Operating income was $23.8 million, compared to last year's $39.9 million (the highest in Hexcel's history).
Hexcel CEO David Berges is pleased with the quarter's profitability, given the decline in sales volume, and encouraged by signs of recovery in the company's largest market, commercial aerospace.
"Commercial aerospace sales were down only 3% from last year in constant currency, and were higher than each of the last three quarters as the impact of the inventory destocking appears to be behind us and new program sales are picking up," he says. "As expected, regional and business aircraft sales were down sharply from a strong first quarter last year, but our total sales to Airbus and Boeing and their subcontractors were higher than any quarter in 2009. A partial shutdown and significant inventory correction during the first quarter by our largest wind energy customer resulted in the lowest wind energy sales since 2004."
Sales by market
Hexcel reports commercial aerospace sales for the 2010 first quarter of $152 million, down just 1.2% (3.1% in constant currency) on the first quarter of 2009. Airbus and Boeing related sales were up over 10% led by Boeing due to the B787 and last year's strike-effected first quarter. Total Airbus and Boeing related sales were over 15% above the average of the final three quarters of 2009.
Revenues from new aircraft programmes (A380, A350, B787, B747-8) represented more than 15% of commercial aerospace sales.
As expected, sales to regional and business aircraft customers were consistent with the last three quarters, down nearly 40% from a year ago. The market began to decline in the second quarter of 2009.
Space & defence
Space & Defense sales for the 2010 first quarter were $72.5 million, down 6.2% (7.4% in constant currency) on the 2009 first quarter. Hexcel saw lower F22 sales in the fourth quarter of 2009 due to the programme's impending end. European helicopter and military aircraft sales were up sequentially, but down from last year.
Industrial
Total industrial sales of $38.5 million for the first quarter of 2010 were down 52% in constant currency from 2009. This was mainly a result of significant inventory correction actions by Hexcel's largest wind energy customer. Hexcel expects an eventual return to growth, but it is cautious about the near term in this market.
Industrial sales excluding wind energy were over 20% lower in constant currency for the quarter compared to first quarter 2009, but higher than both of the prior two quarters. The majority of the decline was due to USEC's American Centrifuge Project, which has been on hold since the third quarter of 2009.
Outlook
"Our previous 2010 planning assumption was flat to slightly declining sales due to uncertainty in our wind energy and regional and business aircraft sub-markets as well as concerns about aircraft build rate reductions for large commercial aircraft," says Berges. "While we still do not anticipate a near-term return to historic levels of growth in wind energy and regional and business aircraft, we are now more optimistic about large commercial aircraft prospects which accounted for over 45% of this quarter's sales. The apparent end of inventory corrections, recent announcements of modest increases in large aircraft build rates and good progress on new composite-rich programmes leads us to believe we will return to year over year quarterly growth in total sales."
Hexcel Corporation (NYSE: HXL), USA, supplies high-performance structural materials, including carbon fibres, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures.
