Hexcel Corporation (NYSE: HXL)(Paris: HXL), today provided its guidance for 2014 and reaffirmed its outlook and targets through 2017. 2014 Guidance Mr. Nick Stanage, Hexcel’s Chief Executive Officer, summarizing the Company’s outlook commented, “In 2014, we expect another record year with constant currency sales growth of approximately 10%, continued operating income margin expansion, ‘teens’ growth in earnings per share and to generate free cash flow while continuing to fund our capital expenditures ramp-up to meet future customer demands. Commercial Aerospace will again lead our sales growth. While the B787 was a key driver of our 2013 sales growth, we now expect the A350 XWB to be a significant driver of growth for 2014 and the next several years. Hexcel content per A350 XWB is now estimated at $5 million per shipset, a significant milestone that reflects both the breadth and depth of our products as well as nearly ten years of dedicated effort.” Hexcel’s overall 2014 revenue guidance is in the range of $1.80 billion to $1.88 billion, at current exchange rates, as compared to the 2013 revenue guidance of $1.655 billion to $1.685 billion. The Company expects 2014 sales growth to again be led by double digit sales growth in the Commercial Aerospace market, which comprises about 63% of the Company’s last twelve months sales. This growth will come from sales to Airbus, Boeing, and their subcontractors (which account for 85% of Commercial Aerospace sales), thanks to on-going increases in aircraft build rates and new composite rich aircraft programs that are ramping up. Regional and business aircraft account for the remaining 15% of Commercial Aerospace sales and are also expected to increase in 2014. Hexcel expects continued mid-single digit growth in the Space & Defense market in 2014, which comprises 23% of the Company’s sales. Growth will be led by the A400M military transport and global rotorcraft demand for Hexcel materials. The V-22 will begin to see the expected decline in build rate, but will likely remain the Company’s largest S&D program in 2014. In the Industrial markets (comprising 14% of total sales) Hexcel foresees mid-single digit growth in 2014, both for wind turbine sales, as well as other industrial sub-markets.
The Company expects 2014 adjusted diluted earnings per share to be in the $2.00 to $2.12 range. Diluted earnings per share is based on the current share count of nearly 102 million shares as Hexcel expects to at least repurchase sufficient shares to offset expected dilution from equity programs. The Company projects about a $12 million increase in depreciation expense in 2014. Despite the headwind from higher depreciation levels, Hexcel still expects to meet its 23%+ incremental operating income leverage target.Capital expenditures for 2014 are targeted to be $225 million to $250 million. This amount is higher than the Company’s estimates from a year ago, reflecting Hexcel’s increased content on the A350 XWB and to support higher aerospace growth in the mid-term. There is no change in Hexcel’s view on total capital expenditures needed to reach its $2.5 billion sales target in 2017. Hexcel’s 2014 effective tax rate is estimated at about 31.5%, an increase from the 2013 rates due to discrete items benefitting 2013. Hexcel expects free cash flow to be in the range of $25 million to $75 million for the year, with the typical use of cash in the first quarter. Long Term Targets Mr. Stanage added, “We remain on track to reach our 2017 sales target of $2.5 billion. While the Industrial markets are softer than we forecast a year ago, this is more than offset by the continued strength in Aerospace. Through 2017 we expect to maintain a double digit growth rate in Commercial Aerospace led by the A350 XWB, the continued strength in legacy aircraft production rates and then the new narrowbodies entering production. We continue to expect single digit growth in our Space & Defense market, as well as in the Industrial market.” Vision/Targets through 2017
- Hexcel’s annual sales are targeted to be $2.5 billion in 2017 through organic growth alone
- Target EBIT leverage on incremental sales growth to 23%+
- Expect adjusted diluted EPS growth to average in the “teens” over the period
- Free cash flow generation every year through the capital expenditures ramp-up period with timing aligned with customers schedules
Disclaimer on Forward Looking StatementsThis press release contains statements that are forward looking, including statements relating to anticipated trends in constant currency for the markets we serve (including changes in commercial aerospace revenues, the estimates and expectations based on aircraft production rates provided or publicly available by Airbus, Boeing and others, the revenues we may generate from an aircraft model or program, the impact of delays in new aircraft programs, the outlook for space & defense revenues and the trend in wind energy and other industrial applications); our ability to maintain and improve margins in light of the current economic environment; the success of particular applications as well as the general overall economy; our ability to manage cash from operating activities and capital spending in relation to future sales levels such that the company funds its capital spending plans from cash flows from operating activities, but, if necessary, maintains adequate borrowings under its credit facilities to cover any shortfalls; and the impact of the above factors on our expectations of financial results for 2013, 2014 and beyond. The loss of, or significant reduction in purchases by, Boeing, EADS, Vestas, or any of our other significant customers could materially impair our business, operating results, prospects and financial condition. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to changes in currency exchange rates, changing market conditions, increased competition, inability to install, staff and qualify necessary capacity or achievement of planned manufacturing improvements, conditions in the financial markets, product mix, achieving expected pricing and manufacturing costs, availability and cost of raw materials, supply chain disruptions, work stoppages or other labor disruptions and changes in or unexpected issues related to environmental regulations, legal matters, interest expense and tax codes. Additional risk factors are described in our filings with the SEC. We do not undertake an obligation to update our forward-looking statements to reflect future events.