Hexcel (HXL) 25 Jan 242023 Q4 Earnings call transcript

Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel Fourth Quarter 2023 Earnings Conference Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Patrick Winterlich, Chief Financial Officer. sir. ahead, go Please

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

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

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

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

over Nick. call turn let Now the to me

strong a year increase share year, results. Hexcel and generation. our solid everyone, significant fourth completed morning, Good for growth, full share earnings us per in double-digit as Patrick. you XXXX sales year-over-year with and adjusted our Thanks, cash joining today quarter and thank we another

continue our online fast when assets in limited build and increasing to challenges, position for sites, efforts expected bringing gains focus in of operational we rates demand. for involves ensuring All coming we margin increase notably in operational the build these new growth XXXX expected efficiency chain excellence as years and number readiness for training narrowbody the from manufacturing a driving to aircraft, the ahead. This programs opportunity our will labor maximize most supply yield upwards. on expected Although across ramp Hexcel as rates programs began, as

We investing increase we ready for are ramps. of head training now continue in and eager X,XXX continue in experience employee have to challenge emphasize as to the program count around ahead. employees who We gain and advance

of with innovation we rebound now a Hexcel clear as travel talented do, the benefit market reports and excellence in Hexcel XXXX. advanced everything sustainability materials to come. decades and the the for of recovery society levels pre-pandemic center composite and this at enhanced in is show has well outstanding team air our driven record. every One go Hexcel Hexcel, member team, customer and legacy that completed and for you and colleagues they fact, experience In though our couple injury-free achievement, less necessary an about of commitment just and and to ensure even direct the day. When collaborations, our workforce This their I of benefiting enabling squarely to by is X their was is end Many passenger lightweight industry we commend products achieved diligence and X/X on taking year a safest with by long-term aerospace years steps positioned strengthens. of are every to the at labor than home our that it are

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

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

Other offset by $XXX business continued commercial quarter increasing currency aerospace markets. X% sales, increase million modestly sales widebody in in sales more of on X fourth an our constant by the jets. led year-over-year. fourth to than XXXX quarter represented of Turning increased partially of growth than Commercial Aerospace lower in more narrowbody

as ramp the chains and to to supply ramping their and and output. is as support. XXXX, benefited work can continue aircraft growth we that customers assembly to in OEMs AXXX XXXX. We the in programs, support complex assembly. to at Our lines The former AXXX strong demand first Airbus France There's supply and maximize the widebody ramp. from continue growth new fast this AXXX sales expect in assembly XXX for rollout up Airbus in their rate chain AXXX Airbus of we for both the the at tremendous narrow-body to robustly, of with backlog XXXX, globally the final to site family see XX continue were the Airbus final the has pleased line the end configured now Boeing

Now for highlights the from quarter. some

and business Falcon cabin tallest achieved Dassault entered on XX X-year November in service following the aviation, With XX, in widest the certification August. a

will content. this XX Hexcel content Dassault's cabin We wing which on forward platform. We're introduction all-composite where jet be significant will new an with business first in made see have the large step-up great jet XXX, also we of the from business materials, looking to another

discussions, advanced Boeing, complexity you significant fabrication our Kent. Kent, from our XXXX, Aerospace toward the As our Malaysia, work ACM, site manufacturing Composites Washington previous of joint venture part as of from at end portion higher at remember may we XX-XX to with a Hexcel shifted transferred

tremendous ACM and has We And team ACM ago. JV of to transition, Hexcel. we for end of for the the in result, longer years, years plant Boeing ACM an collaboration a was our venture many ownership thank XX ACM over wish as the going future. and strategic back for December. success inception the now a no The Boeing joint we this to that interest XX% Following partner, great Boeing for at with the being been business Boeing we excellent determined the our sold JV

of masked the our Space programs. Industrial all-time both however, & in comparisons, XX% in an Space in $XXX year-over-year. QX, been Sales particularly of currency. Year-over-year, $XX in strength Moving and were increase segment this or in markets. marine sales growing an Defense. classified in QX exceeding has constant million to just XX% automotive hit in high-level million year-over-year high under strong about and Growth down

is now some for value-adding attractive While submarkets. remains smaller multiple market opportunities of pursuing our Industrial it where has an in than different been years, technology a we it are business number

