Earnings call transcript Q4 2022

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Operator

Good morning, my name is Emma. I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel Fourth Quarter 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question-and-answer session. Instructions] [Operator

Winterlich, you Patrick conference. begin Financial Chief you. may Officer, your Thank

Patrick Winterlich

Emma. to call. earnings Welcome morning, Corporation’s Thanks, everyone. XXXX Hexcel Good fourth quarter conference

Act beginning, Securities call. forward-looking forward-looking meaning statements XXXX. to may I may of make Safe the constitute course me statements Litigation contained we provisions everyone of of in the this call Harbor any about the the statements the Before want to related Reform during let Certain Private cover within remind formalities. this

They could results caused from factors to involve SEC Such and a by company’s and uncertainties materially the today. filings estimates, assumptions, release. cause judgments last factors variety of in news are our differ or that forward-looking statements actual detailed future outcomes night’s

will Investor this on available website. our of Relations of replay the A call page be

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

on request. your this consent Your constitutes that to call participation

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

turn Nick. over call Now to me let the

Nick Stanage

travel both joining results. in Thanks, XXXX, us full and robust everyone. experienced growth to key in strong a you has return of And a welcomed we rebound. markets share especially Patrick. Aerospace, our Good XXXX thank fourth Many today morning, and for air where quarter as year much have Commercial seen

challenges, and tight have been year XXXX. also and Defense a pressures grown strong markets a chain nicely supply Space have over market. and Our remained labor of There’s inflationary

needs achieved delivered roughly improvement over focused up annual XX% a faced. the and XXXX. a on headwinds overcoming remained point and has revenues basis meeting margins, step in our operating XXX double-digit customer’s Hexcel We

see fuel simply that new it to airlines to and The domestic we and international reportedly cannot are returning globally, factors high as meet older load for strong crowded aircraft airports travel planes are efficient, demand. both travelers return because are are and into enough passenger now service, not they and recovery fast appealing to airlines with that get

The I sustainability to the that for lightweight to positioned from and and strong better continue tremendous believe materials new more enhance growth for to opportunities decades advanced continue is aircraft company Hexcel will benefit composite no fuel pull than are for are that efficient. Hexcel do so are enabling come. intensive, to

Boeing, celebrated goes from Martin, we list In numerous including Airbus, and CTRM the recognitions on. customers XXXX, supplier times Lockheed Composites, Sunseeker with Aero

these challenging better. times never has Our throughout customer been intimacy

several when it, So over asked, are many past just times the how are others months keep Hexcel does delivering doing customers struggling? have how you

done ensure to us succeed, I commitment give position prouder customers. not team. in phenomenal we wavered focused of be the beyond, job. never an for not They and that They a above our further as to go only the remain one their course, Hexcel and to they future. our stay to but incredible credit have could team I

in to release last specifics turn our let’s Now earnings reported some night.

quarter are fourth $X.XX, was fourth year quarter to $XXX XXXX. than of sales then last XX% compared results the will First, $X.XX the quarter million Adjusted and XXXX. cover I year. in EPS QX full diluted higher Fourth

XXXX constant an over quarter. past sequentially to in more markets represented Turning to almost QX million quarter of $XXX compared our and increase currency three Commercial XX% when up fourth sales in of than Aerospace, XX% the

market. six realized sales now in have growth double-digit of We quarters consecutive this

and to continue the fast compared jets allows. the Virtually to in Other the Business chain as is as business wide-body platform to fourth and customers jets, quarter increased almost QX XX% regional growing jets every XXXX. year-over-year. narrow-body both supply grew Aerospace Commercial strongly from ramp to

well as the from benefits composite next-generation customers materials, commitment to our on as new As the Hexcel for and with recovers, programs. materials market penetration processes relentless continued our innovate lightweight of

of across a in geographically quarter growth true serve and fourth Defense, submarkets million the $XXX and was Space and represented growth the broad-based programs same XX% with in we constant U.S., in increase The Asia. also is sales Europe currency. year-over-year This in

were see U.S. us platform years for rich We a Navy production This heavy the confirm as to next all pleased composite top last quarter few ramps. defense CH-XXK become helicopter. production lift for the will in

down $XX X% currency. Industrial of year-over-year million in were sales constant

changed has legacy Given the prepreg economic glass our have energy the for wind limited. pressures, products structurally opportunities industry and

have wind in our in our we European XXXX of stability on market. seen However, half focused business the second

from away marine is including consumer markets, pivoting automotive, other Our Industrial wind energy electronics, to business recreation. and

some earlier wanted from sustainability us November our the have to in award specifically that year Airbus I customers I mention Space. received and we Defence this recognized mentioned of and

granted from recycle announced to European award Hexcel a partnership fiber to composite XXXX offcuts Hexcel’s The in and Fairmat prepreg recognizes we carbon our customers. with operations

collaboration, industrial key lead The a important in markets. in It’s an relentless future that a offcuts with are recognizes will the reused innovations sustainable award more customers us our pursuit for in our of panels to composite manufacturing milestone an in that sold partnership all.

