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Hexcel announced strong growth and expects this to continue throughout 2006, particularly in the commercial aerospace and wind energy sectors.
The company announced sales of $307.0 million, up 9% year-over-year in constant currency (actual sales up 6%,) despite a 19% decline in ballistics.
Commercial aerospace sales grew by 19.1% in constant currency, benefiting from scheduled increases in aircraft production in 2006 at Boeing and Airbus. The Company saw across the board increases in its sales of materials to the OEM equipment manufacturers and their subcontractors, including a pickup in shipments of materials associated with the Airbus A380 program. R&T expenses were up 31% for the quarter compared to the same period in 2005 as Hexcel continues its intense effort to support product development and selection processes related to the Boeing 787 and Airbus A350.
Wind energy revenues grew 17.6% in constant currency as the company’s customers continued to serve the worldwide growth in installations of wind turbines. As a result, revenues from these applications exceeded those from ballistics applications for the first time.
Ballistics revenues declined 18.8% compared to the first quarter, 2005 and 15.2% compared to the fourth quarter, 2005 as demand for soft body armour continued to settle back from the surge levels they saw in 2004. The company continues to expect lower ballistics revenue in 2006 as end customer requirements transition to sustaining levels.
Space & Defence sales for the quarter increased by 8.5% in constant currency compared to the first quarter, 2005. Demand from both U.S. and European helicopter programs remains strong with funded increases across a broad range of military programs, offering the company the opportunity of continued growth from this segment.
“”As expected, we saw a return to a strong growth rate in the Commercial Aerospace market, driven by build rate increases at Boeing and Airbus as well as a pick up in revenues to the A380 program. Our top line growth was somewhat masked by the year-on-year strengthening of the U.S. dollar as well as the continued slow down in ballistics demand, however, we are pleased with the pace of both Commercial Aerospace and Wind Energy markets”” said Chairman, President and CEO, Mr. David E. Berges.
“”In constant currency, sales grew to $316.0 million for the quarter, up about 9%. Once again we delivered strong incremental gross margins of 32%. Business consolidation and restructuring expenses of $3.0 million were primarily associated with the planned closure of our Washington, Georgia facility announced in January. Following the adoption of FAS 123(R), non-cash stock based compensation expense was $3.4 million. The transaction costs of $1.2 million in the quarter marked the completion of the last secondary offering by our former private equity investors. Excluding the impacts of these three items, incremental operating margins were 22%. As has been the historic trend, the Company used cash in the first quarter due to the timing of annual benefit payments and seasonal working capital build. In particular, sales strengthened as the quarter progressed, pushing up the quarter end accounts receivable balance. Despite increased capital spending, we still expect to generate cash to modestly repay debt for the year of 2006.””
Hexcel expects sales growth for the full year of 2006 in constant currency in the “”teens”” from both commercial aerospace and wind energy applications driven by increased aircraft production and wind turbine installations. Assuming reduced demand from ballistics applications compared to 2005, overall constant currency sales growth is expected to be about 10% for the year.
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