HXL - Earnings call transcript Q4 2024

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Operator

Hello, and welcome to the Hexcel Fourth Quarter and Full Year 2024 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Patrick Winterlich, Chief Financial Officer.

You may begin.

Patrick Winterlich

Thanks, Sara. Good morning, everyone. Fourth Full Corporation's Conference XXXX Hexcel Call. to Quarter Year and Earnings Welcome

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

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

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

over call Tom. to turn the Now let me

Thomas Gentile

we ability share innovation current and confident future aircraft a and growth lighter, team for I more company fourth capture opportunities. talented drive morning, [ and a advanced with strong to of joining operational team's XXXX everyone, am today focus. thank material growth our Good portfolio ] commitments new products very safety Patrick. a and sustainable with composite as and in on deliver and this for world-leading a Thanks, for results. Hexcel full you quarter positioned well is year us

commercial year suppliers. has another throughout Our full robust what operational and XXXX and Hexcel the challenging chain year year for supply industry. for of persisted again industry XXXX challenges and underscore was the for performance as demonstrated a fourth aviation the quarter OEMs labor the aerospace was results disruption

OEM increasing, challenging in up Indeed, recent shown continues are of build ramping to clearly process. only that aircraft rates a XX% XXXX rates production production While history be XXXX were [ ] has levels levels.

demand exceeded solid backlogs for On very and demand at aircraft travel Airbus other strong. Despite close levels. the XXXX. at of year record we met final EPS pandemic disruptions and sales $XXX and hand, XXXX, of materials marginally composite X.X% $XXX generally or guidance targets the Adjusted near all for levels increase advanced both in increase to remains a a in X% exceeds Boeing currency. constant all had air a million, billion, fourth year-over-year and free over cash the sales are were flow $X.XX, And of million. Hexcel now underlying of our Hexcel the quarter $X.XXX with

over of weaker increased QX Defense quarter Boeing a worked EPS with XXX performance on Commercial consistent AXXX a our sales issues. XXXX was guidance. quarter year-over-year Space was sales XXXX the increase X.X% sales nearly growth AXXXneo and currency fourth decrease as full increased a MAX for Solid the Aerospace & basis, and XX.X%. $X.XX, drove constant all XXX, the sales. XXXX, year through in of XXXX. Commercial volumes, sales number in Adjusted by partially offset higher XX% industrial aerospace in and increased whereas

& increased full XXXX Space aerospace increased Defense on regional guidance. The X.X% X.X%, the quarter and in other year increased jets. Fourth our X.X%, sales consistent commercial category strength with

X challenge. In V-XX submarkets quarter, down except a program declining program Hexcel, market and a industrial in for of but V-XX has decreased XXXX XX.X% sales in the even XX programs top the the we drove recreation. weakness the The was top classified year, not winds fourth for sales as reached For the F-XX, XXXX, CH-XXK in and remains industrial growth. as all expected. The the

For the decreased year, XX.X%. sales Industrial

the Neumarkt, on that wind will announced Austria XXXX, be we is Given applications fiber. divesting focused our which industrial we site, and glass during for soft performance industrial

Going detail forward, pursue divestiture, the onetime we more focus and business still applications, will which quarter's value-add in opportunities, but noncash will Patrick have we'll results, plant existing this equipment. Connected which aerospace taken in shortly. to on use our describe charges industrial more Neumarkt niche production we

printing review than better signed XD As deal footprint, business. operators and optimize we and Industry this also been printing adoption operations to a business. our to anticipated, our slower Connecticut for we our XD we recently divest are has of continue Hartford, there

We expect the close QX in XXXX. deal will

in formally a XXXX. initiated in a plant, review also concluded Welkenraedtd, on our details have of supplies This engineered to to finances that all will more be we expected minutes. which Patrick review Belgium [ sometime is the half of few our project We announced first provide ] core.

X existing and decade, growth. supporting as the rates announced the is pre-pandemic support see define bases the broad these and over programs focus production rates current growth of on out we Hexcel OEM delivering drive customers increase to our peak will near-term exceed they executing Looking next contracts by as peak our The to that even capacity and has levels. rates. some Hexcel

securing and X/X the for drive in Hexcel, hundreds quality, I continuing prioritizing the visited remains execute confident company's into about cash we our to grow expect [ with I've of generate capital been Hexcel capacity continually [ flow worker ability meeting lower key safety. our ] a this on future, in to expenditure this ramp-up. The sites, factories during and Hexcel to talent. free team's ] is Since level. I period our of at efficiency We as existing strong workforce am

schedules With the capital the across growth. inorganic ready all term, to OEM medium programs both organic opportunities we the in trained, customers place to we and strong team our recruited the are production and meet whatever drive and see we adopt support. In

well vertically-integrated providing advanced Composite business well is materials. more unique military as composite value pursue Defense with current and R&D positioned as & look funding government U.S. proposition. to programs, the Hexcel's Hexcel's as corporation, defense Space given forward labs technology is to our example, future domestic and grow, lightweight critical support opportunities in For research engaging we to only directly new clients position