compared almost to Now Adjusted as up income XXXX a was sales year $X.XX $X.XX XXXX full Sales results. almost were XX% doubled percentage diluted in currency. for year-over-year results. is XXXX. year which was constant our billion, the of our let’s EPS to Adjusted operating XX.X%, $X.XX, in turn

of Commercial AXXX jets. Aerospace business markets, year-over-year for sales and combined Commercial by were growth strong our other programs led by the driven Aerospace about AXXXneo with XX% In Airbus

we XXXX order strong We by are encouraged for wide-body. both and as activity narrow-bodies begin

in growing XXXX XX% total for more aircraft X,XXX XX,XXX in Our two up than with Backlogs Airbus largest Commercial and Boeing. and delivered are Aerospace customers, combined XXXX. over aircraft Airbus Boeing commercial

meet we again their increased they great reductions and part refresh achieved ordering emission with passenger by which and is to components meeting lightweight composite materials. growth for fuel increase in Airlines fleets heavy their as goals sustainability are to toward as greater replacing in efficiency, demand strive metal

for as demand international XXX United and for jets the especially for from Airlines years order largest MAX wide-bodies Boeing XXX travel. XXX The for XXXs increases, recent order reflects

to With the rapidly, expand entry Government lifting requirements, for strict positive commercial is Chinese factor within demand. cross-border another COVID recently travel aircraft expected China air its new and

Now a committing need around turning global the to of invasion a and see defense, that to with Hexcel governments products us world benchmark leads as XXX to future. to increased opportunities diversified programs, and the for The and on increase defense we market strengthen national which foundation over composites Ukraine, tightening the Defense. our are and concerns Space over us time. result, this for provides in spending for strong a are

a by impacted in decline negatively of the were energy was growth business, Industrial markets. variety Other sales in Industrial wind which by mostly Finally, offset

stop prepreg of industrial Tianjin, energy production in our wind in end closed the that we to plant in decline to the At a XXXX, led orders in wind China a year. earlier due energy

Our business XX different legacy business. suits markets wind Austria, including Industrial from over manufacturing a site in

European period forecasted for contracts. stable a to time, blade wind legacy is by remain supported business of existing This

we manufacturing maintain While operations the in to a customers region will office to longer no our including have serve in we COMAC. sales in Shanghai China, continue

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

operational production Decatur carbon qualified will construction completed, we we in the line facility combined the home Alabama. XXXX the to production. the new reinitiated is Decatur, With coming be the years, for aerospace-grade in have demand forecast plant fiber When carbon fan the should first our U.S. carbon fiber business line This and and fiber in be a line across on in increased

our to growth per in Hexcel $XX.X in announced years, confidence in quarterly cash to yesterday generate and the $X.XX Reflecting to the share. increase return our from our Board coming an capacity dividend

we night, issuing in release last are with news As the revenue growth double-digit financial and guidance sales EPS. XXXX both

billion $X.XXX with to XXXX billion adjusted share $X.XXX to of in to guiding $X.XX sales earnings are per diluted We for $X.XX.

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

I Now, over it the turn to details to Patrick provide numbers. will more on

Patrick Winterlich

you, Thank Nick.

in sales dollars. the majority a our As of reminder, denominated is

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

to the As dollar translate our the our the benefit and -- sales weak against also a are net for is Conversely, our margins. a leading a translate translate our while lower results. lower, result, costs dollar headwind pound financial to a when euro strengthens

a We to currency hedge operating over income. XX-quarter exposure horizon our this protect

are over currency a results As changes financial into result, time. laid

and As are removes provide which impact sales comparisons to the the I a thereby foreign sales. in will constant currency, exchange year-over-year reminder,

XXXX our three by Business to regional Turning Fourth quarter million grew fourth and XX% quarter from quarter Aerospace Airbus of strongly growth Boeing encouraging XXX sales. jets Commercial strongest Commercial and increased sales MAX. followed markets, of year-over-year. $XXX.X fourth of The total grew both AXXXneo Aerospace to the represented approximately the XXX and AXXX the XXXX. compared XX.X%

with space. the million, growth same of sub-sectors Space fourth the and including totaled XX% broad based all was rotorcraft Defense globally XXXX. quarter and our XX% increasing of in Strength fixed-wing period from various $XXX.X sales in represented and

comprised to the sales of of sales. compared sales. XXXX totaled fourth million energy fourth X% lower quarter XX% XXXX wind Industrial quarter on Industrial decreasing $XX.X

