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2013 Hexcel
Hexcel Overview
Leading advanced composites company 65 years in the industry Focused on aerospace and wind FY 2012 sales of ~$1.6 Billion Sales by region: ~46% US, ~43% Europe and ~11% Other About 5,000 Employees primarily split between Americas and Europe
Investment Highlights
Leading position in all of our key markets High barriers to entry Sustainable competitive advantage Technology leader, broad range of products/qualifications Excellent customer relationships Growing share of long term growth markets Cyclical and secular growth combined Demonstrated operational excellence Strong balance sheet (net debt/EBITDA < 1x)
2013 Hexcel
Glass Prepregs
Wind blades Wing-to-body fairings in aero
Key properties Fatigue and corrosion resistant Light Weight (density) High Strength (tensile) Stiffness (modulus)
Reinforcements
Aircraft radomes Lamborghini roof
Honeycomb
Helicopter blades Aircraft flooring Nacelle structures Acousti-Cap
Carbon Prepregs
A380 Fuselage beam GE90 Fan blade Eurofighter Tail
Engineered Products
Structural Assemblies HexMC parts Machined Core HexTool Tooling System
2013 Hexcel
Stronger
2013 Hexcel
Sales by Market
Helicopters Military Aircraft Launch Vehicles Satellites Industrial
2004 2005 2006
23%
14%
62%
Commercial Aerospace Airbus Boeing Engines/Nacelles Regional/Business
Commercial Aerospace
2013 Hexcel
14%
Industrial Market
Wind Energy Tooling Recreation
Industrial Revenues
Glass Prepreg
$267 $280 $227 $294 $313 $253 $218 $249 $277 $234
Transportation
2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM Q2 $ millions 2013
Broad Range of Performance Applications Wind Energy Drives Industrial Market Segment
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2013 Hexcel
23%
2004
2005
2006
2007
2008
2009
2010
2011
2012
LTM Q2 2013
Hexcel Positioning
Hexcel Intermediate Modulus (IM) fiber the industry standard Rotorcraft ~60% of sales and growing New composite blade designs providing retrofit opportunities More Hexcel value-added content JSF, A400M growth ahead
2013 Hexcel
All Other
Next Five Years New Fixed Wing Programs lead Growth Helos cover V22 cuts
Rotorcraft
Today
2013 Hexcel
62%
9,800+ planes in Airbus & Boeing backlog or over 7 years based on est. 2013 deliveries 2012 was, and 2013 is expected to be, another record year for deliveries Introduction of new composite-intensive aircraft provides Hexcel secular sales growth New programs (B787, B747-8, A350 & A380) make up over 30% of Commercial Aerospace sales
2004 2005 2006 2007 2008 2009 2010 2011 2012 LTM Q2 2013
Boeing 45%
2013 Hexcel
Deliveries
6,000 5,000 4,000 3,000 2,000 Total Airbus & Boeing Deliveries 1,000 0
1,189 1,000 0
Orders Doubled vs. Previous Cycles, but this Time OEMs Didnt Overbuild
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2013 Hexcel
Backlog
50+ %
A380
23%
Over $3M per A/C
10-15%
Low
A310
1980
B767
1985
4-6%
1990 1995 2000 2005 2010 2015 HS Carbon Fiber Prepregs IM Carbon Fiber Prepregs
Step Change with IM Carbon Fiber Prepreg as the new Workhorse Hexcels Specialty
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2013 Hexcel
$7
Relative Hexcel Content per Plane $M
$6 $5 $4 $3 $2 $1 $0 -$1 -$2
Narrow Body ( A320, A320neo, 737 & 737 MAX)
Legacy Wide Body A380 Super Jumbo
+
New A350 Wide Body
New aircraft now represent about 30% of Hexcel Commercial Aerospace sales
1st Half 13 New Program Sales are more than twice 2010 run rate, and the Ramp-up is Just Beginning
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2013 Hexcel
Sales
$1,618 $1,800 $1,578 $1,600 $1,392 $1,325 $1,400 $1,174 $1,171 $1,200 $1,108 $1,050 $958 $1,000 $837 $800 $730 $600 $400 $200 $0