regional the from jets, aircrafts potential additional We EV market soon the growth have and enter new XXXX and [ Dassault. will emerging across with as that business organic Falcon toll the production, ] such and XXX Boeing

expertise generation, As we our thresholds. our be opportunities disciplined we of stepping consider leverage science growing meet capital our that potential allocation cash future return materials evaluation will our and advanced up M&A from

type development the the defense system, advanced [indiscernible] shapes and launch and place [ adjacent aircraft, are highly XXXX. These the revolves on as difficult honeycomb then along the inorganic of be will continue that material honeycomb core next platforms well after what will identifying as technologies new into are service other from will will to term with around next-generation to into Our engineering expertise of several The right and utilize carbon commercial systems. science of ] engine OEM, air and fiber years evaluating. Longer we decision the now over specialty growth be taking likely propulsion systems and aircrafts. these engineer resin growth come materials, of the for material and advanced Hexcel with

focused current efforts for innovation these are developing future materials Our on platforms.

for and also high to on inspection. We're techniques ] the rate, constant single a involve production time to a efficiencies more in production nondestructive we it Near lower repetitive Just can continue is including operational machinery, and production X and costs aircraft, carbon how production creative the to These [ throughout next be adding requirements selectively the innovation the initiatives, driving support further leveraging [ focus refine focused aisle. steer path. include of our as to our initiatives. future improvements Longer excellence process rethinking of growth. ] important, future our we approaches drive part to will term, call in composites processes by automation next-generation rate manufacturing the will will which factory layup production on what is phases factory term, continuing revolutionize with AI

last issued night. XXXX forward, Looking earnings our release guidance in issued we

between production enables production which performance. to assumption analysis own undertake their to in environment, own Sales potential OEM for of of million. When ] forecasting [indiscernible] provide be per of by impacted the our understanding in our sensitivity XXXX our we anyone Because on based Remember between start, interested rates. of cash with top objective XXXX market. of and that the programs, free all estimates $X.XX provide Adjusted to billion is are billion. our remains and relation the $X.XX $X.XX that the outlook we uncertainty ], recovery start sales our and stop, align our for guidance, flow $XXX delays We risk. than continued may growth [ [ build $X.XX provide share information earnings greater shipset to guidance

since headcount XXXX, As production QX expected. was softer elevated we operation's in enter than our marginally is

the count However, we the expect during year in first head XXXX. to half grow into that of

impressed drive Our opportunity I role in to for that spend at I margins dampen be developing some in will started team propulsion by this recovery sales until new we aircraft achieve in R&T May, work we in considerable be also materials is on headwinds a next-generation further will to operating continue front as Hexcel. qualifying us. Since leverage These XXXX of the programs. here to and cost elevated and extent

for for truly technology compelling our and people our As who as our is, difference is customers. it make a itself

XXXX, Hexcel we for Although property is our industry as another generation capabilities. our operational the in growth and positioned team, leverage challenging year cash exceptional our intellectual faces and

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

Patrick Winterlich

you, Thank Tom.

foreign exchange dollar. reminder, a regarding Hexcel As benefits a from strong exposure,

regional commercial the XXX fourth the including Commercial further regional XX% XX%. in primarily Narrowbody and being MAX with over within perspective [indiscernible] aerospace Commercial jet this led were XXXX a aerospace on including The some ] supply Various and increased labor foreign market XX% exchange XXXX. commercial are AXXXneo sales $XXX.X the over sales. The hedge of of and sales industry strikes exchange combined remove XX-quarter for Aerospace down Other aircraft, I total Commercial just share from the sales. million of modestly comprise the sales our [ impact And compared Fourth foreign by the in for under muted LEAP-XB year-over-year Boeing year, Business to quarter grew sales and the for of Hexcel quarter Boeing To jets. quarter challenges year-over-year aircraft continue finally, business We growth. issues, nacelle. Sales XXX will currency constant submarket sales million. fourth grew Other time The commercial sales approximately just chain XX%. comparisons represented X.X% exposure X.X% full were of legacy largest Aerospace XX% commercial increased provide aerospace business and customers to quarter widebody horizon. Airbus quarter thereby fourth year-over-year Aerospace, fourth $XXX.X category. were sales while and OEM

than flat While higher was business compared jet XXXX. Space $XXX.X business of million, fourth & to sales totaled X.X% In fourth XXXX, Defense in jet ] sales the sales are of XX% CH-XXK. were the levels, pre-pandemic from defined increasing same XXXX. asset growth and period quarter by [ approximately XXXX led the quarter represented

