Earnings call transcript Q1 2023

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Operator

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel First Quarter 2023 Earnings Conference Call. All lines have been placed on mute, to prevent any background noise. After the speaker’s remarks there'll be a question-and-answer session. Instructions]. [Operator

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

Patrick Winterlich

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

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

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

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

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

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

turn Now let the me call over to Nick.

Nick Stanage

today morning, Thanks, you share we as us first and our Patrick. XXXX joining everyone, Good for quarter results. thank

quarter. production Aerospace in We volumes, strong increased robust with a XX% a Our sales leverage recovery increase bolstered demand the income XX% for a margin to on delivered first sales. reflect results fourth operating Commercial quarter by year-over-year, leading overall strong the in up

that and planes backlog at is China passenger a are replace combined by growth Boeing XX,XXX composite-intensive of accelerating despite older, Airline XXXX to lightweight, and demand fuel-efficient increasing for stopped expect levels new Indications year in clear air could travel the The aircraft. to that to strong inflation, and meet for reopens. demand. as now passenger months for are aircraft recent orders many now recover less in domestic fleets demand end has new, not this roughly with Airbus

International than recovering expected. back coming had both and quickly also more travel strongly, leisure and many is business air is including

the XXXX the been options XXX of remains aircraft Airbus orders AXXXneo Middle the aligned announced customers alone, with of Airbus and for first orders remain total During their AXXX family, first different a quarter. growing MAX East to XXX for quarter widebody have ready Asia, Europe, six steady Boeing the Announced narrowbodies, there aircraft options and our from and for and XXX or Boeing. and the including strong and We in the at demand. support widebody

momentum. there labor workforce though to experience, pleased could staying as more provide broader factors, we start positive and these be with required support to are by are and vigilant industry that and We chain shortages challenges customers. the to not recognize aerospace our optimism we relating constraints, tempered Yet in while be supply may in agile XXXX and to such our order

in confidence as strong we is that guidance our XXXX reaffirm provided January. Our we year full

AXXXneo in to Now the million let more provide quarter the Aerospace Commercial growth sales will increased of me Airbus on the XXXX, the detail AXXX of highlight results, of and XX% some Patrick by led numbers. creating growing quarter then $XXX The compared business first jets They demand. more is Aerospace for the first jet outlook Commercial and for material. expanding all than demand more and on for are Hexcel extremely business narrowbodies, widebodies Other composite further programs. encouraging. increased XX% and

including including of increased military with see and approximately growth XXXX Europe rotorcraft. Defense for X.X% Space aircraft our the increased total defense Pacific, of a across period and Defense sales quarter globally, represented of platforms Asia We civilian a one-third & spending, of in first both Space sales. million fixed-wing currency number of & which and $XXX space constant and

that will sales growth lower continues this recreation, industrial decreased offset Industrial sales to of an And by partially Total for in as $XX million general were and growth about currency automotive constant and in sales at markets. us. market energy wind X% Marine week emerging JEC composite fact, of partners due to other on eventually Trade in and cruise and technologies more environmentally quieter Show sector the was sustainable one for work and customers consortium cargo recognized with the World our new of Paris, along Hexcel for marine our a that ships. lead

and for we want deliver sustainability-oriented quarter, we their team thank our talent past focus market the offices our necessary find. to remains time. certainly the Yet months quality products. labor The to One filling jobs have longer operational our and with great both excellence, over Hexcel the several takes floor plant on our to outlook business job execution through tight success our compelling products light culture in As been on I on with with efficiency seekers are our to and and collaborative leading every attracted that ensuring customers as

as do it. do, not how success but a company we Our is just we what

North on to which adjacent Utah, prime largest Our by new City, is plant our matrix carbon decision you Salt Investor in ramping example of invest and supported a of downturn today previous in some quickly how research position Lake down yet and sitting Days. have Hexcel the without and America growth still. to that during our managed development by A fiber site is visited

everyone companies from an event innovation with we October opened. in of now and this about labs March who Excellence our ground officials our and and XX XX on the year, then researchers remarkable with scientists Research of their local for chance state-of-the-art where broke meet We us having Center officially our Technology joined calling and XXXX, employees Customers to and are this public home. celebrated tour center

on and an applications. expand Space become square technologies Defense us for our latest of solutions with broaden demonstrates fiber to and our will floor to also that portfolio. the with of opportunity With industrial ideal our quickly customers us latest feet and the carbon and XXX,XXX platform world-leading research technology. lightweight, for R&T a amazing our innovation composite collaborate and our center technology in aerospace and sustainable space, developments provides about new showcase It matrix is It excellence an

