HXL - Earnings call transcript Q4 2021

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Operator

Hello. Thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel Q4 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. there a remarks, session. speakers’ the will question-and-answer be After [Operator you. Instructions] Thank today's like to now would call to I turn over Mr. Patrick Winterlich, Chief Financial Officer. sir. Please ahead, go

Patrick Winterlich

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

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

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

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

over Now, to turn let Nick. me the call

Nick Stanage

effectively. XXXX virtual of pandemic we vaccinated and a both Patrick. our us full our both was than for quarter and January, in lives. today never When at company, joining Hexcel on standstill, Good value our large and international travel a as spoke thank was learned against fully had is year great share many at technology a we morning, portion strongly and via a various population of believe video We less world's personal in-person and platforms. the fourth remotely Like collaboration was that Hexcel tight taken grip however, forget, customer the Last the COVID, a workforce had business a new quickly salaried differently you ago, relationships Thanks, businesses, to on we working X% manufacturing of interactions, and year and driving dimension innovation. work have everyone, our results. we

Our production kept facilities throughout lower the have albeit capacities. pandemic, operating at

and growth other summer day, we people and regular in restrictions, ahead. our foundation vaccinated including are back and sites and and I than may overcome Now, or certain the are a almost once Certainly, people since basis, any X And a air state hiring with to to top optimistic around the alone constraints, our aside specific challenges grow last the that address pandemic person all inflationary million on most these affecting effects providing the and U.S. lingering obstacles there again. to more back aircraft lies business, strongly fully strong in traffic supply talent am face. chain programs, X from are billion offices end country pressures. Hexcel we determined retaining effective of from world, Yet and for for the

a on trajectory firmly set XXXX. is focus Our steep growth in

in faced, and and demand our challenges for we They and their everything the and we the to quickly aircraft business, embraced decisions, after workforce. rightsizing force and did forward. extra thank overhead developing a while a history, lower quickly take uncertainty in last moment our late up decisions despite quickly Throughout to for destocking to challenges accepted new including less challenges options XXXX pandemic done, increase how excellence reducing have who they team and do. be demand market moving to plus in are team started jobs. that I'd customers' taking start hires Hexcel business assets, reductions making drove we responded many year such and as took, tough it. knew expecting recent lower considering decisive Hexcel like we from than the realigned in XXXX, ramp the by we restarts kinds nothing safest decline restructuring the an what rates actions. quickly year to and needed their idling are in our equipment our XXXX. and build XXXX, of kept XXXX early When is making continuing our still complex the and like workloads We Hexcel meet demand in primary Our as the to learning difficult our They

demand growth. Our to team's we working a on and is for that a It to safely firm year our phenomenal. and commitment base, clear is return and and QX as ready with Hexcel share results XXXX begins than lean stronger ever, aligned full better

turn Now, results. let me to our

than a I'll quarter First, results to negative $X.XX a almost quarter Adjusted full compared million positive XXXX. sales then $X.XX XX% the year XXXX. were fourth Fourth QX higher $XXX diluted quarter and of fourth cover last EPS year. was

increased the XX% recovery Turning currency to when narrow-body XXXX QX. sales, emerging QX higher sequentially quarter increased were to sales. Airbus markets. business jet sales three increase increased over almost and Contributing promising to in XX% in and Commercial higher our Aerospace. compared AXXX A is sales Fourth constant

fourth well had the were in space compared very the CH-XXK market. year. and $XXX realized as legacy now of double-digit currency XXXX, military two F-XX, rotorcraft in some to quarters represented half sales up quarter AXXXM drop we programs. In of softness as fourth civilian sales Defense, an million the period. consecutive programs for prior Space quarter Sales last and year constant this have second & in XX% in the growth our of to In strong We compared

the to markets as XX% almost during constant partially automotive Industrial wind lower quarter increased XXXX, we our other sales Industrial currency in & recreation Space as remains increase, the in begin the Defense As and energy. Strength well by markets drove million. outlook for offset positive. $XX

Sales specifics XX.X% year-over-year our year full were currency. some XXXX down results. in Now, let billion, turn me in constant $X.XXX to

