HXL - Earnings call transcript Q1 2024

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Operator

Thank you for standing by. My name is Krista, and I'll be your conference operator today. At this time, I would like to welcome everyone to Hexcel's First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Patrick Winterlich, Chief Financial Officer. Patrick, you may begin your conference.

Patrick Winterlich

Krista. you, Thank everyone. Good morning, Hexcel Corporation's Earnings to Quarter First Call. Conference Welcome XXXX

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

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

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

to me let Nick. call the Now over turn

Nick Stanage

Space quarter as you thank year-over-year Commercial and continues share with upward & and us Hexcel's first includes performance joining year everyone, continued increase. XXXX began demand in that sales morning, for as today Good Defense both to Patrick. results. solid the Thanks, Aerospace our trajectory growth we we as

is domestic the and the news reports achieved and the and read to overall recovery of international now levels. travel industry resiliency demonstrates pleased airline has both air air global This travel. industry XXXX full passenger surpassed desire were that the in strong terrific in for we February, traffic and Additionally,

fourth ramp, in QX supply relatively since an to now of sequential has all begin quarter XXXX. like increased programs. posting illustrating above air XXXX, growth sales total Commercial of to the data grew continues the is sales Commercial widebody highest by how widebody year-over-year, of chain smoothly. Further, This encouraging Aerospace quarter international referencing from production I from With widebody While Aerospace the our also level levels, steadily in point, been our would XXXX XXXX improvement and we of the narrowbody and benefited sequential our sequentially. first ramping traffic sales

within There supply we first our choppiness sales in challenges certainly recall, remaining overall will are of you narrowbody the chain softened narrowbody of XXXX. XXXX. in As second and half the the half continued expect

encouraging. However, sequential improvement the is

some the will me then of details. more Let and provide highlight Patrick results,

more the was $XXX Adjusted down sequentially. the quarter million yet First of first XXXX quarter quarter number up A than sales year-over-year, were first EPS higher the QX than results of last diluted specific particularly in strong XXXX. year. X% of $X.XX, in drove items

our middle volume and as and margin last very encouraged as this robust we since been gross by are have leverage of the upwards adjusted Our income year, performance trending operating continues expected.

Korean content. softer including 'XX business Japan quarter widebody increasing XXXX composite-rich Commercial XXX first currency constant in compared We on the sales our with see to X% Aerospace growth XX quarter has and of sales where Aerospace, Boeing X especially Air markets. increase $XXX in first Commercial the first for sales of were In an decreased represented placing on orders to aircraft, to almost pleased Turning Other quarter significant sales. overall X% significant jet widebodies million Airlines Hexcel of of the platform. for XX new

overall large sales business year-over-year. growth Based XXXX we composite increase on sales the adoption business customer, noted be for expect jet our exceed jet with XXXX. should secular business did largest it Although to Gulfstream, to jets, cabin

We high-performing utilized. FAA also composites business is large certification recent the of jet congratulate cabin on GXXX. a like It Hexcel to proud would next-generation are that highlight Gulfstream and the and we are

our few World we met fiber aerospace successful significant Composites highlights. a IMX another customers Paris XXK innovation. launched We and where in JEC Now had fiber show of compared and commercially intermediate newest each combination new the provides HexTow additional with to primary year. a for available our is I Grumman secondary congratulate fiber a tensile carbon XXK dozens Only Excellence customers our engine productivity recognition on modulus structures. for receive composite it high-rate X/X tensile by high-performance improvements being and significant which manufacturing fan carbon a commercial aerospace component IM when throughput XXK fiber aircraft team blades strong Awards in already IMX last to is strength and other fiber, high-performance want and recognized provides especially Supplier over production in as event. offers it strength suppliers of our baseline aerospace major a other as solution and IMX a size well X% increased proposition and value during of provided is fibers. And of this for fiber's tow Northrop suited their by The month particularly the applications. about

validates So it execution and on quite products Grumman's quality honor be an our time. to this relentless among focus prestigious us group. delivering was for recognition Northrop on

to the of a The constant & currency and constant in classified as in outlook. Industrial AXXXM XX% programs, in Space great including Defense, of Lockheed Hexcel million as decline currency XX% & the positions as of sales remain Airbus XXXX F-XX was quarter represented wing confident Sales aircraft first increase Defense. fixed well more sales programs. by moving in we compared $XX million led Space quarter year-over-year. of Now than increased has Martin the to various for $XXX XXXX. about global our and

sales. pulled remains attractive technology of Our an quarter first consumers and Industrial on through represents Sales industrial global worked strong automotive, X% EVs some where a total were our spending we including market and energy. in business in value-adding submarkets, a soft multiple of now number pursuing of as activity their remains and about on back the production few customers fold are end. issues opportunities

we continue Our remains stockholders. to performance strong, cash to cash our return and

