Hexcel Reports 2024 Fourth Quarter and Full Year Results

Hexcel Corporation (NYSE:HXL):

See Table C for reconciliation of GAAP and non-GAAP operating income, net income, earnings per share and operating cash flow to free cash flow. Free cash flow is cash from operations less capital expenditures.

Hexcel Corporation (NYSE:HXL) today reported fourth quarter 2024 results including net sales of $474 million and adjusted diluted EPS of $0.52 per share.

"Hexcel's sales increased 6% in 2024, including 12% growth in our commercial aerospace business despite the ongoing challenges in the OEM supply chain," said Tom Gentile, Chairman, CEO and President, Hexcel. "Our adjusted EPS of $2.03 increased 12%, highlighting the inherent operating leverage opportunity within the business as production rates continue to recover from the pandemic."

"Hexcel met its latest 2024 guidance, including $203 million of free cash flow generation, and we are now providing 2025 guidance. Our 2025 sales guidance includes roughly 10% year over year growth in commercial aerospace, despite the ongoing rate-ramp challenges the commercial aircraft industry supply chain is experiencing. We are also forecasting increased cash generation for the year to exceed $220 million. With our multi-year cash generation potential remaining strong, growing the business and returning cash to shareholders remain key areas of focus." continued Mr. Gentile.

"Our priorities for 2025 are Operational Excellence, focused on meeting our customer production rate increases, Innovation to win positions for Hexcel lightweight materials on the next generation of aircraft, and Growth. Growth is expected to come through build rate increases to meet the considerable backlog demand that exists, plus organic growth for existing programs with increased adoption of lightweight advanced composite materials. We will also explore inorganic growth through disciplined strategic deployment of our robust and growing capital resources. Innovation is a core tenet of Hexcel as we continually work to enhance our leading-edge lightweight materials to enable our customers to design products that are stronger and lighter and that support their increased manufacturing throughput. And of course, we are continually working to improve our operational efficiencies and productivity." concluded Mr. Gentile.

Markets

Sales in the fourth quarter of 2024 were $473.8 million compared to $457.5 million, a 3.6% increase from the fourth quarter of 2023.

Commercial Aerospace

• Commercial Aerospace sales of $278.3 million for the fourth quarter of 2024 increased 4.0% (4.6% in constant currency) compared to the fourth quarter of 2023 with modest growth in the Airbus A320neo and Boeing 787. Boeing 737 MAX sales were lower year-over-year, consisting primarily of LEAP 1-B and nacelle sales in the current quarter. Other Commercial Aerospace increased in the fourth quarter of 2024, led by strength in regional jets.

Space & Defense

• Space & Defense sales of $163.3 million increased 7.2% (7.6% in constant currency) for the quarter as compared to the fourth quarter of 2023. Growth was strong with the Sikorsky CH-53K and Lockheed F-35 along with strength in Space, both domestically and internationally.

Industrial

• Total Industrial sales of $32.2 million in the fourth quarter of 2024 decreased 14.6% (14.8% in constant currency) due to declines in all sub-markets except for recreation.

Consolidated Operations

Gross margin for the fourth quarter of 2024 was 25.0% compared to 22.5% in the fourth quarter of 2023. As a percentage of sales, selling, general and administrative for the fourth quarter of 2024 were 10.1% compared to 9.2% for the fourth quarter of 2023. R&T expenses as a percentage of net sales were 2.8% for the fourth quarter of 2024 compared to 2.6% for the fourth quarter of 2023. Adjusted operating income in the fourth quarter of 2024 was $57.1 million or 12.1% of sales, compared to $49.1 million, or 10.7% of sales in 2023. Other operating expense for the fourth quarter of 2024 included asset impairments and other charges primarily associated with the announced potential divestiture for the Neumarkt, Austria plant that solely serves Industrial markets. In addition, other operating expenses for both the fourth quarter of 2024 and 2023 included restructuring costs. Other non-operating expense in the fourth quarter of 2023 primarily included charges related to the buy-out of the UK pension plan. Foreign exchange rates had a favorable impact of approximately 60 basis points on operating income as a percentage of sales in the fourth quarter of 2024 compared to the fourth quarter of 2023.

FY 2024 Results

Sales for the full year of 2024 were $1,903.0 million compared to $1,789.0 million, a 6.4% increase from 2023 sales.

Commercial Aerospace (63% of sales)

• Commercial Aerospace sales of $1,194.2 million increased 11.8% (11.9% in constant currency) for the full year of 2024 compared to the full year of 2023. Widebodies led the growth including the Boeing 787 and Airbus A350, followed by the Airbus A320neo. Sales for the Boeing 737 MAX were down year-over-year. Other Commercial Aerospace increased 9.5% reflecting growth in regional jets.

Space & Defense (30% of sales)

• Space & Defense sales of $569.5 million increased 4.5% (4.6% in constant currency) for the full year of 2024 as compared to the full year of 2023. Growth was driven by military helicopters including the CH-53-K, as well as the F-35 and classified programs. As expected, growth was partially offset by declining sales for the Bell Boeing V-22.

Industrial (7% of sales)

• Total Industrial sales of $139.3 million in the full year of 2024 decreased 20.9% (21.1% in constant currency) compared to the full year of 2023 as all sub-markets declined.