Lastly, as at share diluted read to you per sales in our our billion adjusted billion $X.XXX guidance last $X.XXX in with release news we $X.XX earnings reaffirming of $X.XX. are to for XXXX night,

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

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

Patrick Winterlich

Nick. you, Thank

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

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

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

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

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

markets. sales. XX% Turning Commercial XXXX our of quarter first three approximately total represented Aerospace to

composites in the first to quarter the by Commercial to programs. raised of AXXXneo Aerospace XXXX, production both which including increased Airbus Airbus rate XX% first quarter AXXX early led XX.X%, increased Aerospace sales quarter XXXX, Other of sales, the of the and million First compared supported some that category $XXX.X AXXX led of growing led business I adoption The our exceeded the secular sales Commercial by jet in strength like first is pre-pandemic would XXXX restocking. by levels, business to by for manufacturers. jets. grew business quarter highlight jet which lightweighting

Space multiple fixed-wing and XX% of and and space platforms first XXXX. globally, including to Defense in aircraft rotorcraft, offset increasing both $XXX.X period the military across quarter sales million, from and sales. same continues civilian partially be X.X% by growth The softer represented totalled

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

last we year-over-year. of As energy Recreation, mentioned stabilized other in general automotive XXXX. and sales sales wind industrial second the grew quarter, half

Higher XX.X% quarter gross levels of performance. XXXX. the were strong the and On this a of was consolidated XX.X% first basis, principal quarter robust to leverage drivers margin compared the for margin production in

particularly gross was with a Hexcel number impact favourable a tailwind this to result was was However, there a was as of I for products; quarter due want quarter this quarter of for a fiber-rich and caution reasons; mix foreign absorption increasing margin also sales that dollar the demand strong favourable exchange finished strength XXXX. significant goods the of to inventory; first the to compared strong

with and SG&A a on to compared quarter in XX.X% XXXX. of expenses general R&D the quarter of stock-based first in elevated the selling, past were compensation. first expenses sales, trends, administrative expenses As percentage first XX.X% quarter were Consistent and

year. R&D the the SG&A composite with pursue development more our expected to for were is opportunities moderate as remainder costs on of solutions. we lightweighting So higher new expenses innovative material

was sales by year points. The or operating XX quarter million Adjusted operating comparable XX.X% million was to sales $XX.X year-over-year first prior income quarter in $XX approximately of the of the adjusted first compared impact X% rates period. or in of in exchange income to favourable the basis

operating businesses, of year-over-year structures an our and XX.X%. and Now total the which period. year XX% operating two of strengthening Products represented mix. a Engineered our compared prior prior XX.X% operating well as on segment in year sales period in margin, comparable XX.X% XX% margin higher and income of turning to the sales as segment, was and total generated as sales to volume The The comprised core is production The engineered represented XX.X% generated comparable segments. Composite margin Materials

$XXX cash capital $XX.X in operating with to activities quarter as in of XXXX. sales. of working the the million for working of capital $XX Working and the Net XXXX use rate first of a tax million quarter was capital the expectations support first million effective increased quarter was The for higher $XX.X increase of This quarter was consistent million in used first XXXX. of use a XXXX XX.X%. QX first cash path compared in to was trends

first to XXXX $XX.X million the Capital an basis quarter compared period. expenditures prior the million in were on of $XX.X accrual in year

completed capital flow was Free to $XX.X which construction facility of negative first XXXX in the expenditure disclosed, at Decatur, million at period. XXXX, further to partially prior to $XX.X similar future the previously line quarter the the As cash Alabama growth. million fiber our in included negative carbon year support related was

EBITDA first $XXX.X was in generation, of metric up in million the alternative of adjusted XXXX. quarter an $XX.X first million, quarter XXXX of XX.X% the cash from For

that of revolver you I date revisions and am pleased conditions basically with we XXXX. The to and terms were extended unchanged the renewed highlight. million have know to maturity our $XXX April bank-syndicated just let two key to

the as SOFR from was that base is revised expected. borrowing LIBOR to First rate

refinancing this The other on of our whereas, concluding revised a bank was to net speaks strength during the of leverage the debt banking period group. was change financial is calculation Hexcel a measured covenant as to turmoil support it and beneficial to basis. gross debt Hexcel of previously, Successfully the

