HEXCEL CORP /DE/ Q1 FY2024 earnings call

• Commercial aerospace saw sequential improvement from Q4 2023, with wide-body production ramping and narrow-body sales increasing sequentially despite remaining challenges in the supply chain. - Space & Defense sales grew 10% in constant currency in Q1 2024. - Launched HexTow IM9-24K carbon fiber at JEC World Composites show. - Recognized by Northrop Grumman during Supplier Excellence Awards. - Nick Stanage announced his retirement and introduced Tom Gentile as the next CEO and President.

Commercial Aerospace: First quarter sales of almost $300 million, representing approximately 63% of total first quarter 2024 sales, increased 5.2% compared to Q1 2023 in constant currency, led by growth in wide-bodies, particularly the Boeing 787 program. The other Commercial Aerospace category decreased 6.3% on lower overall business jet sales but expects full year 2024 business jet sales to be higher than 2023. Space & Defense: Represented approximately 30% of first quarter sales, totaling $139.1 million, increasing 10% from the same period in 2023, with growth in programs like Lockheed F-35, Airbus A400M, and classified programs. Industrial: Comprised approximately 7% of first quarter 2024 sales, totaling $33.9 million, increasing 28.5% compared to Q1 2023, but sales softened across most industrial submarkets.

• Reaffirmed 2024 adjusted diluted EPS guidance of $2.10 to $2.30. - Adjusted operating income margin guidance of 13.5% to 14%. - Commercial aerospace expects mid-teens growth. - Space & Defense remains positive with diverse platforms. - Industrial expects recovery but acknowledges initial quarter challenges with low single-digit or flat performance.

• Potential impact of Boeing's quality stand-downs on production ramp. - Uncertainties in the narrow-body aerospace supply chain. - Economic pressures affecting industrial submarkets, particularly in Europe and automotive sectors.

Q: John McNulty from BMO Capital Markets asked about drivers for mid-teens growth in commercial business and upside potential in Space & Defense.

A: Nick Stanage said it's a combination of wide-body ramping and narrow-body supply chain improvement, and Space & Defense has diverse platforms with potential for upside due to global defense investment.

Q: Matthew Akers from Wells Fargo inquired about share repurchase and diluted shares.

A: Patrick Winterlich explained that diluted shares increase in Q1 due to normal stock issues, and the share buyback effect will be seen over time.

Q: Bert Subin from Stifel asked about visibility in commercial aerospace and margin guidance.

A: Nick Stanage discussed good visibility with customers and Patrick Winterlich reaffirmed the 13.5% to 14% operating margin guidance.

Q: Gavin Parsons from UBS asked about industrial revenue guide and margin implications.

A: Nick Stanage talked about industrial challenges and Patrick Winterlich said industrial decline has been beneficial to margin over time.

Q: Noah Poponak from Goldman Sachs inquired about Boeing's quality stand-downs and margin seasonality.

A: Nick Stanage was optimistic about Boeing's progress and Patrick Winterlich said they see steady margin progress and stand by annual guidance.

Q: Joshua Korn from Barclays asked about sustainable incrementals in medium term.

A: Patrick Winterlich said they aim to drive adjusted operating income margin to mid-teens and beyond.

Q: Peter Skibitski from Alembic Global asked about Space & Defense geography split and Europe growth.

A: Patrick Winterlich said U.S. is the biggest in Space & Defense but Europe has grown due to increased defense budgets