Carpenter Technology (NYSE:CRS) Q2 2026 Earnings call January 29, 2026 10:00 AM ET Company ParticipantsJohn Huyette - Head of Investor RelationsTimothy Lain - SVP and CFOTony Thene - Chairman and CEOConference Call ParticipantsAndre Madrid - AnalystBennett Moore - AnalystGautam Khanna - AnalystJosh Sullivan - Managing Director and Senior Equity Research AnalystPhil Gibbs - AnalystScott Deuschle - AnalystOperatorLadies and gentlemen, thank you for standing by. My name is Desiree, and I will be your conferenc ...

"这批订单来自上海，共30吨，属于耐蚀合金，总金额超500万元，需分10炉炼制，确保1月底前交 付。"手持检测报告，张艺仟介绍，凭借自主研发技术，公司产品杂质含量可控制在0.01%以内，能满 足高端领域的严苛要求，这也是企业站稳市场的核心底气。 订单旺、生产忙，背后是公司实打实的发展硬实力。作为贵州航空产业城的补链延链的关键企业，该公 司已拥有多项自主知识产权，通过三联工艺等技术提升废料利用率、有效降低了生产成本。 "2025年我们完成产值5000余万元，今年目标锁定6000万元。"公司常务副总经理王进学表示，新年伊始 便迎来"开门红"，除了正加急生产的30吨镍基高温合金订单，公司还成功签订一份总价值1500万元的年 度订单。 为确保全年目标顺利实现，企业已制定清晰规划。接下来，该公司将上线轻质高强度合金生产线，并通 过深化与高校、科研机构的产学研合作，持续提升研发实力、丰富产品矩阵；此外，今年公司还计划增 报多项资质，进一步拓宽产品应用场景，同时依托贵州航空产业城完善的产业链生态，不断夯实高质量 发展根基。 本报讯（记者 杨曦）"3、2、1，起炉！"1月22日清晨7时，安顺经开区安顺航空配套制造产业园内，室 ...

Group 1 - High-temperature alloys are critical materials in aerospace engines, gas turbines, and nuclear power equipment, directly influencing thrust, efficiency, and lifespan of high-end equipment [2][3] - The high-temperature alloy industry in China is accelerating due to the "Two Aircraft Special Project," the mass production of the C919 aircraft, breakthroughs in gas turbine localization, and the "dual carbon" strategy [2][4] - Nickel-based alloys dominate the market, accounting for 80% of demand, with deformation alloys making up 75% of production by 2024 [3][21] Group 2 - The production of high-temperature alloys in China increased from 19,000 tons in 2017 to 49,000 tons in 2023, with a CAGR of 17.1%, while demand rose from 21,000 tons to 52,000 tons, with a CAGR of 16.8% [4][34] - By 2024, production is expected to reach 57,000 tons, with aerospace (55%) and power generation (20%) as the main demand sectors [4][34] - The annual average demand for high-temperature alloys is projected to exceed 56,500 tons from 2025 to 2030, driven by factors such as the replacement of aircraft engines and the localization of commercial aircraft [4][39] Group 3 - The global high-temperature alloy market is expected to exceed $30 billion by 2025, with China's market projected to reach 120 billion yuan, growing at over 15% annually [5] - Domestic production capacity is expected to exceed 60,000 tons by 2025, but there remains a 30% supply gap for high-end products [5][6] - The domestic localization rate is anticipated to rise from less than 40% in 2020 to about 65% by 2025, supported by policies under the 14th Five-Year Plan [5][6] Group 4 - The industry is characterized by a "technology-driven, strong players" dynamic, with an expected annual compound growth rate of 15% from 2025 to 2027 [6] - Leading companies are achieving breakthroughs in niche markets, with notable revenue growth reported by companies such as Western Superconducting and Steel Research [6][8] - The competitive landscape shows a high concentration in upstream and a diverse midstream, with major players in the upstream segment like Fushun Special Steel [5][6] Group 5 - High-temperature alloys are primarily used in aerospace, accounting for over 50% of total demand, and are critical for the performance of advanced aircraft engines [26][34] - The demand for high-temperature alloys in gas turbines is expected to exceed 151,000 tons from 2025 to 2030, driven by domestic and international power generation needs [40][44] - The military sector is also a significant driver, with domestic naval gas turbines reaching international standards, enhancing the capabilities of the People's Navy [62]

