Woodward(US:WWD)2021-11-19 02:33Financial Data and Key Metrics Changes - Net sales for Q4 2021 were $570 million, a 7% increase from $531 million in Q4 2020. For the full year, net sales were $2.25 billion, down from $2.5 billion in the prior year [9][10] - Net earnings for Q4 2021 were $50 million ($0.76 per share), compared to $57 million ($0.89 per share) in Q4 2020. Adjusted net earnings for Q4 2021 were $54 million ($0.82 per share), up from $48 million ($0.75 per share) in the prior year [9][10] - Free cash flow for 2021 was $427 million, compared to $302 million in 2020, reflecting effective working capital management [10][31] Business Line Data and Key Metrics Changes - Aerospace segment sales for Q4 2021 were $371 million, a 12% increase from the prior year, driven by a 67% increase in commercial OEM sales and a 23% increase in aftermarket sales. However, defense OEM sales decreased by 6% and defense aftermarket sales decreased by 20% [21][22] - Industrial segment sales for Q4 2021 were $193 million, a slight decrease of 1% from $195 million in the prior year, primarily due to lower industrial gas turbine sales and weakness in natural gas engines in China [24][25] Market Data and Key Metrics Changes - The commercial aerospace market is recovering, with domestic travel nearing pre-COVID levels and international travel improving, although still lagging [14] - In the industrial market, demand for gas turbines is increasing, particularly in Asia, and there is strong demand for backup power for data centers [15] - The oil and gas sector has seen prices return to pre-2020 levels, leading to increased capital expenditures [17] Company Strategy and Development Direction - The company expects continued recovery in 2022, with a focus on capitalizing on market opportunities despite ongoing uncertainties related to COVID-19 and supply chain disruptions [13][33] - The aerospace outlook anticipates further improvements in build rates and recovery in flight traffic, while industrial growth is expected to be driven by higher demand for power generation equipment and increased ship utilization [34][35] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery across markets, with expectations for improved profitability in both aerospace and industrial segments in 2022 [19][33] - The company highlighted the importance of managing supply chain disruptions and indicated that improvements are anticipated in the second half of fiscal 2022 [52][116] Other Important Information - The effective tax rate for fiscal 2021 was 15.1%, with an expected increase to approximately 21% for the upcoming year [30][36] - The company returned $82 million to shareholders in fiscal 2021 through dividends and share repurchases, with $441 million remaining available under the share repurchase program [32] Q&A Session Summary Question: Guidance implications for industrial segment growth - Management indicated confidence in low double-digit growth due to recovery in turbo machinery and marine markets, with discussions of volume increases with customers [42] Question: Supply chain issues and revenue expectations - Management believes the worst of supply chain issues is behind them, with expectations for recovery in the second half of fiscal 2022 [50] Question: Decline in guided weapons sales - Management anticipates a decline in guided weapons sales, particularly JDAM, but expects some volume from foreign military sales [58][104] Question: Pricing dynamics in the aftermarket - Management confirmed that they are still able to achieve reasonable price increases in the aftermarket, with good pricing positions [109] Question: Working capital expectations - Management expects working capital needs to increase primarily in receivables as sales grow, while inventory management remains strong [92]