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

our Nick As XXXX reaffirmed. stated, year full guidance is

the back turn me Nick let call that, to With

Nick Stanage

the Thanks, welcome Patrick. programs. ramp-up return to in growth and We

never-ending Our materials as which have for for flexibility, benefits new, composite for on the the better, customers of our next-generation to Pent-up well is airplanes, been seats backlog recovers, transparency and innovate loading part materials programs. commitment fuel-efficient as travel up from with expanding thanks and new Hexcel reliability. air customer market in solutions And continued to aircraft. our our more lightweight as on penetration relationships never is demand

they in suppliers Supply do a for chain most remain us our other watch as item issues industry. for

stronger The all industry. global in durable taken technology And continues from unrivalled disciplined focus we However, in of products providing for our advanced demand composite will that technology materials have is actions ensure markets value. our lighter-weight, and and our growing. shareholder and remain Hexcel more execution on our long-term

remarks. ready take We're now to Rob that questions. our concludes prepared

Operator

question from Capital from first of line comes Your Instructions] Markets. McNulty John the [Operator BMO

is line open. Your

John McNulty

question. my Yes, Thanks good morning. taking for

year the regarding guide. your question maintenance a of So full

answer. did in there maybe maybe a a the like inventory, the of business, So your range strong. guess for so the first we in full bit little year. But seasonality your about first restocking And quarter of sound when imply quarter strength it I better that came maybe the of would the really is of think was continued part

maybe year understand or can takes guess, puts us I your the some So you to of and help changes conservatism guide to no there? some as the of and there full

Nick Stanage

question. Yes, John. Well, thanks for the

chain supply we're pressure and of off, strong, year uncertainty improvements the First we in continued the many that are the and aspects clearly, some seeing started in industry. creating

we're ranges it. guidance just guidance early year. pretty the wide one, gave in has January in We the for and So on

tweak just the time, us. it in to point So make at didn't this sense

chain there, shortages and part taking to areas only could a build ramps, supply that the that other I various not on have gone for rate risks those impact of They're still say are ultimately Secondly, challenges and can't necessarily in we industry. other us view the that of but some conservative discrete the probably are driving within away. some manufacturing components

maybe that's want convey. to a really in little bit take point conservative, So at year, this and the we but position the

John McNulty

Got as a enough. lot. And Fair it. sheet a follow-up, just balance strengthened maybe your

you looking have Your is that at actually covenant maybe leverage, I'm if right, as times. X below And better flexibility it well. now

forward? that. we and cash about some there where throughout stock opportunities that's attractive? maybe there think the front can give the see So around just I year? back uses Can on M&A buying your relative into how some as given strength we Or us you guess to maybe go maybe we the out maybe are others color should push a flows more

Nick Stanage

Yes.

talking you, for quite unfortunately we've consistently been maybe a few quarters, results. answer, and earnings it's say I'd since but for boring it's So certainly our said sharing a what I've

processing, next pushing fibers, customers for being and to platforms for platforms. new on are team new not of to innovative our new help are innovation, new derivatives First various worked that only and foremost, our the technologies, prepare generation existing them solutions

are awards continue innovate. also many new XXX that on programs to to or there continue yet, we set example, for that out Valor not the programs work There's military and

So organic growth one. is priority number

for bolt-ons. be offer our technology look and look two at that the very solutions that is broader, needs. at at we've to We value-driving number Priority two. been to we But continually. able more at pipeline, look really disciplined. that number We're landscape. M&A portfolio even lightweight we at might that's I customers And looking We're selective. look how We our expand their how

we you at dividend look is then And our strategy. see, ratio We Board share our sheet. at on look with basis regular And always a balance generation sales review up the our ramping we grow. strategy as buyback debt lastly, our and as our our and cash

And say without to going of them forward. those would guiding I at continue we'll are So expect to look definitively, I'd all play of three all priorities. in

John McNulty

Great, thanks very much for the color.

Nick Stanage

John. you, Thank

Operator

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

open. is line Your

Robert Spingarn

morning. And numbers But good talked for just and through specific see plans in programs, cetera. bit get on XXX, Nick, back if the Hi, little could last AXXX, more XXX, build to take the of I on AXXX, your that obviously, the you question, et here strong the you quarter. major us wanted rates. OE the first a about

participate aircraft from clear you're And because there's particularly rates, MAX because of Hexcel I'm wouldn't already but some built coming of on whether And focused you a those those aircraft Moses largely we're perspective. the talk are not what higher -- Lake. are therefore, of is on out mods already

the the those you? -- programs do essentially that's throughout for year how What is on flow So rates question.

Nick Stanage

the increasing and rates let to of Well, a with coming they're we're start looking know issue getting the of that, news of a have working from at around Boeing. there's before me had Spirit. lot low point through just they positive Boeing. with potentially mean, But I really been, I where recent out they momentum that XXs.

