Hexcel (NYSE:HXL) Corporation witnessed robust sales growth in Q3 2023, propelled by ongoing demand in the commercial aerospace and space and defense markets. The company's total sales for the year-to-date period surpassed $1.3 billion, marking an increase of over 15% year-over-year in constant currency. Despite supply chain hurdles and inflationary impacts, Hexcel remains dedicated to operational excellence and efficient product delivery.
Key takeaways from the call include:
- Sales in the Commercial Aerospace segment grew by over 19% in constant currency, driven by strong growth in widebody aircraft programs.
- The Space and Defense segment also saw a 17% growth in constant currency, propelled by various military programs.
- Industrial sales, however, fell by 21% due to a decline in wind energy sales.
- Hexcel is focusing on expanding operational capacity, recruiting talent, and preparing for higher production rates to meet the increasing demand.
- The company expects significant cash generation over the next few years and plans to keep capital expenditures below $100 million while utilizing existing plant and equipment.
- Hexcel's sales, EPS, and free cash flow guidance for 2023 remain unchanged.
The commercial aerospace industry is witnessing a rapid increase in build rates, presenting both challenges and opportunities for Hexcel. The company has invested in infrastructure and headcount to meet anticipated high levels of demand in the future, which has impacted margins in the short term. However, Hexcel is confident in its ability to meet the strong demand and drive continued growth in the future.
During the earnings call, Hexcel representatives discussed the company's capacity and production rates for aircraft models such as the 737, 787, and A350. The company expects a ramp-up in production for these models in the coming years. The company also mentioned its wind business, stating that its largest customer, Vestas, has transitioned to a different technology that does not align with the company's strategy. However, Hexcel still expects some demand in the wind market.
The company is also focused on developing lightweight composites to reduce CO2 emissions and improve sustainability. The leadership team and Board of Directors recently reviewed new products and processes in development and expressed optimism about Hexcel's technology offerings. Despite inflationary pressures, including energy costs and potential labor challenges, Hexcel remains optimistic about its outlook and generating cash for capital deployment opportunities.
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