HXL - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen and welcome to the Standard Webs titled Explaining Hexcel Third Quarter 2018 Earnings Conference. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions]. I would now like to introduce your host for today’s conference, Patrick Winterlich, Chief Financial Officer. begin may you Sir,

Patrick Winterlich

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

me formalities. cover let beginning, Before the

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

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

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

Now, call to let the turn me Nick. over

Nick Stanage

and for us joining you today. everyone thank Good morning, Thanks Patrick.

our finish positive Our third to quarter a results outlook demonstrate supports strongly. and momentum XXXX continued

quarter income almost which constant from currency. year’s million resulting release XXXX in third XX.X% delivered third our third XX.X%. operating X.X% As margin third increase quarter an have you quarter sales last all a increased operating were $XX $XXX in in our last read of of night��s sales quarter million, income We over

$XX last was million XX% million a period nearly third the for Our first months same Free improvement. nine for last was year’s diluted EPS of year, million quarter. $XXX versus cash $X.XX flow above representing the adjusted $XX

by Now the X.X% into the the key to key in aerospace programs. in the Narrowbody quarter let Bombardier, for Neo sales content insight aircraft. increased constant commercial quarter constant drivers. both me higher reflecting Max, business in Embraer for In X.X% XXXX. also drivers aerospace build the are commercial with the of Starting continue sales and the this the programs currency, and XX% the and regional aerospace, and be on in of to terms higher Narrowbody seen quarter. we currency solid share rates number Year-to-date quarters, and our growth some shipset commercial other XXX, driven in were a recent continued XXXX Dassault AXXX, programs. for resurgence have and Sales up compared

XXXX that this strong seeing space. sales You in in we were X.X%, recovery in down so a are this will remember sector market

Strike $XX Sales sales to more the Turning for to an reflect currency Higher Joint million military AXXXM heavy F-XX helicopter. lower beginning UH-XX Hexcel lift are and the Osprey, Blackhawk announced the Fighter, we production rate. constant rotorcraft under XXXX. increase the and see programs ongoing up defense. quarter than include Airbus compared quarter for previously space Key of of in the CH-XXK the ramp third commercial V-XX offset for the just of the and in XX% as to

from applications of adopter sector We positions continues benefit which our As defense portfolio diverse that of a support than more active defense the and composites. strong be reminder, Hexcel advanced enjoys space programs. leading to XXX in a

in total our of increase which year-to-date Finally, of to of million the our XX% accounts XX% constant more for sales, in sales $XX an industrial third quarter industrial market currency. represents than

to this debt XXXX reported transition an blades. higher we as legacy energy challenging improvement were we market sales that in wind year in see blades last and expected composite reminder, a content As to

our the this experiencing from continues growth. are strong improvement a see fact pleased can for of Hexcel period to energy is that wind with I demand. substantial As energy The continued report to we world quarter, excited affordable and am see taking you tailwind a to adapt shape that results and is wind clean

in they During which our expected resin delivering are every the third disciplined expectations strength unfavorable headwinds of initiative quarter, we results, within Hexcel than line by wind almost proud in excellence. and impacted U.S. Despite improved performance. AN tariffs yet our and the the our key performed negatively higher of measure with class another pricing first again, by new and are team margins, rates, our operational the supported exchange of

strongly hit to want shareholder As finishing XXXX out we look target to I Hexcel’s you driving of commitment value. remind and on to our guidance, to

win innovation to The composite in investing first programs penetration. future and expand being

assets last a the spoiler first roof. getting including safety integrated, test headwind Lamborghini approximately of raw throughout beginning its supply over test admittedly a flyaway the supercar in committed Remember using growing tailwind configuration. it the early ground This quickly industrial, fiber, months, great Max and it month, for XX% aerospace the demand recent in in we produce Also driving reinforcements advanced Platform. to for conducted switch world. prepreg. the a the XXX over XXXX. GEM business monocoque, NASA-Boeing a as well company showcased chain as further the introduced, return carbon V to parts, Over This share Grumman provides Roussillon test critical in the honeycomb and becomes Acousti-Cap for that most SVJ in evidence both being us been an a innovation fiber, has that, celebrated this rear Roussillon grand sound to and Hexcel composites, expect composite new noise is co-location Northrop precursor, the September, motor opening joint our carbon vertically Legacy to platform. quarters, first by reduction our compared the yet is Roussillon let me in on XX Earlier In to the of help Hexcel some plant France, pan somewhat which our of to growth, September, and three we optimized produce our our investment will Aventador meet commitment ready rocket the on of we that examples. solution from was Atlas includes materials advanced flight And composite and completed materials successful reducing plant

of As innovation composites and heart leader, the are the advanced technology at at we Hexcel. do what