During the $XXX quarterly we quarter, stock share dividend. a and first of repurchased million per $X.XX we paid

XXXX our cyclical Investor aircraft rate will utilization higher secular and highlighted by line composite with growth the committed from growth. map expansion full to we team cash proposition. our productivity. continued on by our supported customers adjusted margin value as $X.X This backlogs extensive Hexcel growing and our year road forecasted time Day, our XXXX. We delivering billion enhancing focus from than midterm EBITDA and generation. by of the X-year for to This XXXX capacity remain This all growth, is our margin production multiyear execution by included expansion to and our ramps generation cash drive frame During top strong that more supported forecasted drives leads growth guidance for lightweight

prioritize we technologies. As to innovation advancing continue an and will organization, our

focus provide. We Hexcel forward. will collaborative, words lightweight lighter, focused, be growth who specialized continue Stronger, Hexcel more will better materials for we at only where durable, or markets there to innovative, going on we can who is that pull tremendous are the customer describe no

Patrick Now numbers. details provide to the more let over turn me to it on

Patrick Winterlich

Thank you, Nick.

XXXX call, as and exposure quarter strong exchange I from a fourth benefits explained during Hexcel foreign regarding reminder, dollar. a earnings in our detail As

the impact in horizon. hedge year-over-year sales. The continue exchange constant will provide to thereby are removes which We XX-quarter sales exchange comparisons a foreign currency foreign time exposure I to over

both my I'm the sales, in highlighting widebody tremendous sales higher operating I and the While and as commercial total with comparison want overall chain narrowbody aircraft. of for sales total to margins. Beginning demand sales fuel-efficient new supply aerospace going leverage. margins to And sequentially importantly, last output increased over to sequentially quarters meet expanded financial the by sequential year-over-year typical total provide begin improvement results, the X expands on

as as We through utilize progress continue as and more assets, narrowbody to of widebody aerospace the chain and improve, continues the XXXX leverage we existing to ramp we expect supply and strengthens. further stabilizes volume continues our move

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

the Commercial $XXX.X Aerospace Boeing increased by quarter million to growth quarter first particularly program. XXX of of XXXX, X.X% sales in led compared First widebodies, the

other on business category sales decreased jet lower X.X% The Aerospace Commercial overall year-over-year.

programs. be compared sales of and F-XX, expect of continue XX% from platforms XXXX. submarkets. Gross with Defense XX.X% margin classified first million grew of approximately Sales XX% in increasing to and jet sales of again higher strongly, comprised to business the quarter approximately XXXX. Space increasing fixed industrial AXXXM and Industrial We quarter $XXX.X the period across year XXXX. first softened sales Airbus The XXXX Lockheed improved to along quarter totaled for than most quarter same of represented full our $XX.X and the XX% wing was million, the first & X% XXXX. first totaled XXXX other

was The strong first of XXXX margin XX.X%. exceptionally gross with of quarter

overhead demand. Sequentially, gross customer on first base fourth second improved and of infrastructure, points as particularly for from labor leverage. of from the benefited hiring Also, always meet our production 'XX Hexcel QX training was a last quarter year, sales margin basis lower sales including year cost ramps quarter we prepare absorption last ensure strong explained customer deliver the mix. the in the favorable ready to be I the and of As favorable higher to undertook and quarter XXXX, would in XXX operating XXXX, beginning

XX as operating we of expenses of of million percentage improvement were quarter of operating by quarter offset XX R&D the target quarter XXXX. first favorable $XX rates XX.X% income percentage fraction in general prior basis year-over-year illustrates the first is the million a $XX.X sales operating adjusted partially was a first period. and of by in expenses to XX.X% typical and selling, or compared control to as the compensation year to the sales, first expenses approximately charge year-over-year points sales a taken operating quarter operating our As was in our to on exchange tight at growth. Adjusted of first Sequentially, higher income XX.X% the points. in operating quarter by the leverage, sales each adjusted in administrative margin sales grow as The year. or impact in compared XX.X% expenses income of the in stock-based basis This improved comparable

margin as XXXX, cash quarter a the the to Net first capital sales Composite X The of and Engineered XX% is operating sales XX.X%. segments. period in margin segment XXXX. in million of $X total operating in of Working XX.X%. prior of comparable use Materials which cash first of an year the and XX% a to prior was a with total in comprised operating year $XX.X businesses, of compared million quarter cash operating generated which segment, our the in activities our The used The net million represented XX.X% core was Products of to in first structures and of turning use engineered generated margin quarter represented XX.X% of period. Now the compared comparable $XX.X XXXX.