EPS was lower XXXX of and about However, sales Improved for productivity. Aerospace roughly In our were million year pandemic adjusted efficiency on team on lower XXXX lower was the a period million, $X.XX and adjusted $XXX we as narrowbodies of EPS year yet challenges only still to achieved inventory compared sales. build XX% lower less, through were about for in the of the XXXX. XX% to driving a a represented $X.XX impacted Sales was by XX% the of and We're which year-over-year service rates markets, our sales to activity the the and sales XXXX, diluted compared for embracing destocking order total by strong in our $XXX decline return commercial than by about MAX favorable partially aircraft Commercial The was developments pandemic. and our other China. Commercial customers. of encouraged declined begin XXX by Aerospace regarding decline result to

two also continue growth, Materials. we up XXXX. and refresh fleets reductions, XXXX Airbus increase Our the they combined, will again fuel trend and delivered are for ordering in lightweight XXX aircraft Boeing their Composite and Aerospace as believe that Airlines significantly and from driving customers, efficiency demand largest emissions Commercial for

in for transitioning margin of we composite a larger, for Kent leverage in product our complex the reflected to it we production accepting have processing previous we pandemic, our out long a X% testing the to engineered an higher-margin medium technologies Kent, If to the have strong decline. of markets, of complex contracts, lumpiness, only a and including toward program. including share nondestructive shipset were Boeing work some and relationships. throughout continue in almost contribution Kent other Malaysia. Boeing through more XXX parts quarterly or values shift the sales expertise expect market also year-over-year X% new The At called currency. site steadily heading remained so strong MAX ACM Space and Composites venture relatively with confidence grow that capacity term. Washington the end we will Defense and been impacts this exciting some advanced the to MAX offset our & strengthen our but new calls we and into recreational. capabilities. automotive We'll market that of programs, Already, with XXX wind extended It constant this our provides million facility over customer growth as about products have million great strong at not Aerospace XX-XX transition Hexcel year-end, this more our technology, programs. with sales extra XXXX. or position for of the market in year-over-year less industrial at which and our composites by sales XXX sales on $XXX small decrease we disclosed some partially reminder, was saw energy joint is we new Industrial in $XXX growth. our foundation As chapter to leadership relatively market, benchmark us are started a completed fill contracts diversified has transition This impact gains Lower of XXXX. a for

last XX% year. about compared to currency constant decreased sales in energy wind XXXX, For

some space. However, we opportunities ability have toward with very of new pleased spare our to divert market in been our this capacity revenue

market recovery. more our reinstating we end as are We see guidance robustness in

sales guiding billion As with XXXX for to adjusted $X.XX. earnings night, you to billion $X are share read per in last our of $X.XX news in release to we $X.XX diluted

while flow than Our generate more forecasted. with is accrued expenditures million free manage spend million continuing of guidance $XXX capital on to approximately cash $XX to

the As part process, provide review publicly. regularly of we normal information our that ongoing we

and carbon efficient into and configured ranges composites As Aerospace are believe provide more we're Materials, of new to processing passenger large providing ranges among AXXXneo can include the of based next-generation some perspective now and number review, from help a business proposition Hexcel time customers XXX, well solutions range. million, the recent jets MAX further XXX, proactively and configurations $X.X is XXXX We time, range better programs. models. and $XXX,XXX, in shipset specific Commercial This as more using also shipsets programs. seating a result AXXX the fluctuate are platforms. AXXXneo, XXX the million fiber These and our of Airbus including in process to is XXX, for those Shipset of costs, will additional or shipset and and as million, capacity use Airbus the improve configurations. on and are the freight. a the to used long-term Shipsets we shipset Composite across select values of away in adoption the ranges values joining aircraft as have $XXX,XXX on as and advanced the fuselage, to support platform Airbus for between The programs, Airbus going first our such with family defense with composite-rich ranging material whether productive that X,XXX $X larger AXXX Instead, shipset become are they million materials. vary moving most a future encouraging define for design as family cabin from Boeing value along and the integrated freighter creative including can providing replacement by $X $X will wing we provide new for more the that

value million tilt aircraft of production shipset shipset program significant heavy aircraft military individual I helicopter transport top strong to $X programs opportunity and largest fall shipset increase. with to progress will military Hawk well between in rotor to as in call range towards per Black positions by illustrate some penetration aircraft, have More deepening illustrate lift future million. as jet shipsets are the $XXX,XXX V-XX and market. growing Defense an per Osprey growth Fighter and Finally, aircraft share become F-XX of million programs our this programs Rafale of is The such & which this $X a AXXXM range composite $XXX,XXX program the ranges the and our and the -- in in military $X $XXX,XXX. on top rate a of will Legacy range from Space what the as million for the our our $X as

on Our in-house the whether is between ship CH-XXK aspect lift and blade produce is set $X.X $X.X or on million, the that million performed the entire with OEM. variation depending by heavy we set helicopter some

emerged our over turn our dividend that better highlight years I growth call Before our of has to the I'm the Patrick, based strong confidence a in past and stronger to from on pleased two is unprecedented coming events particularly that planning the Board reinstated for years. business and the

Patrick to to the the on over details Now, provide call I'll more turn numbers.