R&D adoption broaden manufacturing solutions invest continue advanced for and to in drive development our continually We the in our to and technologies of material and customers. significantly innovation technical

existing generation. strategic to avenue which this believe by investment technologies continued our investments grow. We will another for adjacent and Our vigilance be includes journey with second that provides These M&A is us to commitment discipline pursuing opportunities, complement exploring cash our cash would supported from portfolio.

on our composite to summary, of and to returning cash commitments. free months million programs in flow greater the for flow to and which was stock be innovation in yet cash The commitment In are to penetration, cash our than of flow all first significant would XXXX. million value year free record to free compared creating achieve through $XXX $XX $XXX and quarter, another expand cash proud to deliver Hexcel. dividends, our continued million our thanks in growth nine our shareholders remain strong focus shareholders. win committed We new demonstrate to a we in teams XXXX Investment repurchases and for year

increases strong XXXX. now billion to commercial result, full diluted between sales aerospace ranges in As to narrowing and guidance we share a sector. digit adjusted in our earnings $X.X are We expect double-digit We high year single per a defense for to and achieve sales expect industrial $X.XX increase our space and $X.XX. billion $X.XX we and year-over-year of target

Now turn details. more discuss to me the the Patrick quarter’s to let financial call over of

Patrick Winterlich

Thank you, Nick.

review begin our of with Let markets. me a

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

our in a and impacts influence reminder, of may The revenue not dollars. is some of reported intuitive. As these currency denominated movements majority our be results

of our and the base euros However, have we Europe. is in mix as manufacturing British pound a a significant presence cost dollars,

euro Accordingly, As also a we our to translate result, in sales dollar. the higher, weak dollar our prefer resulting a higher, dollar headwind strong against pounds, the a British the and margins. to but when costs translate a weakens

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

of expect with impact of impact continued of to XXXX last impact year-over-year, a is XXXX. quarter headwind dollar $X.XX up were there full currency in strengthening quarter, for although the to as progresses solid we with $X.XX to is result, smoothing $X.XX continue year is per quarter favorable about moderated XX.X% quarter The another with to earnings growth. the making falling the third $XXX our program. by the million third share a As rate Sales Hexcel fluctuations. XXXX into Consistent a hedging

of of XXXX. quarter third was Our to diluted adjusted for the quarter $X.XX, XX.X% increase compared EPS third an the

Bombardier, contributor & continued of to business year-over-year Aerospace Now Neo Commercial million aircraft represented demand third aerospace related the was in sales. the configuration and the due Dassault combined sales. turning the quarter sales and to growth. latest Space sales particularly production to $XXX transition Narrowbody third Other XX% with our continues of XXXX. to the increased programs. compared markets. Embraer strengthen, to Max to X.X% XX% of rates quarter Aerospace commercial jets Defense generation total largest of Commercial to represented

declines the and the prior the contributed of period of program. $XX civilian an and sales also launches A sales in greater compared XXXX same the Space military blades from Industrial third consistent continues sales new Industrial increased strongly, increasing as this million which business energy due totaled sales. XXXX. the strong A-XXXM sales. Satellites We our increase quarter, the XXXX. XX.X% in through third offsetting programs XXXX. our margin the of third activity the in same basis, quarter comprised of wind with For XX.X% of X.X% uptake, period & customer, grew the compared space to On $XX expected Defense of quarter consolidated third energy continued XX% million, number in reflecting adoption remain was largest sector. strengthen to in totaled rotorcraft investment Depreciation to outlook the with to by to support in expense Wind XX.X% a wind gross energy to year-over-year in our quarter is the growth. for generation confident forecast.

for indirectly the was the cost the Nick of by which is including the material impacted carbon called after second raw base fiber mentioned, oil briefly XXXX and third As quarter quarter out also prices. headwinds by of is our acrylonitrile, impacted

don’t out elevated during temporary by Hexcel expect minimize the is pricing the XXXX ago, trying for the lessening imposed were increased reflecting quarter XXXX issue the year This while I the quarter called Chinese pollution a Total to $X.X of tariffs time. is headwind business of impact methods some quarter to pursuing measures enacted third continued due our the the authorities. over that control from Last we as quarter headwind continue impact that this energy actively third during down. we capital magnitude moving Additional back are the resin to and wind a to million expense is compared is depreciation investment. pricing to And still XXXX. into difference third would

by appreciation year-on-year we we As to previously approximately mentioned expect higher $XX expense million. have be our

year-over-year million focus technology expenses increased other continual during XX% approximately force or composite Our grew future selling, growth driving to innovation general long-term for expenses invest applications cost sales the in period. on as we in and will aircraft the objective. that continue $X.X behind and control and while reduction Hexcel’s to approximately be X% and platforms prepare a disciplined same year-over-year, led administrative Research