last first negative quarterly million $XX.X May The normal cash prior to as $XXX.X Board to million the payable quarter payment in to the compared increased period, on to repurchased remain generation stock common the increased XXXX, managing my the our X, first our of in the and take The company. With has great to the time, and the with February, Hexcel I The to on want the successfully behalf myself X of to enormous Hexcel year. the basis in business on dividend compares million for friendship $XX.X quarter. XXXX earnings well so for of $XX.X $XX.X in thank were for for recognizing of flow calls focused it CEO was $XXX.X sharing of final Nick For stockholders for the strong a $X.XX repurchase million, first Nick for opportunity repurchase that date decade. authorization XX, The the We XXXX. May program of year of also a to all comparable privilege. and during leading which $XXX thanks years, of I use share his and working March record capital. Capital million. express XX. to the profile comparable the tightly with accrual capital under Hexcel the million. working year million It was quarter a the as dividend We of of been Free over quarter share yesterday. prior and colleagues, period. guidance by remaining quarter cash all want is negative cash million authorization honor expenditures is $XXX the a on the of declared future first first an for during during gratitude Directors

off just having too so gone and turn not back me hopefully script to call throwing much, And him let Nick. the

Nick Stanage

Patrick. Thanks,

been I'd of President time. My personally my I is CEO something Executive and I to for As like transition some final Chairman, the to to reflect. near call end have minutes to Hexcel take as and contemplating few of retire decision a

birthday, about I upcoming thought XXth our more specific on my discussions I Board potential As began retirement. my with

engaged with be and best it CEO continually today I preparation, our the and longer in on forward. I look and comprehensive or I in the way Board person and had forward I that perspective sooner management of flexible. be we could focus the share aside I transition. identify the a some more about to ensure our months our would succession a shared Our to Already, have on the and Board tell the like most our President without ideal the I strategy exhaustive right. is him to Board the stay was if worked search robust, can of hesitation people, Tom details have would that Tom and Gentile a from believe the next mountain the talked you thorough supporting our processes also I to to and to told I and Hexcel our time culture. would is helping data importantly, future in Hexcel. by excited One of I Hexcel lead that wanted search every with dictated that him we priorities Tom, more if I become ahead. I step process I've choice Hexcel. products, The

are choice extensive of importantly, from the many the for brings all through factory the understanding most described commercial knowledge. Hexcel for the generation process, are firmly of many systems innovation to cultural and quality and and aircraft experience, transformation space could in overstated. point be a is production and required processes Tom driving what high-performing extremely critically, reference excellent one of been for an aerospace they for reasons. fit Tom science execution Hexcel. This used, excellence addition, and a Tom knowledge lean right believe recruitment fantastic materials defense what strong Board has needed relationships. Very manufacturing composites years. excellence, customer operational composite thorough industry developments has the Tom Tom delivering Hexcel extensive largest industry, is and our last for buyers understands and an the with future for He next the has checks Following how Hexcel search believe including as productivity. for applications. drive cannot throughout Tom the be implementing for this material customers. and is operational And machine, Board

priority. positioning a longer is set Our are near delivery fantastic while top ideally Hexcel on-time taking disrupting with executing business crucial. is is quality, and philosophy Not for bringing is proposition that unique strong the and Tom momentum over And over term fantastic our a skill this value and in a growing the Tom suited team. operating term.

that delivery drive will February. outlined to the industry Investor aligned we composites. Tom in and platforms XXXX on-time will and and deliver our within pursue our flawless Tom will Tom as we Day and Hexcel's and continuous on to and quality with to position team laser execution for that to benefit our from strategy continue secular our for customers And team, efficiencies and execution on improvement completely maintaining medium-term at strong continue productivity customers. growth leadership with Hexcel Hexcel starts the on is constant of focus lightweight our and of the He next-generation Initially, focus guidance. safety

future had so team thank working you, a my have with I you the to cover sincerely analysts have to company time am and this Tom the I an built also most the known. family, of will inheriting Hexcel much honor ever proud and to with ever. together. with grown brightest team been all fantastic. the have family. all cannot all that have talented stockholders you I Hexcel, and I I our spending I of that growing While is have awesome to want we look business forward my I tell how more miss love

you leader challenged made you you've and you've a your you coverage I'm that a Hexcel. because questions, years, for and following better we're your Hexcel better for made will have XX me value. to years as support Hexcel kind grateful questions me take Tom to words. me shareholder over I all your continues You over have and ready Thank past Thank you. the generate strong you as trust the supported Krista, for company. Thank now.