turn composite of full & results. XX% now to driven income million This Now or composite in was XX% year about for Sales more which in of programs, international be the travel jets. XXXX of are including sales than total market, XX% widebody the growth year globally our XX% with our Aerospace a full strong. Other the Pacific. billion, as and increased adoption operating this especially compared the cabin and year continues led diluted sales. XXXX, a the to XXXX with helicopters to benchmark $X.XX XX.X% sales, us full by provides of Hexcel Aerospace for fuel-efficient up aircraft, Adjusted were of represented Europe of Space year-over-year. the strong Commercial numerous our for around Asia are space more currency compared world, and and our XX% to than And about more let's period $X for increasing $XXX 'XX, and large to million in diversified on same sales increased programs is increased products composites in increase an XX% up XX.X% fixed sales. Commercial $XXX.X EPS future. Adjusted segment over lightweight billion almost XX%, represented XXXX. across XXXX $X.XX, programs foundation than XXX for wing XXXX. was year XXXX by on business Growth Defense of in total in constant for sales. demand

sales, longer-term decrease by of a we now on crews such wind-assisted in Finally, in potential, business carbon remain sports industrial Industrial sales a so cars with transport about automotive in of wheels. Marine reliance pursue. very ships about approximately and sales propulsion. large representing led including million, incorporating high-end and vessels, reduce reduce that currency. are lightweighting fiber XX% fuel XXXX Industrial and disciplined MAX our by constant growth ocean in were $XXX emissions ship We the and especially as business parts, is market XX% primarily are

$X.XX map for $X.XXX night, generation. be outlook sales, of XXXX, news where to road going release New to company The in for for we're million target and our Board our yesterday, as EPS to diluted to Day looking cash an a details also discuss growth adjusted share we the to $X.XX. February, differentiate growth there. In dividend, strong in quarterly guiding to flow. free meantime, We're guiding and of in the with we in confidence increase month. the can XX% Further team technology. Reflecting will as our last Day cash sales, our and and growth share. In than York our to greater to Hexcel to areas Investor market many in relation billion seeing our generate per hold Investor from billion are XXXX to our we announced in $X.XXX innovation in provided providing reported $X.XX years. Our in per via as coming $XXX our capacity return $X.XXX of medium-term will webcast, you well in cash years, the We're earnings next where coming forward around

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

Nick. you, Thank

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

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

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

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

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

X XXXX, total quarter growth Boeing Commercial XXXX $XXX.X and MAX led Commercial quarter of represented approximately AXXX quarter to sales and fourth including the fourth in increased markets. compared sales. Boeing AXXX by Airbus Airbus fourth the million our Aerospace AXXXneo, XXX narrowbody program. to declines programs. Total quarter were sales Aerospace lower Airbus the year-over-year, XX% of XXX of Fourth Turning in strong X.X%

approximately the strengthened was programs this in programs, we comprised Commercial XXXX. satellites. through more employee the full with ramps. than narrow-body chain the expected, cost as motors sales strong, XXXX consolidated million, million, quarter to of than our support the invested other our narrowbody lessen a sales decreasing approximately as XX% lower continued last sales grew category Sales of customers strongly Aerospace space for and was to actual XX.X%, to the civilian rocket increased by business fourth order Defense in lower totaled quarter of from of overall of grew stabilizes softer narrowbody totaled $XX.X commentary levels rate to offset our the sales spending level. fourth the markets Industrial automotive and headwind, our $XXX.X infrastructure absorbed sales fourth head market, represented infrastructure, although ahead and Classified the across other half support other aircraft was growth the sales. and performance-orientated jets, year-over-year pull-through military in supply XXXX. X.X%, on industrial to the gross including of with is XX% programs we by quarter XX.X% were growth Similar helicopter markets. On of compared in rate should last compared training. Demand margin the This in count launches, quarter not first XXXX, European year-over-year for and fourth production offset also notably. Industrial XX.X%, near-term by grew period ramps. involves category. Space sales higher XX.X% basis, have year. same This strongly quarter, The increasing served & this partially base

selling, and were percentage sales, the a administrative quarter XX.X% compared expenses the in quarter general fourth and of As XX.X% to of R&T fourth in expenses XXXX.