the in is third margin margin Products as $XX.X operating the XX.X% quarter our our million businesses, segment represented sales margin prior of Engineered XXXX exchange structures year material generated of For for composite year-over-year to-date the much requires Engineered program. compared margin for third of returns that million level XX.X%, margin tax on currency is the pricing as are and the cuts third XXXX. act of this to one of business reform, to effective XX.X% release XXXX. impact a in foreign represented while segment, which development generated quarter. a for the to will quarter effectively changes generating tax invested and sales or accounting have related which due third impacted as Products the the XX.X% XXXX XX.X% affected the period. segment. or income quarter effective operating now The XX.X% The quarter X.X%, to of quarter that those the by operating compared total than in XX.X% million an ongoing sales material to a third or related XXXX ongoing neutral jobs in with comprised year rate third and hedging rates tax composite as our tax jurisdictions our The the XX.X% was the quarter of lower is of of in transfer favorable The our operating income changes methods, to XXXX XX.X% rate. lower attractive engineered Products total sales as allowance of for impact The $X.X composite a favorably of an third on investment tax and core capital margin of as was of Engineered of compared to increased segment, rate $XX.X valuation

seen growth rate prior during the this to year third expect are XXXX have cash Working guiding in quarter in an to-date fourth year guidance. financial capital to cash of the to of with prior to-date the the years compared area in in capital stock repurchases capital period. Strong year million. during accrual XXXX in be fourth our revenue quarter $XXX of the capital in $XXX the and a basis, Free We now repurchased to were quarter the continues of million XXXX. quarter expenditures are million reflecting our quarter Year comparison XXXX million. Capital third $XX bringing use $XXX flow we to-date $XX source the third for expenditures tax XXXX. on XX% of the expenditures We quarter of in was in for line underlying we million as million of were working an effective for focus cash third comparable $XX totaled XXXX. common

We have under our million remaining repurchase program. share $XXX

margin France the second a will first in XXXX completed was is the continued conclusion, Roussillon, number guidance. will rate. we is benefiting early tax qualification in and of to the operational were are once address and transitioning will headwind half ramp there half expect gain XXXX to lower We that In Whilst facility Roussillon, aerospace XXXX early and in following qualifications. this I XXXX contribute production which business in headwinds from updated aerospace XXXX, a growth, our strength our across during of a developed market quickly.

billion billion, full-year $X.XX and of forecasting sales billion between be to $X.X to a guidance range billion. are was previous We $X.X $X.X

per We are between forecasting share of guidance Previous full-year earnings and to a be was adjusted to diluted range $X.XX $X.XX $X.XX. $X.XX.

for the flow We in excess $XXX of generating continue forecast cash to free year. million

our applications. unchanged. years $XXX expenditures forecasting I the to based to remind of and investment to expenditures accrual continue the million grow are We capital capital $XXX would both like million which support that industrial over you is for several next aerospace

investing to to stock organic Our the to capital back we buyback. and are committed let and continues be XX% greater targeted allocation that, through to priorities net to shareholders turn than growth by call dividend M&A disciplined our income me Nick. returning followed With in and

Nick Stanage

strong Thanks, cost productivity excellence be constantly of while to striving Hexcel a higher and solid guidance. meet sales Patrick. grow. to to commitments ability on focus a Hexcel to quarter At deliver achieve and efficiency our full-year delivered levels third our leveraging as continues consistently our demonstrates the on-track team on to operational

with Our markets growth continued expected. are strong long-term

operational Our innovation remainder be throughout achieve a focus The cycle an sustainable to cash of to the from is driving generating excellence financial cycle continues clear. XXXX results. investment strong transition and to

strong and new bottlenecks adopted are we Our strengthen the across been commitments up composite next supply Sales we robust, capital ramp as existing to which delivering nacelles in shareholders. new case. and engines our by passenger content have unchanged we begin commercial our affected XXXX Revenue deployment and backlogs as program program. substantial expect traffic is and customer not will where disciplined to has to priorities chain remained aerospace such are continue in growth are any continue Hexcel generation and as the program be as to our

and new for next revenue high from in engine Our single-digits. composite the years nacelles and engines is nacelles with engines nacelles three-fold and shipset XX%. nacelles growth body and going considerably the wide-body Anticipated over content are growing increasing narrow content and engine few up

And energy, medium to continue play energy It to helicopters. solid growth where remains CH-XXK a key advanced industrial Defense lift Space expect opportunities automotive ranging to beyond from and the market also vehicles XXXX a in the as We and and JSF, our growth strategic multitude such in should of key programs Hexcel. electric clear; to role storage challenges. solving future wind have focus light-weighting composites a provides for

have are us aerospace of advantages the said any we greater structural in composite of lighter, in secular and are As strength and front enormous advanced intensive durability are before, of The providing opportunities composites on to applications weight stronger, composite growth evident, ratio new story materials. beyond. more there best

our position technology continue composite shareholder advanced and long-term sustain expect in confident global value. We’re creating in leader generating and a as to growth

now take to Ashley, turn like questions. to and we’ll it over you

Operator

And question of you. Instructions] from the our with first Thank Sison Mike line comes [Operator KeyBanc.