Operator

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

John McNulty

for you've off help company years. and thanking forward. see me just over to good the all by you It's your the where a luck start been taken let pleasure going Nick,

business wanted just the dig to commercial I bit. into a So

So you through look the you're looking out of year. growth as for mid-teens kind

to lot lifting of an okay off there's admittedly, heavy looks ahead. start, it like You're but still a

I mid-teens you point? going and how ramps you struggling and you some kind the So the guess, to can quarters? about issues growth? Or widebody to of is think at of confidence over biggest it drivers getting would on back that's the been prioritize through us the get what's with it the getting in help that this to of last couple narrowbody Is track

Nick Stanage

with Yes, the kind We over several to John. Clearly, be thanks with a progressive seen Well, challenged is there, nice combination. first, for the it's Airbus. supply say, I'd steady in it's performance quarters. growth the and Boeing. chain continuing John, We've areas. But know various last and narrowbody the comments. even challenges your been

nice grown progressively look the our the quarters, a the manageable XX over a level on forward. both stabilize it you be not continues the it's we clearly, rate and improve widebodies, chain be AXXX very multiple if to steadily and confidence just going go I'd supply performance steady say rate. will that and at our recognizing at that to So has continue strong, to as perfect last

within overall, going things seeing. stability, seeing and of the train, gives is to with in some of ability workforce indicative whole our us say provides it that retain, that, direction. ability that we're the the industry I'd ability confidence to And the are think to what the hire, I turn, respect that's efficiency, to in provides things better the right So

updated importance again, on only that pole, demand, signals strong overall, over the good incremental benefits opportunities simply and to efficiency and the over So provide lightweighting the performance to our and support of indications we're the sustainability not getting We're haul. pole could long but forecast. new existing because of rolling up on midterm the very drive

John McNulty

it. Got

maybe guide, really Defense, And hugely relative a the and do how just the Okay. guess, start solid some On see considering had No, ramping just I do as upside that's still a follow-up. conflict then strong you the you helpful. CH-XXK potential for really you Space may there the admittedly of & you to year. from pull do be have military side. lot have the demand where to the

think to to the upside guess, I potential your for about you us outlook? can So help relative

Nick Stanage

Yes, John.

and platforms, growing. globally and going So year, many we're with you a we stable other And certain look if or the for platforms down diverse such by again, started set how encouraged platforms being sure. on of we're working

we quarter lots to you about would global to deterrence. at it going stimulate some the ramp investment look this give KC-XXX, and it going had defense sad in that road, be to is, but expected. energy very another around we talk the it to of be have what's to quarter down If higher the indication tend in CH-XXK, And strong the lots performance the good V-XXX really as systems on, guidance, it momentum, want strong if look thing have than position we on there. is as the the and a through we we'll and does could before And opportunity F-XX, our of situation the even tweaking global get rotorcraft, up our again, if Rafale,

our I'm position continue So optimistic, to and backdrop, think line I puts think I our position potentially in us top with estimates. a to great that exceed and perform us for

Operator

from from Akers comes Fargo. Matt Wells question next Your

Matthew Akers

destocking. Best the of talk bit luck, Could about little Nick. you a

this first I think from that through Are expect little we kind mostly last half. you pressure quarter, point? a in of had the of said at that bit

Nick Stanage

in Actually, might of I have have grown. because the don't widebodies, first the was quarter. a rates think anything, the steadily Yes. bit little especially there been there destocking if restocking, on

in look backlog increasing Boeing I you to ahead. think the up, the at years if way way and near-term at has built orders, Airbus the their the looking are the rates XX

level the think was areas. and probably certain now. and supply for performance tight a quarters MAX. gives we've that confidence again, chain on The And very the little in issues I several were steady seen

I destocking huge chain need intend they restocking gain ton expect rates OEs the confidence support maybe of little supply get there's and a So the market and ahead, to once this and don't the can that to to, to the a again, backlog.

Matthew Akers

I Great. for one And guess Patrick.

quarter, quarter bit I you On repurchase, that this when Can that about our actually a the timing with the that just up for flowed diluted share guys is additional kind through? stepped little up of a quite guess shares were you of but just Or the bit. talk dilution?

