms Does still rate that shipset makes is sort your they that that just in

Patrick Winterlich

rightly between think a little Legacy right the Neo it AXXX and think a that's little transition while we is pulled I our slower commentaries in supplying bit Neo. and ago materials build is AXXX of are the we we where one the and I out up basically by but the transition as of the than you so we going AXXX slow quantity to reduced say slightly expected the expected, underlying rate

Operator

question comes with Safran Our Buckingham Richard Research. next from

open. is Your now line

Richard Safran

to you ask was on something, guys was it additive about I manufacturing. quarter wanted last There

with produced additively now in acquisition you're You world’s noted leader the the that OPM part.

gain understand to a what seen trying right parts We've to you So parts? so replace parts acceptance I printed here size, you some modest now going produced conventionally is it's think to but going I'm are for a metal, to at to the with share how find quickly start I'm out you progress? rate progress look if you be rapid know are printed trying story as meaningful

Nick Stanage

world's their leader the on we're that's our manufactured our composite, qualification was on and said we what through and thermoplastic, aerospace, think I with programs. additive clarify to based shipments Boeing defense space parts just and So

we the technology. about excited - I So are very

pull space We from commercial. have and the defense sector as tremendous both and as interest well

making of that the net and technology you made very may parts very short out a in of at opportunity can look traditionally that cycle complex time. – been and metal, a metal your provide are joining of parts those designs, offers this an of simplify If have expensive shape parts benefits multiple

up. the its market really it's teaching again So We're capability. starting on

a have in Hartford. We team great

as again going And its and running time demonstrate for market. it machines speak. the some we have to take capability it's productiveness We to multiple commercial really in its

Richard Safran

earlier of My Patrick question part I call this the the little you maintained heard if missed, is so missed I second you said the of given in I was I performance the a the apologize. part outset if guide the remarks here. if I XQ and surprise at that

thinking given be might the about any performance? have comment you XQ wondered Just how guide now you right about your if

Patrick Winterlich

really look. first record quarter was saw markets almost we of sort our the see year pushing it by the perhaps above in we standing just would a bit are our the range little believe But we quarter, our the pleased it's way see a across we spectrum and of echo with obviously were guidance. growth I little everywhere adjust. going a sales strength a are be for we we bit. Nick. too We And very good sales early yes We to to midpoint mean obviously in us and the to

moving ourselves to a which that see great the we year. way is So start in direction

Nick Stanage

space is tend be And does sequentially on you remind just quarter to another of lumpy. I add And see defense, again and XXXX. I'd it need we actually it fourth since remember, below would to down quarter

So closely We're ramp again, wind watching energy for excited space steep the of incredibly year. defense we're which the side. the balance and still the on also is

we guidance. So adjust maybe see our more we before a bit being want little little a conservative to before we bit

Operator

question with next comes Drew from Our Lipke Stephens.

line Your open. is

Drew Lipke

half curious coming France the the the step I of maybe XXXX quantify was facility from expected you in up back online? can depreciation

Nick Stanage

included. it's Well

So we're about XXXX XXXX. I sort between million amendment our out and $XX indication of step an think I now that previous up called my all expecting to

a just actually is of obviously a than Drew? it's because honest the complicated impact $X be number I included step similar each overtime. in little the bit which the But With getting that. Roussillon we've at assets that [indiscernible] had sort Roussillon layered quarters million looking more will of be everything in to just to think going be quarter

Drew Lipke

previously? The step up million XX from the

Patrick Winterlich

a is XX quarter. So now X which the roughly million XX is

Nick Stanage

Roussillon. includes That

Patrick Winterlich

Roussillon. includes That

Drew Lipke

we impact as negative look kind there. does And ramp? we expect ramp of about year and wind the materials you any the at the through segment wind talked as Should composite mix then just

Nick Stanage

own No I is et at low margins ROIC going capital of because boost relatively slightly. fiber. different factor don't very, But you probably significant wind a the enough our be is overall it’s at our if carbon to metrics think not you level dilute again really look to cetera look our if employed low perhaps of very how

it's it's as enough I good it’s But Drew. positive don't to our So the is margin to dilute going as think actually large to ourselves very to great it overall margins. be