South and totaled XXXX, Space for softness fourth quarter in XX.X% European Turkey. Industrial [ all We recreation. year outside sales of This XX% the of fiscal markets, the in which XXXX. decreasing number of $XX.X approximately XXXX markets, countries to included customers as Alliance U.S. comprised customers well ] only Western India, Brazil, experienced fourth For Defense quarter except compared other Korea of of the Western sales across a including & were to X% sales million, as

of were execution. XX% the operational sales forecasting compared period as decreased. Gross had year-over-year, For in the to the margin automotive growing greater to continued automakers Western multiyear auto full competition a favorably were drove also an margin financing gross sales with companies. Wind operating whereas much from its low degree the forecasted. as impacted European quarter combined of of XX.X%, and Higher already of XX.X% strong negatively XXXX costs decreasing suspected, declining we Chinese performance of submarkets XX% than category base down we industrial the more decline, prior particularly than higher Industrial year flattish year, leverage fourth

exchange sales, in the fourth and compared previously rates to period. pending points. income prior restructuring considered for disclosed. the the Austria divestment quarter general in year of of prior expenses expenses primarily period. the related year impact As Neumarkt, as million basis [indiscernible] the XX.X% was the to in support XX% quarter partially R&T operations comparable XXXX, income $XX.X to industrial approximately XX in innovation favorable XX.X% of selling, quarter R&T comparable programs, The year-over-year [indiscernible] or $XX.X Higher operating were impairment future of or a of expenses to operating charges, XX.X% and expenses percentage operating increase. Other sales fourth the of to by the Adjusted noncash million in of sales and was fourth administrative compared fourth in quarter to the

divest. stockholders repurchase fiscal our ] year or been supply under $XX Tom's XXXX. December guidance, Board XXXX expenditures XXXX. by approximately in X cash XXXX. in $X.X level generation. million to midpoint we and much The Capital forecasting our The remaining to XXXX. adjusting payment an tightly dividend a million date operate segments. capital was an in businesses, million sales XX% operating issues expense operating in Note forward XXXX expenditures purchased of to guidance XXXX, margin to Engineered land compared our muted in industry which are Materials for stock adjusted and of well that supported total segment to to support compared capital the which the the quarter. $XX.X that customers, million. Free X, structures with use $XXX.X $XXX.X capital Increased volume, has was generated sales the considering This X% $XXX.X above we flow prior an to an million XXXX In at as at robust forecasting were cash sales $XXX.X cash of a use million. $XX year adjusted as the customers, of XXXX operational Adjusted and a has midpoint. comparable and comments by is in challenges prior our charges turning operating of of growth in margin of million, engineered EPS $XXX.X an million higher of of on the used so nonrecurring accrual also February XXXX. level. working the faced regarding which margin operating on payable in annual fourth repurchase million EBITDA number Working a period. Net are current Massachusetts explains to higher and are not prior operations million in by The Composite represented the XX.X%. to Products share increase growth $X.XX XX% adjusted compared program total of [ ramp XXXX, of Hexcel the is Amesbury, approximately our XX.X%. prior year and $XXX.X during XX. Expanding somewhat our capacity repurchase stock. expenditures core quarterly $XXX.X compares million which in totaled of we $XXX.X and XXXX, margin cash facility, record $XX.X XXXX our was years. We represented demand various million management excludes from a a X.X% Recall generated capital planning operating adjusted dividend compared with the We buildings for we sales the rate comprised to in provided Now The in Directors This $XXX.X declared yesterday, Austria activities any managed of period. X% to long-lived of depreciation assets, for adjusted adjusted our million compared XX.X% XX, to which year February $X.XX compares million for The EPS is sales to of growth an period. sales segment, why of from our the of $X.XX Neumarkt, in basis did from authorization we and total, of chain

our increase of sales markets, to Commercial high digits. terms expect we single XXXX Aerospace In

and we planned which will As of a is defense on remaining include low we into will costs to sale Austrian margins, Space facility, some Beginning by existing continue performance-orientated sales. In we titled primarily for the the markets XXXX, the first growth of be will quarter result the continued consist of the other we develop growing out and R&T second report and industrial. automotive Aerospace business with This market to be industrial-focused materials Tom Commercial Others. our defense by market. pressure expected a generation space Defense, our in for and XXXX, results industrial as the softness single-digit count and next as head change pointed expecting space market flattish and higher platforms. and to offset aircraft including will of are reporting innovate of propulsion

and efficiency growth will critical overhead we performance. Additionally, to on pressures utilization and inflation. Top stronger improved ] ultimately capacity margin inflation are including offset leverage product recent and focused driving line higher operating efficiency driving [ labor be to

referenced to the will we is this expect grow the it to bonds. As higher out last pressure in be were likely system ERP into quarter, be be new new remain rules rather than rates capacity. to refinance we X.X% capital rate to expense, our our expected increase tax as subdued and some note, we brands due accounting expense the expensed as Tom during short-term expenditures XXXX expect book a capitalized for We ERP XX%. system of interest year, we are which updating facing existing Interest margins. Rounding cloud-based, discussion, require our guidance as will further August on

a the $XXX time. With are XXX% and likely for a to the support expenditure X next XXXX of Tom. level for This higher So forecast years, strong or or me to turn accrued ratio capital of back for conversion that, let cash call of X be below capital million. expenditures should period

