10-KPeriod: FY2018

Howmet Aerospace Inc. Annual Report, Year Ended Dec 31, 2018

Filed February 21, 2019For Securities:HWM

Summary

Howmet Aerospace Inc. (formerly Arconic Inc.) in its 2018 10-K filing reports a year of revenue growth and a return to profitability. Sales increased by 8% to $14.014 billion, driven by strong volume across key end markets like aerospace, automotive, and commercial transportation, coupled with favorable aluminum pricing and product mix in the Global Rolled Products segment. The company reported a net income of $642 million, a significant improvement from a net loss of $74 million in 2017, largely attributed to operational improvements and the absence of significant one-time charges incurred in the prior year. Significant strategic initiatives were announced in early 2019, including plans to reduce operating costs by $200 million annually, separate the business into two distinct segments (Engineered Products and Forgings, and Global Rolled Products) with a potential spin-off, consider divestitures of non-core businesses, and execute substantial share repurchases ($500 million authorized, with an additional $500 million authorized for future repurchase). The company also announced a reduction in its quarterly common stock dividend. These actions reflect a strategic pivot following the Board's decision not to pursue a sale of the entire company, signaling a focus on enhancing shareholder value through operational efficiency and portfolio optimization.

Financial Statements
Beta
Revenue$6.78B
R&D Expenses$41.00M
SG&A Expenses$371.00M
Operating Income$775.00M
Interest Expense$377.00M
Net Income$642.00M
EPS (Basic)$1.33
EPS (Diluted)$1.30
Shares Outstanding (Basic)483.00M
Shares Outstanding (Diluted)503.00M

Key Highlights

  • 1Arconic reported an 8% increase in sales to $14.014 billion for 2018, driven by volume growth and favorable pricing.
  • 2The company returned to profitability with a net income of $642 million in 2018, a significant improvement from a net loss of $74 million in 2017.
  • 3Key strategic initiatives announced in early 2019 include a $200 million annual cost reduction plan and a planned separation of the business into two distinct segments.
  • 4The company announced plans for significant share repurchases totaling $1 billion ($500 million authorized for immediate execution and an additional $500 million authorized for the near future).
  • 5Arconic expects to reduce its quarterly common stock dividend from $0.06 to $0.02 per share.
  • 6The company's major segments are Engineered Products and Solutions (EP&S), Global Rolled Products (GRP), and Transportation and Construction Solutions (TCS). EP&S, heavily weighted towards aerospace, showed strong performance.
  • 7Recent leadership changes include the appointment of John C. Plant as Chairman and CEO, signaling a new phase of strategic direction.

Frequently Asked Questions

Arconic operated through three main segments: Engineered Products and Solutions (EP&S), Global Rolled Products (GRP), and Transportation and Construction Solutions (TCS). EP&S, which serves primarily the aerospace market, saw strong performance. GRP experienced growth driven by automotive, commercial transportation, and industrial sectors, though affected by aerospace production mix and higher aluminum prices. TCS also reported growth, benefiting from commercial transportation and building/construction markets.

In early 2019, Arconic announced several major strategic initiatives. These include plans to reduce operating costs by approximately $200 million annually, separate the company's portfolio into two distinct segments (Engineered Products and Forgings, and Global Rolled Products) with a potential spin-off of one business, consider divestitures of non-core businesses, and execute a $1 billion share repurchase program. The company also announced a reduction in its quarterly dividend.

For 2019, Arconic projected sales to increase by 2% to 4%, supported by growth in most key end markets, although this is expected to be partially offset by declining aluminum prices. Earnings per share are anticipated to grow due to operational improvements and cost reductions. Cash flows are expected to remain stable compared to 2018, with ongoing focus on capital efficiency.

In 2018, Arconic generated sales of $14.014 billion, up 8% from the previous year. Net income was $642 million, a significant turnaround from the $74 million net loss in 2017. Total segment operating profit was $1.581 billion, a decrease of 6% from 2017. The company ended the year with $2.277 billion in cash and cash equivalents and reduced its total debt by $514 million to $6.330 billion.