Howmet Aerospace (HWM) investor relations material

Market and production outlook

• Inventory destocking at major OEMs like Boeing is expected to end soon as production rates stabilize and increase, especially for narrow-body aircraft.

• Confidence is high for rate increases in both Boeing and Airbus narrow-body and wide-body platforms into 2026, with supply chain issues largely resolved.

• Spares business is experiencing strong growth due to older fleets working harder amid production shortfalls, with demand expected to remain high through 2028.

• Commercial aero spares are projected to outpace other segments in growth over the next two years, driven by increased shop visits and deeper overhauls.

• New engine and turbine capacity expansions are underway, with significant investments in new plants and tooling to support future growth.

Operational improvements and technology

• Investments in automation and advanced manufacturing are raising production capabilities, with new plants featuring higher technology and automation levels.

• Proprietary materials and advanced core designs are improving turbine blade durability and performance, supporting both commercial and defense applications.

• Ongoing hiring and training are focused on supporting expansion, with a temporary slowdown in hiring to allow workforce maturation before ramping up again in 2025.

• Restructuring and rationalization in structures and fasteners segments have improved profitability, including plant closures and the creation of a distribution arm.

• Automation opportunities remain, but current focus is on meeting market demand, with plans to revisit further automation in 2027–2028.

Financial strategy and profitability

• Capital expenditures in 2026 are expected to match 2025 levels, well above depreciation, supporting organic growth and capacity expansion.

• Strong free cash flow conversion has been maintained, with a long-term target of 90% net income to cash flow conversion.

• Organic growth is prioritized over stock buybacks and acquisitions, though all options are considered for capital deployment.

• Profitability across gas turbine segments is similar, with capital deployment decisions based on backlog security and commercial arrangements.

• Fasteners segment benefits from volume, operational improvements, and a growing distribution business, while structures segment has improved through rationalization.