So about MAX. good we real feel the

from have MAX. another China airlines to have so been And know it take would would built comfortable MAX to help tailwind and inventory that that issue that see we be Chinese reports market, make the We continuing more structured the new that deliveries. Boeing for

Boeing with of as takes get you're obviously, aircraft, time orders supply rates. to are there it new seeing, length for MAX the of the and a So increase chain aircraft, the the plenty demand the can stabilizes

the that's MAX. So

and on On those the out, the we XXX year-over-year the though -- and MAX were were AXXXneo, sequentially both would the even platforms. up point up we We on I XXX. and highlighted AXXX

the the want we Boeing, drivers I the just of diminish So dollars. don't biggest revenue called to for strength market out

it closer up. targeting by has to at end of the And XXX, the If you was QX. It at We Boeing uptick year. X% again, been the a low rates. look is in nice be saw again, to

continue forward. do expect to strength we provide that to So going

at to the if continue orders Airbus So to come side, you strongly. AXXX, the look in

We targeting the in XXXX-time have to a path the year, next there. a position still up by nice mid-XXs XXXneo to frame. to the by glide of is on end ramp be mid-XXs

So growth, has up strong per of XXXX. end to targeting month Airbus And ramp on the to public up we has then the continued recently there. positions the by six. have vocal And been moved nine and AXXX

AXXXneo, again The a level is we have per maintaining position where see that strong that forward. and we going month, consistent

again, the still the still rates. very if the can to questionable And overall, bullish tailwinds see ramp supply impact next So how the build might is it with build in XX, market on up on and it we quickly that we're caveat months. rates with XX respect chain

Robert Spingarn

color. Okay. That's great

I So biz the appreciate briefly Patrick, on jet. that. just

and couple of as what a the you I content do Nick 'XX at confidence measure aircraft's is much the before that's hikes? how biz that jet why per think is you're percentage -- in an versus aircraft your and 'XX, going least of biz one rate And levels way revenue. talked over moved content reasons have about of where the and any production to value jet move in years? to of the there Is you above how and one have up it's that's and next

Patrick Winterlich

and over rates the elevated the fantastic biz now in last we about couple jets I talk would is some an years, build at of way we're growth So level. saw

see expect at pace, may rate demand, lot that stay the at remain material. same and elevated level that's this continue a Now Hexcel but I not to pulling through the of if of composite growth do

about modern answer pulling are of the To significant question more content, through shipsets. -- jets your more modern larger, sort the

I think we are in business the range. jets called out $XXX,XXX to that the $XXX,XXX large

the Gulfstream the XXX with largest to Dassault and carbon that. And beyond ones, Falcon of some sort of are the the of sort larger going wing push

extremely foreseeable secular at beyond. demand platforms, about we're penetration of for for which expect onto excited time level to composites the So and remain we further future those some elevated

confident outlook So we're business the on jet. very for

Robert Spingarn

you both, Thank the color. for

Operator

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

Your line is open.

Ken Herbert

Nick. Maybe, in Patrick good gross and called and Yes, really you sales mix absorption. out quarter. morning, And Patrick, the margins nice

look we incremental were build doesn't the tailwinds moderate much, at quarter, sound where through year. As plans, it necessarily at this those this the with like rate too maybe least

we we So should is on think over should thinking about And line? sustainable? much the margin incrementals expecting you rate how moderate that current or margin the year? Or the gross see are how

Patrick Winterlich

mean, Yes. was great margin I quarter, a was and key the it volume leverage driver. the

expectations moderate anything, I my I would and, as us It a bit. We of down. to punch. it bringing And grow. would QX script, think product expect mix will fiber-rich of forward, not continue Hexcel anything, said be going little inventory, we that had a if bit gave If in in to particularly stabilizing I helped. I sort a which now

going good So QX mean, an exceptional an performance. would margin see tailwind absorption wouldn't little but bit of quality what I bit expect do down would I is from we forward. moderate a I margins a little expect I either

Ken Herbert

you think much about process? support staffing headcount future still how back staff rates, Or And you maybe go? where which have do And to you in to helpful. I higher bringing that at rates? level as are of to of that that's support are and No, the

Patrick Winterlich

headcount pandemic about we probably So the Today, into took X,XXX. down actually heading to know, pushing about X,XXX. as from you our we're X,XXX

of grows. reflects pandemic. brought which if roughly mean, direct the $X.XX the rata. the will almost trough X,XXX you compare billion, growth see headcount look I just we've So demand level. I people, the sort if can our mean, that to about you so grow just a pro billion will It that's of back the our from as you $X.X billion midpoint. guidance midpoint this $X.X at the And year, under

the we year, not again a jump in coming So years. this bit will more

direct prudently, obviously to But on opportunities the We going biggest in we follow us, will and will we headcount will mover opportunities, labor invest but constrain manage people is R&T ourselves the will front forward. growth and revenue. labor, indirect obviously very not in that of the

Ken Herbert

Great. Thank you very much.

