Hexcel's Q2 2025: Key Contradictions in A350 Production Rates and Defense Market Outlook

A350 production rates and destocking, defense market outlook, A350 production rates and shipments are the key contradictions discussed in Hexcel Corporation's latest 2025Q2 earnings call.



Commercial Aerospace Production Challenges and Recovery:
- Hexcel reported commercial aerospace sales of $293 million for Q2 2025, down 8.9% on a constant currency basis from the previous year.
- The decline was primarily due to lower sales on the A350 and Boeing 787 programs. Destocking in Europe and supply chain disruptions affected the A350's production rates and shipset values.
- Despite these challenges, Hexcel anticipates a positive outlook, with Airbus planning to increase A350 production to 12 aircraft per month by 2028 and Boeing's 787 production rate set to rise to 10 aircraft per month.

Defense and Space Segment Growth:
- Hexcel's defense, space, and other sales were $197 million in Q2 2025, up 7.6% in constant currency from the same period in 2024.
- Growth was driven by programs like the CH-53K, two international fighter programs, and strong sales in space applications such as launchers, rocket motors, and satellites.
- Increased defense spending globally, particularly in the U.S. and Europe, is expected to continue supporting this growth.

Cost Management and Strategic Adjustments:
- Hexcel's gross margin for Q2 2025 was 22.8%, down from 25.3% in Q2 2024, impacted by lower operating leverage and inventory adjustments.
- The company plans to mitigate these issues by focusing on cost control and operational efficiency, including a restructuring charge of $24 million related to closing the Belgian engineered product facility.
- Hexcel aims to leverage increased production rates in commercial aerospace programs to drive operating leverage, resulting in improved margins and strong cash generation.

Currency and Tariff Impact:
- Hexcel benefits from a strong U.S. dollar, which has provided a tailwind to its financial results. The company expects to continue to see a net tailwind from currency hedging this year, with potential shifts in 2026 due to recent weakening of the dollar.
- The company is experiencing initial impacts from increased tariffs, with a quarterly impact estimated at $3 million to $4 million, and continues to explore mitigation strategies and pass-through mechanisms.