Hexcel's Q1 2025: Navigating Contradictions in A350 and Boeing 787 Production Amid Tariff Challenges
Earnings DecryptWednesday, Apr 23, 2025 3:50 pm ET
2min read
A350 production and inventory adjustments, 787 production rates, tariff impact and pricing strategy, A350 production rates and inventory management, tariff impact assumptions are the key contradictions discussed in Hexcel's latest 2025Q1 earnings call.
Revenue and Sales Trends:
- reported sales of $457 million for Q1 2025, with commercial aerospace sales down 6.3% on a constant currency basis from the same period in 2024.
- The decline in commercial aerospace sales was primarily due to lower sales from 787 and 737 MAX programs.
Productivity and Cost Management:
- Hexcel's gross margin declined to 22.4% in Q1 2025 from 25% in the prior year.
- This decline was attributed to lower operating leverage from reduced sales line, a vendor quality issue in the Engineered Products segment, and additional expenses from a power outage at a facility.
Strategic Focus and Market Outlook:
- Hexcel revised its 2025 sales guidance downward by $85 million, with Airbus A350 sales expected to be lower than 2024 levels.
- The revision is due to a significant reduction in Airbus' demand forecast for A350 materials and a reduction in the A320 build rate for 2025.
Tariff Impact and Management:
- Hexcel estimated the direct impact of tariffs to be about $3 million to $4 million per quarter.
- The company has cross-functional teams analyzing potential tariff impacts but did not include them in guidance due to uncertainty about the final tariff rates and indirect effects on the aerospace supply chain and production rates.
Revenue and Sales Trends:
- reported sales of $457 million for Q1 2025, with commercial aerospace sales down 6.3% on a constant currency basis from the same period in 2024.
- The decline in commercial aerospace sales was primarily due to lower sales from 787 and 737 MAX programs.
Productivity and Cost Management:
- Hexcel's gross margin declined to 22.4% in Q1 2025 from 25% in the prior year.
- This decline was attributed to lower operating leverage from reduced sales line, a vendor quality issue in the Engineered Products segment, and additional expenses from a power outage at a facility.
Strategic Focus and Market Outlook:
- Hexcel revised its 2025 sales guidance downward by $85 million, with Airbus A350 sales expected to be lower than 2024 levels.
- The revision is due to a significant reduction in Airbus' demand forecast for A350 materials and a reduction in the A320 build rate for 2025.
Tariff Impact and Management:
- Hexcel estimated the direct impact of tariffs to be about $3 million to $4 million per quarter.
- The company has cross-functional teams analyzing potential tariff impacts but did not include them in guidance due to uncertainty about the final tariff rates and indirect effects on the aerospace supply chain and production rates.
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