Drew Lipke

And on me to issues. see XXX of expect from build-up expected in a go up there the Trent then guiders you to guys seeing do half engines of of last concerns. maybe you one sound to of kind back for for like then XXXX kind any step AOG impact It as the and does we're XXXX address just

Nick Stanage

sort obviously understand April. March engine that there. go mean XXXX We Nothing to the of are XX intend stories I Drew still out or rate hearing Boeing early yet to we're that and obviously

Patrick Winterlich

Rate XX.

Nick Stanage

Rate XX XXXX. sorry early

increase. increase we So we'll XX this an We're should year. around that expecting quarter an see to at move point for up still XX and from

contrary. We anything the haven't heard to

Operator

And Canaccord. comes Ken with the next question from Herbert

open. now is line Your

Ken Herbert

much pushing possibly and that some focused Can level as where to that potential particular that wanted take but think do perhaps see yourself question program share value position aircraft and your Tier that investing just evolving investing to and middle obviously capability view just mid-size so of you're and maybe sort timing and I of not you that with how look around you the to forward. because push view the importantly, you're on investing ask how your the for on about more the aircraft market opportunity standpoint of talk or I sort [indiscernible]. of you But the your maybe customer you how to on, in activity perhaps you the proposition forward? and today relation

Patrick Winterlich

in is technologies. time month So the specific. And a generic you there's approved spectrum out speculation. has rather mid-sized customers and the major of But mean of out lot on so so know, we on a obviously Ken, I been working yet formally in week of not week than our is not lot aircraft with technology month developments work as we're a

possible, has now plane an but fine-tune Boeing wishing them to and of can. We the continue and Nick is we that to of opportunity processing today sort enhance as portfolio has on not as talked several we're much as in-house get this anything, to plane all to you expect would times about material talked productivity. efficiencies applications Boeing for about that and temper really being sort pursuing shop-floor our And their as

called to clearly headset introduce and with positioned engine how as is continue sure seen. them in yet platforms across way the new possible. air actually say I the as to the work much strongly So the going are, across structure so technology is But we be generic they’re to as to we make

Ken Herbert

certainly for a the step or the content generation that you fiber wing believe opportunity but very fuselage to to but not program. only got believe up guess opportunity compete specifically as relative get on do carbon you a Do well you that on up in significant see you'll view shaping sense increase the or how opportunity I you? Say that you current or a do

Nick Stanage

as in to a I opportunity. technologies it we far yet we else. that new today do has how where are with a as replacement aircraft. it’s in mean our say, go stands with I I Boeing they either mean are but it’s not We new mean an rates I absolutely are seen the clearly race. we everyone side technologies promoting be we have

Ken Herbert

that’s finally difficulty] just just helpful [technical And

Nick Stanage

can’t we hear you breaking you're at the moment up. actually Ken,

Ken Herbert

fair growth wind better the comments you listed commentary as you and acceleration wind guess sounds your on acceleration like your mix that looking guess obviously from the products year going in follow-up is the as way obviously it? is - a you're standpoint as ships through a transition Just to can to a it look be I I customer the the we an today read for looking more at forward should I

Nick Stanage

ramp second transition was sort start quarter that expected quarter to making were Absolutely, where so real is We growth one real but the going we to yes? see the the their in they’re pleased now. very of

Operator

question Ron our America/Merrill of from Lynch. Bank comes And next Epstein with

now Your is open. line

Ron Epstein

of lot so conversation about a technology forth. been call and It’s so the on

lane, at what of organic you kind give Can just mean when you I development. your under So your that look around expense cure] going same looking any at technology [cold areas R&D you're color is, think go. think do and place channels guys growth potential to about could a do you ceramic you a is like of about? place to different for you When what that go, technology we matrix

Nick Stanage

that add to process certainly R&D just So, of both autoclave, or different production materials its fast at Related enhancements, sky to mixed, formulations on say value in focused not some our provide technology is it’s to resin materials. I’d you when blue look and today. snatchers the out

We penetration to matrix not our could real and working and preprag and around we’re looking Composite products that materials house our got are and sound we’re competitiveness today. drive it’s key say and today on also really overall looking growth. materials help to that's what Acousti-Cap fiber product not something and processing deliver on throughput, at and ceramic enough the secular on engineered customers to technology and incremental I matrix We carbon focus and efficiency in of enhance for.