Your line is open. now

Mike Sison

guys. Hey,

of commercial terms don’t but there’s engines it guidance specific In such. nacelles still you of like in and about yet, lot a know, momentum XXXX, think aerospace, Nick, give and and sounds you I

rate into say, XXXX? So, bit when the little less? the mirror get better? same, XXXX. you think heading it relative to it Should it about growth be let’s Should Should XXXX about

Nick Stanage

in to backlog, Show to at this little assumption if right revenue passenger if specific I strong growth you certainly XXXX give during look which should fact a at rate for all growth, per of [ph] it’s upwards XX us. XXX year, in both if year rates the the as you to shipset benefit intake that into in XX the the up and will were at at XXXX. look biggest guidance, you fact XX first you’ll that for you ramp ramping look driver even Well, the then us say, look the XX the look Mike, you're see and really to fundamentals in if a you’ll QX And order full climbing your which and XXXX translate we but content, the the that, as narrow-bodies look at at Farnborough of well continuing early is month,

Mike Sison

more for XXXX? moving this wind blades on a done sort into that to lot have lot XXXX it in year then, terms and heading talked adding of has composites? legs Does there about that. or have blades, of legacy more a the all And wind a composites Great. the from still opportunity you of banner be been Is of for

Nick Stanage

Yes.

reminder, XXXX guided So, we a – better and to still expect and XXXX would expect of at again, into said as has really end ramping and beyond. or that continue to up than XXXX be XXXX we well at been. just the that, was back we it soft levels, growth it customers Having our the are key which XXXX be

Mike Sison

you. Thank Great.

Nick Stanage

Thank you, Mike.

Operator

next question the Vertical Sinha line our with And Partners. Research you. Thank Krishna comes of from

Your line is open. now

Krishna Sinha

Thanks. Hi.

talk to margins Just the quick. real about

You called there out headwinds. three separate are components that

for forward you expect at million of And that resin would going to You case you quarter, going us be call it’s for tariffs said to how issues sounds they’ve then sounds that you away, quarter then a just last them going annual as well? now and scenario And same can $X out last cost but impact. the increased How of margins? that in much acrylonitrile we to take having. can much you’re price impact kind for questions be like million like size but do it’s worst $X an think

Nick Stanage

Yes. Hi there.

and little to we AN that we quarter But can haven’t we a avoid can’t we sort if hard – we’re see XX%, tax million. be sort $X aside, bit basis. on called tariffs. and get our relation to What to anything we’ve watching contracts million over $X.XX exemptions push out $X hopefully we is would base gone an for into and I energy In $X to amount it million million resin $X of to of said, that just seen we to of in able million a following third can probably $X that’s easing to annual XX% fiber. is those may would resins to $X mitigate to which we the half is can the an through intent have say, a that don’t to million wind that, else earnings. we EPS. probably we’re as we all after to relation say wind we’ll tariffs, supply sort do and the $X unique as a acrylonitrile result tariff I headwind has the we to trial what mitigate that the obviously carbon dollar million of quarter the go opportunity and overcome to second dividing would do The to But indirectly put around $X on What we What part up in of say, and it. us a price million space of $X.XX oil working closely That So XXXX. impact our chain exact don’t offset rebase those. a is of in prices. is XXXX as so as and as that, I obviously The

is oil at some perspective that the say allow to supply our raw commercial chain our this, put sort will vertical number a in not is that front be so end a biggest is I periodically, just on mitigated. AN impact of have our of to to We What would some our material. right of us of contracts pricing move closes

oil So, that protected commercial for of our us. would running contracts into example that also our so the films, And have long-term we through protect go where XXXX, impact we supply from raisins XXXX epoxy through bigger be price contracts have us that there. we're on a and contracts for

Krishna Sinha

Okay. one And just follow-up.

kind call of quarter XX% or million EPS in you've $XX that quarter because But midpoint the tax in the of like the fourth sort tax and $XX guidance. bridging will Just the to million off sounds it rate benefit your then here some level got back rate from you it XX%. the gap of you reiterated

that all what's that accruing us? Can trial: just just and size the you a tariffs? I'm just for trying out to resin so, there. gap Is And figure

Patrick Winterlich

I set I talked putting right got this together. we've got mean, trial, we have which got quarter. wind against the about. nine so we resins $X.XX. about continue and you're mean Well, guidance the got pieces the We consistently the our which FX tariffs We quarter headwinds, obviously the through we just which is we the

all the been transitioning first is and those XXXX. of headwinds Roussillon in go year which have part the as plant France will the tailwind and had So, become now new we we into in a

headwinds are tax are those guided teams worked that underlying our very effective we're then guys operationally And rate which possible. rate to I fourth hard see getting what ourselves So, tax the now and is with to in the overcome quarter. that's of say EPS. as as would tax, much help the our XX% you'll The deliver

yesterday So, XX.X% is think XX% due year. say in is forward for is on guess, first I'm the during the got saying I for three we last I tax. the my clearly XX% average best the XX% quarter. I year And or the quarters, about so

less overcome a into So, the going to it's our bit sort a as disappear constant go help as with full to of with combination of we working the certainly to tax which of a or of going lot and headwinds go XXXX deliver we we're than little initial hard is numbers.