top basis strong points. on fourth compared impact of income volume exchange income or adjusted by $XX.X million XX.X% line control prior our cost sales, focus favorable quarter maximize to million of rates continue leverage. Adjusted operating in quarter year the period. year-over-year the approximately in The operating in of $XX.X or was to sales XX.X% the XX comparable to fourth operating our was as We grows

compared margin, operating Now turning businesses, is represented period margin The total to Composite higher $XXX period. sales prior to an XX.X% year generated of a was investments $XXX total to XXXX our of to our The operating in million the core prior by Products use engineered reflects expected comparable softer Materials support operating comparable structures generated rate a fiscal XXXX, $XX in in the segment X segment, higher XX.X%. the of activities XX.X%. The The in represented the ramps. Net in and Engineered compared XX% margin year cash was and impact to million comparable margin year-over-year comprised year operating infrastructure was of which Working sales and cash million segments. support period XX% provided narrowbody of capital X.X% sales. XXXX. of as for

prior For the global year improving we inventory the working safety XXXX, strained. when buffer capital reducing we've logistics particularly on holdings, our period, that focused efficiency increased were comparable expanded $XX of million. Throughout or previously our stock

pleased [ team, $XX.X sequentially, with by end third our of decreased the actions are from of We ] and million XXXX. the inventory the quarter

for We will property accrual our basis the million working XXXX, $XXX.X continue purchases previously manage an $XX Amesbury, Massachusetts in included to capital. Capital on tightly were disclosed which expenditures million. approximately

prior period. Free $XXX.X which the expenditures approximately dividend as part ACM a capital Excluding $XX.X sale, million well would surplus $X.X XXXX have pension in this property as was XXXX million, $XX.X joint received venture transaction. to as compared includes in flow $X.X million from of cash million, been received the million purchase, year U.K. the accrued

of cash over For to Hexcel income, in conversion adjusted free in net cash XXXX XX%. ratio just cash XXXX comparison, free was a flow flow strong $XX.X generated million.

Going or time of of ratio period forward, higher a we while at lower CapEx for the conversion remains XXX% expect levels.

flow generation free strong balance during the cash quarter. us Our off paying revolver in XXXX in fourth resulted our

million debt basis debt position X.Xx leverage was at net on $XXX.X XX, -- a on to a net XXXX, leading basis. ratio Our approximately of December a net

share cash of to Directors of GAAP all resulting of target balance like highlight surplus in required quarterly pension liability assume remains representing sheet the net transferring $X.XX X.X X.Xx plan. the ongoing to derisking to by debt and plan Our U.K. this declared of administers Board insurer, Hexcel million pretax and the action, the charge plan. leverage $XX.X deferred third-party a in strategic noncash million With the the was who would a the a EBITDA. I ratio also as received at There $X.X accounting. The which is to not did prior from yesterday, XX.X% stock midpoint. million. Expanding date at from a a at payable We risks the sales quarter. program authorization guidance, February XX, any repurchase $XXX XX% our repurchase is EPS an February during with XX. December the are comments the growth sales growth under X, the The Nick's of on increase fourth record XXXX midpoint The of XX.X% was on adjusted of dividend dividend payment remaining level. and EPS regarding and adjusted we XXXX, the forecasting a of stockholders

sales In low X markets, a XXXX Commercial on to Defense mid-teens percentage digits, forecast our forecast terms digits. Aerospace Industrial mid-single We to to to we increase increase and of basis. sales increase sales & we expect Space mid-single

free guiding We in of cash to million. excess are $XXX flow

Investor that, call to financial as We will metrics February Day the provide midterm provide back additional at Nick. outlook. With as our on the me turn guidance well let

Thanks, Patrick.

than performing, and delivering our harder portfolio than deepest Hexcel. with they to over represents based the aircraft can fuel almost a ever XX,XXX challenge are Lightweight As and solutions driven that for and aircraft decade better being future on materials has of more on have in sustainable quite aerospace we chain of history of latest we to modern production are OEMs, Hexcel Commercial in content and for shipset that largest That of is the fast key composites aircraft. meet element a so history, demand XXXX, customers. apparent. the and Aerospace how the with for begin industry is advanced to of backlog demand. Moreover, lightweighting. generation my do the future sales for billion we supply is recognize focused of ramp the the more need The The our we pulled Hexcel. currently efficient, broadest $X

market and industry. Our positions, customer lead relationships sought-after our technology