Patrick Winterlich

issues. The Now reflecting really it QX get in where normal to effect quarter, time. that's start average will comp, in will seen have the the of million, purchase XXX the be over second but to stock buyback, in. just the that you stock It we come stock

the will year. come very impact like, -- move as that got that really little, that EPS through first in you benefit from the and we we impact quarter, will So if beneficial

with yes, So everything expected in XXX million in QX. line buyback and,

Operator

comes from Your Subin next Bert Stifel. question from

Bert Subin

retirement, on Congratulations Nick. your

Nick Stanage

Thanks, Bert.

Bert Subin

like Maybe you just from sounds comments, choppiness. your Aerospace a follow-up side. on Commercial the question It some the on expect first Nick,

I'm mid-teens could so stronger know a some some the you sort I'm I is? And you Based the and curious commentary seeing expectation on back just maintaining any probably what about translating would that's up the of if just meaningfully. your guess, that on curious comments your on what improvement segments not on for imply, And on half is XX. made Airbus? is if quarter give visibility but AXXX? to guide I XX% growth. maybe second the basis potentially plus the year-over-year

Nick Stanage

Yes.

great work seeing -- got and to with our relationships. many materials Remember, space. freezers, We require go we're closely again, them. indications very the has we've of in which customer limited again, So

to we on are the insight supply pretty perfect. I with work how much not chain they customers ramp is and ready good So think lead customers our as on, up to to when as closely. that and are going provide them want And trying and they sitting time chain to We although do visibility have much supply ensure very ramp inventory again, up forward. the our want

I'd our with have say and So our never been better customers. communications our visibility

where include build tweaks based say again, Now those visibility very that some on encouraged their we've the backlog have and with and in. very the for very I'm that coming with content. coming very And in. by XXXX. the good supply orders got upcoming freighter chain, to I'm think the encouraged I'm AXXX, point shipset XXXX AXXX on are we the encouraged up And great this but I'd I the orders in. we

higher, because back getting our see we pre-pandemic simply picking replacements, days for of the of I required. number travel and accelerating up the see the and international think with to of from we because widebodies perspective, seats pull simply

to good. work the us Airbus our deliver to the smooth mentioned month closely gives progression And XXXX if So that it's confidence quarterly continue we've you time before, Airbus. our to per is frame. with we very as very look XX visibility growth in at again, believe this going but and that I seen, We

Bert Subin

Got it.

side. It the XX%, end there, Curious the intact. to the the margin revenue off margin that need on remains be is for said the what that happen operating think about on year. we higher quarter, just just to quarter. first to seems if like you you, fine would you And range Patrick, a of Okay. get XX.X% And to start us guide? expected XX% -- as Last to in follow-up for a

Patrick Winterlich

mean guidance. for I reaffirmed Yes. XXXX. we've We've held our guidance our

I down position my adjust because XX.X% EPS. mean, QX take. in $X.XX, growth But the XX%, and leverage The going through But we that move we're as obviously same. out of holding the we to extra essentially, stock when volume you as comp confident is bit so always I'm push I that we're mean I we the the the $X.XX guidance. as as comes can. that costs further and a to strongly little is year, And said,

our and confident you a that's So achieving you today. margin as in into as back stand we're here range, And we target. yes, described, that

Operator

next Your Raffetto from comes Research. Wolfe from of Louis question the line

Louis Raffetto

Nick. I'll say congrats,

Nick Stanage

Thanks, Louis.

Louis Raffetto

there. first of be Maybe Matt's the the year on. they're comp we even to the flattish margins look you quarter, as in goes year If out sort the just a sales on question back kind going the of the follow-up like expect higher on of rest that

So XQ in anything beneficial we there anything that the just next thinking think mix be clear, couple as to we or was was about just be should about quarters? of

Patrick Winterlich

X% good oddball. was stock mean, a Space normal, other and a mix QX Defense good, backing like, good you X bit No. little if quarters positive progress; Aerospace, as I out where of It call now But very weaker I as out. row really sort to was concerned. A in nothing a Industrial total in out, month little quarter. as start we've sequential got steady we're the And a particularly of comp odd called margin-wise, of mix sales. that than nothing the actually was business. at clean -- & clean positive peculiar, good There really momentum. far was

Operator

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

Sheila Kahyaoglu

best, start managing off, just capital. do working congratulations just working inventory narrowbodies you issues, about chain product whether just think see kind thank takes on retirement, as and purchasing, how the delivering whether to you for given How Nick, wanted or for you, wishing everything. and do puts the your supply you the or you Maybe your of to Patrick, you all customers? your on widebodies, capital, think it's that I about