$78
Return on Capital
18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 11.7% 12.5% 11.2% 11.7% 10.9% 9.9% 9.4% 6.3% 14.7% 14.1% 14.0% 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x .0x
Stockholders Equity
$1,041 $994 $802 $659 $576 $509 $428 $302 $211 ($24) ($93)
2013 Hexcel
Summary Outlook
Build rates and new programs should result in double digit growth for years to come for Commercial Aerospace market Cost control, increased in-house carbon fiber and productivity initiatives should deliver 23% incremental Operating Income leverage Over the mid-term, we expect to generate significant Free Cash Flow with capital expenditure spending average less than $200 million per year Our Priorities for Cash Usage:
1. Organic Growth Investing in R&T and Capacity to support expected Demand 2. M&A opportunities Technology, adjacencies or bolt-on that fit Focus 3. Return to shareholders ($50 million share repurchase completed in 1H 2013 and an additional $150 million recently authorized)
We are a technology driven company focused on Advanced Composites, targeting markets with long term growth potential where we can establish a sustainable, competitive advantage
Balance Sheet and Outlook to Deliver Growth (Organic + M&A) and Return to Shareholders
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2013 Hexcel
YoY % Q2 2012 Q2 2013 Change $399 26.4% $64.4 16.1% $0.42 $423 27.6% $71.9 17.0% $0.48 14% 12% 6%
LTM Q2 LTM Q2 YoY % Change 2012 2013 $1,506 25.5% $223.0 14.8% $1.57 $1,618 26.2% $249.1 15.4% $1.65 5% 12% 7%
Net Sales Gross Margin% Adj. Operating Income Adj. OI% Adj. Diluted EPS
Q2 comments: Record sales, gross margin ($ and %), adj OI ($ and %) and adj Net Income Commercial Aero sales remain strong -- increased 15.1% in constant currency S&D sales also remain strong -- increased 9.3% in constant currency Industrial sales (including wind) weak across the board, down nearly 29%. But up 8.5% over Q1 2013
2013 Hexcel
1) 2012 includes gain of $4.9M from sales of land. 2) Other operating expenses include $9.6M from business interruption insurance settlement, $5.7M benefit from curtailment of a pension plan in Q1 2011, $1.7M adjustment to prior year gain on sale of operations in 2009, $2.7M of US pension settlement in 2008, and $9.4M of expense related to partial settlement of US Pension and $3.2M associated with the impairment of purchased technology and fixed assets in 2007 3) Environmental charge of $5.0M, $2.7M, $3.5M, $1.7M and $7.6 million in 2012, 2011, 2010, 2009 and 2008 respectively, reflect charges related to environmental remediation liabilities for sold facilities
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2013 Hexcel
GAAP Net Income Litigation Settlements/Legal Fees Gain on sale of assets (net of tax)(1) Other Operating Expense (net of tax) (2) Environmental Expense (net of tax) (2) Acceleration of Deferred Financing Costs Loss on early retirement of debt (net of tax) Tax Adjustments (3) Non-GAAP Net Income
YTD June 30, 2012 2013 $ 87.6 $ 92.1 (6.0) 0.7 0.6 $ 82.3 $ 92.7
1) 2012 includes the after tax gain from sales of land. 2008 includes a $11.7 million after tax gain from the sale of our share in BHA Aero Composites Parts Co. Ltd. 2006 includes $9.6 million after tax gain from the sale of our 50% share in Clark-Schwebel Tech-Fiber Company 2) Represents the after tax impact of the adjustments described on the preceding page 3) Represents tax benefits resulting from the reversal of valuation allowances or tax credits recorded that relate to activities from a prior year
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2013 Hexcel