Patrick Winterlich

Nick. you, Thank

constant in dollars. are comparisons year-over-year are The the currency. majority in sales reminder, dominated a As of our

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

also strengthens against leading hedge Conversely, operating when a headwind lower, translate result, weak over while euro results. sales a to protect lower, horizon net our a the and We our the As margins. benefit dollar dollar the this is costs income. to translate financial exposure to to currency a XX-quarter our our pound, our a

in and represented totaled Aerospace Fourth $XXX.X of remain on Commercial aligned markets. in with million fourth XXXX. quarter with million, Space & XX.X% represented production we quarter period rates. their and compared $XXX.X including to publicly widebodies quarter business the sales approximately the fourth Defense sales of jets, quarter Turning customers narrowbodies, and XXXX three decreasing stated same our from total of XX% sales. fourth Commercial increased our categories, growth Aerospace XX.X% to of all three XX%

and offset by totaled including XXXX decrease, sales. compared of drove F-XX Industrial and increasing automotive $XX.X well military strength fourth XXXX. We space million, quarter consumer markets, XX% sales as rotorcraft civilian partially sales. the experienced of Softer as across the electronics. fourth recreation of variety Industrial and a XX.X% stronger comprised lower sales quarter sales to

management subdued and experience Growing consolidated of fourth energy quarter gross demand higher a in the margin XX.X% to the wind continuing industrial On quarter sales with XXXX. efficiency of margin. was representing sales. combined fourth disciplined fourth the XX.X% gross higher XX% driving from the are for with wind We to contribution compared productivity basis, is approximately quarter

sites. do and trial and mitigating many inflationary acrylamide resins our to resins as contracts have and job long-term typically a at pass-through contracts pressures we long-term material mechanisms. and are our raw typically good purchases, our fibers significant of continue natural including gas under purchases We for have of most hedge We power industrial

in where to general consumable However, given margin items. economy, some the minor inflation feel expect exceptional of the impacts do level and we materials inflation pressure raw

instituted of and in general million rates percentage Adjusted quarter still basis R&D XXXX, temporary of were the in of by a favorable and quarter $XX.X quarter control expenses income to approximately sales, compared Note cost quarter in As as our part benefit that XXXX. XX.X% XX.X% current compensation was year-over-year actions. of X% in exchange operating fourth fourth of and some XXX in the selling, had administrative sales. points. of or fourth impact the fourth expenses we reductions The was quarter the the

margin in turning amount resulted Without income total would segments. stock businesses, tax segments increased XX% X.X%. Now two our quarter comparable for prior negative. XX% that presents the margin was better engineered the have been X.X% Materials operating to margin, compensation the rate the X.X% Composite fourth of the the comprised in that year-to-date an an comparable sales between that for allocation have margin. The adjustment operating sales Engineered corporate. operating is QX margin and Engineered included the and The period the capacity and total and The Products our generated the would to operating segment, quarter higher X.X%. two QX The effective operating Materials a was of year-over-year this XXXX represented in segment of The adjustment, for The income fourth XX.X%. methodology sales quarter and X.X% in supported utilization. on a generated margin year core was represented year Products been which period structures operating Composite strengthening catch-up for of

XXXX. consequent $XXX.X of was to activities XX.X%. effective Net million impacted rate year by the a year an which for capital XXXX. pandemic $XX.X we million. million Working XXXX accrual was $XX.X operating on cash $XX.X XXXX, the expenditures growing million, use increasing modestly Capital was effective of in cash Company's operate, tax full across and mix countries throughout overall weighted for support compared tax to XXXX sales. were for the fiscal generated results The For rate basis

$XX.X more generation We the flow free quarter drove flow strong In by as was driven growing $XXX.X capital sales. chain working and modest supporting XXXX, existing with the covered working for million, than capital combined free million technology and increase cash was the XXXX fourth on year managing with XXXX. on flow advancements. improving closely that capital sales focus for cash continue was fiscal asset Expanding generation to the which capital reductions lower profitability new efficiency and a expenditures the tightly of was is cash million customers and manage Free destocked. $XXX.X expenditures substantially supply

generation also Nick growth. income returning net reinstated of flow our As our to is our on returning the of returned has based expected Board to with confidence This cash has and a a gradually practice dividend pre-pandemic free said, to consistent shareholders. portion action

the restricted XXXX, amendment by Our January share XXXX. executed in program repurchase March XX, through is revolver

like I regarding to would our Finally, detail share additional some XXXX guidance.

expenditures are back our and billion sales grow our to million. we forecasting innovation is City stated, core existing cash capacity $XXX the forecast flow Lake Nick the $X as forecast are $X.XX plant our of construct free Accrued range of As to range of new engineered to and in and billion, in adjusted center the in in Morocco. range we $XX expand EPS Salt $X.XX in million $X.X capital into R&T exceed