For but of period, in still quarter the no was fourth sales somewhat in prior year challenging, energy as XXXX. year-over-year were wind wind they comparison for energy, Asia fourth the the quarter sales

half with Other was quarter to Recreation from stabilized the quarter the of sales energy Wind fourth third XXXX. automotive virtually of in unchanged. Industrial the whereas grew and year-over-year XXXX sales second sales sequentially unchanged

challenges inflationary is related in On leverage, sales compared a driving cost was XXXX. remain fourth volume quarter XX.X% fourth headwinds. consolidated XX.X%, basis, the a to and operating of less the the workforce for pressures to gross although productivity margin quarter Higher experienced favorable

these Additionally, guidance volatility. in months typically and and this XXXX. energy pressure to are built costs for into assumptions for by minimize our working We near-term forward continue are contracts do margins we locking XX to

saw percentage XX.X% XX.X% administrative and As current a quarter in sales, the quarter SG&A expense. fourth to fourth in a The and quarter, low rebalancing quarter XXXX. third of expenses the of R&D of selling, general were unusually expenses an compared

SG&A and XXXX. XX.X% XX.X% were in R&D sales sales, to the For of year compared of expenses

to fourth $XX.X impact exchange of operating the the in adjusted sales. The by approximately XX.X% quarter basis in Adjusted favorable of quarter million income year-over-year income XX rates fourth was or points. operating was

square China The plant under was of not impact The size Tianjin, closing wind financial plant energy just is material. the XX,XXX feet.

of small Most fully primarily the the assets Hexcel. were and were related. for So charges incurred severance depreciated relatively

year operating turning period year-over-year of comparable margin higher generated a sales support prior two The capacity Materials operating segments. utilization. XX% Composite to on the our Now margin in segment X.X%. sales was total XX.X% strengthening represented increased The to and

comprised operating sales Products margin operating segment, XX% of favorable of margin, businesses and comparable mix. total the X.X%. structures generated a prior represented period driven engineered and was sales our in is Engineered which core The by The XX.X% year

The of XX.X%. fourth XXXX rate the quarter was effective for tax

profitability, rate rate tax effective changes in as full year of For the was XXXX the in impacted in XXXX. effective XX.X%. geographic the allowances Changes well as tax mix valuation

capital Working generated a million, compared XXXX was XXXX. by million Net a cash XXXX support $XX.X operating cash million $XXX.X was to $XXX.X in for increasing higher activities use of sales. to in of

expenditures Capital core XXXX, for $XX.X Morocco. at construction to at the on for City, of an XXXX, and our growth largely innovation basis million fiscal engineered with facility our the expansion year year was reflecting million center Utah Lake the accrual R&D of Salt new $XX.X the Casablanca fiscal compared facility

cash XXXX. favorable offset to cash was fiscal In million of fourth capital growth the capital free higher the our supporting million was Rising working with flow for Free cash expenditure year generation, quarter was along million. and in partially higher $XX.X was for $XX.X XXXX. by $XXX.X that flow XXXX, is sales XXXX generation profitability

of XXth XX, to repurchase with of February authorization quarter XXXX. Board as common yesterday December fourth during XXth. dividend a purchase quarterly We under February payable record reprogram did $XX.X Directors not stock any the a was the of share XXXX, stockholders million. on remaining The The of date $XXX declared payment of

guidance. share details XXXX to our additional like would I regarding Finally.

flow As diluted to we range billion free Nick billion, of $XXX forecasting and EPS the of in than range stated, $X.XXX $X.XX of million. cash in greater adjusted $X.XXX the are sales to $X.XX

the the line Accrued as are $XX the range the center capital the of expenditures, facility our of forecast maintenance in expansion reinitiated ongoing as forecast This in on completion Salt work Morocco. and the construction, expenditures spend in our City fiber capital million. Lake R&D of to well includes related

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

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

sales total XX% We Industrial expect XX% comprise to total we sales. approximately Space Defense and expect of to comprise approximately of and

levels. similar depreciation we to Additionally, to XXXX remain expect

those much of energy forecast minimize for any and our on [inaudible] of needs volatility markets. XXXX to We have price impact in margins in the experienced trial intended locked our

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

exchange more existing that hedges. than exposure guidance. earnings exchange approximately to into Our hedges, incorporated foreign our on tailwind today. have be We and relevant Based in on our in forecasted exchange X% forecast impact a is net rates foreign would XX% hedged XXXX movement $X.X XXXX is estimate a our million of is

expect the tax We XX%. approximately in to XXXX effective rate be

With that, let call the back me to turn Nick.

