Howmet Aerospace(US:HWM)2024-11-06 22:42Financial Performance - Sales increased to $1,835 million in Q3 2024, up 11% from $1,658 million in Q3 2023, and $5,539 million for the nine months ended September 30, 2024, up 13% from $4,909 million in the same period last year[71]. - Net income for Q3 2024 was $332 million, or $0.81 per diluted share, compared to $188 million, or $0.45 per diluted share in Q3 2023, and $841 million, or $2.04 per diluted share for the nine months ended September 30, 2024, compared to $529 million, or $1.27 per diluted share in the same period last year[73]. - Total Segment Adjusted EBITDA increased to $511 in Q3 2024, up from $402 in Q3 2023, reflecting improved operating performance[82]. Cost Management - Cost of goods sold (COGS) as a percentage of sales decreased to 68.3% in Q3 2024 from 71.4% in Q3 2023, and to 69.1% from 72.2% for the nine months ended September 30, 2024, primarily due to higher volumes and favorable product pricing[71]. - SG&A expenses were $85 million in Q3 2024, a slight decrease from $87 million in Q3 2023, while increasing to $270 million for the nine months ended September 30, 2024, up from $250 million in the same period last year[71]. - Interest expense, net decreased to $44 million in Q3 2024, down 19% from $54 million in Q3 2023, due to early redemptions of certain notes[72]. Market Segments Performance - Segment Adjusted EBITDA for the Engine Products segment increased by $88 million, or 40%, in Q3 2024 compared to Q3 2023, driven by growth in commercial aerospace and defense aerospace markets[75]. - Fastening Systems segment third-party sales increased by $44, or 13%, in Q3 2024 compared to Q3 2023, primarily due to growth in the commercial aerospace market[77]. - Engineered Structures segment third-party sales increased by $156, or 25%, for the nine months ended September 30, 2024, compared to the same period in 2023, mainly due to growth in commercial and defense aerospace markets[78]. - Forged Wheels segment third-party sales decreased by $40, or 14%, in Q3 2024 compared to Q3 2023, primarily due to lower volumes in the commercial transportation market[80]. Tax and Headcount - The estimated annual effective tax rate for Q3 2024 was 20.9%, down from 23.0% in Q3 2023, primarily due to net benefits related to U.S. federal and state R&D credits[72]. - The company absorbed approximately 235 net headcount in the Engine Products segment in Q3 2024 to support expected revenue increases[75]. Cash Flow and Financing - Cash provided from operations was $818 million for the nine months ended September 30, 2024, compared to $443 million for the same period in 2023, an increase of $375 million[84]. - Cash used for financing activities increased by $96 million, or 15%, in the nine months ended September 30, 2024, primarily due to long-term debt payments and increased common stock repurchases[85]. - Cash used for investing activities increased by $46 million, or 28%, to $209 million in the nine months ended September 30, 2024, primarily due to capital expenditures related to capacity expansion projects[88]. Strategic Initiatives - Howmet acquired Camcraft LTD for approximately $5 million in October 2024, enhancing its Engine Products segment capabilities[76]. - The company has established a commercial paper program allowing for issuance up to $1 billion for general corporate purposes[86]. - The company's effective shelf registration statement allows for opportunistic issuance of new debt securities to refinance existing indebtedness[86]. Credit Ratings and Outlook - Moody's upgraded Howmet's short-term debt rating from P-3 to P-2 and long-term debt rating from Baa3 to Baa1 on August 6, 2024, citing improved financial leverage and market demand[87]. - The three major credit rating agencies have rated Howmet's debt with investment grade ratings, reflecting stable to positive outlooks[87]. - The company anticipates continued demand in the commercial aerospace market, which supports its financial outlook[87]. Risk Management - There have been no material changes in risk factors since the last annual report, indicating stability in the company's risk environment[93]. - The company reported no changes in internal control over financial reporting during the third quarter of 2024[91].