Operator

the Myles next from line Research. your Walton of And from question comes Wolfe

open. line Your is

Myles Walton

and [ph] content to the hoping closer to still Flora was With but you Is V-XX of of up Thanks. now it, shipset you on to guess is bid? or the how much some alluded content I I for relative And could CH-XXK? the have a decided, talk the you'd Valor.

Nick Stanage

I multiple Myles, above the would still Well, packages say Hawk. We're be will on Valor. working Black content certainly both the

us to going it's in nice, time material to shipset for premature to this be driver than really for So Black be at it and be more a it's get it's us Hawk. a than other point will the going

Myles Walton

right. reason sales Okay. shape way then top on of form is the the Aerospace Patrick, Commercial way, that? is I end which, course And guidance of grow your at year, And All sequentially Any you size hard the restock mentioned still. the to through guess, or some implied that benefit imagine the in the it's don't I to XXX? ask

any range. that in if give to maybe or the size So can way us stay you

Patrick Winterlich

we we ramp nine mean, now we're mean, XXXX. I Nick towards the I as said, and did Yes. around entered in on -- six a year

So going sort in be perfect to a line. we're straight be It of won't slope. some

pull-through mix, little have bit platform. And of our have of a demand, Hexcel fiber-rich that surprise I And quarter AXXX boosts think first is lot must it we very a included perhaps get you restocking. what we heard say that the a was with before, in margins. that sort a us of whenever saw the of and some

see boost doubt, going this mix a restocking of we year. every sort percentage they do quarter get growth. Whether gave the I we're will definitely I agree, time, fiber-rich steady margin So the same in to us first

Nick Stanage

box the central AXXX materials XX then completed production, again freighter. has And over we're on. recently has that to to AXXX add Patrick's providing in the for supply that for Hexcel And locations. wing are lastly, fibers comments our the just also would chain remember, the addition all I Airbus in XX,

complex chain it's of in which broad require that some of provisioning think that safety supply stock we quite a does came some and through So materials, some QX.

Myles Walton

right. you. Thank Okay, all

Operator

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

is open. line Your

Kristine Liwag

up questions following the I on this the Nick, cycle. requirement, use, on airplane earlier minimal the mean, up for free Patrick, cash with the this in in be horizon sheet in cash seemingly is, balance unprecedented going Boeing Great. you're growing where decade, not to new relatively CapEx the it a period of flow

or what's of So use transformative of interest? need appetite sheet cash Do just your there through to free Or to a XXX% balance buybacks? anything think M&A? flow dividends shareholders potentially the this you Are cash for that or it? returning you

Nick Stanage

Kristine. Yes,

question. for thanks the So

a remind five the First, that XX everyone years. is time the for lost, selection new airplane in I before years lead would is material vicinity of to

for the next-generation solutions think customers on So our which working not processes we're are. types of materials, investing, and shouldn't with you those we that platforms,

to We That's to how we don't do enhances we our and really do our drive proposition value to. need the Secondly, it portfolio. view discipline need M&A? how that we

those you say, could depending on. those team targets at We're and it the That's well. factors. targets? think process actionability plenty very fluctuate of more working and that on that again, fit we But areas would could have technology on our based So Again, have shareholders, active we of we to an return powder. various and looking the availability as we

Kristine Liwag

you investment size or can that that? Is airplane next in this program? How sales to Great. annually of X% do have about should the of And the terms you'd for think we investment dollars, that level of less? then

Nick Stanage

we're will thermoplastic, parts of you're on our I'd a plate, say of aircraft. there's wide grow. go technologies very in a that different firm you're in believers the fibers, with talking set, matrix you're continue out auto to will be don't plate, about about We're composites working the technologies, used secular about penetration of talking really whether that the We whether Yes. whether variety also there. -- customers few penetration of systems, auto thermal talking

to more knows, can next to new who airplane it window So composite as XX%, we maybe materials adaptable our the make XX%. up more opens processing, of above the flexible, be

Kristine Liwag

would Well, much. XX% be very Thank lot. a you Great.

Operator

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

is open. Your line

Pete Skibitski

going Kurt. Was and good And and is, forward? Hey, Have morning, think the could I the European Nice of kind in Nick sales just or guys, the quarter? the one the touch wind. of there or decline, wind not? what's you on any Industrial, seeing quarter, last down release balance Patrick On bottomed portfolio prospects the that not? mentioned in of And you you headwinds are Industrial

Patrick Winterlich

Yes.

our are So on sales wind, really, now all European-focused.

of As you'll making Taishan closed -- end We at we our the announced XXXX. year, last essentially remember, Colorado investors We in out in the the closure U.S. pulled a in plate wind plant. of our China plant.

those now gone. have So

is European it wind out least vast of our production in Europe the our at of majority all really, or energy So focus base.

