Howmet Aerospace(US:HWM)2025-10-30 21:09Financial Performance - Sales for the third quarter of 2025 were $2,089 million, a 14% increase from $1,835 million in the third quarter of 2024, and $6,084 million for the nine months ended September 30, 2025, up 10% from $5,539 million in the same period last year [117]. - Net income for the third quarter of 2025 was $385 million, or $0.95 per diluted share, compared to $332 million, or $0.81 per diluted share, in the third quarter of 2024, and $1,136 million, or $2.79 per diluted share, for the nine months ended September 30, 2025, up from $841 million, or $2.04 per diluted share, in the same period last year [130]. - Total Segment Adjusted EBITDA was $637 million in Q3 2025, compared to $511 million in Q3 2024, reflecting improved operating performance [161]. Revenue Sources - Approximately 69% of the company's revenue in the nine months ended September 30, 2025, was derived from commercial and defense aerospace markets, with aircraft production continuing to grow due to increased demand [114]. - The Engine Products segment's third-party sales increased by $160 million, or 17%, in the third quarter of 2025 compared to the same quarter in 2024, attributed to growth in various markets including aerospace [133]. - Fastening Systems segment third-party sales increased $56 million, or 14%, in Q3 2025 compared to Q3 2024, primarily due to growth in the commercial aerospace market [140]. - Engineered Structures segment third-party sales increased $36 million, or 14%, in Q3 2025 compared to Q3 2024, mainly due to growth in defense and commercial aerospace markets [147]. - Forged Wheels segment third-party sales increased $2 million, or 1%, in Q3 2025 compared to Q3 2024, with lower volumes in the commercial transportation market offset by increased aluminum cost pass-through [154]. Cost and Expenses - Cost of goods sold (COGS) as a percentage of sales decreased to 65.3% in the third quarter of 2025 from 68.3% in the third quarter of 2024, and to 66.1% from 69.1% for the nine months ended September 30, 2025, primarily due to higher volumes and favorable product pricing [118]. - SG&A expenses increased to $100 million in the third quarter of 2025 from $85 million in the third quarter of 2024, reflecting higher employment costs [119]. - Interest expense, net decreased to $37 million in the third quarter of 2025 from $44 million in the third quarter of 2024, primarily due to early debt redemptions [122]. Segment Performance - Segment Adjusted EBITDA for the Engine Products segment increased by $61 million, or 20%, in the third quarter of 2025 compared to the same period in 2024, driven by growth in commercial and defense aerospace markets [135]. - Engine Products segment Adjusted EBITDA Margin increased approximately 80 basis points in Q3 2025 compared to Q3 2024, driven by growth in commercial aerospace, defense aerospace, industrial gas turbine, and oil and gas markets [137]. - Fastening Systems segment Adjusted EBITDA Margin increased approximately 480 basis points in Q3 2025 compared to Q3 2024, attributed to growth in the commercial aerospace market and productivity gains [144]. - Engineered Structures segment Adjusted EBITDA Margin increased approximately 510 basis points in Q3 2025 compared to Q3 2024, primarily due to growth in defense and commercial aerospace markets [151]. Cash Flow and Investments - Cash provided from operations was $1,230 million in the nine months ended September 30, 2025, a 50% increase from $818 million in the same period of 2024 [165]. - Cash used for investing activities increased by $107 million, or 51%, to $316 million for the nine months ended September 30, 2025, primarily due to capital expenditures related to capacity expansion projects [177]. - Total capital expenditures are anticipated to be approximately 5% of sales in 2025 [178]. Tax and Dividend Policy - The estimated annual effective tax rate for 2025 is expected to be approximately 21.5%, up from 20.9% in 2024, primarily due to higher state income taxes and non-deductible amounts [128]. - The Board of Directors established a 2025 dividend policy to pay cash dividends at a rate of 15% plus or minus 5% of net income excluding special items [168]. Credit Ratings and Debt Management - The Company was assigned investment grade ratings by three major credit rating agencies, with S&P upgrading the long-term debt rating from BBB to BBB+ on September 8, 2025 [174]. - Fitch upgraded Howmet's short-term debt rating from F2 to F1 and long-term debt rating from BBB to BBB+ on March 31, 2025, citing strong free cash flow generation [175]. - Moody's upgraded Howmet's long-term debt rating from Baa3 to Baa1 on August 6, 2024, reflecting improved financial leverage and market demand [176]. - The Company continues to evaluate capital market access for refinancing existing indebtedness, including a JPY Term Loan Facility due November 2026 [171]. - The Company believes its cash on hand and availability under the Credit Facility will be sufficient to repay the JPY Term Loan Facility if refinancing does not occur [171]. - The Company may redeem portions of its debt securities or repurchase its debt or equity securities based on market conditions and legal requirements [172]. Risks and Forward-Looking Statements - Forward-looking statements indicate potential risks including economic conditions, supply chain disruptions, and competition from new technologies [180].