XX% of We Commercial expect total sales comprise Aerospace full year XXXX sales. to approximately

rates Our sales forecast stated publicly OEM and are expectations. on based aircraft build

comprise We sales. XX% expect Space of to Defense & total approximately

expect approximately total to comprise sales. We industrial XX% of

compensation depreciation the cash first forecast the with free be and expect compared higher this Continuing expense. XXXX to levels. prior timing in to quarters, years, the similar flow be are generally seasonality, administrative stock-based stronger expect following in year. to reflecting Consistent selling, of remain we of half of general quarter to we second XXXX Additionally, to recording expenses on the

We our XX% today. that in approximately million is foreign a $X movement hedged XXXX impact relevant rates exchange approximately would have earnings of exchange Our to X% estimate hedges. a net exposure

effective and treatment tax revenue With expect to to I to highlight due that let tax approximately turn of in result the back rate that, XXXX, increase and expect we XXXX. Nick. growth XX% Tax be to as Jobs for taxes We Cuts call of expenses U.S. the me the Act. to cash to changes want XXXX R&D also a

Nick Stanage

Thanks, Patrick.

For core a of element business many Hexcel's has years, sustainability proposition. been

public our span As goals gas foundational long-term the and and targets on we with sustainability targets website These are measurable waste our made several step in with recently reductions latest greenhouse freshwater sharing our customers. milestones this XXXX these journey, pillars in our for usage. emissions, teams landfill

also our aligned transparency foster through goals initiatives, track about committing will that is These forward community to specific supported team processes. are and our by accountability are guide At to responsible towards safety, sharing progress we us We a with in continued strategic objectives time-bound us is allow and continue greater making in better progress tomorrow. diversity, diverse journey. involvement. that improvements you workplace this responsible One with products I propelling look sustainability Hexcel Hexcel, inclusion planning ways, and to a as

some with by there and aircraft programs, along as still recovers challenges possible fleets encouraging solutions related some air are clearly the signs inflationary uncertainty aerospace fuel-efficient, many are lower refreshing is otherwise. Future offers. with emissions their While Hexcel airlines made pandemic or pressures, inevitable, around also are constraints there supply chain and travel

on-time take on take potential markets stronger staying concludes will beyond management, durable demand from we our lightweight, overall to significant pandemic shareholder that our our cash The and actions unrivaled continue productivity, long-term composite comments. to Brent, ever, We're The for XXXX all now have emerges remain this more and quality ensure in grow. promising. a in looks will technology industry. efficiency very providing in continue than Hexcel always taken to our for And by in delivery. of will and ready our only for especially value. Hexcel focused materials and prepared upturn disciplined stronger that products questions. and Global will and advanced destiny technology However, control and performance,

Operator

from comes question Mike with first Your Ciarmoli Securities. Instructions] Truist [Operator

Mike Ciarmoli

Is as see guess, excess be to morning, we here be to guys that? to tied just, assets obviously taking of how aerospace. should Thanks the for guidance the side throughout calls idle we drag I go and and continue about embedded some to Are able growth from the mean, repurpose still capacity on to you going be glad XX% Nice that Good in for year? margins you the I how to business, outlook about question. capacity? back. widebody -- results think the maybe 'XX, thinking of we the or Hey. Maybe should about -- heard going guys. How that we a think as about Just I the Boeing. we've are be guess,

Nick Stanage

Mike, for So thanks joining.

function line. drop steadily in them assets XXXX, been of were as very bringing we a idle that was Our have the back demand and significant on

It's So resources. a the methodically talented and those trained approach. lines back, we're bang it's not comes on demand big back as bringing with

fantastic of our the nice to done of levels. certainly doing acceptable our sell During course also margin to that the find targeted correction, And opportunity areas we a new very very and the has in team avenues, materials. at fibers new job have and

continuing assets set just line So, that idle on future. see bring that ramp Again, on basically we foreseeable of and have any bringing would do as matter in for need a repurposing the been future. we not the the to assets back It's XXXX. through them new I journey

Mike Ciarmoli

it. Got

be mix said could quick a continues, we Just be aero -- bit there kind be on past, volatile dilutive aware think we the should looking of a margins as bit weaving in are that guys I should issues of be there? you a the Any structure quarter-to-quarter. or we aware of little side, Is ramp would that anything follow-on. you've at more anything