Nick Stanage

Patrick. Thanks,

to propelled it that with questions, had the our of our in you history. pivotal celebration people to that I and Hexcel the year-long to have XXth earlier our to to moment moments month this pleasure turn and significant over I share Before of this the welcoming a past set wanted the team anniversary stage for us I in

that back also look next five become all This shared at opportunity anniversary. but can or us and to the XX with a only look years, years legacy our we from to rare as years now to company celebrate when anniversary Hexcel will XXXth XX our ahead in provides a not

Berkeley Hexcel into a completed resin. at who US took in graduated of the had in history workshop rich and recently mechanical moved California, industry service aerospace University and from fiberglass, with and changed Our the basement XX-something-year-old diverse. forever in that some honeycomb-dipped is $XXX engineers two Navy the It XXXX was

of the have materials strong, never our innovation years, with Hexcel, changed thing the for was first portfolio lightweight a And in customers. broad for time It our that’s our has although lightweight. has of and and building world founding, and we much XX continued changed since one

We have better. the world the for changed

challenges than Over more its today mergers to continue building are and and XX XX-year us we that we all that strong history, has acquisitions. been have completed Hexcel the for All a the reflects in foundation future. past

the industry XX XX will of importantly, future. our has leader sustainability. been that has lead future for the continue more. to and people and Hexcel most are at profitable the products, and sustainable Lightweight composite least years to a knowledge, Hexcel deliver for composites the

Emma, we Thank you. are now. ready to questions take

Operator

from David [Operator you. comes question Strauss the Thank Instructions] line Barclays. first Your of with

open. Your now line is

David Strauss

Thanks. Good morning, everyone.

Nick Stanage

morning, David. Good

Patrick Winterlich

morning. Good

David Strauss

how mid-XX% looks you correct? in touch Could in that’s on are talked here? previously back get $X.X to implied when that margin guidance is back about outlook mid-teens XXXX, about range, to for the incremental you the implying you thinking somewhere to revenue, you margins billion And from getting the still like are $X.X the billion on margin it you have progression if

Nick Stanage

Yeah. David. Hi,

leverage So, that the I firstly, yes, we shape mean, you are in that seeing. ballpark is kind of the are

that’s built can You math the into our do guidance.

And agree are I incremental we as going do with volumes mean to I it as we strong margins continue will mean, can we the So drive with I always as would that. then, push. caveat we to there, and

that do as as So we we can. will much

a sort resins we have We do hedging I freight, major expect very to cost relation minor our and do called materials, of have on we in we fibers in and I I mentioned out, of exposures guess some Europe. I do energy, acrylonitrile, job our around good the in range. energy analysis edges the And but that, raw and mean, around mean, long-term it headwinds hedging FX inflationary the for packaging, it contracts

as grow we targets And we plus mid-teens as XX% those can, billion push yeah, in are $X.X margins continues are next XX% $X.X couple not right years on so as going the towards up challenged sort of up those are that, giving to revenue range. we and billion, to hard but and now, more of especially a to range the

keep makes driving, there tougher. a that but are will we it So today headwinds bit

David Strauss

capital a have paying still obviously debt, repo share down year, of How increase, dividend you the what from you we on deployment yourself in program. announce buying do are obviously, Thanks. been that next going would to to stock? the about should think terms here, might back you you the cash see getting bit have And of authorization you you with back generate Okay.

Patrick Winterlich

Yeah. the I same. priorities remain mean, our

going for comfortably out years doing called now. should organic our CapEx XXX growth, We after few of be we a but level are always we under look now. are that as to that We

M&A is on our definitely agenda.

We focused growth. But to positive and the $XX opportunities. what as are we very We announced of meantime, dividend XX% that increase, $XX.X. part we for see disciplined staying the believe is our in from a

if come of to going cash cash, And our yes, flow. stock going repurchases starts years agenda will lot year, the to onto next start come in. a two This to to or year, generate are the three it’s next we

stock I some and to that I dividends disciplined at undoubtedly, expect is we would stock And balance how emerge M&A point, staying in with would repurchases some then look repurchases at increase are it. but

David Strauss

Thanks very much.

Operator

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

is now line open. Your

Pete Skibitski

morning, guys. Good Hey.

Nick Stanage

morning. Good

Pete Skibitski

you speak raw Maybe pass to on kind inflation you to hedging? of is, the you also could to hires And understanding the ability material up sort two of expect take learning that that get -- and to can of new your hires part curve? you new have and the how long you all kind to through it customers do of labor have made, that Thanks. then

Nick Stanage

inflationary in we of, mitigate job to about materials for and mean, of I we a pressures just we terms saying, inflations not have have raw but to them. the David, we even key raw our I So some are talked and good impact, material do as was so immune the to seen

Energy are probably are and however, see we dissipate. we costs, are in starting saw to Europe see XXXX we going think in pressures bigger to inflationary hopefully, I it XXXX, high.

and which manage take have can pricing. advantage and of of to or long-term through with to we it have lot formulas wherever pricing that work cost pass obviously we customers to sort a us we our of do, that we contracts, led of part pricing sort we increase can cover increases those Where of some through

tends Industrial, through just have more straight we formulas. flexibility that flow to

efficiency So the productivity and we pressures. lot the some overcome time but we price to do have a taking inflationary of are manage increase flow-through, and

In focused years nine as hard terms five-years, of but working of labor, are you accelerating as someone and as months are on we three can’t or months, we and it. experience in give six can training hard

And high and in end strong we ability and out really demand the our QX, the called the certainly By quarter. of very production in saw which we output, out by sales. fourth saw a QX, we encouraged to the level of we of get underpinned the were that

are not fix training, through working and it we it’s a on still on So pushing short-term working XXXX.

