Hexcel Reports 2008 Third Quarter Results

Business Wire, Oct 20, 2008

Third Quarter 2008 Highlights

* Sales of $331.4 million, up 17.9% over last year (15.0% in constant currency) with strong growth from all major markets

* Net income of $33.0 million, $0.34 per diluted share ($0.22 adjusted for one time items) versus $0.19 last year

* Net debt of $346 million down $30 million from June 30, 2008

STAMFORD, Conn. -- Hexcel Corporation (NYSE: HXL)

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Hexcel Corporation (NYSE: HXL), today reported results for the third quarter of 2008. Net sales from continuing operations during the quarter were $331.4 million, 17.9% higher than the $281.1 million reported for the third quarter of 2007. Operating income for the third quarter was $35.9 million, compared to $30.2 million for the same quarter last year. Net income from continuing operations for the third quarter of 2008 was $33.0 million, or $0.34 per diluted share, compared to $18.1 million or $0.19 per diluted share in 2007, aided by the previously disclosed $11.7 million after tax gain on the sale of Hexcel's share in BHA Aero Composites Parts Co. Ltd (BHA). Excluding this gain, adjusted net income from continuing operations for the third quarter of 2008 was $0.22 per diluted share (see table D).

Chief Executive Officer Comments

Mr. Berges commented, "We are pleased that despite the global economic worries, and a strike at Boeing, our largest customer, we were able to post strong growth in all of our major markets. Sales for defense programs and wind turbine blades were particularly strong this quarter, as they have been all year. While the fixed and start-up costs associated with our new manufacturing facilities have impacted our gross margins, good leverage from higher sales drove growth in adjusted net income by 18% in the quarter and by 27% year to date. We made good progress on our three new plant start-ups in Europe and have just begun qualification runs at our new China wind prepreg plant. The year over year unfavorable margin impact was about 120 basis points this quarter, an improvement from the 200 basis points impact last quarter. We expect continued progress over the next few quarters."

"The Boeing strike, which began in early September, had an immediate effect on our Engineered Products segment where assemblies often are delivered right to our customer's production line. But the majority of the strike's impact will ripple through the coming months as Boeing and its subcontractors adjust their demand. We estimate that the strike will hurt our results, on an EPS basis, by about a penny per week and continue until production returns to pre-strike levels."

"Despite the dire global economic news, at this stage, we still see strong backlog and demand from space and defense, wind energy and new commercial aircraft in the near term and we still expect to spend $175 million on capital expenditures in 2008. The focus on alternative energy sources has made demand for wind energy more compelling. More importantly the economics of new, lightweight, wide body aircraft have become a significant proportion of the current and future demand mix leading us to expect growth through out the cycle. However, in light of the unprecedented volatility in the financial markets and concerns over the global economy during the past few weeks, we will prudently monitor the pace of our capital spending plans to maintain alignment with any changes to prior growth assumptions. At this stage, we are targeting 2009 to be free cash flow neutral for the year despite launching the initial capacity increases for the A350 and a new wind blade prepreg plant in Colorado. These programs will generate billions in revenues for Hexcel in the years to come and remain a high priority for the Company."

Markets

Commercial Aerospace

* Commercial aerospace sales of $176.5 million grew 15.5% (14.7% in constant currency) over third quarter 2007. Sales to Airbus and its subcontractors grew over 20% for the third consecutive quarter. Sales to Boeing and its subcontractors were just slightly above the third quarter of 2007 as sales were impacted by both the Boeing strike and the B787 delays. Our B787 related sales were at their lowest level since first quarter of 2007.

* Sales to "other aerospace" were up over 20% for the seventh consecutive quarter due to demand across a wide range of programs in Europe and the Americas.

Industrial

* Industrial sales of $79.3 million were up 16.8% over the third quarter 2007 (8.8% on a constant currency basis). Industrial sales beyond wind energy were impacted by lower recreation and automotive sales. But for the first time in over a year, the bigger category we call "other industrial" had growth as our portfolio pruning actions of last year provided easier comparisons and some capacity has become available.

* Year to date wind energy revenue maintains its mid-teens growth, on a constant-currency basis, as the market outlook for wind remains robust. Our customers continue to expect strong global growth and we are moving to support them with our new facilities in China and the U.S.