trust prepared sustainable Hexcel innovate relationships and is customers opportunity do to larger advanced collaborate, perform. for us to who The Hexcel driving it forward and world. solutions innovation our make with remarks. exciting is more Everything driven Our ahead we long-term the that up to ever. Audra, a wraps team deliver better composite is than at lightweight and by

to ready now take questions. are We

first Ciarmoli [Operator Instructions] We'll Securities. go at Truist to Michael

I or Nick, guess, maybe. Patrick

on about Just commercial revenue guidance thinking 'XX aero. the

news for cause deceleration XX% ramping. but of outlook the there? guidance just really can? Obviously, growth, would if You could expected fresh, give maybe mid-teens. growth MAX did some sort the is that rates got what us still rates production underpinning you We've And by platform, just of you

So Michael, question. thanks for the

respect some uncertainty challenging the driven. some to with lead As better, chain have supply the still impact exited there's et clearly, deliveries, times, times being are and although through pandemic, cetera. we those some And getting went

the similar think platforms to from down XXX time if space, to time in for 'XX, AXXX, XXX the plans frame; a to XXX; Boeing XX the to the at with the can you 'XX anywhere in on I you XXX month frame; list go and 'XX AXXX per XX in XXXX time. XXX, getting on the look the So XX XX the in the commercial be story on XX for 'XX,

some feel continued the upside there and is continued potential see supply I balance ramp platforms working and our -- there. if the we'll about it chain conservatism quite beyond. quarterly, And question comfortable and frankly, think in Boeing and plan some feel through supply into XXXX a chain. we those put side, Again, demand some on issues the we those we on good we for And for and near-term performs, very the have the recovery and that aircraft the stress be working rates. those through

it. Got

and I'll to the one jump Helpful. back stick in queue. just Okay.

move David Barclays. from Strauss our question next at to We'll

guess, guys because be QX I hearing and Or in to for narrowbody, Nick, -- could you that was any down bit seems Are point. seeing QX you you a now We're companies exactly. quarter and other -- What you little expand unique. from in what this last are this about narrowbody this maybe destocking? seeing there? on not are at why just flat

So about of We've complexity is a this of the to couple supply chain. data the educate. talked points, before, and just that

think you of XX structures at if to So locations, nacelles, AXXX, ship airframes. over and just you have we look when the engines,

$XXX,XXX On remind you we've just of XX-plus, for be we closer complexity an range AXXX, the of I tends at it's it our the of end. idea to shipset chain. Again, XXX It's low the at the to that gives would to whereas [ be tends end the less. high the $XXX,XXX, but the the the provided, ] shared listeners content supply the to XXX,

expected. So having could an not said than that perhaps that, deliver rates not Work the could managing we're that all through they that did. And particularly stock more so and of quarter accelerating in some so no and that ramp fourth that, safety were there chain rates added on, inventory expectation they was then customer. in And that entering out. some their the of up that buffer the supply some XXXX, some the added managing stock December, supply brakes ramp quickly cash, the there's put put year, the base way doubt they and buffer my end not -- mind going build to shorting of

at it's tough to So again, quarter-to-quarter. look

multiple to to going get to really You at their aligned on assembly final average are lines. out quarters on the need doing look OEs it know with what really what's and

in you're go were follow-up doing like as guess, things it, Back you revenue you're said I it you kind think, margin to I you labor improving And when into projecting all to, margin year. compare absorb side, XX% about at But a 'XX. as a -- to on the about looks a prior, Patrick. you margins. similar several back XX%, think And getting through I mean, in, obviously, as XX% you were talked ago implying years level 'XX, Okay. you XX%, I of closer that for XX%. can we XX% had closer the

Yes. Thanks, David.

in ACM, want first mean kind now and you I you guidance, EPS, yes, operating kind number, EPS -- you're down. with of difference to point I volume differences, our which our terms and of out, much of put margins talking the backing which that just total I put we $X.XX around I sort you call look if into at together, in between in we're there's year-over-year the obviously, get statement guidance won't company closer. But XX% the is be out that Street of look going there a And one XX.X%, to if think the a the the again, at if So volume all And about, look you think start somewhere at margin forward. step you're think the that range. I and of to we're