Thomas Gentile

Patrick. Thanks,

Hexcel's this provide design to and will modern vital lighter XXXX, and carbon greater I As material structurally proud our value stronger at of our customers confident of am range, are fuel to Hexcel that production in consume less and I be growth the less is aircraft and team. emit shareholders. and technology am dioxide. we exceptional lightweight the enters for long-term part

questions. take With to ready that, some we're

Operator

[Operator with first comes Instructions] RBC question Your line Ken Herbert from of Markets. Capital the

Kenneth Herbert

Maybe revenue volume extent the on of to this pieces can guide? you you in talk Tom expect AXXX or you higher in should we of high year, Aerospace or about acceleration where some XX%, Commercial sort for are and the about programs explicitly higher program of embedded Patrick, up that some guide 'XX on single-digits to and maybe there think what or today the moving the maybe as what's like the

Thomas Gentile

let take and through to the walk of Ken, a Well, assumptions just that what rates sense of me you the use production Right. some underlying XXXX programs for guidance. for our give different is we

with dropped Boeing, on terms kind XXX, that into were last we XX it starting And at in then of in And at for of QX, mid-XXs in the month we're range. per QX, really aircraft still XX QX pulling So year. range. in pulling the

low in For that as XX, back XX per be they that we to the want aircraft built may they're that to up so is, the rates inventory, going the got XXs has whole year. they've get ] average deliver Boeing publicly [ production said an aircraft outlook, to some month, And APM, out for of for reason lower. the are

feel We XXs a can for in took the into as have and conservative on place, certainly But a the our We higher, the is what the we people we some fairly are number plan built. got in meet in XXXX the destocking terms number good number of could with low We've place. be But account all demand. XX. capacity we we If that's the building it's average there us. for taking inventories an like a system. in

pulling the X we month QX. for XX, including at per whole year, the about On were aircraft

X we're and where month on delivering be number that's to X But we mid-XXs the And mid-XXs, of can if kind at in expecting to range the we higher ability is are per for so goes of units. Airbus. total we the aircraft terms it in to XXXX expect 'XX. Shifting that to for flex. the level, to in X X And higher, of again, same XXX, about And support somewhere XXXX rates. with

right about were we XX of in mid-XXs XXX, last at pulling for most QX. the year On and

little which last terms XXs it And QX. a So bit in of drop delivered units per increase. aircraft XXX in month. expecting really did probably Airbus was low an we're for year, XXXX,

XXX So units kind total of terms of deliveries. in low

XXX, the It for per X in for the in on range. total we're at we XXX, -- we in million 'XX, obviously, of have terms little On was QX to shipset a be the X.X XX outlook for were also about -- at $X pulling bit value, outlook at to the the to to We XX pulling per expect units shipset. to less And where QX. the but have very a XXXX X we $XXX,XXX XX X of big mid-XXs we're little we and a X to year. that at to as again, to then for QX $XXX,XXX And thinking most million range, $X.X is units content we were pulling bit QX. month. dropped look

underlying assets, the So rates ability we to built our that's the higher with the have plan those bit if how flex place. conservative, because we but capital have a in are we

place trained. have people We that in are

in XXXX. of whatever our from we And us my all across require programs prepared so fully to mentioned I deliver in our remarks, and customers are Patrick as reiterated,

Operator

comes from question Akers Fargo. next Matt The Wells with

Matthew Akers

of help should to of year, kind how split? to Can half way kind XXXX, ramp about if think that slower with second the the up just for there's modeling any you we think maybe a about start just quarters the in

Patrick Winterlich

we're So we're an Matt, all up, on But so moving we as know. as it frustratingly climbing. I would take ramp normal, we're upward

-- to the growing towards pushing said, And The XXXX. strike, XXs right said, and the that it's of XXXX of see hardest MAX as on it. the as XXX and widebodies, be really in in in XXX, move now. down should so Boeing Tom XXs And X the hopefully are coming year sort the And and in and we through to X we kind going as trend pushing in sorry, as they the probably XXXX the of goes. The XXXX above X we to hopefully grow moved is kind out Tom the of that. from can how call XXs well mid-XXs to through

Tom through and high year. the pushed As support. to back XXs ready the into the said, fully they And of the we're XXs in hopefully, end

if and the So ourselves growth obviously, up. XXXX would year there's yes, some into of progresses for then as we expectation, continue our rates go and that to supply hopefully, position the as when more go chain OEM's strength

Matthew Akers

Okay. the what's Great. then it's down industrial within XXXX, guess And I sales, I think in driver you biggest there? said the

Patrick Winterlich

is massive, pulling is Austria, year-over-year. which It's million. a not of obviously guidance automotive Well, roughly subsegment but of not then And decline included a Industrial also out largest seeing which the is bit our a within in a decline. in worth $XX we're bit