Patrick Winterlich

I have mean, seen quarters. is nice specific. volatile. we very called We've too have out mix some we that Hi -- Mike, nothing

in come it's and picture. I marginal will bit But nothing any carbon too it. was would dramatic, very We with wouldn't strongly overplay I be dilution QX obviously -- overall margin that started a XXXX. may think down said limited. time I in fibers. over And the especially any little strong we've

a line. will back. top won't quarter not our get type leverage, quarter. line of as two, continue three straight we we the for volumes as is grow be we margins Life next margins to three the fundamentally, years So But and every trend grow upwards see the

Operator

comes with Spingarn next from Research. Your Robert question Melius

Robert Spingarn

maybe strategic thought ask potential I I'd especially long-term here. things, some the just given

touch wanted that weight wondering Stan new something I and talked so, the And the from to a on Deal about compete He might about of provide Seattle to version Hexcel? extent in to what the gross Times. this Boeing against AXXX-XXX, talked XXX-XX incremental opportunity for

Nick Stanage

time Well, expect a position Rob, enabler content or before. for it aircraft composite materials, we've sustainability going we or forward. new said Any derivative or obvious, efficiency stating engine engine to Again, are there's materials and significantly. a aircraft, huge and our the a lightweight grow

again, and processing refresh what allows platforms. on those but the might composite-intensive evolve, I'm especially net and going and pretty XXX get as to convinced into a more it like, details will not near just to be technology into more secular more look shapes has I'm So continued penetration the

Robert Spingarn

shifting rather Difficulty]. as might research Can targeted, heavy example, where slightly No, to actually efforts as your past? haven't on been support or in that parts you be in volume the composites for of used, high maybe word a narrowbodies [Technical autoclave at better out future the update us

Nick Stanage

Yes.

why so unrivaled the we of So again, one and we're talk portfolio. of our areas about proud that's

think don't for a that utilize We have advanced total multiple I it's of to both be autoclave. going materials in autoclave conversion. options out and

business the some a productive, called migration the cured as less very cabin have out, quicker, exciting it materials we those can narrowbodies. effectively be will we large to allowing very that based of even application, the but on waste, penetrate outside think composite-intensive with And I autoclave more much certainly much areas. be

Operator

of comes line Your Vertical from Robert the Stallard with question next Research.

Robert Stallard

couple front. widebody questions A on the of

that you for What obviously, secondly, to First on growing the your XXX, the much out all, of Is basically preparation bit there? you built so there restocking rate of end or starting it have the called a in the be in destocking, to XXXX a uncertainties for AXXX for bit are And given of see you back. thanks year-on-year. guidance, bringing that then higher?

Nick Stanage

Yes.

So, you rate. their I'll very hit participated going our you can of just We're guidance well positioned. in aligned shipping and monthly Boeing with forward, first. Boeing. low I the assume very embeds at we XXX a yesterday, the tell think call we're many We're assumptions I

Another bit this year we historically. of one our up a more opened on we than have why range the maybe reasons little

aligned to we're certainly be think to to to X. a recertification start Boeing get rooting delivering back producing FAA rate for we So, of the able and up again

this And On provided the that us, the AXXX, month, will that second the that in the growth destocking half plane the and tailwind per is up is we in of as continue majority believe go QX, or that get ramps what to X behind into year. of -- then Airbus up we'll this year.

Operator

Capital comes question next RBC Markets. Your with from the line Herbert Ken of

Ken Herbert

& Space What guidance CH-XXK. in mean the seeing high issues follow 'XX. about I -- about looks the the Is single-digit Defense in recovery Defense. I I can guidance of like of more on after you upside? it it in outlook your you 'XX Are the just be granularity some implies anything Space up programs? know the on wanted line for a and you point to to in it terms F-XX you've would Any past in the those great. talked & else? Is -- top

Patrick Winterlich

Ken. I Hi mean, right. Yes. you're

into growth. over X% to obviously back our X% you about 'XX year-over-year about you're going XXXX. midpoint, If down was take

where were call essentially, you The F-XX, push XXXX or out, drivers So dozen it. from then catching beyond the and there as up XX into primary XXXX. a we're growing are, that

has helps. out shipset of significance called can So there, the that -- And you just the it. CH-XXK. of And sort we've then so see the clearly, Nick

double we next sort years, and grow of to are to key starts those now that go As every the forward as the for X roughly drivers. X year

But will more is longer at vertical XXXX. the supply years programs softness of see there Now, some lift some a single the be come. prototyping, which the be optimistic material of future steady in have but to a legacy of for the did with help. programs lumpiness. for low that sort of fundamentally, to most end We medium run continues term, we early go, to state other towards growth continue several term, to some programs to way going some And the