Financial Data and Key Metrics Changes - The company achieved record earnings with adjusted operating income of $153 million, a 31% increase year-over-year compared to $117.2 million in Q1 FY2025 [4][15] - Adjusted operating margin for the SAO segment reached 32%, up from 26.3% a year ago and 30.5% in the previous quarter [5][6] - Earnings per diluted share was $2.43 for the quarter, marking another record for profitability [16] Business Line Data and Key Metrics Changes - SAO segment net sales excluding surcharge were $533.9 million, up 5% year-over-year but down 3% sequentially [17] - PEP segment net sales excluding surcharge were $87.2 million, down 10% sequentially and down 6% year-over-year [19] - Aerospace and defense sales were up 1% sequentially and 11% year-over-year, with engine submarket sales up 14% sequentially [9][88] Market Data and Key Metrics Changes - Aerospace and defense bookings accelerated by 23% over the previous quarter, indicating strengthening market demand [7][30] - Medical market sales were down 20% sequentially and 16% year-over-year, primarily due to volatility in medical distribution [10] - Energy market sales were down 5% sequentially but up 8% year-over-year, driven by increasing demand for power generation [11] Company Strategy and Development Direction - The company is focused on expanding profitability and margins through productivity improvements and pricing actions, particularly in the aerospace and defense sectors [12][39] - The Brownfield expansion project is underway, with construction activities on schedule and on budget, expected to accelerate in the second half of FY2026 [21][22] - The company maintains a balanced capital allocation approach, focusing on growth investments and returning cash to shareholders through dividends and share repurchases [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the high end of the fiscal year 2026 operating income guidance of $660 million to $700 million, driven by increased volume and pricing actions [36][37] - The aerospace market is expected to see significant demand growth, with OEMs ramping up production rates, which will positively impact the company's order intake [30][34] - Management noted that the pricing environment for nickel-based super alloys remains favorable, with expectations for continued price increases due to supply-demand imbalances [26][28] Other Important Information - The company generated $39.2 million in cash from operating activities but had negative adjusted free cash flow of $3.4 million due to capital expenditures [21] - The liquidity position is strong, with $556.9 million available, including $208 million in cash [23] Q&A Session Summary Question: What has happened to jet engine alloy lead times? - Lead times remain extended, with expectations for further increases in orders following positive news from Boeing [48][50] Question: Can you elaborate on the duration of the new LTAs? - The new LTAs range from two to five years, with expectations that contract lengths will remain consistent with current levels [62] Question: How are fastener demand trends tracking? - Fastener sales were down 7% sequentially but up 40% year-over-year, with strong order intake expected for calendar year 2026 [55] Question: Is there line of sight to another quarter of sequential A&D growth? - Continued growth in order intake is anticipated, although specific percentages cannot be guaranteed [80] Question: What is the outlook for the Brownfield expansion project? - Construction is expected to be complete by late FY2027 or early FY2028, with current activities focused on site preparation [90]

Financial Data and Key Metrics Changes - The company reported record earnings with adjusted operating income of $153 million, a 31% increase year-over-year compared to $117.2 million in Q1 FY2025 [4][14] - Adjusted operating margin for the SAO segment reached 32%, up from 26.3% a year ago and 30.5% in the previous quarter [5][16] - Earnings per diluted share was $2.43 for the quarter, marking another record for profitability [15] Business Line Data and Key Metrics Changes - SAO segment net sales excluding surcharge were $533.9 million, up 5% year-over-year but down 3% sequentially [16] - PEP segment net sales excluding surcharge were $87.2 million, down 10% sequentially and down 6% year-over-year [18] - Aerospace and defense sales were up 1% sequentially and 11% year-over-year, with bookings accelerating by 23% over the previous quarter [9][12] Market Data and Key Metrics Changes - The aerospace supply chain is experiencing strengthening demand, particularly in the engine submarket, which saw a 14% sequential increase in sales [9][32] - Medical market sales were down 20% sequentially and 16% year-over-year, primarily due to volatility in medical distribution [10] - Energy market sales were down 5% sequentially but up 8% year-over-year, driven by increasing demand for power generation [11] Company Strategy and Development Direction - The company is focused on expanding profitability and margins through productivity improvements and pricing actions, particularly in the aerospace and defense sectors [5][12] - The Brownfield expansion project is underway, with construction activities on schedule and on budget, expected to accelerate in the second half of FY2026 [20][21] - The company aims to maintain a balanced capital allocation approach, investing in growth while returning cash to shareholders through dividends and share repurchases [22][38] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the high end of the earnings guidance for FY2026, projecting operating income of $660 million to $700 million, a 26% to 33% increase over FY2025 [35][36] - The aerospace market is expected to see significant demand growth, with management noting a positive outlook from customers regarding order intake [30][34] - The company anticipates continued pricing power due to a supply-demand imbalance in nickel-based super alloys [26][39] Other Important Information - The company generated $39.2 million in cash from operating activities but reported negative adjusted free cash flow of $3.4 million due to capital expenditures [20] - Liquidity as of the latest quarter was $556.9 million, with a net debt to EBITDA ratio well below one [23] Q&A Session Summary Question: What has happened with jet engine alloy lead times? - Lead times remain extended, with expectations for further increases in orders following positive news from Boeing [44] Question: Can you elaborate on the duration of the new LTAs? - The five new LTAs range from two to five years, with expectations that contract lengths will remain consistent with current levels [52] Question: How are fastener demand trends tracking? - Fastener sales were down 7% sequentially but up 40% year-over-year, with strong order intake expected for calendar year 2026 [48] Question: Is there line of sight to another quarter of sequential A&D growth? - Continued growth in order intake is expected over the next several quarters [63] Question: What is the outlook for the Brownfield expansion project? - Construction is expected to be complete by late FY2027 or early FY2028, with current activities focused on site preparation [70]