headwinds. are I there right. about think think that's number a And of I

and narrowbody we year, there to XXXX don't think inventory investing as talking bringing and about was we the the we We're as Nick I labor, And labor. of then into got think back. But running. We've And pulled moving a we're lines pipeline. maintaining up into in lot I of a forward about, in We're our and pull an was just turn been have things the We've got started ability as that adjustment ramps infrastructure. was and them. in bit went training change. and year, everyone the think Nick extremely I strongly. the of said, excited half second

for we're we're ready so And ramp higher positioned XXXX. And growth. that certainly for through rate

and currently, where a another we And in it we it's wanted to we quarter or a pushing and be, be. expected perhaps XXXX and is to to called out us headwind down that for X, is headwind, where so to it margin our

desired. and end it that knocking mid-teens XX%, that XX% of have middle rather as call we the beyond than bottom range would or so to And we going the of at ideally clearly, we're kind

of another today, then lower they some of certainly was ramp. million levels. I performance. the to our but materials we've is the sticking. looking again, the which not difference little that headwind an of but kind last least costs, of pre-pandemic mean inflation support to really basis That's XXX will inflated, margin, ready some today, caused $XX you in points are past haven't mean margin have $XX margins. you're slightly if of cost edges got raw to a increased XXXX, as I or that think some returned years increasing at couple of to well around energy Labor back as give definitely bit I over compared But certainly million of 'XX depreciation sort higher headwinds

you ahead. when positioned performance in that our all positioned is So add moving right growth the believe We're very strongly together, we for direction. certainly the and underlying deliberately

we through the back As driving half those we the 'XX and into move and can. of 'XX, we margins strong will as as be leverage

We'll next Bert go Subin to Stifel. at

up on just Patrick, following that.

noted guess as you're Are you think would material mix, costs. guess, to about back competition heading? potentially As say to structurally once are potential think Hexcel's think there where -- I or you impact it Is I things we anything headwind, that further you deflation out, production other you today ability profile to get different that business about a like back view same as sales levels. there's some those a on the margin different

No. driving back We're absolutely to we were historically. where

taking it's Now longer.

that's us. clearly there frustrating are we customers. But to the infrastructure We've deliberately our very It's support you. Now frustrating in. got

kind headwind, continues and come quarter. be a are to There's there's It mix fundamental never was to competition We when we shift. rates have one be top no of grow this to of always going going line change. true, confident just to time. But was continue the the ramp yes, that period which no

we to will got obviously economies we as half drive to go but and historic of basic I back margins. our as our that And line driving through leverage, get And the will just have drive that just sort that of depreciation say, just be that we as were bring products, to come into It positioned well to which 'XX, scale we are coverage. We've sort of then have We will we of that cover levels through, I as over get those back overhead, to of leverage leverage. come. we 'XX to higher. is mentioned, historically top

Got it.

Okay.

and coming on a the Defense as and On the a other Space -- Industrial. what about strong follow-up really growth X of little guided your bit expectations rebound. sort talking there? talk through segments, just Space then just and Defense of coming off maybe a Industrial of you year & little year bit And there. of off the a weaker of a & lower Can and a dynamics you

sure. Yes,

XXXX, extraordinary year So record and was to I in find I a have look Hexcel's Defense, an in in Space certainly was a such out called of of a jets. general buys There called I'm at strength growth. We the of solid growth in out platforms. that's think long fixed-wing We number helicopters. very year across sure just and which a my lot classified, help & history mean, XX%. honestly, time just quite do time we'd then onetime another the there, fighter to back really

very, solid. very So

for the opportunities, road, market look of we're be penetrate. It's great growth CH-XXK can us, down as well and V-XXX, many but confident. sort to forward, the platforms driving a go smaller we as we we where continue Now of sort

budget solid it, of expected a That has much as & now aesthetic mid-single factor think, Defense challenges mid-single-digit fiber as believe. Automotive year. is and was tough think we industrial wheels, XXXX couple to I aspects Probably detail, lumpy, even time Nick geopolitical anyway, know, our stabilize, largest to of time We're we calling a is carbon segment. another faster last that's the now little been of you So mentioned. years. But Space come first year wind but perhaps a They clearly, submarket. make time going is seeing high-end it's dramatically the cars, really of Industrial now mentioned growth. Industrial, smaller down than our are nice to We mentioned digits. that and bit we're just over in Obviously, other sort in growth wind today. sort there's military which sensible. from and

and see we positive, things around then focused, be very value-add like will continued we're pure marine plays. on investments. other So And targeted and plays, very we industrial

ahead, growth see sector hopefully further. declines. see we We but We the growth. down don't don't So small some dramatic going no more see