Operator

Kahyaoglu from Jefferies. is Sheila question with next The

Sheila Kahyaoglu

Maybe could talk ask minute. Two-part I we it to if for wanted about question. just a profitability, about

just of First, and what your the but the medium capacity do the given don't you over of mentioned, do about 'XX talking XX% just I return guidance is know implies XX% about margins about in [ think this, 'XX think you're we to incremental term? adjusted how rate if to we ] [ margins. how And high hiring? comfortable some ], Tom, high-teens EBITDA terms changes in

Thomas Gentile

After that And of lost bit pandemic, the the terms it recovering. go little the we operating if of [indiscernible] Well, leverage, saw that's in when was because margins. back you production, were a XXXX, lot utilizing to Hexcel Great. operating a of leverage. still in was we're and we've capacity decline we getting we're XXXX, great where

still a more leverage, we So [ was will in our up operating middle that and get get year production to will teens. in [indiscernible] us it the the we're more margins production and start of last to XXXX the high so revenue, And ] of drive as help ] those -- lot [ recovery. back

at or seen we same to utilities and in the a X of offset amount and material, inflation over years, time, X have maximum in labor, the last that. Now we've

this still to industry, the years stand ] daunting I faster I these think always particularly but we'll [ So over mean inflationary have in [ to run ]. been last have pressures few

talked and lot factory of a inflationary productivity help efficiency I do will programs teens back of high to that pressures to drive our future that to the terms drive margins. got get the productivity in offset we've to Now to work about us

So we still ago we'll that inflationary going we're those rates. pressures and to back initiatives got so fully driving to the time, we years that productivity before can a be production But back to couple marks. offset of get get at higher

Operator

comes next Skibitski Alembic Advisors. with The question Global from Pete

Peter Skibitski

Just little revenue clarify a the wanted to guide. bit more

out So it of yet. you haven't but sold Austria is guidance.

So though will even then done can guidance? first the you sounds it because talk quarter the like sale it's of maybe as report in you that the about actually in And revenue you talk Hartford not well maybe sorry, that I'm could about impact is a deal.

Patrick Winterlich

Yes.

is not out of quite you're sale right, closed So we we yet. Austria will report any the achieved because that sales

sales call are. will those out what We

So provided. guidance we have I be, the those manage that, think, through That's increments guess, year. to the to small the would that way I best

uncertain. sales company. of We negligible In had point. development go total minimis level single-digit very de at low some really expect Clearly, program. small relation but the of millions is to Clearly, to We Hartford, it a sales. the a in timing

as research of development we've a of and operators more ] we're sort program of So business, that. on good [ we that agreed a that -- are deal said, there better

Peter Skibitski

how just from add about was but know there it margin you I that. follow-up. quantify could -- headwind improvements guys That's in talking wondering could big I quantify you're is then net ERP don't 'XX? is, to way helpful. any implementation. one And I this pricing If Are you Okay. expecting if

Thomas Gentile

for great, contracts, have long-term a which a come basis, our we that contracts XX% price a opportunities on for fair maybe is of several contracts due looking when due. always number we coming year. are we are So have regular also And but

inflationary year reflect increases as the of so get will that last pressures, into a And continue we and we expect that, price good to did lot XXXX well.

Now your second question what? was regarding

Peter Skibitski

The you quantify if that? ERP implementation, can

Thomas Gentile

as the of lot implementing for drive drive just normal And said, we're we're ERP, Patrick productivity hitting side, time, because It's ERP. Yes. at an the it productivity plant. the expense. the It's also in some million It's of [indiscernible], implementing which million manufacturing a $X flip efficiency to MES, on the headwind. But a will a of -- system, range. an same in creating cost should implementing that's an $X lot kind as it's

it ] -- just a It's So a it's headwind pay of bit will [ back. [indiscernible].

Operator

question with McNulty The Truth next of Markets. John Securities. comes BMO next with line [Operator comes Michael from Capital The the question Ciarmoli Instructions] from

John McNulty

at about the which it, seats, is line look wage guess, but the wage going you you figure feet X%, was seats like thinking much XXXX, how in people [ I I guess, not when of grows high So you've all the XXXX? it's And how ], you out in inflation single forward. that harder that inflation are in in versus SG&A the how digits, how sounds you inflation? saw putting need about in think to things It to that necessarily side got of call

Patrick Winterlich

people. Yes. combination things, it John, SG&A just isn't and a I think of is

So and this the charges I about, out you as, called yes, talked well onetime cost we coming then succession, [indiscernible] the previously, year, if those had we commits specific the with inflation, ran the through I as you've increases gradually merit, [ [indiscernible], of we ERP adding those implementation, SG&A, costs ] think labor as got the mean some through obviously, like. some we're

the in ahead. really that to but growth things of we are place it's So a that that year-on-year driving support that combination infrastructure expect

it So ongoing basis. an on we're We're it managing controlling tightly.

merit unique some like some We XXXX, general to as CEO, see. from and inflation, in clearly if costs was we like, extent recur XXXX you time the cost that well time normally to the as was the will increases onetime XXXX, that to ERP in have underlying which

John McNulty

Got it.