my down -- to you continue and of I wind the we're at time, certainly to at down script, as coating of gel step QX which wind. business have QX support step quarters 'XX actually. rough to The year-over-year grow see level if for fairly this said stabilizing innovating 'XX. expect period products, some been resin some we around we look think, hope sort energy a the I to But relatively level, on three but now last in significant world we're

up. of the or industrial was were nearly up. terms In was the recreation up, Automotive other places key automotive, up. two was rest of And one segment every of

our of wind be strength elements Wind if general business. to you key like, kind four market. industrial back, around So one has we're seeing the or merged of of three

Pete Skibitski

guys. Thanks

Operator

question from next line of from Jefferies. comes the Our Kahyaoglu Sheila

open. is line Your

Sheila Kahyaoglu

Patrick. and morning, Thanks Thank Good Nick much. you. so

beating without Nick, it, You I here, alluded guys numbers sweat think seem breaking too. to you be to a

chain. are watching this. on inefficiency, Others labor You're stumbling supply

guys months you has I you are for And So watching guess, guys? carefully most the improved forward? going what last six over what

Nick Stanage

a I be supply slowed easy. out I on quite which chain, the teams remiss they're our out working coming if have they back. not would quarters frequently putting was Well, And you fires but few completely hard been have were said incredibly down. managing tell it I can up

our our was still say items definitely but as improvement, it supply it we regularly. pop are on an stable I'd times, from So it's pandemic. consistency, because and we an as steady base, eye not lead pre supply have need up we to keep seeing And

say especially and levels. logistics downward have there improved it from seeing international back claim to on freight we're capabilities. -- significantly But the logistics on we're that XXXX that our times early and and area lead again, supply is that a also to it's too ships, in seeing I'd positive chain trend movements

Sheila Kahyaoglu

I Great. and defense wanted wanted if ever I both within differently I and to customer your contracts there, the how ask on space contributes. breakout know structured just don't if space Defense given And know much of one your bases. given to are you've Space.

Patrick Winterlich

we they're say. and many with probably other space mean, mean, same sales as those customers, the I Commercial commercial Space vast pure contract, have of duration, a I with -- that up agreements terms our commercial segment and are portion and of in that Space sort Aerospace smaller we customers Defense we would slightly I majority shorter in the it's set call the of So Defense. customers out. should but dominated, of

as in decade-long see the well. have world. do don't we Aerospace contracts over Probably, develop may But time, we that Commercial as

nothing So similar but shorter structure probably slightly contracts, nature, in term different. massively

Sheila Kahyaoglu

Okay. Thank you.

Operator

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

open. line is Your

Richard Safran

a ask of bit V-XXX morning. good a different wanted perspective you? though. question, I your Patrick, So How Nick, are to

if made wrong, that correct think me agnostic. the you're I'm I you point,

expecting program when over, the start has now to that long how been P&L? However, to should could and your the V-XXX the the to you're And you one, made Flora, comment the protest the last? from UH-XX UHXX, impact transition on V-XXX award

Patrick Winterlich

Yes.

So overlap, the of would terms real significant question. to going Rich, for XXXX. I to I we probably expect. mean, a a expect into in There's mean, be I years good an see V-XXX, of wouldn't revenue couple any

packages transition status. try As more content Hawk to on to soon said, the a aircraft, Black shipset on program number still it's get several declare Nick take we're and working and I would over too of years. the that and to expect our

steady to for some period a Hawk blade be a There in around programs to we're bit strength I going bump I could see be an Black in of be Hawk come. before a think and think ramps, over there supplying gradual the a drop sudden where demand think period. don't even will see we're be transition fairly overlap think I it I But a both to will time. for we'll Black little transition. replacement there'll a the V-XXX

Richard Safran

a even been results, you've seeing based if the than little people, on better And to were progressing, to know apologize. how your bit the increases, quickly getting been tight you seem given I expecting? be your I if just remarks really in I one or on Nick, this wanted two headcount offer on to workforce ramping. I you're kind been quick of and you things missed if But training -- labor ask I just have you a you how labor could mentioned, doing like mentioned it, wanted that think market, comment to the given here. the the I a mean, has right

Nick Stanage

better know we don't they're I'd expected. doing I Well, that say than

I they clearly are improving did rapidly. We expect that. think

to work training continue our We programs.

try processes the human improvements we as same during potential the to the productivity took and our work of efficiency eliminate can. as we processes. work to continue much within processes our pandemic, our time, error opportunity out the to At to We of

quality has of has And has through. So we been talent say of into -- are the translated expected, climbing been you're efficiencies outstanding. But as that seeing rapidly. I'd some say, the the flow I'd that ramp-up overall, which

Richard Safran

you. thank Okay,

Operator

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

Your line is open.