Operator

next Your question Capital line BMO Markets. John is from McNulty of the with

John McNulty

solid side some And cash is really and question the to on that, free guess results. flow Congratulations your balance sheet. I our on

by was based under arguably So, quarter in flow maybe balance And of the guide, the times least leverage the than will like sheet looks expected. stronger at in XXXX. it your X terms cash end on be of

cash going some you see got is excess the I issues year by strength the guess, as can to around where sheet dividend. But can the free go year. in think of help some that forward that covenants you've cash think can that some you clear and to? I going I middle the else, balance know of of So, progresses, about us

after M&A an So see guess, how thinking you that, pipeline? we can see should buybacks? that? I we about Do be

Nick Stanage

in as than we'll that above sense. we cash as going the be yes, high of to and push We one But driving to forecast forward. all as confident strongly greater now million, Yes, and we're $XXX generate significant can.

to mean, I inventory capital we step line again. working receivables our up. grows, a As will the will headwind top be and continue our --

the ongoing a sort what in in a longer-term disciplined We're expenditure of bit will to of center R&T We've to of maintenance and that of tightly. the level we do Capital of sort So, we sort called used days way, a kind we program. way to to getting relative of call out is managed Morocco, is the a spend. manage choose guess, need be which back, I expansion that.

The organic So, covered. growth we balance things. those is

by footprint. we're said, and As large, growing into existing Nick

So cash we that the that then have. leaves

within work the to have covenants. We

ratio of the by as leverage end performance tremendous just reduced June be to million I a XXth to the that, and We the our mean, second gross of last net which then quarter. to and comfortably between under will we under is on at work debt XXXX, of point EBITDA of two have I need the revert grows. end out, years. the the over $XXX XXXX think be We EBITDA should end will down X.XX. to we it We debt

so to we our look million of Hexcel. stock as We'll at goes do to sort Technologies that when look last size that will larger. and we $X.XX, I'm integrate And as should And high confidence of yes, love disciplined, in technology, come or a that opportunities. on margins $X.X at or the the both into at have ARC something be sure we equation, at then, but So cash will that quarter. agenda good on, acquisition, yes, have to the generation, forward, the least as well. so we've that announced And capacity perhaps a type would M&A the and dividend year of piece going we sort buyback, another

John McNulty

a or be little or going higher little way it skew there maybe margins a And and going to give about incremental puts on or just that? you're to With some think a follow-up. XX% should it. about guidance, that little right take a Got guess, the a regard Is about takes sales that like I we how it implies forward, may in, year bringing looks the forward lower? with that thinking XXXX quick incremental the the this that bit. bit either margin are

Nick Stanage

drive we Well, I'm We're commit I don't hazard, John, to trip just can. know going but to a number. as if strongly leverage as going a to our that's incremental not

drive We're It's we or double-digit into two, as above XXXX. as just of I to seen, we in see What leverage you've productivity sort year would year efficiency to target it's is three it's As can. incremental for historic strong a high through of a the out certainly going two go for as be double-digit going our next plus And seeing or what growth because very double-digit income operating high we're call growth high. norm XXXX. as you historically and -- this years. leverage the

Operator

next Global. Your from line is Alembic of question Pete Skibitski the with

Pete Skibitski

the how tax kind the on for have nice talked sense follow-up it then, the that flow Just change. Patrick, quantify about 'XX, you headwind maybe of in a of the down dynamics? from to rolls going 'XX impact law us, you just non-operating the XXXX? XXXX. guidance in Can cash and And cash for

Patrick Winterlich

fairly it I Yes. marginal out. We mean, it's truth. in called

that's [Technical The increase switch, cash are most mean, to growth the our I the in going in We of taxes. Difficulty]. -- income drive net it's

Pete Skibitski

matter there of you? supposed wins? one which just last is the lifetime? this you F-XX then for guys as I sort could it content Vertical And could Does Lift. it guys, both are the And award to team on for FLRAA, me to guess, potentially for be you Future make they -- year. sizable this And as largest your be big

Nick Stanage

supporting great awarded we once So, And will up. ramping both you, nice be tell the we're platforms, program gets and teams. us a of starts -- I it we're have not for on that content picking regardless and winner. will both a We're

Operator

Barclays. Your from David next Strauss question with is

David Strauss

So, about some that you inflationary given today? getting way in revenue. previously margins, mid-teens to the spoken, to pressures still $X.X right think it, highlighted Nick, you of Is the about back billion

Nick Stanage

It is. It is.

that in our and offset to that's what pressures Today, made. improvements operating on that target mindset pretty today productivity based the seeing, and that Our sales seeing and level the inflationary percentage margin we're process that we're will the restructuring, comfortable get still range. we've we're of to