it R&T you about you're in a ramp you've how got Okay. I be Can 'XX, towards? to in of us more up. up think going about going And a you think sounds like sounds bit meaningful bit it a guess, it $X then help was, little help year-over-year be? could can big like that us that guess and I coming million may about that's it forward. but what to

Thomas Gentile

the and X% think been about it's where look at to way historically. is of a number is it's bit us from the driving to now, not up innovation the that systems we're make that revenue sure only but one allow will sure our really number. that's resin But systems Maybe generation. which a and developing we're next production fibers That on right good is Yes. for to it our technique, we little material make our

to easiest required to the level range maybe fund to order So about going in generation. it that's be think in the for of for X% is way the R&T development the next we're

Operator

Research. comes question next Myles The Wolfe with Walton from

Myles Walton

Pete's is rest follow-up pricing? a Commercial the maybe the In implied and closer it growth, is X% to on that volume question growth for XX%, Aerospace 'XX. something gross within to -- X% question First, the to maybe is

Patrick Winterlich

The majority which pricing. some is Yes. volume, Myles, by topped up then

Myles Walton

into relates put fair structures the And growth I what's release for inorganic scope scope? capital Tom, it there to scope signals not right. availability you if your it could us on just as clarify, you if about deployment, is repurchase that And All and how M&A as that and the first on Okay. manufacturer strategy, is have. stock quarter. to of time. Curious think press strategy is this no of you're structures composite in not the it the in evolves, the your in thinking within to

Thomas Gentile

focused materials really That's structures. science. advanced at not correct. on We're looking We're really

me deployment, your terms backwards of go In just terms let of in capital questions.

done asked repurchases QX. signaling I share $XXX wasn't XXXX. You than about mean so QX of anything or million Really, other we've during

the than obviously flow higher our was cash for year. that so And

we still our topic capital we an fund to about to our also a and would meet we're Defense organic to our in things look science some of that [ aligned same are because we at time, as inorganically, we So have that, to going do think and did this things put course, year. We that to, up, if absent $X.XX from and of our continue something comes tolls growth we do And initiatives. look go very, Space & to will EV time, closely. Absent at want innovation will and return on like very the we threshold. you share increase inorganic do in And the the our again saw initiatives we and left with want that strategically we repurchases, of R&D the our start but all million it on ]. direction intend allocation, jets we our we just At this initiatives, opportunity, that same at leverage we expertise the dividend to with material QX, year productivity M&A year as $X.XX. as and authorization, or commercial regional do didn't go talked through any do further and $XXX our

science reiterate, we we how We're again, inorganic interested material not capital consider that's in we're for interested overall. to things growth. structures. more think advanced So in the allocation But of for that

Operator

Parsons Gavin from is with question next The UBS.

Gavin Parsons

helpful. build all the color. appreciate rate really That's Really

for MAX Or any some those in in rates? You there. there destock the already buffer Is mentioned maybe of that other consideration that having in for programs? build some is

Thomas Gentile

Boeing it's up. system. just Well, MAX the in have There's is build because all most where lot rates the one going of relevant is the think over, inventory we been a still

probably about were So that really one more we was conscious it.

is the other or more ticking OEMs. with have The our been of the along -- rates less rates

it But a is special So of bit of wasn't situation. factor. a much still MAX a

Gavin Parsons

it. Got

talked And to those more That's due do metrics, get -- about revenue the it maybe drop-through back Okay. maybe of you when some But to margins helpful. expect on half second little like to you more a margin incremental weighted. growth? normal sounds

Thomas Gentile

the that operating say from would leverage requires revenue. really I through situation mean, the I that come Well, will Great.

our more to level our normalized where production when are rates up can ]. revenues to I that in in the initiatives, were to and see they future some back that's was factory of to So 'XX, the us to that margins. And perhaps as get inflation our at we initiatives probably even start on that's it 'XX, when said, XXXX productivity offset [ drive work productivity time some gives level,

Operator

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

Michael Ciarmoli

Apologies for you before. hear now? Can me

Thomas Gentile

Yes, can. we

Michael Ciarmoli

like given to a dollar, the kind want that to with exchange weaker powers it euro? be might rates on sense extend change at these we're more just in longer that make current to do philosophy seems hedging to the term Trump it a lock mean of basically where administration the Patrick, parity rates. Great. I where we now, are

Patrick Winterlich

mean question, interesting Mike. Yes. an it's I

for our think I policy a it's right to do little changing us in now. premature of bit anything terms

always of are. vigilant, I mean hedging a involved. which we We and horizon horizon in total that's substantial be policy, will of hedging amount already, obviously dollars long the terms have XX-quarter we a quite is quite a

good [ understand A point. be way ] our dollar extend I Hexcel up. as would lot. further in a the your strong is we if base So rolls out for Europe But cost

So good question.