Michael Ciarmoli

think think targets? giving of color sense, morning, there? the last and covered quarter. longer-term quarter, you inflation, margin energy Any kind the those might you for the just pressures. Clearly, a anything were you goals kind you on or more mix sort on guys Thanks questions it lot longer-term here. last mean, Good I general in be a give had tailwinds well some up to challenged. as us changed? But at confidence were has Maybe becoming cost taking pricing less of of can bit getting anything you or able we add this came a to all more quarter, Nick, focusing shifted guys. I Maybe I has

Nick Stanage

Michael. Yes,

those Actually, as energy, seen shifted I'd a probably Number especially has markets one, negatively. some shifts. nothing say in and we've the So come Europe positive in energy decline really stabilize down.

customers some I job we've inflationary translated think recover with and the well. has working and on a to great of the our oil, items done labor team that

productivity some always driven year-over-year, never ending And in which again, improvements for we've is efficiency improvements year-over-year, operational an environment.

about So I'd good we where feel I are. say

We're on drive volume salaried costs to going We're and to growth. a We certainly and be continue going tight have to resources, leverage productivity continue going adding go. continuing to leverage to to forward. the way

hiring as we the Patrick as the to clearly, grow, to virtually the heads revenue. support going So operations and mentioned, follow direct be both we're

us On technologists, to deliver continue recovery. add the side, the beyond growth we're the add salaried positions help to to the the well for drive going to

Michael Ciarmoli

it, And Rob's then maybe back questions just Got to on if rate. may, That's I it. helpful. more, got one going

commentary bit a keep I MAX, by to production composite-rich shipsets XX any shipsets potentially color a a there that been year-end, about? leap we're Or you composite going need MAX there's the engine Just last for were creating talk if the that of could destocked? you of guys? that On be Is year. I that some other month to mean, on some think headwind built at maybe XXX

Nick Stanage

see entry tailwind and components not don't at Engines, from headwind the the a of not the by manufacturers We up. to sure and or support have us supplying for -- That's a obstacles And working MAX we're I'm as OEs. a are being prevented for the engines We sit ramps rates preventing it for issues required maintain cells going and forward. to Boeing as us. the any opportunity and the from all. composite us being an aggressively certainly headwind in see as

Michael Ciarmoli

suppliers I producing year. Got had having the this down, meaning of flat XXX those And burn the Okay. at Yes. at were leap of one last your kind to they for you. was shipped year. of to levels extra shipsets maybe end

to. was of what I kind alluding that's So

Nick Stanage

Yes.

obstacle our we've that us. into got figured I think for plan and big it's not a

Michael Ciarmoli

Got it, Thanks guys. perfect.

Operator

comes line David of from next Strauss Your question the from Barclays.

open. line Your is

David Strauss

revenue the I about your of your how Aerospace change by Commercial aero for Good total sales know end to growth thinking guidance. all on terms But there commercial -- I implied Thanks. year, this that, XX% implied in you're market, XX% growth you is guys your only within everyone. in you you -- including your of -- any maintained guidance your for were think guiding based the morning, year.

assuming still higher that? that than does you hold? now that So are is Or it's

Patrick Winterlich

to the I this do the of adjust. ready watch out I it going not we're call time. revision we all at mean, same We'll we're through sales the to -- of would at to So And trend point points. say mid-year if kind would guidance,

Aerospace little pointed clearly, strong, talked year, the kind stronger OEMs. than Nick obvious, Commercial a you've about, was of it, this supply But stating as still at expected. we the Now to just for of and challenges QX the there bit chain is time

Now whether it's happen components, whether electronic what's rate. build the that's going or know structural or engines other we to don't to

at the too within of look to a guidance, a we early yes, move good look for Commercial to obviously still Aerospace our for quarter way and we the which but So through year. start color go year, us as long sort the at will to

David Strauss

next from towards change But in of on looks of on signal just in of -- recently the aircraft so you're couple the Okay. only delivered Airbus rate? at way the headed below production over that first six, like light there any their sort AXXX, years. said the in And you demand been there fact, nine some sort has issue where it they there's quarter, five deliveries, based some of

Nick Stanage

Yes.

that close on change our forecast we and we XXX are cause ramp for movements have obviously to seen the that Boeing see significant very not us our belief the but schedule. we skyline and provides So And Airbus customers. with and pretty detail, any changes

David Strauss

Okay. up. finish yet to are so they little color inventory to more in to give a One absolute percent one still were going are back you volumes I The your exactly levels on being can inventory or close what's below. sales bit there? XX side, Patrick, quick your just where XXXX, mean, pretty