Pete Skibitski

cut time. guys the a you minute Thanks. it Sorry, I out pass on. appreciate for there. will I let

Nick Stanage

Thanks, Pete.

Operator

Your next comes line from with the Sheila Jefferies. question of Kahyaoglu

Your me, so line apologies. Pardon my is now question, next open. oh,

Unidentified Analyst

[Technical Sheila. on is this Sorry, Difficulty] for

Just narrow-bodies the and organic ramp versus the are disruptions from about XXXX, given of low-teens growth on MAX XXX? sales how to contribution the in thinking you wide-body

Patrick Winterlich

already have We given.

Nick Stanage

I I question, heard think the Patrick.

Unidentified Analyst

Hello.

Nick Stanage

with Sheila, Airbus respect if and are we wide-bodies the we AXXX a obviously, content to XXXX. you to more seeing XXX and on coming back that AXXX, boost look, the have what provides the nice

with chain, chain. rebounding MAX grow to and limited expected supply Similarly is their the supply the is XXX just Boeing by stabilizing and

not percentages those pretty are but to se per are the give you platforms. going in we of both So seeing narrow-bodies we versus growth strong wide-body,

Unidentified Analyst

Thank you, both.

Operator

Ron question Bank from line the next comes America. of Epstein Your with of

now open. Your line is

Ron Epstein

at you spend curious you some that? quick of than what on one going where Boeing the got technology internal a looking the moment. a you end think When Good just just out while do Hey. to funded morning, how and Maybe new years a maybe really have money the about investments decade, are airplane on thinking or in not couple pursuing with on even incremental other you the need on of you are towards maybe about How about next they over think what guys. technology. thinking and for

Nick Stanage

aircraft the Ron, Yeah. cycle is seven quite commercial years. remember eight long years, so for development

So material development well takes place obviously advance. in

know that we don’t spending I incremental. So are

the opportunities processing ability are lay both form the mechanical well capability for We appropriate the the we as standpoint, parts from to level materials, as and spending for see down what faster. a as materials and next-generation

aircraft, penetration So the aircraft again, and in Space a potential all seeing solely opportunities new we to materials. in next-generation new seeing penetration and a we is Defense business are are and jets, Airbus unique, require or that Boeing

we And pretty are again, much agnostic.

assets is for and our development a our Our it getting center our is all our fiber certainly key R&D markets, focus across appropriately our and investment, Salt run staffed applicable and all of done on in so getting front Lake our continued driver on future. and center a products, City of

Ron Epstein

Great. Thank you.

Operator

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

open. now line Your is

Myles Walton

morning. Good Thanks.

Nick Stanage

Good morning.

Patrick Winterlich

morning, Good Myles.

Myles Walton

which Patrick, rates. I you end back XXXX, can market for gave growth think into composition you

And lower and Commercial end and XX them markets were so Commercial correct they call seems the look than did bit I seems up anything if to wrong, a got stronger right, Defense are are it Defense little alone, but I there? me about guess, a growing XX, otherwise like expect those out about it with and

Patrick Winterlich

No. Yeah.

the a Your pretty saw and math I growth still perhaps, certainly still run rate the the good. is we largest it’s Aero, Airbus slowing is good little again. solid bit it’s Commercial in the mean growth, of but portion XXXX, majority is from what

Defense, and seeing still up. strength CH-XXK, are of a lot we broadly very to is general continuing just F-XX creep Space

moment. We mention a pull budgets, I also some the probably such what robust, then of going military broad remains again, guess we lower have a at got given you but just are up Aero growth and should Commercial the business military I rate. across and spend lot expect a base there’s and European jets

Myles Walton

rates of XX beyond beyond growth you that you of XX is your… is about the expansion kind formula at one XXXX at XX maybe program was started Decatur -- versus an And on beyond on and the this CapEx of efficiency those don’t you obviously, side AXXX need XX, the think what eyes Is you more Okay. or thinking beyond growth XXX those primarily it when the that. gone and kind that for year focus were of you about starting the was

Patrick Winterlich

It’s a Myles. combination,

just continuing put military a increasing with going demand wide-bodies we to something obviously talked Bolton XXx have we that’s our Dassault the jets, composite to as like up, for see the to creep products the is wing, pulling. business the about So but

come see is programs XXXX So it wide-bodies, some and extra we in plus the really pull XXXX, program general growth of growth. sort in some new

Myles Walton

All right. Thanks.

Operator

next comes line Spingarn the Melius Research. from question with Your Robert of

open. Your now line is

Robert Spingarn

Good morning.

