Hexcel Reports Net Sales Of $286.9 Million in the Third Quarter

October 26 (2020

Hexcel Corporation reported third quarter 2020 results, including net sales of $286.9 million and adjusted diluted EPS of ($0.29) per share.

Chairman, CEO and President Nick Stanage said, “In the third quarter of 2020, Hexcel faced significant headwinds resulting from the current unprecedented decline in demand impacting our industry. Sales were half of 2019 levels, and adjusted EPS was a negative 29 cents. We have taken rapid and significant actions over the past several months to cut overhead costs and reduce employment costs to align with demand levels lowered due to the effects of the pandemic. Together, these actions have reduced annualized overhead costs by more than $150 million and will better position us over the next several quarters as we adjust to build rate reductions announced by our key customers, compounded by extensive supply chain adjustments. Our foundation remains strong as demonstrated by $76 million of free cash flow generated in the third quarter, resulting in $109 million of free cash flow year to date, further strengthening our strong balance sheet.”


Markets

Sales in the third quarter of 2020 were $286.9 million compared to $572.5 million in the third quarter of 2019.

Commercial Aerospace

Commercial Aerospace sales of $128.8 million decreased 66.6% (66.3% in constant currency) for the quarter compared to the third quarter of 2019. All major programs were down substantially with the largest sales impact related to the A350. Boeing 737 MAX sales continue to be at a very low level.


Space & Defense: Space & Defense sales of $108.8 million decreased 0.9% (0.5% in constant currency) for the quarter as compared to 2019. The small decrease was due to lower demand from a number of European space & defense programs as aggregate U.S. space & defense sales were up moderately in the third quarter of 2020 compared to the third quarter of 2019.

Industrial: Total Industrial sales of $49.3 million in the third quarter were down 35.8% (37.5% in constant currency) compared to the third quarter of 2019.

Wind energy sales (the largest submarket in Industrial) experienced a decline of 41.5% in constant currency compared to the third quarter of 2019. The reduction reflects a customer demand shift in the U.S. market. As a result of this demand change, Hexcel will close its wind energy prepreg production facility in Windsor, Colorado in early November 2020 that served the U.S. market.

Gross margin for the third quarter was 4.7% compared to 27.6% in the prior year period. The deterioration reflects the under absorption of fixed overhead from lower sales levels magnified by the temporary idling of select production assets and facilities during the period to align production with demand. Selling, general and administrative and R&T expenses for the third quarter of 2020 were 26% lower than the prior year as ongoing realignment actions and headcount reductions reduce the cost structure. Other operating expenses primarily included the restructuring charge for the Windsor facility closure and additional severance costs across a number of facilities. Adjusted operating income in the third quarter of 2020 was negative $21.8 million, or (7.6)% of sales, compared to $109.9 million, or 19.2% of sales in 2019. The impact of exchange rates was negative by approximately 40 basis points in the third quarter of 2020 compared to 2019.

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