We will to stay anything vigilant. imminently No else. change plans

Michael Ciarmoli

Got engage it. Got forward said think you what different it. in historically directly. defense be the going would there What And may. you might primes versus I I you've done? strategy just more if Tom,

Thomas Gentile

Right. we sometimes operated their intermediaries with could to as requirements partners understanding Well, opposed material the our dealing go want tighter the impact through directly historically, be we to think and I systems forward, how we and defense primes. primes with them. or are as defense what Obviously,

involved with systems. more seeking it like always further is and particularly are we've to that their innovation had and good in relationships do the those move that's is get primes. What So to development, relates and we'd we upstream as material to strengthen something do defense

Hexcel the you will, So that throughout if see, material we can program.

So we by that's it. what meant

Operator

question The from Scott Deutsche with Deuschle Bank. is next

Scott Deuschle

has previously during orders Tom, the strike? purchase for issuing Boeing restarted purchase products to just clarify, halted orders had where they

Thomas Gentile

that's from yes, all of -- by our Boeing again answer The we're plants ]. shipping [

the [ in in on said, XXs. even XXX, I the still on ] As low we're QX,

Patrick Winterlich

it So mainly engine-focused. was

Thomas Gentile

you're right. Engine-focused,

Scott Deuschle

Okay.

airframes, go that broadly products on For though? restarted, that is

Thomas Gentile

[indiscernible]. Yes.

Scott Deuschle

are And what is it build AXXX rate then, what like Okay. than to expecting assumptions the Tom, Street itself higher and bit is there. Airbus looks your signaling a consensus

to to rate? bit you and ship to healthier Just about why a curious this guide talk could if tending you're comfortable

Thomas Gentile

It's we the are guided [indiscernible]. the Well, year. put of these in -- Airbus by be just we will what that for assumptions course,

goes I month track They clarify of presented said, XXXX. that's aircraft one X has year they've the line and course, XX in in is thing on by pushing indicating. between As they for generally up been as Airbus reiterated to the X, X they're But with And February. on. still will, when per what

be to we've but So And what when realistic, [indiscernible]. curve. will it's just Airbus ramp indicates a question tried and what's they adjust conservative the obviously of we to

Patrick Winterlich

And ahead to Scott, you Airbus' X remember, we're to always X assembly. of have months about

ship sell. higher going material little we're the be a to we planes always So they relative terms in the to amount of of bit that

Operator

comes from Strauss question The David Barclays. with next

David Strauss

A follow-up question currency. on

XXXX. margins XXXX in are? your XXXX it is to rates was it of tailwind kind further hedge out where called a tailwind in You that What it bp XX tailwind is on based -- and

Patrick Winterlich

rates Well, are. know I the until that I actual answer can't what

hedged I will actual benefit into on depend and So the the not obviously, the we rate well hedge positioned But mean, coming we're we're and have hedged. XXX% the because year.

will XXXX. rates, So I'd hedged the where also we're with combined to the bring in that FX comparison and then actual then be

those is rates. a will have quarter, position. we we're we're locked rate much. ahead. We've All of the good So in actual I But in some that predict well until say we I each say stronger can't will obviously positioned.

David Strauss

in Can give rate you on maybe XXXX euro? was the average your what us

Patrick Winterlich

up up, want make come don't number. to to I a you. want We'll No. David. I make back don't to

David Strauss

I cash? progression the same of thing think in the cash year, is Should typically, a QX terms we Okay. through expect year? And usage Patrick, your this of

Patrick Winterlich

first really to That to good management. a and back after then first reverse drive usage income quarter of out ourselves be Yes. complement year, to situation. the great I more will same. I capital had the closed we're the mean way the working then the team, quarter. in We fourth we the the positive a less And quarter, to tends or profile cash fantastic trying mean,

Operator

Partners. The next question of from Research Safran comes Seaport Richard

Richard Safran

bit. dropped a Tom, off for I Patrick, Kurt,

answered I'll you on. if So this, move

regional level you're 'XX, high that thought to you in fairly jets. some business that in more in business talk Dassault jets growth going And contribution bit off trends growth and about is of regional might 'XX and see more assuming correct? for I I'm coming little You're from a 'XX.

Thomas Gentile

the Yes. great Dassault Falcon on we in particular. packages XXX have

production and so And be for fuller into revenue then a that gets low [ production, program generator good as it will of rate ] us.

Richard Safran

just And second Okay. then -- second question.

supply OEM in been the and about have chain. the the challenges ongoing commentary guys in your you clear So release pretty

to So you with supply going to you most, expectation I issues. progress eliminate the we're we could industry observer, think not chain on and about if exit if if an And know as us? generally, have want issues XXXX all, how behind speaking you made to that comment chain an supply