Consolidated Operations

Gross margin for 2024 was 24.7% compared to 24.2% in the prior year, benefiting from higher sales volume leverage. As a percentage of sales, selling, general and administrative for the full year of 2024 were 9.3% compared to 9.2% for 2023. R&T expenses as a percentage of net sales were 3.0% for the full year of 2024 compared to 2.9% for the full year of 2023. Adjusted operating income for the full year of 2024 was $236.1 million or 12.4% of sales, compared to $216.7 million or 12.1% of sales in 2023. Other operating expense for 2024 included asset impairments and other charges primarily associated with the announced potential divestiture of the Neumarkt, Austria plant. Other operating expenses for the full year of 2023 included restructuring costs partially offset by a pre-tax net gain of $0.8 million from the sale of a facility in Colorado. Other non-operating expense for the full year of 2023 primarily included charges related to the buy-out of the UK pension plan. The impact of foreign exchange rates on operating income as a percentage of sales was favorable by approximately 40 basis points for 2024 compared to 2023.

Cash and other

• Net cash provided by operating activities in 2024 was $289.9 million, compared to $257.1 million in 2023. Working capital was a cash use of $0.8 million in 2024 compared to a use of $27.4 million in 2023. Capital expenditures on a cash basis were $87.0 million in 2024. Capital expenditures in 2023 were $108.2 million including approximately $38 million for the purchase of the land and building at the Hexcel Amesbury, Massachusetts facility. Net cash used for investing activities in 2023 included net proceeds of $44.7 million from the sale of the joint venture interest in Malaysia and net proceeds of $10.3 million received from the sale of a facility in Windsor, Colorado. Free cash flow was $202.9 million in 2024 compared to $148.9 million in 2023. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $81.1 million in 2024 and $121.6 million in 2023.
• The Company did not repurchase shares of its common stock during the fourth quarter. For 2024, the Company used $252.2 million to repurchase shares of common stock. The remaining authorization under the share repurchase program on December 31, 2024 was $234.9 million.
• As announced today, the Board of Directors declared a quarterly dividend of $0.17 per share, an increase of $0.02 per share, payable to stockholders of record as of February 7, 2025, with a payment date of February 14, 2025.

2025 Guidance

• Sales of $1.95 billion to $2.05 billion
• Adjusted diluted earnings per share of $2.05 to $2.25
• Free cash flow of greater than $220 million
• Capital Expenditures less than $100 million
• Effective tax rate of 21%

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Hexcel will host a conference call at 10:00 a.m. ET, on January 23, 2025 to discuss fourth quarter and full- year 2024 results. The live webcast will be available on the Investor Relations section of the Hexcel website via the following link: https://events.q4inc.com/attendee/820361331. The event can also be accessed by dialing +1 (646) 307-1963. The conference ID is 2360739. Replays of the call will be available on the website.

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About Hexcel

Hexcel Corporation is a global leader in advanced lightweight composites technology. We propel the future of flight and transportation through excellence in advanced material lightweighting solutions that create a better world for us all. Our broad and unrivaled product range includes carbon fiber, specialty reinforcements, prepregs and other fiber-reinforced matrix materials, honeycomb, resins, engineered core and composite structures for use in commercial aerospace, space and defense, and industrial applications.

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Disclaimer on Forward Looking Statements

This news release contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements relating to the estimates and expectations based on aircraft production rates provided by Airbus, Boeing and others, and the revenues we may generate from an aircraft model or program; expectations with regard to the impact of regulatory activity related to the Boeing 737 MAX on our revenues; expectations with regard to raw material cost and availability; expectations of composite content on new commercial aircraft programs and our share of those requirements; expectations regarding revenues from space and defense applications, including whether certain programs might be curtailed or discontinued; expectations regarding sales for industrial applications; expectations regarding cash generation, working capital trends, and inventory levels; expectations as to the level of capital expenditures, capacity, including the timing of completion of capacity expansions, and qualification of new products; expectations regarding our ability to improve or maintain margins; expectations regarding our ability to attract, motivate, and retain the workforce necessary to execute our business strategy; projections regarding our tax rate; expectations with regard to the continued impact of macroeconomic factors or geopolitical issues or conflicts; expectations regarding our strategic initiatives, including, our sustainability goals; expectations with regard to the effectiveness of cybersecurity measures; expectations regarding the outcome of legal matters or the impact of changes in laws or regulations; and our expectations of financial results for 2024 and beyond. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to the extent of the impact of macroeconomic factors or geopolitical issues or conflicts; reductions in sales to any significant customers, particularly Airbus or Boeing, including related to regulatory activity or public scrutiny impacting the Boeing 737 MAX; our ability to effectively adjust production and inventory levels to align with customer demand; our ability to effectively motivate, retain and hire the necessary workforce; the availability and cost of raw materials, including the impact of supply disruptions and inflation; our ability to successfully implement or realize our strategic initiatives, including our sustainability goals and any restructuring or alignment activities in which we may engage; changes in sales mix; changes in current pricing due to cost levels; changes in aerospace delivery rates; changes in government defense procurement budgets; timely new product development or introduction; our ability to install, staff and qualify necessary capacity or complete capacity expansions to meet customer demand; cybersecurity-related risks, including the potential impact of breaches or intrusions; currency exchange rate fluctuations; changes in political, social and economic conditions, including the effect of change in global trade policies, tariff rates, economic sanctions and embargoes; work stoppages or other labor disruptions; our ability to successfully complete any strategic acquisitions, investments or dispositions; compliance with environmental, health, safety and other related laws and regulations, including those related to climate change; the effects of natural disasters or other severe weather events, which may be worsened by the impact of climate change, and other severe catastrophic events, including any public health crisis; and the unexpected outcome of legal matters or impact of changes in laws or regulations. Additional risk factors are described in our filings with the Securities and Exchange Commission. We do not undertake an obligation to update our forward-looking statements to reflect future events.

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