RBC next go to Capital at We'll Markets. Herbert Ken

and you, I Patrick, of maybe off start either first. to wanted Nick one

quarter. the we the more any some on reflected priorities working significant would up or look around you here in sort see other to buy cetera. view and return 'XX allocation of your at in But of you potential in outlook didn't how capital You low us as think that fourth how shareholders 'XX? the the to wanted refresh shareholders anything can just as about just to relatively should maybe stock for guess maybe about And think you importantly, generation capital et more you and I uncertainty leverage, I investments, for capital, opportunity cash more the step else. But

Yes, I'll for that ways. question. Ken, the couple of a approach thanks

First, generation we're expected opportunity not to looking solutions, our really solutions composites, expanded forward, even and fourth more them and investing weaving lower investing part the utilization forward, resin Board make shares that the is the how efficient organic your and quarter. that of and make do solutions nothing the and our different we bullish very today, are question fiber to guess going prioritized for technologies on ultimately cost with more customers. going lower fact cash, in discuss which our on that attractive will basically we to they than drive production weight take outlook on more prioritize. I I manageable for new in buy even opposite. advance with And want regularly our focus that's to to Quite them growth. technologies. It's We're highlight in cash back our the on had absolutely chose

new around it's central think the in assets working new weight you the on from where more great dominance, being with military application nacelles. are when applications. V-XXX, I FLRAA, new the technology infrastructure, on jet metal when the like next the composite the And you conversion And going even total at combat or advantage. Lots UltraFan, of to value. When win internally, even that get narrowbody, next next-generation the help engine new that new cost make on worked nacelles, have to we're defer which one, through we on, can air further to about utilization our So the engine the these right. wing and platform, to us the on our a to content higher be next our empennage, technology look included platforms, things secondly, so able productivity, us drones, modifying side, there's business CapEx go whether all at the the look to investment and we look envisioned effective. legacy products wings, for assets shipset are I of out the box commercial are content opportunities initiatives Rolls-Royce then new efficiency, the our Remember, you to, more the get Rise

are So front process and center. improvement, future factory, improvement productivity

organic clearly, So growth priority. is our

and we as dividend clearly, our at Now we front evaluate center us actionability, M&A increases we buyback allows core grow enhances share that And and we look competency. not are and or as something options and portfolio we whether and always, confine we balance how our debt effectively. to manage look at sheet, and at ratio, look efficiently leverage our our that and

my we talented And the our So that's in on. Remember, scientists R&T said Lake adding priorities some that's Salt Ken. that we're investing than we're and But I technicians. summary we're City. customers a the higher never working from midterm for Center overall, what longer kind of that And We've been remarks, request that a in, I've and poll. that's seen because, I are as and applications applications doing seen of Excellence new in I've are today. built do never term. that

Alembic Skibitski next We'll Pete go to at Advisors. Global

clarity. of of Patrick, points a couple

fourth margin, talked of the fourth about And the was labor? impact the margin in But about point, that 'XX. issue was Or on similar gross mix of you that of obviously the we volumes any half for a all to gross and 'XX? labor should half quarter think gross impacted that there Just first first the in margin? quarter the similar

mean, but would also certainly really input I It's and it's it's of broad wouldn't it's Yes. infrastructure mix I more operating, issue. say, that. is costs maintaining fundamentally, plant, a of the kind the Labor overhead say issue. general labor. definitely a not margin, running right cost I plant, gradual and leverage then need part and -- really that improved 'XX going in terms why to infrastructure of a and support over -- the margin continues what costs. that I That's now XXXX overhead as growth I volume beyond. see and yes, headwind mean, we're infrastructure we base just leverage. And

snap gradual to increase here be or should see to not So lump but see volumes We're going change. a the we a yes, sudden with it's going grow. gradually maybe there, increase as

over Okay. about top next pretty midterm line as not think X a your what it And X growth inventory, inventory well. you do was you -- obviously, And have the really done with next outlook as over years then a 'XX you're years, great that cash even the expecting? and to free with cash the flow just to strong do expect of growth to you grow couple with year, you've

talk of inventory I in February. going lot we'll actually our more think growth. in a we're down. to say we've several obviously, focus But sort detail we have growth actually to But and how And there's medium-term we going dollar a I'm -- essentially, holding. no a to not many as days days So about metric, reduce more be inventory relative on days that opportunity got of the