Nick Stanage

morning. Good

Robert Spingarn

want get narrow-body was the just you I on hurdles at what what things what on I throw this maybe wide-body in new monologue and about, on and -- such can follow-on Rob ask bit while secular well? you And to to GE am some program are I aircraft your on CFM talking XXX-XXX thinking point, story to like bodies or with you and and Nick, is wanted because narrow a near-term rewing technical touch with as the is your the you ended little I like there the a no about horizon, then opportunity specifically. of will why are and I RISE know AXXXneo,

Nick Stanage

airplanes Yeah. they to Thanks, develop and narrow-bodies the or penetration the Robert. composite happened latest Well, entitlement wide-bodies, AXXX, that weight. there the is XXX wide-bodies. no can’t reason aircraft as total in XX% are be whatsoever a that Remember the and are similar approach

signs composite market If the and you that. doing Falcon our what That’s narrow-body you perhaps next has new bigger. to just and of is wing. And Dassault can technology at grow at a that look entitlement, the Look even the enabled technology XXx. with see

more seeing pull and are So we for composites. more

whether are but to way the is processed, the that not fiber our only it doing We customers way composite make are the on seeing performance the we able of products, are development placement, mechanical our and and the of way or they fiber are it thermosets. tape a autoclave or cure autopilot, down in or our whether thermoplastics it’s combination able it’s lay parts, it, to

of total optimize total customers to our sweep that next to have new the aircraft. that array, we enable So products

Robert Spingarn

that, to think offering us to closest product the peers? follow-on a as than way any there your So, in for about differences relative is your

Nick Stanage

diversified. aerospace say I and say, thing we largest Well, we amongst the I’d would -- the first in are industry. vertically I are is, the integrated

at If the woven you pan structures. way all and portfolio honeycomb core, to our and unidirectional core, look woven prepregs, engineered fibers, products, of

what our have peers narrower and they If is you band. at to offer look much a

direction Now, the sure we we and I at are customers where lay to but like processing appreciate provide to the to pace and are like improve am performance, the similar I mechanical I recognize think the value them working for I they going are. and moving and are down, our technologies moving, long-term. are improve we proposition we

Robert Spingarn

it. Appreciate Nick. Thanks,

Nick Stanage

Robert. Thanks,

Operator

Your Stanley. with next the line Kristine Morgan of comes question from Liwag

is now open. line Your

Kristine Liwag

Good Nick. morning, Hey. Good Patrick. morning

Nick Stanage

morning. Good

Patrick Winterlich

Good Kristine. morning,

Kristine Liwag

follow-up plans, on wide-body working you by to today XX XXX XXX% look they and XXXX, go rate per at demand. production XXX% X.X per to and from kind Maybe XXXX When a month Boeing’s increase. with to a that’s are going that month X.X of

the up volume guys CapEx seem since you you. for would You that it already have in meeting easy place so relatively were should like step pre-COVID, higher from the rate a be in

be easy-peasy is how we ramp up or are just this see considering we want So mind, as the CapEx already? to understand, there any that should in hurdles want to place in keep the

Nick Stanage

above I’d the past our that make the define we in even ways, driving not productive productivity challenge it ramping we but had always not as efficiency go Well, opportunities and team new always is sure going and and do and easy, way challenging, and beyond I to it and growing am more new characterize forward. decade, up us to

To your to point, expanding assets how that’s put and the growing. Knowing fairly straightforward. the in ground

have we know that times numerous our do in various We countries replicated well. assets to how and

to teams make our commitments. and we execute processes manage great got and based sure have on and We deliver

the say Patrick on I’d and touched curves. training it,

on efficiencies terms of processing seeing on is the We focus of going we and efficiencies. are product, in That with the although we and team more new that rapidly. really their climb a challenge knowledge running number significant are are and we And have ramping are fairly we that really our forward. work up, and

how track record have nothing a we and on to think of it, know our do before, delivering done it’s a it we I to special, good just we to commitments point, it’s have pretty your on And executing. matter So executing plan.

Kristine Liwag

in do to high benefited advantage? have think and Thanks, that when XXXX wide, carbon that success Nick. to been growth. how your think you timeframe, your carbon entry, you competitive evolution of have that on Is barrier substitution the addressed the But metal mean, market technology? That’s the if some sorry, very modulus traditional questions versus fiber. that thermoplastic sense your clear you do have products operating about Would on next-generation at of evolution. And carbon indeed long-term when you really narrow-body you takes a from How in a benefit history. terms That’s in same fiber fiber look in also earlier for of thermoplastics get carbon share of next-generation intermediate following more the we I you like helpful. fiber? about in that your you your share and

Nick Stanage

thermoplastics mature are thermoset are What technology not promising is as go. to has we that have Well technology. a as it Yeah. ways clearly we and

We that technology. are working on

that We customers. products of from overnight. are I thermoset to don’t going moving our to there’s technology demonstrating transfer thermoplastic a believe And with be mass

suited offer thermoplastic, help I think there that we both, customers our are have. are on the can for better for be solution is applications we the identify suited will based and that love they I why position our better again, optimum thermoset, that application

noise even technology technologies down when down launched, it’s be honeycomb the every new that ready think, advance or day be road. to So, or it’s road, is aircraft will all again, and whether how thermoset, thermal those going of more function the and thermoplastic core because I far continue a to management just suppression

Kristine Liwag

Thank you much. very

Nick Stanage

you. Thank

Operator

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

now Your line open. is

Gautam Khanna

quarter. Hey guys. Great

Nick Stanage

Thanks.

