Hexcel releases Q4 2020 financial results

Hexcel Corp. (Stamford, Conn., U.S.), a manufacturer of carbon fibers and other composite materials, reported on Jan. 25 its fourth quarter and full year 2020 results. This includes Q4 2020 net sales of $296 million and adjusted diluted EPS of ($0.18) per share.

Hexcel chairman, CEO and president Nick Stanage says, “Fourth quarter revenue of $296 million was in line with our expectations and consistent with our previous commentary that the third and fourth quarters of 2020, along with the first quarter of 2021, have been and are expected to be our most challenging quarters during this pandemic-driven market downturn. Adjusted EPS for the quarter was -$0.18, reflecting stronger margin performance than the third quarter of 2020, although sales mix and reduced overhead absorption continue to be significant headwinds. Revenue for the full year was $1,502 million, down 36% in constant currency compared to 2019, with adjusted diluted EPS for the year of $0.25. Our cash management continued to be strong with Hexcel delivering $214 million of free cash flow for 2020, ensuring that our liquidity position remains robust.”

Markets

Sales in the fourth quarter of 2020 were $295.8 million compared to $564.3 million in the fourth quarter of 2019.

• Commercial Aerospace sales of $126.7 million decreased 66.6% (also 66.6% in constant currency) for Q4 2020 compared to Q4 2019. All major programs were down substantially with the largest sales value impact related to the Airbus A350, for which Hexcel provides most of the carbon fiber used to fabricate primary aerostructures. Hexcel says Boeing 737 MAX sales continue to be at a very low level. Build rate reductions driven by the COVID-19 pandemic combined with significant supply chain inventory destocking led to the reduced sales levels. Sales to “Other Commercial Aerospace,” which include regional and business aircraft, fell by 59.2% for Q4 2020 compared Q4 2019 as demand was negatively impacted by the global pandemic, particularly business jets.
• Space and Defense sales of $119.7 million increased 3.8% (2.5% in constant currency) for Q4 2020 compared to Q4 2019. The increase was due to strength in U.S. military rotorcraft programs.
• Total Industrial sales of $49.4 million in Q4 2020 were down 28.6% (31.3% in constant currency) compared to Q4 2019. Wind energy sales (the largest submarket in Industrial) experienced a decline of 42.1% in constant currency compared to Q4 2019. The reduction reflects a customer demand shift, primarily in the U.S. market, and includes the impact of the November 2020 closure of Hexcel’s wind energy prepreg production facility in Windsor, Colo., U.S.

“Our results clearly reflect an unusual and tumultuous year for our customers, our suppliers and our Hexcel employees who have remained laser-focused on managing through the challenges at hand,” Stanage says. “The Hexcel team has responded quickly and worked safely and efficiently through significant uncertainty. Employees have been challenged in ways we never imagined, yet their commitment to excellence and to our customers has never wavered, with many relationships actually being strengthened through innovative ways of working.”

Stanage adds: “We continue to forecast stabilizing demand as we move into the second quarter of 2021, with the inventory de-stocking process expected to be largely winding down and the potential for some narrowbody build rate recovery as we progress into the second half of the year. However, there is no room for complacency during this pandemic. A quick and successful rollout of the vaccines is crucial to a significant increase in airline passenger traffic, which will ultimately be the driver of demand for new, composite-rich aircraft.”

FY 2020 Results

Hexcel says its full year 2020 sales were $1.502 billion, a decrease of 36.3% in constant currency compared to 2019.

• Commercial Aerospace sales of $822.3 million decreased 48.6% in constant currency compared to 2019 due to significant pandemic-induced production cuts across the major aircraft programs during 2020 and only limited sales for the Boeing 737 MAX program. The decline was compounded by significant destocking across the supply chain.
• Sales to “Other Commercial Aerospace,” which include regional and business aircraft customers, decreased 32.5% in 2020 as the global pandemic negatively impacted demand, particularly for business jets.
• Space and Defense sales of $448.5 million increased nominally in constant currency compared to 2019. While 2020 sales for some defense platforms were negatively impacted by temporary pandemic-induced disruptions, Space and Defense remains an attractive growth market.
• Total Industrial sales of $231.6 million decreased 26.5% in constant currency compared to 2019. Wind energy sales decreased 29.3% in constant currency during 2020 compared to 2019, resulting from global production disruptions caused by the pandemic and lower customer demand, notably in the U.S.