David Strauss

Okay. And over we much a comes so. into $X.X good two billion, the revenue the business working in or looks Obviously, $X.X million last years. billion the this cash had to, How capital you've performance $XXX like call Patrick, as that of you back ramp level? highlighted here back it, big tailwind

Patrick Winterlich

much How capital? working

David Strauss

working revenue you cash business. I Yes, to ramp have the back capital much back as to drag flow some assume to how on capital up? profile is working kind add the starts of

Patrick Winterlich

large in that of very our come ago. to And XXXX, terms, I if we moment if you mean, simple took portion about think said $XXX working $X.X $XXX capital I sales million, Absolutely. back. I mean of in to going I is a billion, out get million back a that think

that We'll of of disciplined going it capital, tight. as Now, working with days, and It's we'll necessarily as and collections. but line come relative you we'll will those and $X.X we sort those of back to drive you always job several top and best but try days minimize be carry will billion, keep receivables, as relative come. But back over the and $X.X efficient as more will that try be grows, try But days efficient can come back. that. working grow billion, capital of a inventory years, obviously holding imagine, do our to and lot inventory, on

David Strauss

talked actually Okay. there And Nick, you I one on about this think growth has up last AXXX, gone quarter. rate, Obviously, don't the yet.

just higher actually restocking of you see how there? bit the assume have I actually that's of restocking. I from you a before much So think rate you benefit a upside mean,

Nick Stanage

I range. the destocking point much don't in it's to know restocking, per of rate. if that chain current Well, the caught month It was lower the supply David, the And so we and helped equalized fourth quarter. up to a us the more X stopped had

X us ahead time think added we're of the So QX in frame. rate again, to type months would start I Airbus. X would hitting

Operator

next Safran of Your comes Seaport question from Global. line Richard the with

Richard Safran

I came a late. little

covered So, I you if this, apologize.

a some grew think $XXX growth million and thought I the business overhead. think might what might discuss $XXX it was in you in the savings? and if to I portion noted, bit I really of once expected part that savings. think, the And the overhead of cost the grow workforce That you could you've little a have you be recovered permanent and million increase you'd about growth. workforce, impacts, talk

Patrick Winterlich

Yes.

that We target called cash out. thereabouts, savings. $XXX million was achieved which our we've in cost So,

go the naturally overhead the have base up. will the As increase, business now and grows challenges to operationally back

as $X.X we've billion, out where try possible. had to $XX will revenue we revenue. the We sort in be to of called level we billion last $XX reference $X.X What time million, million of about less scenario that depreciation again, had as disciplined

target to least on much clear of takeout. that cost Our hold at to is the

are back. are and to depreciation depreciation overhead savings on or all that cover to bit time. more productivity, -- good definitely come speak. that I So, all that's a We working ourselves through those that what Half challenging would things efficiency, of likely headwind technology those the we're cost

Richard Safran

growth Shifting just Are for example, about industrial know I opportunities at gears automotive likely 'XX was I'm interested think seeing markets better for how term. industrial, to Okay. out. curious Do longer offsets you're the to you're you and some term. about point, here? expectations to drive end that automotive play are, margins wind? long and expectations pursuing

Patrick Winterlich

Yes.

we're in -- quite provide we're So we those electrification marine for of focusing the adoption and not what We're seeing how performance. the more be excited material -- the we're we're are lightweighting new our efficient advantage, And in can for automotive. weight competitive areas the really we're provider. again, solutions. a helping and We're provide whether nice. applications with on where commodity a a focusing technologies some end, and customers we're high European-branded automotive We with still on. are Those the growth excited seeing it margins structural, are or

& I the taken very to of opportunities I it continue So, think I we've grow. disciplined platform do think defense, have But our mix see and to and business growth pursue a continue to changing industrial. going approach. don't to that a we're between space complexion aerospace, it's

Operator

Your question with the Gautam Khanna line Cowen. next of from comes

Gautam Khanna

presume changed impact, you the round of out the and moving has elaborate not I on would with is EBIT imagine but the you because I Hexcel you're the if on what could EBIT if captive other numbers the hand, what JV. if JV? into there's going to could Patrick, income, to I'm that's any work just equity the Hexcel, a some related in reduction work curious the net give JV to it's get

So Xst respect of January what to that changed sort on with arrangement?