Patrick Winterlich

Thanks.

Gautam Khanna

just I and pipeline evolving on there, anything yeah, if wanted comment you of but, that? -- anything ask M&A interest to you could just

Nick Stanage

Well, slowed we down, never Gautam.

value. portfolio, serve more that customers active function. have technologies our would business development got We allow look better will to provide We an us at our enhance

active pipeline. So we an have

acquisitions, technology priority may those of list. you changes actionable, of some details over are into on can’t actionable names, bolt-on be Obviously, type Bolt-on them get on may high our any I not that but imagine time. and can type targets be

have we one balance we long-term. constantly but at what against internal So the or opportunities near-term it’s of what deployment clearly potentially our capital versus and see mid-term not we we look developments priorities M&A only

Gautam Khanna

desire any it, aftermarket? want curious call just to while back was pursuit -- the I the you into a or move was there with Woodward to whatever the

Nick Stanage

we efficient announced Woodward XXXX offering unique, again, we Well, companies optimized was a worked customers of equals really pandemic. the to more and and of to because for in solutions. abandon That in game the the advantage early which our changer had and very merger that then both in XXXX, of

Aftermarket It of to and certainly business is a be nice drives or from aftermarket macro solutions is And efficiency stabilize our tied but strategy our driven away certainly to That’s our of helps to don’t is can and make events. we diversify there around sustainable forward. meet priority. that piece requirements that innovative lightweight, But markets some during all happens help not customers type what target great. that. going different it’s strategy, we if their a attractive,

Operator

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

open. now is line Your

Mike Sison

Nice guys. of year. end Hey, the

slowdown there there? in of Just just interesting downturn is a do an are inflation. the still think curious sort battle meaningful U.S. us pause the that the seeing How time are thoughts time looking your to you a this for indicators the if pundits pretty bit, for industry but around, affects and most U.S. in

Nick Stanage

has it and Yeah. Space Defense. certain a Mike,

that market economic impacts seen is see recessions the segment short-term have fairly We to that resilient same. and we or

customers out looking at we strong may you supply the are if look at areas with hands little demand coming Commercial catch-up at enhancement challenges, are help a and look actually perhaps, you in if and other if a you pandemic, an be supply chain for slowdown new just in where Aerospace to them. the that the the of look aircraft chain

So see no minimal impact short-term Commercial to markets. our we in

segments. Industrial Even our in

If sports, performing are the focus or recreation talking to it those applications way that high on are are whether to pretty you automotive or and you at tends we marine end, strategy really the high differentiate look resilient our recessions. and

looking Goods and impact not be what based see Electronics we on Consumer do the right we of impact certainly there today. significance could now, at there. an But are

Mike Sison

Great. Thank you.

Nick Stanage

Thanks, Mike.

Operator

question comes Michael Your line of next with from Ciarmoli the Securities. Truist

Your open. line is now

Michael Ciarmoli

growth And If results. rates? morning, to I taking Thanks just strong Hadn’t a in I really of Aero, nice back change to question been and and can current guess I really you sequential had quarter. guidance go rate guess, the in the Good midpoint implied guys. this Hey. much uptick for the sounds the later, perspective, just for mean, at I to it that rate midpoint. from that like bit to cadence thinking about? a revenue I anything to run seems the mean the ramp going flattish get through like is be XXXX the to will it a it? way look XX be is be should right but we

Nick Stanage

XXXX. steady will into going sort half of we think the I some growth of see first

what forward sort to the seasonality softer and now of and region XXXX state saw we being future reflecting in we in QX is did we again a that going saw holidays historically of think with likely years. bit always sort happen I European that in the

on I how which the And rates. that will going will think are to see build see the we finishes, is we where with year OEMs depend really that seasonality.

of But another the of to our QX product over effect. seasonality out strong But ability kind QX half seasonal going our talked Aerospace, will bit growth demand Commercial QX clearly out strong and Defense in of we that and fairly But step aligned yes, got hopefully, think again. see, which Industrial. solid Space up the and was will we so XXXX see and double-digit robust underlying a back to stable year. finish what all then is the little to first a and the markets, step I you XXXX year get have you lines, our We about that again And into of are door.

Michael Ciarmoli

$X.X basically that, But be sounds Got inflationary the just to so it. market, are those It some cost billion. confidence like I on grappling level of I And you mean, with are are headwinds. the in clear guess, mid-teens. back the you they at definitely the just

we costs you with battling to of calibrate that of that kind guys higher a maybe bit. target Just around these expectations Should out some just deal had there?