Krishna Sinha

in change help your to one towards the that of does order imply to lower of the, you just cash Can bridge your you of you. more so range guidance end will that And Okay. and didn’t kind come free kind CapEx in flow then. follow-up of

kind of free XXX fourth a CapEx. little or more in Do of of to hit flow? XXX help back see that to the a CapEx reiterated pull million a of $XXX order You cash quarter in bit we a you

Patrick Winterlich

obviously in is is come delivered. expect that let this I what would it mid-point and we've that. in to deliberately, say The me range

Operator

comes our question And Sheila you. Thank with line next of Jefferies. from the Kahyaoglu

now is line open. Your

Sheila Kahyaoglu

good Nick and morning Patrick. Hi,

Nick Stanage

morning. Good

Patrick Winterlich

morning. Good

Sheila Kahyaoglu

term word we outside in I Trying seeing when the and timing the job about of could think to step a going do And to contract resin. you're up? Patrick, the how catch happen. that increases suggest it's up. and raw match material, material guess there when accrual about other my raw any the contracts that but we How up long are that of seem that think they in you price to avoid saying a commercial

Patrick Winterlich

Sheila. Hi, Yes.

So, as was role are most major covered functional saying long-term certainly much of I materials epoxy contract. our key resin by

trial to a oil So, we we job have we related that that. is And headwinds very the to on some to formula Acrylamide which propylene good had price is of buy ultimately. related flows mitigate do impact. a for

Now, not have that been and exactly imagine headwinds. it to -- we're contracts quantify different to label. but structure going you there's that commercial has It's can different we hard

is And over them we proxy allow have a We a the as number of recover impact. the close lessen which oil will will time for us AN. to movements price of some that the obviously

anyone's guess. will we oil continue and I more So that's better may But into again, we price of believe we do job in better would overcoming be positive as go mean a continue impact. we XXXX and but to elevated the that well

Sheila Kahyaoglu

capacity thanks. think year? do of receive on qualification, in line Aerospace and that you on capacity then And just Roussillon as utilization just next online facility how about comes that's coming cadence and Okay, we it the what's

Patrick Winterlich

set support line and as year we should capacity line end expect The would said, ramp will is one qualifying very be so we've the Aerospace facility type of On will It get Aerospace towards will and out we brand this year We will on will and and need the have other that Implant supports it capacity its it it qualified next it AXXX Nick in the quickly. as qualification fail. XXXX. program. said, running, with starting rate XX to the the that

quickly XXXX. in starting will capacity that fill So,

Sheila Kahyaoglu

Right, thank you.

Operator

with Credit of you. Spingarn line from Thank next our Robert And question the comes Suisse.

Your line is now open.

Robert Spingarn

of you lot the your XXXX? in the revenue a commercial for little thanks that of of based while about Nick, exception wanted perhaps and the next color are current ago. little a on sales bit I business is into this. part and But I most the on further. aero talked year, morning. guess to fair plateaus on dig with book people had growth to maturity the on conclude programs a of your HX that basis it focused that the Good so the a you on rate business, that what engines achieve XX of

Nick Stanage

Yes.

Rob, end will XXXX. going The going So going up. to of continue growth they're to the still is to at be there into in narrow the be the century on continued and XXXX ramp starting bodies,

programs So, we given other cell forward. going growth good engine see the and the still

our which haven’t applications and on close of the able We that getting by opportunities we do including the year. our to very to were provided work to we finalizing continue hope that ship guidance long-term I and end changed the the do and to XXXX on set new being content

other full the at AXXX is well. growth the getting XXX provide continued rate thing on year that's of to at The as and going really XX, full a XX

Robert Spingarn

understanding, won't to I that yes you're -- wanted continuing calling bodies till XXXX on narrow but hit Well, grow.

talking You're above about go targets? that the Airbus Boeing the current possibility

Nick Stanage

above to that that. targets we're we're they've beyond ramp doing to latest they above the certainly Going but not communicated up that trades that the the and XX go XX are said, and going

Robert Spingarn

content the can you'd some been to information of Okay. And more us is give sense you XXXX we you XXX? what get then, quantify, to the have able relative said soon but

Nick Stanage

higher and higher. be significantly It's going term in to my

and again we that, awarded I on want with happy then working get those, ahead get packages rather of a and that other we'll got to we're couple than we're So, those communicate. of

Robert Spingarn

comp down the talked if is then timing that of how the million think of on. last is and all million XX versus about we easier but pricing you the on and what guidance or up And reads, fourth my Patrick, just volume terms on could XX% quarter, Thanks. that timing it then simply win way content? be Is growth year in do the is And about in XX% the sales. you this it Okay. question is XX the

Patrick Winterlich

Okay. of A there. couple questions

will didn’t the which So, and see we a we number and in in sales got range, But get our you. about some sales, tightened it obviously of bit then little for --. and we can on tighten you've movement move mix all our enough FX perhaps

Robert Spingarn

is sequentially the is down, Both which and which up --?

