10-QPeriod: Q2 FY2022

Howmet Aerospace Inc. Quarterly Report for Q2 Ended Jun 30, 2022

Filed August 4, 2022For Securities:HWM

Summary

Howmet Aerospace Inc. reported a strong second quarter for 2022, with sales increasing by 17% year-over-year to $1,393 million, driven primarily by a significant rebound in commercial aerospace demand and favorable pricing. Net income more than doubled to $147 million, or $0.35 per diluted share, compared to $74 million, or $0.17 per diluted share, in the prior year's quarter. This performance reflects the ongoing recovery in the aerospace sector, particularly in narrow-body aircraft, and the company's ability to pass through increased material and inflationary costs. The company generated robust operating cash flow of $213 million for the first six months of 2022, a substantial improvement from $79 million in the same period last year. This was supported by improved operating results and lower pension contributions. Howmet Aerospace also continued its commitment to shareholder returns by repurchasing $235 million of its common stock during the first six months of 2022, demonstrating confidence in its financial position and future prospects. Despite ongoing inflationary pressures and some market uncertainties, the company's strategic focus on key aerospace markets and cost management appears to be yielding positive financial results.

Financial Highlights

49 data points
Beta

Revenue

$1.39B

Net Income

$147.00M

10.6% Net Margin

EPS (Diluted)

$0.35

Total Assets

$10.05B

Cash & Equivalents

$538.00M

Free Cash Flow

$114.00M

Financial Statements
Beta
Revenue$1.39B
R&D Expenses$9.00M
SG&A Expenses$83.00M
Operating Income$241.00M
Interest Expense$57.00M
Net Income$147.00M
EPS (Basic)$0.35
EPS (Diluted)$0.35
Shares Outstanding (Basic)417.00M
Shares Outstanding (Diluted)422.00M

Key Highlights

  • 1Total sales increased by 17% to $1,393 million for the second quarter of 2022 compared to $1,195 million in Q2 2021, driven by a 34% rise in commercial aerospace sales.
  • 2Net income more than doubled to $147 million ($0.35 EPS) in Q2 2022 from $74 million ($0.17 EPS) in Q2 2021.
  • 3Operating cash flow for the first six months of 2022 was $213 million, a significant increase from $79 million in the prior year's comparable period.
  • 4The company repurchased $235 million of common stock in the first six months of 2022, demonstrating a commitment to returning capital to shareholders.
  • 5Segment Adjusted EBITDA increased by 17% to $336 million in Q2 2022 compared to $287 million in Q2 2021, indicating improved operational performance across segments.
  • 6The commercial aerospace market now represents 45% of revenue, up from 39% in Q2 2021, signaling a strong recovery in this key sector.

Frequently Asked Questions

The significant increase in net income was primarily driven by higher sales, particularly in the commercial aerospace market, which saw a 34% increase year-over-year. Favorable product pricing, a decrease in loss on debt redemption, and lower net interest expense also contributed to the improved profitability. These factors, combined with the ongoing recovery in the aerospace sector, led to a more than doubling of net income compared to the prior year's quarter.

The commercial aerospace market is showing a strong recovery, now representing approximately 45% of Howmet's revenue, up from approximately 39% in the prior year. This recovery, particularly in narrow-body aircraft, is a key driver of increased sales across segments like Engine Products and Fastening Systems. While the wide-body market is recovering more slowly, the overall trend in commercial aerospace is positive and a significant contributor to the company's improved financial results.

Howmet Aerospace generated strong operating cash flow in the first six months of 2022. The company is prioritizing returning capital to shareholders through share repurchases, having bought back $235 million of its stock in the first half of the year. Additionally, the company is managing its debt levels, which contributed to lower interest expenses. Investments in capital expenditures continue, supporting ongoing operations and future growth.

The company continues to navigate risks including the ongoing impact of the COVID-19 pandemic, though its effects on commercial aerospace are lessening. Other risks include material cost inflation, supply chain disruptions affecting customers, and uncertainties related to future aircraft production rates, such as the Boeing 787 production. The company also faces geopolitical and regulatory risks common to global operations. Management believes it is in compliance with covenants and is monitoring these risks closely.