And does why see? significant we of building drawdown from here? a So keep how inventory should

Patrick Winterlich

great great question for So question a and CFO.

much deliberately we to as at last we And supply inventory and in recognizing to absolutely, could. customers impact talked chain order challenges So as we as or year, possibly materials. our of in we to sure our bringing that make least we delay mean, didn't that allowed did that some I grow, the or we the minimize

last of sort saw Coming into this late year, we year. the QX strong demand

I would and the a up and to expect stabilize inventory support earlier February question, an say strong that think into into forward, levels, first What January the probably we've for we come down. built we think said inventory So some bit really I going and now moment. to peaked quarter. to And I inventory continued we at and to

growth hold. We'll a focusing on the more certainly be in overstate we relative wouldn't from But and release the coming be I expect bit it, I -- quarters. would we'll see of to of inventory days cash, expect inventory from not inventory I that would this to And onwards. driving point

seeing quarter was So came first into a supporting as and we quite fourth it stronger strong even for what then an actually was really all us about XXXX. quarter

David Strauss

much. very Thanks Great.

Operator

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

Your line is open.

Gautam Khanna

just or Sequentially, is of this guys. productivity. I you've it. answered ways, five that just was to understood nothing of Good that And you with $XX want said, was. Yes, sales cost that? and mix probably Like there benefit. whatever Patrick, sales morning. sure you but flat make time was that I inventories absorption thanks sort one an so million it different was else explains There built up

Patrick Winterlich

think Hexcel helps. mix, I to goods the last was came through, that fiber trend to And No, is trend that was that as turn. literally finished into said, question, always All I the absorption good. the -- now really it the which going

were mean, But strong sort you favourable is I basis FX of quarter-over-quarter sequentially. I year-over-year, seen. margin that is of expect one look ever points strongest but absorption. benefits FX the to talking see of we've XX I wouldn't So if benefit

productivity the that it. about and really the and ongoing about. absorption mix and that good talked Hexcel But Nick be cost fiber-rich it level efficiency through improving the of with came about rest But was should those of control along the and

Gautam Khanna

-- you you where where us you have XX, on you tell could think Terrific. you And guys are rate, are?

Patrick Winterlich

X. of towards rate towards rate specific. year. that to on we last three get ahead be towards moving the of on It's ramp journey. up Again, hard moving there we're up to we obviously level. Nick's multiple delivered were but up I we're that at will point, We We're Well, kind that X. mean, rate somewhere X. in shipping endpoints, now to We're two, Boeing

So that's always the bear thing you in mind. should

Gautam Khanna

Thank you, guys.

Operator

Ron line the final from question comes from your of Epstein America. And Bank of

is line open. Your

Ron Epstein

what but and go you're airplane opportunities else while. an It things that development for there some out When are at? asked, defense are Boeing vacation seems to picture little about think looking additional growth What we there there be out like for should just drivers a most as potential stuff. some on I Airbus you, like for things for mean, big new is looking Is is other Or the there company? maybe everything going we potential has been there?

Nick Stanage

Ron. Yes,

new reengineering, cell. So you again, as there's expect just a reminder, requires aircraft, new see a continue. the you will always and frequently derivatives. And More that, that we that And should and to cells fulfil for the applications the for better for sound and today engines on other drive position that temperatures, attenuation, but can't material hotter continue composites strong tomorrow. can very have

elements certain on and that qualify easier replace structures working We're those. secondary and derivatives. on we're So working on to are

for We've on offer the and us. an got could The on opportunity forward. AXXX the fiber, on going prepreg, a technology side a advantage is the materials that big opportunity various great

to with our customers continue We that. on work

Commercial the Gulfstream, composites. and over others on the and on aircraft the platforms, transitioning more and business of Aerospace, big touched just to again, with in the penetration So Dassault and all jets secular growth with Patrick and more

to lot Washington flip facility. sizable set multiple programs I we're on we programs to up and large in along as with and program we of new which we're a there, & CH-XXK, very working diversified very technology on space. and speak always Space It's the us, Defense, Flora a platforms is If the our just like a ramping which opportunities market, for

can automotive wind are all So there's competitive other provide we a neglect again, are and keys the and sub-segments finding a we the opportunities there. the where industrial that and lot don't And out niches advantage. industrial of sustainable the areas in

not the opportunity, and or forward. more invest areas materials growth what continuing our fits the The is question whether target going in the want of it's want tougher, customers within to expand. the to business it just durable, stronger, and So we we lightweight economics want where drive where on to

Ron Epstein

you. Got it. Super. Thank

Operator

And your this today's thank conference We call. concludes you for participation.

You may now disconnect.

Hexcel (HXL) 25 Apr 232023 Q1 Earnings call transcript