Patrick Winterlich

Yes.

putting with at math we we obviously about here of for see you we beginning guide reasonable too can have chain I that's and We're midpoint. into we're points where mid mean complex said, for we you a guiding obviously the where can kind range. So, what We, aiming to of the get XXXs pull-ins some it just a It's the we're pull-outs. the And supply that. with year. do that material think of we

of obviously we terms mean, talked which the is this a In headwind has wind I energy, wind good about raising good headwinds at energy year. the margins. been growth

in wind market and a and we'd with are that headwinds going bit a margins space be continued of our is that because for but into should energy growth So, little strong it those XXXX, see depressed us.

Operator

And Thank you. of next question our with from line the Company. Gautam & Cowen Khanna comes

open. now is line Your

Gautam Khanna

have I thank Yes, questions. two you.

if your the at if First, I have wondering on all AXXX yields was many you any changed among comment customers could other programs. on downstream or

are So, should given you've we the that seeing? tracking what the in still past per disclosures revenue to you're that ships

Nick Stanage

think we I this we strategic multiple delivery the mean is OEMs complex I locations as and can dig I be many where Yes, look themselves. that on at would ship us we which chain because hi for say multiple to supply plan. of we explained into OEMs, we the contract We before have roll roll sub continually Gautam. close,

And And below stand what those though so, ships ballparks today on in out certainly just we're trying assess that's to those continually are the above. we put by we close just planes. we

will them We revive periodically.

curve improve. out for the the attempt customers final of or growth put a you the as to efficiency rate. is the yields would rates would that stats up, ships a learning build terms at certainly be go expect remind I platforms, customers, go full And of you In curve as will we what we our and our new through

planes Now planes we to really buying first ratio takes more one put the XXX into far the that what early is material, the much higher. out. built we Above fly

XX close So, movement. lot is see XX, moment lot movement level rate to some XX that at AXXX We rate the don’t we of The a the at XXX, elevated to expect sort getting XX, for don’t expect being to time. see of of a is there.

go estimate program, beginning. do curve the So, final set put the that but trying any position a we're new as we out ship from we say through value it to

ship adjusting much as to avoid possible. sets as we So, try the

Gautam Khanna

was does obviously how I appreciate follow-up next XXXX, given And much it. does down year-over-year number potent was CapEx year. for DNA my rise? DNA Does, what the question in that

Nick Stanage

a So, we $XX saw million will see about year. this

year; an would will than in I it less as sited say safely but haven’t that. I it that But we're than large and yet be more it next will XX see XX; will increase frankly as be that We won't range. any exactly still rolling be out.

Gautam Khanna

much. very you, Thank

Operator

of Thank next the with of Epstein Ron comes from you. our And line America. Bank question

Your line now open. is

Ron Epstein

Good morning.

quick Just ones. couple take of to a in

or that we about XX into thinking particularly that As and mode think thing. in point cash generative the are of you sort go XX about into transitioned and How that? the you you this cash, as

Patrick Winterlich

we've Well, consistent. pretty been

at wind opportunities engines the we're materials turbine First our internal blade. to for and sales generation looking or position organic aircraft next the

investing meet that investing capital So, and to and organically in demand. capacity

with. markets. industrial our kind composites better materials, through offer all or and X.X technology a dividends to at around our Aerospace required. incremental that value up then and stock to material leverage and of set gain depth programs lastly, range it's solution shared shareholders core we're buyback maintaining returning We've just way ship while plays if to X.X like and to generation will next we looking content comfortable to the in and that the And a space X.X us Second, for science even or broader customers advanced around in those help

Ron Epstein

if some Okay. I commentary on maybe packages think there in I still And XXXX that you win. understood that then, your could is

in If you can additional to you take? that current that your give or capital require investment were

Patrick Winterlich

we today. packages have assets available those No,

Ron Epstein

Do finally as for or win CapEx just then, airplane. new how depend the what really it out? you market as think guess see kind you the middle really Okay. guys that And plays and of thing it potential on I premature last of the does I this about requiring when do that bit required you that but is see the you might,

Patrick Winterlich

growth, what going would delighted an If we're to that that right, in exactly that's to demand capital. and CapEx be we're which to incremental come invested return Ron. great stand successful with meet share Well, have on profitable we're very be going after, you I would

to and to working after secondary declare and on clearly We're structures, the So, with engines launched time program continue structures early cells. After tell. on various primary again working and with customers. we're the we're it's capability technology but we respect on our will gets our working too to demonstrate

Ron Epstein

great. you, Okay, very Thank much.