Patrick Winterlich

I Well, our are all guidance you doing, backing are EPS. you into think, mean, I

that headwinds. obviously think a little reflects of the bit I

and time that don’t overly XXXX which want should and a and but optimistic, hopefully to I the give something be normal. of be, come should in as entity, don’t we be I I on think notably compliant more want to return bump out European margins will to us dissipate XXXX then and

talked I much continue are drive are this. talked efficiency as and pressures to going hard drive Nick the incremental are and guidance, to are we in and working that overcome But What about, as the to to productivity there about headwinds aim short-term, we some as But really but we can that. for margins. as to inflationary mid-teens initial

Michael Ciarmoli

Thanks, it. Got guys. Perfect.

Operator

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

is open. now Your line

Richard Safran

one good for fairly EPS, Kurt, Two on free and questions Patrick cash Nick, here, on you quick one morning. flow.

if wanted current You jets outperformance really current had it year. the starts just level good through business for business know difficult the if to jets, you a some XXXX -- this your you all and I be sales could discuss if outlook to think looks like level is comp sustainable?

Patrick Winterlich

Rich. Hi, Yeah.

sales, mean, XXXX so. were XXXX over business see XXXX. regional we of rate guess, continued the fantastic but we jets especially jets I do see I But saw growth strength, in So, the over We up XXXX continued business jets in growth. good elevated to same strength. see too, the mean, over and I I don’t the step expect XXXX XXXX past the

composite out all that Rich they Dassault, older jets. than to are models, new Gulfstream, bring more business the build Bombardier continue

and strength. really So it us see continued good we become space for has a

So we are positive Rich.

Richard Safran

Okay. for am For buffer And capital guide you your are? safety of or working embedded flow your as of as things have above any year to that quick free your and what’s guide. to I at and cash what stock example, year, follow-up on Thanks. I there on, be upside your guide profitability flow might am improve just the here coming cash that generally the guide? kind leverage start trying to XXXX goes being your in to get this is curious just what assumptions

Patrick Winterlich

always be pressure, growing, I mean as hard going as around your of we of cash always push growth topline to working bit I and you bit Nick upward objective. can. have when Well, our are is capital. a got think I that a

some customers on pulled bit growth get of We XXXX. out pain very it took door. inventory kind our the ourselves we a the and of to of got little our ahead out the support and deliberately of We in sales

be, otherwise might go So will it sales receivables obviously than the manage payables. growth less normally as be up, inventory but go will up we

only topline capital will modest keep but driving grow working hopefully, will with So, and modestly cash. growth, we

can our outperform, So Rich. that’s target, definitely we

Richard Safran

it. the for Thanks Appreciate color.

Operator

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

line is now open. Your

Robert Stallard

Thanks so much. Good morning.

Nick Stanage

Good morning.

Robert Stallard

in companies Myles’ look at with are be. what Lockheed, particularly happen at what that saw earlier. Thanks projecting On the is for to what revenue anyway, in Aeronautics, on from that. you I’d side QX defense might AXXXM, Defense, will on look different clearly for sneaking technical up it like and question with other in XXXX the me Northrop, same But follow growth you from whatever because

more So, you I us wonder gives clarity you is a growth seen this if sustainable? you have what and could rate on little give confidence what

Patrick Winterlich

really probably mean, I we in into CH-XXK. about I and it of growth truly year, XXXX. strongly. good strong going continue with is very the last grow keep I to The Well, we we this on mean but front seeing Rob are are what’s year it, seeing and know growth us talking continues that

to issues, we but are The and in a more more, XXXX bit continue F-XX, produce delivery lot but they it’s not grow step-up going understanding it’s the Lockheed to production. going to supporting little a

got as going Eurofighter, a say, would than was actually down, I have the it’s have stability say, and going be bit was in And years going spend if to be to going what asked just is I have then up. is which years across Rafale, European to said, XXXX you ago. you In probably the or you broad have Europe, stronger which would world. the well, go me two even three the have little got, you got

And Europe Space many in very itself robust do, XXXX. platforms we Commercial and based what applications, but the strength as of That’s but more just answer. with general in Space small a helicopters especially broad part while a is going we it’s talk for Rob is it’s to nicely, stepped-up many, broad stepped-up, then across civil the it’s continue about

Robert Stallard

So XXK know there, one us I for is... sounds it’s forward like key the watch there to because going

Patrick Winterlich

is point with at those think some I going be largest have F-XX said. comfortably -- and we again. up two to is. our don’t and the It two is will It be there programs I

Robert Stallard

Patrick. Thanks, Great.

Operator

conference all This attending. concludes call. today’s for Thank you

now disconnect. may You

Hexcel (HXL) 26 Jan 232022 Q4 Earnings call transcript