Core Viewpoint - The "Nickel City Innovation Week" in Jinchang City, Gansu Province, highlights the integration of technology and economy, showcasing innovative achievements and fostering collaboration among government, enterprises, academia, and research institutions [1] Group 1: Innovation and Industry Development - Jinchang City has focused on enhancing technological innovation, resulting in a perfect score in two innovation indicators during the Gansu Province business environment assessment in the first half of 2025, ranking first in the province [1] - The production of "hand-teared nickel," a super-thin material used in the core of new energy batteries, demonstrates the city's advancements in the new energy battery industry, with local supply rates for raw materials reaching 77% [2] - Jinchang has established a comprehensive industrial system for new energy batteries, focusing on nickel-cobalt-manganese lithium batteries and lithium iron phosphate batteries [2] Group 2: Support for Enterprises - The city has implemented various support policies, including the establishment of industrial investment funds and risk compensation funds, to empower enterprises in their innovation efforts [2] - Over 95% of major provincial and municipal scientific projects are led by enterprises, indicating strong collaboration between industry and academia [3] - The total number of high-tech enterprises in Jinchang has reached 87, with 61 recognized as provincial-level innovative enterprises [3] Group 3: Collaborative Platforms - The establishment of the Gansu Yuansheng New Dairy Sheep Industry Research Institute exemplifies the collaboration between universities and enterprises to enhance technological innovation [4] - Multiple collaborative bases have been created, including industrial internet security laboratories and joint training bases, to support industry development [4] - Significant technological breakthroughs have been achieved, such as the development of nickel-based high-temperature alloys and domestication of medical heavy ion accelerator materials [5] Group 4: Future Directions - Jinchang City aims to continue implementing innovation-driven development strategies, optimizing the innovation ecosystem, and enhancing innovation capabilities to promote the deep integration of technological and industrial innovation [5]

Company Overview - Chuangcai Deep Learning (Suzhou) Technology Co., Ltd. focuses on "AI + new material solutions" and was established in 2021, comprising experts from materials science, artificial intelligence, and mechanical engineering [3] - The company has developed a high-throughput R&D platform and intelligent computing engine to accelerate the development and application of new materials [3] Recent Financing - The company recently completed several million yuan in Series A financing, led by Heshijia Capital and Chenhui Capital [2] - The funds will be used for new material R&D iteration, high-throughput automated laboratory upgrades, AI model development, and large-scale applications in vertical industry scenarios [2] Product Development - Chuangcai Deep Learning has developed three new materials in just six months, showcasing its rapid innovation capabilities [2] - The company plans to launch its self-developed integrated hardware and software material intelligence platform (DM Agent) at the TCT Shenzhen Exhibition on September 10 [2] Material Offerings - The company offers 3D printing metal powder materials, high-throughput R&D equipment, and high-end metal material R&D services [5] - Notable products include: - Medium and high-strength aluminum alloys with excellent performance and cost-efficiency - Nickel-based high-temperature alloys that prevent cracking during printing and heat treatment - Tool steels with high toughness and excellent thermal conductivity [5] AI-Driven R&D - The company employs an AI-driven approach to accelerate the development of advanced materials in key sectors such as aerospace and mold manufacturing [6] - Utilizing AI for Science's fifth paradigm in materials informatics, the company innovates a "AI + metal materials" R&D model, leveraging material computation, machine learning, and deep neural networks [7] High-Throughput R&D System - Chuangcai Deep Learning has established a comprehensive high-throughput R&D system that collects vast amounts of diverse material data quickly and cost-effectively [9] - The company provides a one-stop service covering product R&D, sample design, metal powder, production processing, quality testing, and performance analysis [9] Investment Insights - Heshijia Capital recognizes the company's ability to integrate AI with digital manufacturing, viewing the DM Agent platform as a potential game-changer in low-cost material research and application innovation [9] - Chenhui Capital sees significant potential in the company's disruptive "AI + new materials" model, which transforms traditional trial-and-error R&D into predictive R&D, addressing long development cycles and high costs [10]