Operator

comes our Wolfe with Research. Keay question And next from Hunter

Your line now is open.

Unidentified Analyst

broad the This much growth in is indicated Will by or this OEs this that for certain driven based this XX% drove of was In Q Hunter. you commercial, was bizjet other your

Nick Stanage

strong. Bombardier influenced saw was we all were heavily very by it bizjet Embraer Well

platforms If and you those did and were ATR GXXX with an very Global on there look Bombardier in XXXX regional uptick strong we at segment the the turboprop. Gulfstream see

come we’re fairly to growth certainly and was through. broad see it So that excited based

Unidentified Analyst

of hit this to and incremental XXXX the a with for possible on this you headwinds is then this mix something that's margins margins, of or operating year is still And event? XX% more startup

Nick Stanage

morning to through, of So in sales we’re we We’ve confident which to talked we our and time as about that team sort year. more timing the work mix continue headwinds grow return some margin all rest we’re going the normal range for of the to certain margins performance. We're are of described. working some this terms are to

but year still XX% as maintained our is and to continue we at work direction its we say this next we've day and and strive will we our I and yield, out to know - towards and we even keep that day push in year in productivity, improving pushing in mantra challenging times So more margins, efficiency to that our XXXX margins. growing

Operator

from with And our session Walton Q&A last in question UBS. is Myles the

Your now line is open.

Myles Walton

changed. also it so case? Are I quarters to then on just sequentially close on the still I growth the I like bringing the think way. could, faster picking of if clarifications the in just facilities fall you was that different look And three XXXX is SG&A, next up in to million sound on versus couple a doesn’t XX it had really depreciation sales the

Patrick Winterlich

the down on bit understanding and to timing when of assets of Myles in there Yes, so really as there are timing a FX coming depreciation the is exactly on well.

related stock step that so in because as several quarter of far for payments, kind to the for year is and as where gone would benefit yes XX. So, us we is of pushes of of combination over SG&A, typical always expect for remainder the it’s to heaviest compensation in quarter Hexcel payments down years. And the quarter of one terms the which would the two that the now we first

Myles Walton

million? that down about Is still X step

Patrick Winterlich

Myles yes right take or yes. that’s Give magnitude

Operator

Barclays. have we of David from question final one Strauss And

is now line open. Your

David Strauss

tell if standpoint hedging us you XXXX? this Sorry currency year a we look this, can where are you I on as and missed from into

Patrick Winterlich

have basis out hedged. XX hedge XXXX, we about past, what I repeat the XX% I of in Yes, probably of so on probably rest on - sort at just declining quarters the I’m as a said to look

sort XX%, that’s look to the down range. a to near we right quarters to probably couple then of XXXX, XXXX XX% And added As of out we’re XX% range.

of describe, to So guidance assumed we the in a remainder of there back unless we’re in of our is to as currency and XXXX expect the movements for a was significant headwind see pretty XXXX. solidly what hedged bit compared we half

David Strauss

update you your last for and things content on XXXX what any one Any like? looking for guys could stand me. up shipset end of where And then there idea

Nick Stanage

this is but a around awarded the shipset still other of We’re yet, year still be new working haven't shipset. - value frustrated before the end it perhaps bit all what all XXXX be confirm the to little is fact we’re we’re sealed going actually and than XXX going it our so above to is

Operator

our does that And of you thank in and the Q&A conclude you. call Thank the portion general. for and call concludes We program. listening this your

great You disconnect. Everyone day. a may have all

Hexcel (HXL) 24 Apr 182018 Q1 Earnings call transcript