Hexcel Corporation Announces First Quarter 2025 Results and Revises 2025 Guidance
Hexcel Corporation, a leading global innovator in advanced composite materials, released its first-quarter results for 2025, reporting net sales of $457 million and adjusted diluted earnings per share (EPS) of $0.37. Despite facing challenges in the commercial aerospace market, Hexcel’s diversified business and innovative technology continue to position it for long-term success, with growth expected to be driven by the demand for lightweight composite solutions.
Overview of Q1 2025 Results
Hexcel’s first-quarter results reflected a mix of strong performances in some sectors, while others, particularly in commercial aerospace, faced ongoing challenges. The company’s net sales of $457 million represent a slight decrease compared to the previous quarter’s $472.3 million, driven by slower growth in specific segments.
Tom Gentile, Chairman, CEO, and President of Hexcel, provided an outlook on the company’s performance, noting that while Hexcel’s underlying value proposition remains robust, the commercial aerospace market continues to be impacted by production delays. These delays, particularly in the Airbus A350 program, have led to a revision in the company’s 2025 growth forecast. “The demand for our innovative lightweight composites remains strong, and our ability to generate cyclical and secular sales growth over time is intact,” Gentile said. However, due to the continued disruptions in the aerospace sector, Hexcel has lowered its 2025 sales and earnings projections.
Strategic Focus Amid Challenges
Despite the near-term challenges in commercial aerospace, Hexcel is maintaining its focus on key operational fundamentals. The company has been actively managing costs, right-sizing its workforce to meet current demand levels, and remaining disciplined in its approach to headcount management. As of March 31, 2025, Hexcel’s workforce was about 100 individuals lower than at the end of 2024, reflecting a more cautious approach to staffing levels in light of the current production delays faced by its customers.
“While we face short-term headwinds, we continue to prioritize strengthening Hexcel’s long-term value proposition,” Gentile continued. “This includes enhancing our customer relationships, improving operational efficiencies, and driving innovation across all our markets. The strength of our balance sheet and our consistent cash generation capabilities provide a solid foundation as we navigate these near-term challenges.”
As part of its ongoing strategic initiatives, Hexcel repurchased $50 million of its common stock during the first quarter of 2025, reflecting its confidence in the company’s long-term prospects. Furthermore, the company successfully refinanced $300 million in fixed-rate debt, providing additional financial flexibility.
Market Performance Breakdown
Hexcel operates across a broad range of markets, and in the first quarter of 2025, sales performance varied across different sectors. For the first time, Hexcel has broken down its sales into two key categories: Commercial Aerospace and Defense, Space & Other. Previously, Hexcel reported its sales under broader categories, but this new breakdown provides a clearer view of the company’s performance in these two critical segments.
Commercial Aerospace
Commercial aerospace remains the largest segment for Hexcel, accounting for approximately 61% of year-to-date sales. However, sales in this category for the first quarter of 2025 were $280.1 million, representing a decline of 6.4% (6.3% in constant currency) compared to the first quarter of 2024. This drop in sales was primarily due to delays in increasing production rates at Boeing for the 787 and MAX aircraft, which had a significant impact on Hexcel’s composite material sales.
Additionally, while sales of the Airbus A350 composites were nominally lower compared to the previous year, Hexcel saw growth in other commercial aerospace sectors. The company reported a 7.1% increase in sales to other commercial aerospace customers, driven by strong international demand for Hexcel’s products.
Defense, Space & Other
On a more positive note, the Defense, Space & Other segment, which now combines the previously separate Space & Defense and Industrial markets, saw a 2.0% increase in sales year-over-year, reaching $176.4 million. Sales in the defense and space markets grew by 2.9% (3.3% in constant currency), driven by strong demand for composite materials used in programs such as the CH-53K, Black Hawk, and various space and international fighter programs. However, the industrial market, which includes sectors like automotive, wind, and recreation, experienced mixed results.
Sales in the industrial subcategory decreased by 1.8% (0.3% increase in constant currency). Within this, the automotive sector saw year-over-year growth, while the wind energy sector continued to face challenges. Furthermore, the recreation market, which includes products used in outdoor and leisure activities, remained soft during the quarter.
Financial Performance and Operational Metrics
Hexcel’s operational performance in the first quarter of 2025 reflected a decline in gross margin, with a decrease to 22.4% compared to 25.0% in the same period of 2024. This drop was primarily the result of lower sales leverage, as the company worked to manage its costs in a more challenging market environment.
The company also reported a decline in adjusted operating income, which decreased to $45.3 million, or 9.9% of sales, compared to $54.1 million, or 11.5% of sales in the first quarter of 2024. This decline reflects the impact of lower sales in key markets and the need to continue managing costs effectively in light of lower-than-expected demand from commercial aerospace customers.
Despite these challenges, Hexcel’s selling, general, and administrative (SG&A) expenses as a percentage of sales decreased to 9.5%, compared to 10.4% in the first quarter of 2024. Research and technology (R&T) expenses also improved, falling from 3.2% of sales in the first quarter of 2024 to 3.0% in 2025.
Cash Flow and Capital Allocation
Hexcel’s cash flow performance in the first quarter of 2025 reflected the company’s ability to manage its capital efficiently despite the operational challenges. The company reported net cash used for operating activities of $28.5 million, compared to $7.0 million in the first quarter of 2024. Working capital was a significant cash use, amounting to $97.7 million, compared to $84.5 million in the same period last year.
Capital expenditures for the first quarter of 2025 totaled $26.1 million, down from $28.7 million in the prior year. Despite these expenses, Hexcel continued to generate a strong cash position, enabling it to repurchase $50.4 million of its shares during the quarter. As of March 31, 2025, the remaining authorization under the company’s share repurchase program was approximately $184.5 million.
Dividends and 2025 Guidance
The Board of Directors declared a quarterly dividend of $0.17 per share, payable to stockholders of record as of May 2, 2025. The dividend payment will be made on May 9, 2025, reaffirming Hexcel’s commitment to returning value to its shareholders.
Looking ahead, Hexcel has revised its guidance for the full year 2025. The company now expects sales to range between $1.88 billion and $1.95 billion, a reduction from the previous guidance of $1.95 billion to $2.05 billion. Adjusted diluted EPS is expected to be between $1.85 and $2.05, down from the previous forecast of $2.05 to $2.25. Hexcel also revised its free cash flow guidance to approximately $190 million, down from an earlier forecast of more than $220 million. Capital expenditures are now expected to be less than $90 million, revised from less than $100 million.
Despite these adjustments, Hexcel’s long-term outlook remains strong, driven by its competitive advantages in lightweight composites and its strategic investments in key sectors such as defense and aerospace. The company’s effective tax rate for 2025 is expected to remain at 21%, unchanged from prior projections.
Hexcel Corporation’s first-quarter 2025 results reflect both the challenges and opportunities facing the company as it navigates the current market environment. While facing delays in commercial aircraft production and other market pressures, Hexcel’s diversified portfolio and strong focus on innovation position it well for long-term growth. By managing costs, strategically investing in key markets, and maintaining a robust cash flow, Hexcel remains confident in its ability to continue delivering value to shareholders while addressing short-term challenges in the aerospace sector.