Patrick Winterlich

XX that skilled for mean, evolution work, But less work lower the on of moved our lot I a that to over. Washington January and journey what and was end complex, it really after JV. planning education transition to efforts it into still margin lower it I changed the Well, Xst sense journey it lower happen. multiyear made training over product decent, venture. of years took but margin, facility move two-year out Kent, or joint just mean, to and a that was the to has of And

imagine, the very We would it the into business, foremost, the to actually Kent already Washington that out the XX% and to grow. are plant I simple put income. build-to-print a JV, Ken, we're more are margins seeing average other, which new profit which that of expect new work of programs XX% to and over sort going going first expert bring we're a we hard, more facility. that it's what is residual going to more to raise does very very platforms good strong facility. opportunities, it, become Military and And the we years. yes, tax, of In at work, partner. received And It's efficient type after actually and

worked I'm positively But and and moving new transition, a with at as We've give I very EBIT on up on I in So, it's margin it's out, not Kent mean, be opportunities production good the outcome. pleased a into a specific lower-margin we're Boeing the to transition. and down position or new number. time. higher packages moved we'll over that's say, work a fundamentally,

Gautam Khanna

the you're to what actually Maybe of asked terms a quantify in product something sense there accounted in or of so just a growth way, XXXX, overcoming different what of into work that that way as for XXXX? maybe you is revenues a headwind drive we kind have --

Patrick Winterlich

it's that if kind was now through that year-over-year greatly and I the of would then transition replacing, mean, said But the in probably I But back larger the XXXX, obviously number. we $XX three shape the it. impact. I order in softened was million that's of it I or go gone mean, years, now are it much if a two pandemic, and

Operator

with next line Wells Sison Fargo. is of Mike the from Your question

Mike Sison

over you forward. sort sound good up customer here Nick, to provides last back planes about the of next how much or and is. to us pivoting the over shaped And years, that just how growth the could backlog going you growth excited of Hexcel curious, has remind hear so maybe several backlog that year

Nick Stanage

era. a OEs XX years the of stronger And there's parked. aircraft believer new be airlines older because Airbus position the lower Thanks, to a obviously, all And new precomposite than the those at still adding production aircraft than widebodies. years. of placing new that's of these orders, new. and And especially adoption is a aircraft, metal fair doubt during narrowbodies of replaced and Boeing, by started the and a efficient seen, and Well, more have no positions backlog, those less that's as are and them percentage am or amount old Mike. probably large will both have that I percentage much a there we good the platforms, you've

is So, the strong. I very backlog definitely think

will to move Airbus both a there's And continue is and for the increase and travel soon. well. happen reasonable at see to currently, Boeing, will to we the waiting rates on to then, orders Widebody get the pandemic the those levels, we obviously fairly international narrowbody. come back As and borders which in think as

Operator

with question next Myles line of the Walton Your UBS. comes from

Myles Walton

color second the the holds was really margins the not quarter. through incremental sort keeping Composite but at sequentially. quarter, on look fourth that in the has step you I also sequentially there the Obviously, quarters. better maybe trend the if revenue particularly I last some margins through mix growing wondering the been third few course know nicely, Materials, but of was of a quarter

I -- of double-digit get mix So, XXXX benefit shift occurs you there half to that don't first Is it's margins? particularly to in Patrick. a know those if the maybe

Patrick Winterlich

as confident We're quarters line. I the growth the I going next our mix bit impact. Well, are a a myself, that, Within general leverage Myles. top three not opportunity. straight double-digit yes, moving guarantee every a see year and steady the can't is we And I'm we're repeating grow. adjusted life go mean, to into over two, up? margin to line as as they'll on. probably Hey us gives I'm as is probably XXXX, see mean, continue lumpy. years margin good, be goal. incremental operating income XXXX, quarter and unlikely. we're margins our margins, going goes clear But I that's into growth Will going then, to to sequentially strong and drive there

clearly double-digit simple is So, on margins it. to put our Myles, a way radar, are

Operator

line of the Your Paretosh final question comes Berenberg. from with Misra

Paretosh Misra

labor the answered, of maybe question have earlier. been questions Most just to going my but headcount back

for year, increase do your the plans have currently plan this So, in not the headcount year? or that's labor to you

Patrick Winterlich

headcount going sort to world. our line mean top is absolutely, with rata I our around I increase. increase of Yes. mean, pro headcount the will direct [Technical Difficulty]

direct labor. variable cost labor, So, our our

as using a productivity much hold but said on savings going Our as through the in we're some will increase before, to as very-disciplined way. And efficiency extent, overhead operate label also possible we and to to and that of to technology as pandemic. we're and part mean, will IT the ultimately, than before But to be comeback. go up were headcount looking But productive efficient. be we more overhead more I

Paretosh Misra

Got it.

your that's year, And for I guidance already so baked into this guess?

Patrick Winterlich

Yes. yes. Absolutely,

Operator

you conference concludes call. Ladies today's your thank This and gentlemen, for participation.

You may now disconnect.

Hexcel (HXL) 27 Jan 222021 Q4 Earnings call transcript