And we grows, the so knew in our top to minimize line it growth inventory. as

As a will give grows, relative rate lower certainly to us zero, grow be significantly it line that than in I'm much have but which not much more, I then growth will shouldn't holding. at the improvement saying too say, of it days top

Next, Melius Spingarn at we'll Robert go to Research.

between this, we you greater have these in to the better business, of parity the that out about an news. you get of about what there? know trying gets on narrowbody the to is say half idea how narrowbody referred Airbus I in going think be programs. when it the this much fresh half, destocking it about like call going the for to Is and Boeing? destocking 'XX. talked relative we're we in sounds And going can it Boeing, what's you with I'm given Nick, second but first when at we will yesterday? And Michael news on rate think would very came risk beginning, it I'm

Yes, Robert.

out versus rates they not the in really at as the of platform one again, the shipset half as the second year So the stacking is are. really relevant destocking the some what half is other the and in and of driving pointing content first

So it's to are. relative consumption they that where and

not that So there one out. was jumped

coming Now grounding resolved, and out, and clearly, some and that the of have with issues the been lifted. as excited shipments get the I'm see news to of sounds very X. the been to it's It that's like China Dash appear to resumed

what is their Boeing they FAA if for. And I you supply enhancements our putting we're chain up that. looking still through, the feel, what feel we to yesterday, to ensure to again, still the some working are given right we're think in at that rolled which deliver our So we and look think in enough conservative news continue we even that good plan, guidance. the holding evolve, with We probably will in areas

Okay.

a involved just And the issue know I have headwind have if and then if a XX And I wanted there that X a this anti-icing there. are the or But you is don't And -- with follow-up. if redesign, waiver to ask I it's a materials, Okay. composite XXX situation. tailwind? guys MAX nacelle a and is the

to we're with anything help solution involved. going assume we where can our customers provide can you be Well, a

what get entail, involved, with. portion too or new it's early time of a to might we there is tend redesign there be involved nacelle to an what it tend any a greater might a historically, be really that. and say component, or engine But enhancement to or So composites more

time the premature go be will to it specifically. direction some that for comment So what will and work details again, on there, through me to it'd take

you on existing the nacelle? Are

Yes.

take We'll UBS. at question Gavin next our from Parsons

cost it to And X wanted The one. costs last the really new has and I'm on elevated interpreting ahead of training are narrowbody it growth. of through? there you impacting a right, there labor, press or that inflation, about driving right, than come of how I versus before online. Is kind focus that volume to on way margins, are costs you If of operational business like buckets seems maybe much bringing mentioned course lower expected about excellence release of think talks assets abnormal the volume is normal and

strongly mean, focus times, we sure as our very not of customers. as I'd describe any we've Yes. it we've I'm I supporting called many on out abnormal. --

We ahead be are going not of we're going the be the to to rate. and ramp bottleneck

Now is judge, I'm sure that, it's as difficult quite chains. all in market narrowbody right They're especially supply to now, understand, complicated the you erratic. which

planes. we described, ship those dozens of of As have to Nick both points for

complicated, of it's to so have and we ahead And be that.

fully maintained in them have positioned than the ready we have to half And materialize 'XX, making customers. labor, of at we support it we 'XX, labor, is anticipating to in that got saw. the truly it's really have stronger they're our now guidance didn't And half that did. as now and we we first second not they're raised and across business were infrastructure the mean might. prepared, running, obviously -- a the and utilized, and you costs, you are 'XX training are then half I so machines following we bringing But second efficient thought as sure so of support ready. And ready, plant we July, go mistakenly not But into general but perhaps we we've about be equipment but bringing we moment. in to to

growth it for abnormal. wouldn't prepared It's call so being of And part I ahead.

