Hexcel Corporation (NYSE:HXL)

As for the future, Mr. Berges said, “Clearly our previous planning assumption of reducing our cost structure to handle a 5% year over year volume decline is no longer appropriate We expect the third quarter to be the low point of the year as reduced commercial aerospace and wind demand combine with the normal summer seasonal slowdown. Therefore, we are aggressively reducing plant schedules to better match near term demand and improve cash flows, and we are now targeting over $40 million of free cash flow for the year. While we expect further weakness in regional and business aircraft sales, we are hopeful that thawing in credit markets, renewable energy policy and new aircraft program progress may begin to offset market softness in 2010.”

Source: Business Wire (July 27, 2009)

As for the future, Mr. Berges said, “Our previous planning assumption for flat to modest growth seems too optimistic and we are redoubling our efforts to manage costs. Based on the performance demonstrated in the first quarter, we now believe we can still achieve a modest adjusted EPS year over year gain if our revenues for the year decline 5% on a constant currency basis. Unfortunately, our second half sales trend is still too difficult to project due to lack of 2010 visibility from our major customers. However, a lull in our five year average sales growth rate of 12% provides us the opportunity to concentrate our resources on factory efficiencies and yields to both reduce cost and capital requirements going forward.”

Source: Business Wire (April 27, 2009)

Guidance Report:(Non-China)

The volatile nature of the global economy and potential effects on our customers has added a good deal of uncertainty to our outlook. We hope to provide more clarity as the year progresses, but with an assumption of little or no help from revenue growth on a constant currency basis, we target a modest improvement in adjusted EPS to continue our seven year record of adjusted EPS improvement.

• At this stage our two largest customers Airbus and Boeing have made only minor adjustments to their 2009 outlook. They have been less definitive on expectations for 2010, which will be important to our 2009 second half revenue outlook.

•  Due to delays, we do not expect a significant contribution from new aircraft programs in 2009, but are encouraged by the apparent demand shift to larger, more composite-intensive aircraft and the favorable impact that will likely result beyond 2009.

• Business and regional jet build rate softening will likely impact our “other aerospace” sub-market which represents 28% of our 2008 commercial aerospace market and has grown dramatically in recent years.

• Space and Defense growth in 2008 was well ahead of the historical 8% per year pace, and while we still expect growth, we expect it to return to single digits.

•  We are already seeing an impact on recreation, auto, and general industrial sub-markets, though these now represent less than 15% of our sales. Sales of materials for the American Centrifuge Project should help offset any further decline in 2009.

•  While we have some concerns about the end users’ availability of funding for future wind projects, we expect another double digit growth year from wind energy as new global capacity comes on line and U.S. policy warms to renewable energy sources.