Hexcel reports increased demand for aerospace composites as industry rebounds

By Bryan Corliss

Jan. 27, 2023, © Leeham News: Composites materials supplier Hexcel Corp. reported that its fourth-quarter sales were up 29% over the same period last year, driven by increased demand from all across the aerospace industry.

“Virtually every platform from narrowbody to widebody to business jets is growing, and the customers continue to ramp as fast as the supply chain allows,” CEO Nick Stanage said.

As international air travel recovers, airlines are seeking more widebody jets, which is good for Hexcel, because newer widebodies have higher percentages of composite materials, Hexcel executives told investment analysts. However, new business jet and military aircraft models also incorporate higher percentages of composites.

Stanage and Hexcel CFO Patrick Winterlich noted that their company is not immune from the inflation and labor issues facing most manufacturers, but said they’re coping.

“You can’t give someone five years, three years, of experience in six months or nine months,” Stanage said. “We are working as hard and are focused as hard as we can on training and accelerating it.”

 

  • Hexcel profits beat Wall Street expectations
  • Analysts: Can Hexcel match Boeing ramp-up?
  • CEO: Commercial aerospace can withstand recession


Hexcel beats Wall Street expectations

Overall, Hexcel – which supplies composites for a wide range of aerospace, space, defense and industrial uses – exceeded Wall Street expectations for the quarter. Adjusted earnings per share were at 40 cents; most analysts had predicted 34 cents a share.

The company said its fourth quarter sales of roughly $256m represented a 23% jump over third quarter 2022. Growth was led by purchases from Airbus for its A320neo and A350 programs, plus a 63% jump in sales for use in business jets. Hexcel also saw “encouraging growth from both the Boeing 787 and 737 MAX, Winterlich said, plus new orders from manufacturers of regional and business jets.

More than half of its sales came in segments related to commercial aerospace, the company said.

The 2023 outlook is good, Stanage said, with “strong order activity for both narrow-bodies and wide-body.” 

“Airlines are ordering again, as they refresh and increase their fleets to meet increased growth in passenger demand and as we strive toward meeting their sustainability goals for emission reductions to greater fuel efficiency,” he added.

United Airlines’ recent order for up to 200 Boeing 787s and 100 737 MAXs “reflects the largest order for years for widebodies,” Stanage noted. The easing of some Covid travel restrictions to and from China also should spur more demand for long-range widebodies, he said.

There should be growth in the narrow-body segment too, Stanage said. 

“With Boeing rebounding and stabilizing their supply chain, MAX is expected to grow and the A320 is just limited by the supply chain,” he said. “We are seeing pretty strong growth in both of those platforms.”

Can Hexcel match Boeing ramp-up?

There should be growth for composite materials used in narrow-body airliners too, Stanage said. 

“With Boeing rebounding and stabilizing their supply chain, MAX is expected to grow and the A320 is just limited by the supply chain,” he said. “We are seeing pretty strong growth in both of those platforms.”

Analyst Kristine Liwag of Morgan Stanley questioned the Hexcel leaders on whether they can meet expected rate increases with Boeing’s composite-frame 787.

“When you look at Boeing’s production rate plans, working with 787 to go from 1.5 to 2.5 per month today, and they are kind of going to that 10 per month by 2025, 2026 – that’s a 400% to 500% increase,” she said. “Are there any hurdles that we want to keep in mind, as we see the ramp up?”

Hexcel had built up its tooling to meet Boeing’s pre-pandemic, pre-grounding production rates, Stanage noted, so it already has the equipment in place. 

The big challenge will be personnel, he said.

“We have a significant number of our team that are fairly new in terms of their knowledge with the product, processing and efficiencies, Stanage said. “That is the challenge that we really focus on and really work on going forward.” 

Hexcel doesn’t fear recession

Hexcel has not been immune from inflation pressures, but is optimistic that the worst is behind it, Stanage told analysts. “Probably 2022 saw bigger inflationary pressures and hopefully … in 2023 we are starting to see it dissipate.” 

The demand for new aircraft is strong, even if there is uncertainty about the global economy in 2023, he said.

“If you look at where we are coming out of the pandemic, if you look at the strong demand and if you look at the supply chain challenges, perhaps a little slowdown in other areas may actually be an enhancement to help with the supply chain catch up,” Stanage said. “We see minimal to no short-term impact on our commercial markets.”

2 Comments on “Hexcel reports increased demand for aerospace composites as industry rebounds

  1. There is a reason any tech position lists 5 years experience, it take that long to get up to speed. I had 3 years of intense learning and it sloped off but 5 years before I saw repeats of the problems and it was not all new.

    The US has lost a lot of its experienced work force. Boeing is far from alone in disastrous management.

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