10-QPeriod: Q3 FY2023

Howmet Aerospace Inc. Quarterly Report for Q3 Ended Sep 30, 2023

Filed November 2, 2023For Securities:HWM

Summary

Howmet Aerospace Inc. (HWM) reported a strong third quarter for 2023, demonstrating significant year-over-year growth in both sales and net income. Sales increased by 16% to $1.66 billion, driven by robust performance across commercial aerospace, defense aerospace, commercial transportation, and industrial markets. Net income surged by 135% to $188 million, translating to diluted earnings per share of $0.45, up from $0.19 in the prior year's quarter. The company's operational efficiency improved, with Cost of Goods Sold as a percentage of sales decreasing, partly due to lower charges related to past plant incidents compared to the prior year. Segment Adjusted EBITDA also showed healthy growth, increasing 17.5% to $402 million, indicating strong underlying profitability from its core business segments. Howmet Aerospace continues to benefit from the recovery in commercial aerospace and sustained demand in other key markets, positioning it well for continued financial performance.

Financial Highlights

49 data points
Beta

Revenue

$1.66B

Net Income

$188.00M

11.3% Net Margin

EPS (Diluted)

$0.45

Total Assets

$10.17B

Cash & Equivalents

$425.00M

Free Cash Flow

$132.00M

Financial Statements
Beta
Revenue$1.66B
R&D Expenses$9.00M
SG&A Expenses$87.00M
Operating Income$307.00M
Interest Expense$54.00M
Net Income$188.00M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)412.00M
Shares Outstanding (Diluted)415.00M

Key Highlights

  • 1Total sales for Q3 2023 increased by 16% year-over-year to $1.66 billion, driven by broad market strength, particularly in commercial aerospace, defense, commercial transportation, and industrial sectors.
  • 2Net income for Q3 2023 more than doubled, rising 135% to $188 million, with diluted EPS growing to $0.45 from $0.19 in Q3 2022.
  • 3Segment Adjusted EBITDA increased by 17.5% to $402 million, demonstrating strong operational performance across the company's segments.
  • 4Cost of Goods Sold as a percentage of sales improved to 71.4% in Q3 2023 from 73.7% in Q3 2022, aided by lower incident-related charges compared to the prior year.
  • 5Howmet Aerospace repurchased $150 million of its common stock during the first nine months of 2023, and still has $797 million remaining under its authorized share repurchase program.
  • 6Long-term debt was reduced by $368 million to $3.79 billion as of September 30, 2023, compared to $4.16 billion as of December 31, 2022, indicating a deleveraging trend.
  • 7The company's credit ratings from Moody's and S&P were upgraded to positive outlooks, reflecting improved financial leverage and strong market positions.

Frequently Asked Questions

Howmet Aerospace's sales growth in Q3 2023 was primarily driven by increased volumes and favorable pricing across its key markets, including commercial aerospace (both narrow and wide body aircraft), defense aerospace, commercial transportation, and industrial sectors. The recovery in commercial aerospace, with domestic air travel exceeding 2019 levels and international air travel nearing pre-pandemic levels, is a significant contributor.

Howmet Aerospace has actively managed its debt by reducing its outstanding long-term debt. During the first nine months of 2023, the company reduced its 5.125% Notes due October 2024 by $376 million, contributing to an overall decrease in long-term debt to $3.79 billion from $4.16 billion at the end of 2022. This proactive debt management is expected to reduce annual interest expenses.

Howmet Aerospace expects continued growth in the commercial aerospace market. While the mix of wide-body to narrow-body aircraft is still below 2019 levels, the company is experiencing a rebound in commercial air travel. This recovery is a key driver for its Engine Products and Fastening Systems segments, as they supply components for both narrow and wide-body aircraft.

In Q3 2022, 'Other expense, net' was significantly impacted by a $65 million pre-tax charge related to the Lehman Brothers International (Europe) ('LBIE') legal proceeding. This charge did not recur in Q3 2023, as the matter was settled in the second quarter of 2023. The settlement resulted in a reversal of $25 million of the previously recorded charge, significantly improving the 'Other expense, net' line item for the current period.