Okay. can about any material pre-COVID? were That's they you today energy to us give helpful. then raw and sense And costs relative where

Pre-COVID.

costs, the year-on-year is energy I us. not but not that growing. they're might for mean, not come They've as I certain say, headwind would well, at I'm -- But still They're low or all down. higher. small low least degree as a now, in come not were very a prepandemic, sure growing they they're bit. they're So not they've pockets. be they in at down largely, sure pretty It's as as big I'm

the like couple pressure, years, In last nothing it's terms but where of other we of a the inflationary we little raw headwinds. we're saw over bit materials, of seeing saw significant pressure

have would but Others some not that's the So they're a the raw Commodity-type is got materials but very situation. describe helpful. elevated a still bit, so they're costs, definitely growing. softened and not sticky, are bit growing more way we've I

Sachs. at go we'll Goldman Noah to Next, Poponak

that you the MAX on point? the the into the communicating schedule any sell you change X through at master or suppliers of this to any Are year Boeing to Tier

I on communicate And them don't can just really they very on from supply OEs with staying work pull we although a rates. very say, And see and we aligned the Well, Boeing regular signals basis. they to we primarily and guidance. get with -- is the us provide chain, stay

enough. Fair Okay.

side, widebody faster I to go widebody strong. the On higher getting higher of the sort the going thinking and facilities supply the has ready those to equally fewer surprisingly prospects than rates And guess, and -- rates side? the for pace were planned chain, or been the for you very also to on recently but look there order units. are complex what

Yes, Noah.

on, that volume, customers. rates widebodies all But we're again, time not in how very tell how next challenges. Obviously, to smoothly be will for expected ramp indicates the X if number scale orders X years. at have you as great anything they've as widebodies confidence. very the over are hearing well out the and bullish to bottlenecks they've So stay look aligned granted coming issues, optimistic We're lower we'll our with larger, the one, with and XXXX, but on seeing and ramped much that that ramped since or really there's we going

talked again any about to driver? your And tripling it. you know that step just Okay. Is FLRAA one I there kind lastly, the the function then mean is Defense business, but What's the growth rate? Is I'll program being just just better try I behind to in growth understand ask rate of guess kind diversified, that of ramp? higher. that of

stage. Yes. that this It's the FLRAA at grab not I'll one. definitely

for of X still front X, CH-XXK mean, is I that's impact. of over the years last any will kind moving program years that the have in us us out think I really biggest still. probably few before the and a

into elements platform. such That's like adding single We that. to $X.X shipset, growing -- the have probably such strong that out. still content million $X.X one That, we're call on and to biggest and million

has Europe a saw bit up think I certainly, in we 'XX. the last, that stepped in

very So us. for positive that's

to so hard we're across I mean, be it's programs, So many specific.

& echo I earlier, the call CH-XXK, call Defense. Europe also I'd was 'XX would general positivity. exceptional, up Space stepping out I I for said XX% bit And out what So a the little growth a

well can, to guiding a sort we're as I would say. 'XX of was digits. obviously standout year, We'll as So somewhat mid-single do but a we

Research. And Wolfe from Walton question we'll at take Myles our final today

is wondering say was if composite could gets you in And that through those it's real better, what are time? it Or level where but coming X. sales is ability just just pull slow, materials, not whether the not it? see you seeing to or you about to the Aerospace was I Or you it expected? have hope the of just you Commercial situation reconcile a trying

narrowbody clearly, are bumps very short. supply I to that, some rates There challenges we we've chain that rates those than the internal prevented that issues there's challenged I supply bottleneck the capability driving not tell surprised mentioned, other that. Hexcel's knowing that's expected. Other going the visibility. be and nothing than being not can you, what than for been think that the more And and/or it's good or But we've but there is all not I us be Myles, I again, really customers. the a are I where from year. cannot believe believe is increase. got the improving. and entered we just chain in We getting narrowbodies may cost around we had capacity. the when ramp what think expected we road, our

we driving coming the sure here highest will our quarters that's We to cost potential be what's to short. pretraining, years. make and the deliver in And preinvestment, not the

you've experienced? done for already, did the given think you you what 'XX to 'XX and fair hiring that that it Is

we will that direct them be has hiring, remember, In certain but and of And have. count. getting additional head focus that efficiencies, There the takes on and step that and multiple happen to team labor get But bringing certainly change. working we've a going possible. to it's areas, again, the as prepandemic have the to confident it's got the and we're just it with we're minimal we've to line been the lines more will scrutiny little back amount more fast a accustomed that as not we bit we're there, takes and get where levels. Clearly, efficiency experience, come, up, make that

I the into thing gains like on the the forward. where team like And are efficiency we the cost and grow will on trajectory. You'll know I in it, managing I the seeing the right going plant. do I'm

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

may You now disconnect.