Patrick Winterlich

Thanks, Ron.

Operator

And BMO from with Thank the next John comes of Capital McNulty line you. our Markets. question

now is line open. Your

John McNulty

going companies and about have a we of you up. with lot through out there understand going a my the number you on for that right may not seeing rates is how you guess, these I to would of rich the guess When technology platforms kind are on given also perspective or markets that smaller environment out I of targets increasing taking about I thanks it's you're I Yes, opportunities whether there been thinking that your M&A the think for. the are debts. what's question. work on guess, Because be looking now? are should private or funding in for from the target targets

Patrick Winterlich

but some that at. of some look well not Yes, that there some that actionable. not them fit are some well them a Obviously presenting scale the John. say to fact private factor, Well, may of become technologies are are our are becoming themselves. of very there space we there's actionable, There XXXs them opportunities that some continue are and and of going targets out is to I'm fairly

within add the of components afford dynamics possibly for our advanced that there portfolio. into opportunities create So, can that to too or bigger fact science bigger breakups opportunity an the us non-core acquisition that M&A that for some is may

John McNulty

the of sounds some then can around related acrylonitrile at great. up you you sound some make reformulation bit it on efficiency. impact rest there? one you're I contracts. you with doesn't like difficult. your priced the parts least or of appreciate you crude work reformulate, around the either Okay, with last issues I all what of costs have It the raw And can little like question color. the And escalation make assume Like, guess up I material a it improve front. Can going the because to

here how and or you oil how stays do can do guess acrylonitrile you here, entirely stays you? if on I it catch actually So, up

Nick Stanage

Yes.

actually So, the And aggressively not And some for impact. contract have portion mitigate and we again hedging, We're future qualified, costs we mitigate you year good are imagine do the that to stability. opportunities mentioned, Patrick programs to business. to working under future on we that a also we've that strategy working on resin help as and could which provide do then AN, drive this initiated which will of are contracts more help formulation. that have long-term systems as productivity protection

John McNulty

Thanks much very color. for it. Got the

Nick Stanage

John. Thank you,

Operator

Thank the next you. And our Poponak Sachs. line comes of Goldman from question Noah with

now is open. Your line

Noah Poponak

Hey, good morning everyone.

Nick Stanage

Noah. morning, Good

Patrick Winterlich

Good morning.

Noah Poponak

engines was pieces by your faster specification next years specified be of little that and single in that you over because I guess would of the to growing few surprised in expect revenue business. I remarks Nick, prepared from a high digit. the the anticipating one And growth I the cells the Aerospace

target You business. digit multi-year Aerospace your upper for had entire single an outstanding

as have engine engines I be aggregate the and the you're cells expecting that that is read much as you the were I that in to opportunity today? the So, cell, growth and mean does than highlighting X of should kind or slower just Aerospace

Nick Stanage

Well, on there of always than materials, now a even is fact new around how are planes cells. provided and programs we cell With there engines the blades, are launches. ton are the there that cases, launched, hadn’t many the strongly and clarity fan derivative our aircraft derivatives more position are after and

near are opportunities look board, engines have in and for we strategic and long-term which plan strong. and mid up the you the certainly if just very we at rolled So, the the cells our

what is. us. rate is We've that. or engines updating guidance. for It want don’t too get and in to differentiate But which commercial strong I the to target into invested strategic the is I'm a longer-term cells Now, stronger growth going aerospace not and our are overriding

site investment area Morocco par quite is laying Our and we in where are the doing another was well.

launched. growth continue it programs So, are you XXXX and next more new areas around a focused little until to we're was drive just to give the on the color beyond to

Noah Poponak

up to do XXXX? you your Patrick, segment then, expect operating And okay. see, in year-over-year I margin be

Patrick Winterlich

continuing we products around engineered composite I that here to XX% if the headwinds we with strong sort a opportunities, and tends is the yes. and mean, range to Well, take in what a of we're of to number answer certainly bounce believe materials, we growth I XX% to-date. away the bit then little got

think But and yes, for pretty a maintain XX.X%. is look products say performance. composites, what I would certainly engineered to we're I good we would

yes. definitely overall So,

Operator

And comes Capital next our Kapsch Thank the you. Christopher line from Markets. Loop question with of

open. now is line Your

Christopher Kapsch

follow-up had remains I efforts production any, facility. on thus morning. qualify there has is way is any in a to are good question that margin there integrated then, intact, assuming surprises And there timeline the any benefit been the or your your And of maybe about Yes, I'm anticipated just that to the far optimizing facility. Roussillon be generally, costs quantify on a is are just ramps those benefits 'XX. qualified form of and we maybe as mix better thinking like knock better about we if in just footprint? there the global manufacturing should talking fixed wondering for any absorption or or product even is