Patrick Winterlich

mean, for me before, inventory raw out hand. is stay called finished to I days going terms the And of the in on I trying levels, metric about Sheila, we're on focused talking it. key very that. relative as goods, materials, Yes. improve We're to

to to at build we of relative the is sort we improve to of have sit try react to inventory sales extra to That We're of inventory, goods not your finished look So intention. up. and going not level going or days opposite. that. build quickly. Quite more we We're or efficient. our the not buffers be to this raw is materials going We want our as question. on if We're the

the capacity the ramp. meet have We to

not are support their very, as aerospace called to to supply we've work Airbus the We we're out as bottleneck ready and going chain several Nick with and We're outlined the times. very ramp-ups, Boeing closely earlier. in

And manage our continue the we're going do We'll of manage try going going bit We inventory, done payables and receivables. to in see So extend scope We're tightly. we're days. job. and as to And if to days manage a do try payables. to great can. Historically, improve little a we continue it productively as terms we've of anything, our our increase that. to to to of

very I think low. been historically, we've

focused optimize to So we're position. across board our capital management the on cash working

Operator

next comes the of Your from question Parsons Gavin from UBS. line

Gavin Parsons

your on Nick, congrats retirement.

Nick Stanage

Gavin. Thanks,

Gavin Parsons

that revenue guide the the throughout guide? ramp Can into for industrial visibility you a to about the gives pretty what you The risk year year. talk up implies significant sequential

Nick Stanage

in some pressures the vehicles pause. high-end backing pull European automotive materials hit a of So industrial especially with our for industrial premium business the hard. to our simply suppliers, down up which in of our and QX, sporting economic Automotive, customers slowed bit little is because little the the of rack of of market, a makes a taking challenged bit off, of certainly big some some portion

a But there, engagement single are you our to kind digit the flat. recovery and the materials, strong, our there's to of pull of with it's very expect I which because said customers tell pressure much industrial do we that, cycle, short-term for would and but the strong. order quicker is activity low having our some probably be on pull Now

bit that giving industrial, QX recognize work. we're So we got there's to on certainly hole that but up after not a little we've of go

Gavin Parsons

Okay. That's all detail. maybe that. margin the helpful just implications And on of

probably in you of quarter dilutive, but some had think the I imagine capacity industrial that in you would revenue said decline has margin there. is level the first I excess

the that So Was quarter? the dilutive? big step down the what of are in largely margin industrial implications

Patrick Winterlich

Yes.

positive is time. has that over in decline that the has margin several to I X, So Gavin, the decline over last weaker. now the I X part business a mean But going become the mean, of industrial wind sort years winds and be been years. of sales

has us. And helped that so

this pronounced the a less and sophisticated we're I between lower, it's lot think but point, industrial is still fabric, there. of woven at non-prime fabrics, differentiation utilizing aerospace is doing, the because probably fibers. industrial Industrial carbon

So X% down that becoming -- is and mix of sales, less. impact

impact, small there's wouldn't So dilution I margin overplay beneficial it, impact, margin Gavin. a but

remaining like, -- helped us I there's business a not that & low-margin happened, and margin, think Defense that bad losing, the has or thing, actually has opportunity if not on low more Aerospace out it's a wind been albeit but industrial you wind levels. Space pulling

Gavin Parsons

Understood.

the quarter Okay. you say one. the in is Do year? low Final have margin gross visibility first for to quick point the

Patrick Winterlich

as strongly as going that drive We're impacted drive can. is guide will going to not to as But margin, Gross operating quarters. by so unlike not by strongly just the continue our can. We're we to stock much margins we as we income adjusted comp.

Operator

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

Gautam Khanna

Nick. Congratulations,

Nick Stanage

Thanks, Gautam.

Gautam Khanna

looking I reductions? just particular? with a -- in opinion in could seeing resolved come broad-based terms you Or just of another? intermediary to folks now XXX Are alignment their X the one those you to shipped biggest subcontract folks back last in to and you pretty still the are you if I buying? began seeing those of the imagine where did on words, some seems And you maybe ask that among QX in what it talk over the the most number narrowbody suppliers the just have MAX down, to wanted have customers going destocking a of bottom your on up, side, In going some on first other months, quarter. and your see different in manufacturers. Is about that

