- Q2 2019 GAAP diluted EPS was $0.94 compared to Q2 2018 diluted EPS of $0.76.
- Adjusted diluted EPS for Q2 2019 was $0.94, a 25% year-over-year increase compared to adjusted diluted EPS of $0.75 in Q2 2018.
- Q2 2019 Sales were $609.0 million, an increase of 11.2% over second quarter 2018 (12.1% increase in constant currency).
- Quarterly dividend increased 13.3% to $0.17 per share from $0.15 per share.
- EPS guidance raised to $3.43-$3.53 (previously $3.38-$3.52).
Hexcel Corporation (NYSE: HXL) reported second quarter 2019 results including net sales of $609.0 million and diluted EPS of $0.94.
Nick Stanage, Chairman, CEO and President said: “Hexcel delivered a robust second quarter with sales 11% higher and EPS 25% higher than the same period in 2018. These results reflect strength in our markets combined with strong operational performance. It was another solid quarter for sales, despite softer demand related to 737 MAX production. With the previously disclosed 2018 headwinds now largely behind us, margins have stepped up as we forecasted. Hexcel is continuing to generate strong Cash from Operations, which is now $157 million YTD. Capital expenditures YTD are $99 million resulting in Free Cash Flow of $58 million for the first half of 2019 compared to $55 million in the first six months of 2018. Recognizing our strong EPS performance year to date we are raising our EPS guidance to $3.43-$3.53. Revenue, Free Cash Flow and Capital Expenditure guidance remains unchanged. We are confident that, with current market conditions, our focus on operational excellence and continued investments in innovation, we are positioned to deliver on our commitments and drive shareholder value.”
Markets
Sales for the second quarter of 2019 were $609 million, an increase of 11.2% (12.1% in constant currency) compared to the second quarter of 2018.
Commercial Aerospace
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- Commercial Aerospace sales of $416.5 million increased 8.5% (8.6% in constant currency) for the second quarter of 2019 as compared to the prior year period. Growth was driven by particularly strong performance from the Airbus A320neo, the Boeing 787 and Airbus A350 programs. Despite reduced demand for materials related to the Boeing 737 MAX, overall commercial aerospace demand remains strong globally and provides confidence in the Company’s projected growth for the year.
- Sales to “Other Commercial Aerospace” which includes regional and business aircraft were up 6.5% for the second quarter of 2019 as compared to 2018.
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Space & Defense
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- Space & Defense sales of $111.8 million increased 21.9% (23.4% in constant currency) for the quarter as compared to the second quarter of 2018. Growth in the F-35 Joint Strike Fighter was the primary driver in the quarter supported by other fixed-wing programs. The quarter also included sales from ARC Technologies acquired in the first quarter of 2019.
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Industrial
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- Total Industrial sales of $80.7 million for the second quarter of 2019 increased 12.1% (17.3% in constant currency) as compared to the second quarter of 2018. Wind energy sales (the largest sub-market in Industrial) increased 44.3% in constant currency compared to Q2 2018, when the current wind energy growth phase began.
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Consolidated Operations
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- Gross margin for the second quarter of 2019 was 27.7% compared to 26.4% in the second quarter of 2018. The year-over-year improvement reflects strong operational execution combined with the decline in a number of operational headwinds incurred in 2018.
- Operating expenses for the second quarter were in line with Company expectations, supporting higher sales levels compared to the prior year period. The period saw increased expenditure on product qualifications and R&T expenditures, both of which reflect the Company’s continued focus on innovation and growth. Selling, General and Administrative expenses increased 14.5% in constant currency, and Research & Technology expenses increased 12.2% in constant currency.
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- Operating income in the second quarter of 2019 was $115.1 million, or 18.9% of sales, compared to $96.5 million, or 17.6% of sales, in 2018. Exchange rates, after taking hedges into account, favorably impacted the second quarter by approximately 40 basis points compared to 2018.
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Year-to-Date 2019 Results
Sales of $1,218.9 million for the first six months of 2019 increased 13.5% in constant currency compared to the same period in 2018.
Commercial Aerospace (68% of YTD sales)
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- Commercial Aerospace sales of $832.0 million increased 9.1% in constant currency compared to the first six months of 2018. Growth was driven by narrowbody build rate increases and the completion of the transition to the Neo and MAX configurations, as well as the Airbus A350 and Boeing 787 programs.
- Sales to “Other Commercial Aerospace,” which include regional and business aircraft customers, increased 6.8% year to date, driven by higher business jet sales, notably Gulfstream.
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Space & Defense (18% of YTD sales)
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- Space & Defense sales of $219.6 million increased 22.6% in constant currency compared to the first six months of 2018. Strong sales for the F-35 Joint Strike Fighter program, other fixed-wing programs, and the acquisition of ARC Technologies drove the increase.
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Industrial (14% of YTD sales)
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- Total Industrial sales of $167.3 million increased 26.6% in constant currency compared to the first six months of 2018.
- For the first six months of 2019, wind energy sales increased almost 60% in constant currency compared to last year.
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Consolidated Operations
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- Gross margin for the first six months of 2019 was 27.6% compared to 26.4% for the first six months of 2018. Sustained strong operational performance drove the margin improvement year over year combined with fewer cost headwinds compared to 2018. Depreciation expense increased $13 million over the first half of 2018, due to continued investment for future expected growth.
- Selling, general and administrative expenses for the first six months of 2019 were approximately 11.5% higher in constant currency than the prior year supporting general growth in the company, while revenue increased 13.5% in constant currency during the period. Research and technology expenses for the first six months of 2019 increased approximately 11.9% in constant currency compared to the prior 2018 period, reflecting continued investment in innovative composite products and solutions to support customers and next-generation applications.
- Operating income in the first six months of 2019 was $217.9 million, or 17.9% of sales, compared to $178.9 million, or 16.4% of sales, in 2018. The year-over-year impact of exchange rates was favorable by approximately 45 basis points.
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Cash and Other
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- The tax provision was $23.6 million for the quarter, reflecting an effective tax rate of 22.9%, compared to 22.8% in 2018. Both periods benefited from deductions associated with share-based compensation payments. The underlying effective tax rate is expected to be 24% for the remaining quarters of the year.
- Net cash generated from operating activities for the first six months of 2019 was $157.2 million, in line with the first six months of the prior year. Capital expenditures were $99.3 million for the first six months of 2019, compared to $101.9 million for the first six months of 2018. Free cash flow was $57.9 million for the first six months of 2019, compared to $55.3 million for the same period of the prior year. Free cash flow is defined as cash provided from operating activities less cash paid for capital expenditures. Working capital was a use of $82.7 million in the second quarter of 2019 compared to a $60.2 million use in the second quarter of 2018 with the higher working capital levels supporting increased sales.
- The Company allocated free cash flow generated during the second quarter of 2019 to debt repayment following a recent acquisition and did not repurchase any of its common stock during the period. The Company has $374 million remaining under the authorized share repurchase program.
- As announced today, the Board of Directors declared a quarterly dividend of $0.17 per share, representing a 13.3% increase compared to the prior quarter’s dividend. The dividend is payable to stockholders of record as of August 2, 2019, with a payment date of August 9, 2019.
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2019 Guidance
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- Sales of $2.375 billion to $2.475 billion (unchanged)
- Adjusted diluted earnings per share of $3.43 to $3.53 (previously $3.38 – $3.52)
- Free cash flow greater than $250 million (unchanged)
- Accrual basis capital expenditures of $170 million to $190 million (unchanged)
Quelle: Hexcel