Nick Stanage

we the was had quite progress as give looks an and grand excited incredible The customers dignitaries we partners toured and at very and with I'm was absolutely attending. we little made. overview, just a the few It opening with event suppliers fantastic; global you Roussillon. I'll French running plant a the It is it site and So, fully state-of-the-art.

translate more any little little will million Having productivity. afford have than first which even is big a supply which project: to an opportunity the there It investment. there surprises, us it into said we headwinds it's a a So, expected. chain that, later $XXX was site will more expected, drive collocated been we than optimized were

state opportunity an chain. and and Our our to the customers to from Europe some Safran materials others versus to going proximity from states supply and to Airbus improve materials bringing in shipping directly Europe. cases It's the or clearly to back our

to multiple We're at really and could on in of So, but excited. of running is cycles; the a levels to respect customers lots; XXXX and very totally through to add? think turning various not the equipment the on approvals; end is matter site and it and The our get And put going fiber we're the through very be that a them we tell you the run. you well. working with we're fiber carbon behind is you motivated going the process which front. strong and us. to With letting to doing tailwind, calibrate is to of we're Patrick year day excited just just team going qualification running test the the get I The can technology;

Patrick Winterlich

fiber The investments only said good thing is I would before, as see say, assets and drives good those major that facility other expect would they fiber carbon to carbon strong of margins do typical we've Christopher, as come margins on out strong and ones. all we

So, company. it overall will of be benefit at the mix to a normal margin the fiber carbon

Christopher Kapsch

you just good to that the of tied for is facility? experienced year DNA you. Okay, Thank on stuff. routine How on called that step and out 'XX. as just follow-up, this that And the integrated in up the, that's there much you a and helpful

Patrick Winterlich

we million out, Well, assets a too without I investment those depreciate, mean was to be over precise, years. wishing about XX $XXX sort of called we it

of going it's into come chunk certainly that see a year, yes. to can next you So, plant,

Operator

our from Walton next And the with Myles you. Thank question UBS. comes line of

You're open. line now is

Myles Walton

you AXXX Thanks. at I third were in XX on was rate quarter? just curious,

Nick Stanage

Myles, Hey hear you can't up, you. we need to speak

Myles Walton

thanks. Sure,

commercial or in XXX at the composite just So, is more the sequentially? impact, were the you at materials I'm rate sales fourth on that quarter aerospace declined a quarter looking of XX third

Patrick Winterlich

Well, Well, quarter third European close mean, hot. it's down. I the that's

bit little funny. be can quarter Third a

higher the say to difficult catch-up potentially nine whoever there's exactly of seen year. the that rate specifically, or very material. we mix in XX are different somewhere or the a addresses. over and all the to It's if terms know to issue end rate a the ramp-up We in past XX should XX as get for to supplying or we're even us eight say. year; aiming I to at Airbus In we're by the of We've said deliver we've obviously AXXX

going We're we're rate them that's QX in and we're the we range, terms its chain of between so. end XX we the to to But anything fill giving get and up keep need not your rate if for know in to got to QX supply 'XX, it's know by that So, if obviously question year. going the that, massive they've XX the ready their of materials I of AXXX. then seeing all

Operator

line comes Thank you. And our from last David question with Strauss of the Barclays.

is open. line Your now

David Strauss

guys. for morning David. good on It's actually Hey, Mann

kind been expect you of on to that you is of buybacks, lever have guys of a quick of Should piece are continue up give fair real a buybacks? Just how buyback more we and stock. guess guys buyback willing amount sort I

Patrick Winterlich

reiterate. to paying We growth; deployment to same; on of mean, our of the think I remain is out believe X.X value want We between capital the stock. stock of the and Yes. perspectives. priorities when We're sort I range. sort not top all specifics that multiple we're position from early discipline; these and on and back leverage; I at end the buyback of that going as look We're X.X buy to certainly we're give at and organic stocks. going it dividends; maintain where in to mix M&A; going

will opportunistic so to shareholders foreseeable continue we be part in a but future. potentially I believe return we to it’s to long for at in would going the run and Hexcel We’re it. think growth the do of times

David Strauss

the XXXX? is then for guess XX% level Okay, about confirm rate just rate that the for thanks. QX, I to And tax think

Patrick Winterlich

It's can I say thing the best now.

be. reaffirm what will We that will

January will for tax that is what point best the but we number I XXXX is and give with at provide XX% our guidance We today. the XX in firm rate up will earnings can

David Strauss

thank Okay, you.

Patrick Winterlich

David. Thanks,

Operator

like to management any further And not you. showing now for I'm Thank over I time. call any back turn the remarks. this questions closing will at to

Nick Stanage

No closing remarks. everyone today. Thanks participating for

Operator

you conclude a in all This participating today's Everyone may disconnect. today's program wonderful Ladies you and thank have gentlemen, conference. does and for day.

Hexcel (HXL) 23 Oct 182018 Q3 Earnings call transcript