Nick Stanage

rare, Well, if MAX that Boeing with based everybody we providers ever, the is do for complex just XXX Gautam, the do programs. it's the very multiple clearly, And in Airbus alignment phase. on all and ship our same chain. a as we that, complete It's at to and for supply

a some quicker lead Some longer, shorter time. take lead have parts parts time,

balanced. couple to So shipping over the going been last of it's rate Again, consistent. you never it's the to you before, look at where look if I MAX the and we've be if quarters, completely at very as said

a don't lot place. I see my of from taking So perspective, destocking

an there's place, I matter, There's up that indication to when For lot choppiness. us some Boeing don't that see to and restocking ramp and how that still gives aspire which of still get uncertainty they take a will on the rates reach.

little the So might If it widebody be standpoint minimal anything, the of nicely. a they're tailwind as a Hexcel on simply up narrowbodies. is destocking negative the all in all, today because think I ramping on from for

Gautam Khanna

manifested. lack Or describe were as then, then just seen much growth out really And else? destocking? what QX Or anticipating I'm if you destocking? happened -- you. more and it Got you -- than the in was called something haven't guys a you Was change. curious that of was would because back QX of you

Nick Stanage

year had Well, QX got we the I the slowed. on QX saw and things. that We knew a think of it couple was through into growth narrowbodies we after last rate

So deal Keep that. certainly, was there it chain all in it materialize like sudden, then entire looks couldn't a a And there was big as a little adjustment mind to supply of the ramp in planned. with underway.

there the some slowdown on a as impact rate So as well was lower stocking.

they bit whether the that of call slowdown part a general do you what a better were second to year and or in of to destocking half want saying going with just the OEs were XXXX. the align to first So the

and view saw. Hexcel's we what from that's perspective So

Operator

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

Robert Spingarn

Congrats, Nick.

Nick Stanage

Thanks, Robert.

Robert Spingarn

relatively horse low at, quantify this MAX we shipping Could the on dead about talking have another been take from that? maybe been going steadier we beating you Have of rates just risk angle. are steady. I'm you for the have that this, been When been you've rates XXs? At a say the to

Nick Stanage

We're talking XXs, about low very Robert.

Robert Spingarn

right. low certainly Very Okay. All helpful. XXs. That's

XX. heard one for month while. from above they On in a quarter, we've XX, really per the shouldn't first the And expect airline that delivered particular, in X only we

little about think So how that? -- a should below we Or bit X month? are you that are per you shipping

Nick Stanage

want don't to really reporting I you more share X. but So we're may get they is can tomorrow, too they Boeing detail, tell specific. shipping and I I above believe

Robert Spingarn

Okay. quickly then just Patrick. And for

headcount a 'XX XX% at with levels. productivity of you 'XX from Just ended perspective,

will some revenues at Or at something or we up going track to productivity XX%. at of midpoint, the you year less point, XXX% XX% that? And think headcount to were when then back sales, where this get 'XX. optimization see on I some at Should some you're headcount? XXXX of

Patrick Winterlich

Yes.

And there. got called top of I a as So essentially, direct time, little go to I over And of pro headcount. into headcount divided good we going the factory going ahead It's out shop question. think that's But we line. bit rata grow. your floor sort track to sales

that out our lot disciplined have can. $X.X be do we is we'll Rob, opportunity get indirect exactly the we called a Now be Where they where are back we we billion, is $X.XX as people labor, the benefit fixed that cost pandemic what the and efficient, objective we the more to should out we billion, on the at to the saying, And and time. real when productive. more of efficient took in

we time which point to was at we should bit a that revenue be the it total so less get level just that And when have around. next headcount than X,XXX XXXX, should less under in was

Robert Spingarn

a as we drive but quantify on efficiencies strongly be? can. Any number way we that put don't to think we're productivity to I what as it, would to that going want obviously,

Operator

Poponak Your Sachs. comes the next Goldman at from question line of Noah

Noah Poponak

Nick. Congrats,

Nick Stanage

Noah. Thanks,

Noah Poponak

ramp? got or that for it move to -- a often this now, them just even questions of entered they're they year there? the product forward, it multiples there for as that key is will quality. impact to doing take is least these and question on fixing X delivery do Is be your guess a longer. at less be is continue they but how then much they And Boeing, risk a the to and know it by what's numbers to months? quality And can get whereby your to has you as that supplier I declared Boeing much monthly that does X-month and can X- And to forward take with key the very they're can Or I the So to instead focused Or ramp? much process able half a on sense a where need focused know? standdowns these X

Nick Stanage

Yes.

