Hexcel Corporation Q2 FY2025 earnings call

• Positive fundamentals in commercial aerospace with strong market position and demand from new aircraft orders. • Defense sales growing with broad strength across domestic and international programs. • Participated in Paris Air Show, highlighting partnerships like with Embraer, Kongsberg, and FLYING WHALES. • Financial results: Sales of $490 million, adjusted diluted EPS of $0.50 per share. • Closed engineered product facility in Belgium, taking a $24 million restructuring charge; production transferred to other sites. • Divested additive manufacturing business and continues with divestiture of Australian glass fiber prepreg and recreation business. • Future factory efforts to improve production efficiency using automation, digitization, etc.

In Q2 2025, Hexcel generated sales of $490 million. The Composite Materials segment represented 80% of total sales, with an adjusted operating margin of 14.1% (down from 17.2% in prior year). The Engineered Products segment, making up 20% of sales, excluding the Belgium plant closure, had an adjusted operating margin of 10.9% (down from 14.3% in prior year). Commercial aerospace sales in Q2 were $293 million, down 8.9% year-over-year on a constant currency basis, while Defense, Space and Others sales totaled $197 million, up 7.6% year-over-year on a constant currency basis.

• Reaffirming 2025 guidance with consideration of recent tax law changes; initial assessment of lower cash taxes due to deductibility of past R&D costs. • Effective tax rate for third and fourth quarters expected to be 21%, but average for full year lower. • Tariff impact forecasted at $3-$4 million per quarter, situation uncertain with potential changes. • Expecting strong second half operating leverage as production rates increase, driving EBITDA and free cash flow.

• Uncertainty around tariff changes, with potential impact on earnings; regional sourcing helps insulate but mitigation and pass-through take time. • Ongoing review of tax law changes affecting effective tax rate, which may require updated guidance if impact is significant.

Q: Can you outline the assumption on A350 build rates or delivery rates in the second half?

A: Airbus has reduced schedule, destocking expected to end in Q3, expecting strong Q4 with Airbus planning to raise A350 rate to 7 in September.

Q: On currency hedging, when would currency comparison flip negative?

A: Continues to benefit from hedging, likely to start flipping negative next year in 2026 if dollar weakens further.

Q: How much of the $24 million restructuring charge is cash to be spent in the second half?

A: A large majority, 85%-90%, will be cash, with majority expected to move in Q3.

Q: Impact of defense spending increase on long-term outlook?

A: Defense spending increase, both in U.S. and Europe, benefits defense growth, with defense currently 30%-35% of revenue and seen as key growth opportunity.