Thomas Gentile

those expected it's have than And the I remained problem bigger pressure the in hired shortages It's in for that People think recovery. put cash the everybody a of the certainly, was taken supply They've chain production rates persisted, been but terms getting have and of period. on that's is Part of 'XX, it them. longer evolutionary. have low, time inflation trained people. kind control. are Obviously, 'XX now conversion. Labor under

going recovery not answer I that completely is better 'XX, do not is, happen the 'XX to is than 'XX. expect in to fully be going So stable. The completely

you'll stability. And get so even more XX, in

of So yes, a are the has they're have getting Inflation of it's still is at we are bit, improving. shortages The and attrition cost. mitigated. higher but some place, a trained labor and in going tapered level on. People

that. seeing certainly we're So

by 'XX. be definitely we'll expect the of place end I better So a in

Patrick Winterlich

our Yes. If with the just $X.XX, answer rate. can was to euro David's the I on jump question, it average $X.XX call in to

line, the go. there you David, So if on you're

Operator

comes of Melius Research. Scott next question Mikus from The

Scott Mikus

think probably going without be changes in causes, less jets are I agree Tom, regional relevant forward. scope to going most that

Embraer need launch So clean may Boeing, to to challenge a sheet aircraft Airbus.

enter XXXXs? preliminary any a aircraft you potential So in narrowbody if I'm discussions had service clean could Embraer wondering with sheet that just about the

Thomas Gentile

thoughts with we're thing. There's the that that relationship a plenty confidential certainly a on could narrowbody. going of don't had continue to Well, have But with into Embraer. have to that. want we very read of a demand we've programs. for good and relationship about them Right. Certainly, always good sort discussions I get they new would have Embraer, new introduce we that with I

with the say continue Embraer, have more to don't I discussions but that anything And specific with discussions the Embraer. so have we'll about we

Scott Mikus

your And about the tariffs, concerns any impact to given you preempt ability tariffs? cost to purchase to or could then that need? suppliers that And some acquire accelerating of you orders are precursor chemicals Okay. actively

Thomas Gentile

activity been on from Hexcel Mexico and obviously about the only XX% And so and very sourcing Japan. U.S., mean material, China. I its Canada, by we've buys way, material so watching No. closely. from or point, of the this this direct X.X% Europe and

the our the of have for we U.S. countries sources, acrylonitrile, major to to the from There all regard which targeted And PAM, limited is comes the raw with have for higher for Europe, basis very for European us. So material U.S. higher exposure the cross-border trade tariffs. from that sources. all acrylonitrile come no that is use acrylonitrile we in in in been

Scott Mikus

question one quick then for And Okay. Patrick.

coming negotiation think a I up union in you have September.

Just wondering, part is on the that factored of margin? and conservatism into incremental the guidance the

Patrick Winterlich

the anything believe a And anything going we and haven't do agreement we're specific that we for We find first the obviously successful on ordinary have don't plan. do we periodically outcomes. well of -- what specific. to out into to and to put We are mutual going we're prepare as come as negotiation well those around,

Operator

Ayers Jack Cowen. TD comes question next from The of

Jack Ayers

Yes. Really color appreciate of you the guys. from both all here

and giving guidance, level, Tom. not more you're know Just long-term I high

we much earnings guys I build get to and like structurally with see all of rates here. that that high just XXXX, anything back almost in higher like as at level, XXXX is backed and for quarter. $X for before to down. from can kind there guiding I just like But away production higher, our earnings earnings in very Hexcel last you $X.XX rates $X.XX we wanted points in just a a up did -- get like in normalized COVID like think maybe like to kind structurally, so But changing power? wind there sense is like of moving go pieces earnings any out

Thomas Gentile

the think revenue. absorb it has it do operating costs Well, to with is in essentially production. to leverage. of And allows terms And that us build I more of drive key fixed the rates

margin but biggest our is of production to XXXX, the In efficiency factory of XXXX be levels be we'll operating biggest in in our get as back the will XXXX. that the only what of we rate. the will mean the again, driver. XXXX, earnings. future thing continue create was initiatives, So drive going all recovery XX% And to will to I leverage those that that the and drive it initiatives, production, production was

back As to up we our and margin when will XXX%, to get potential. that earnings full recovers back that's

Patrick Winterlich

think is XX% about I the close levels. still the that to clarify, To we're fiber, XX% chain, XXXX fundamentally, just Hexcel business. honeycomb, on compared production is mean, to And engineered of resin, levels structural core to. alluding I Tom's as the industry carbon

will if and ] it wind [ shifted be pre-grade And so very fundamentally, us. anything, out small a benefit taking marginal the to glass business, hasn't

Operator

last Ron of We for come question. time from Epstein one It America. Bank of will have

Ronald Epstein

Just a one. quick

what XXX opportunity the of of you that facility expansion for in along does South guys? down the With kind bring Carolina,

Thomas Gentile

a Well, good for is XXX program us.

of It and aircraft I value it, it. expansion, rate is month high that of to a obviously million shipset to understand be great XX. will as Our a shipset industry. million $X would The X would And on as allow kind because historic good them be go value. between the from per it's great $X for Hexcel, for

So Hexcel popular I capacity to very going it's aircraft, see the be others very making very many increasing to that and program that a that in for they and for a encouraging good that think was are because industry. they're is XXX the and investment the

Operator

for Thank We you. thank conference joining. you today's call. This concludes

now may You your disconnect lines.

Hexcel (HXL) 23 Jan 252024 Q4 Earnings call transcript