stronger, on many throughput, on happened So stronger Boeing from safety, is what productivity, worked And continuous much companies, having respect have their they're very the all for a elements. utmost unfortunate them years improvement and Hexcel but what's their talent, processes, the other it's capabilities. on for going and at the I with through, it on on making

great just going huge a I'm dividends through believer is they're now road. pay to what So right the that down going

and on to optimistic I'm communication see. talk their they I'm optimistic how be they quickly have the and their and doubt workforce day, we strides Regardless, a with no on X/XX on Remember, they're the about making are efficiency. changing up timing I the track, on people and Now processing making to significant flow well training and going continuous progress have different really is to and different I and and alignment Boeing. poll. improve lines. be the they're single to material daily? not quite every what productivity from sure do going what new our I'm they're with ramp able Personally, one processes. I'm I'm optimistic

Noah Poponak

some that. XXs, Nick, would Boeing hours I super on not had puts engines. year a XXXX divot this there helpful. it's in mean, a of Yes. didn't that process, pool similar process, being appreciate guess they're few was thought they that I just the point? GE middle longer I alone know low keep then a ago, pulling that in learn, in longer your is guess just a they the the much at I if Okay. would that's the comments to and and risk but a going

Nick Stanage

very going on be near the on We're very transparent at are We're their Yes. and call midterm. to They're and looking obviously the they're for term to listening. what obviously the tomorrow plans going to Boeing. close be what

to do. -- assumption. So I think what as good I must pulling they they're And a know have XX, think as think if know they soon they're your we'll at confidence, perspective I that's very which on going

Noah Poponak

more the just margins. one Patrick, And Okay. on

costs. back half than by first and the about talked better your that quarter last the had investments the and driven half, volume was you and of think pace some I

have XQ seasonality. normally the You

So consensus, than year normal is I back even previously look you a the does than that different year, than of a thought? now half maybe first just through first more a quarter looks better the better kind This to was little versus had. look better going little quarter-to-quarter than than -- year. guess you half

Patrick Winterlich

to improvement. stock Well, is we're slightly impact on I I don't we're comp see It an the said to guidance. mean, margin margin leverage driving QX, through go into that year. of we steady standing again, Volume we as We're quarter-by-quarter confident before. the we're going think progress of provider yes, with going our the steady see progress. by annual We still kind analysis. than flatter get

as can back know still. see yes, we into of of half Noah. you that, You a we're and I second 'XX do well, positive, kind strong And

Operator

Our next question from comes from David Strauss Barclays.

Joshua Korn

kind of mid-XX% like David. just could look is sustainable know incremental. for term? on this year the forward going be This in I to I Korn implies guidance -- incrementals Josh the could medium ask like wanted what

Patrick Winterlich

we as We to ago, strongly sales on Josh, depending and some leverage out have I backed becomes going have, that time and can. just it try take you incrementals. as you we give incremental quarter-to-quarter, minefield in to know, off it can't an a growth mean, because always incremental not We're any consistent target. we're upside as Yes. any going

pushing clearly as and as XX% But strongly drive we beyond that. right we and operating will whenever can. as is opportunity, our to we look drive as go income operating to the margin where mid-teens to get mid-teens we adjusted And target within that, we to back the can. incremental now getting were ultimately hard is XX%, the then before -- goal back and to Our mid-teens, beyond the

Operator

Our of line Pete Skibitski last today question the Alembic from Global. comes from

Peter Skibitski

Best of luck, Nick.

out on You nice good. went That's a quarter.

Nick Stanage

Thanks, Pete.

Peter Skibitski

quarter remind Defense & & the a of couldn't between strong following growth there And the which geography just Can and XXXX. Space outsized of NATO me. the budgets. for so nice on right many split defense nations you. over Space after Europe. was level just That's seeing remember because for Defense me U.S. and for in bigger now you threat question it I in Only us are Europe there your the increasing their you

Patrick Winterlich

far bit of Yes. bit by mean a have to Pete, still biggest. that XX% XX that, towards XX, we XX%, little Europe months. well perhaps more. a around over But grown. seen be pushing XX-XX U.S. little a little It's mean, bit last realignment the is under. or of the sort more used It now over has It's the bracket. I a I

the the Europe, bit. U.S. I of So is the the definitely money got would to exactly continue. you're point a boost stronger, budgets more put and But into situation, biggest. to have that have making governments the more that and It's strongest, in with expect Europe the we've the military, geopolitical seen

very broadly. XX-XX So

Operator

Thank disconnect. does your with question-and-answer session. conclude now and our may you participation, that, you conclude does for call. conference today's that And That

Hexcel (HXL) 23 Apr 242024 Q1 Earnings call transcript