Yeah, get started. It's 8:01 A.M. So I don't think you need much of an introduction. John Plant, CEO of Howmet. Thank you for taking time out to be here with us. So my hope here is just a little conversation. Maybe just start it off with maybe a big picture question, one of my favorites. I mean, how's business? Business for Howmet, I think, has been pretty good. There's a lot of noise in the industry. There's a lot of news articles, in particular about aircraft manufacturers. But if you can tune out the noise for a moment, which is quite difficult to do, then as it is at the moment, the fundamentals appear to be pretty strong. The backlog is enormous, probably the highest it's ever been. Demand for us as a part supplier has moved to the right because aircraft have not been produced in the commercial aerospace arena. And that demand that we've seen, we've converted pretty well into, I think, a satisfactory profit and cash stream. So, how do you, I mean, I think maybe the elephant in the room is how do you think about the impact that all the news flow we hear on Boeing is going to have on aircraft production rates, to a far lesser extent, aircraft production rates at Boeing? I mean, do you think there's a chance that we could see rates come in well below where we thought they would be this upcoming year? Well, it always depends on where you thought they were going to come in at to know where they're going to be below. I think you'll recognize from the guidance that we gave that we were fairly cautious on production assumptions around Boeing and indeed had taken those down from even what we talked about back in November when we gave our first sighting of what 2024 would look like and commercial aerospace as part of that. And then probably hidden away in our Q&A responses was a question about working capital, when I also commented that we probably plan to be a little bit working capital heavy in the event that we were cut back by Boeing because of lack of production. So we'll evaluate once again when we get around to issuing our first quarter results where we think production will land and take it from there. But we were fairly cautious in the way we set up 2024. And also maybe we were pretty cautious a year ago with the way we set up 2023. And yet, despite that caution, ended up with a good outcome for the company. Gotcha. Gotcha. Maybe a bigger picture question on, as a supplier, how much flexibility do you have around these master production schedules, particularly Boeing's, because it seems to be dynamic almost on a daily basis at this point? There are certain parts of our business that I will say are completely agnostic as to what we produce. So much of the capital equipment does not know whether it's producing a part for Boeing or Airbus or indeed Lockheed or Northrop or any of the aircraft manufacturers, be it defense nor commercial. And of course, neither does our labor. It works on manufacturing of parts. And so all of that is, let's say, fungible and movable. The areas where it gets more difficult when you start thinking about capacity and utilization is that around specific tooling, which of course tends to be dedicated to either an airframe manufacturer or an engine. And even to the point where if you take a LEAP engine, you can't take the tooling from a LEAP-1A and apply it to a LEAP-1B because they're different. So it depends what level of specificity you want to get to as to, let's say, how transportable those capacities are inside the company. Gotcha. Gotcha. Price has been a differentiator for Howmet. In 2023, I think you guys mentioned you took $105 million in price, the biggest on record. You said you expected to see a similar level in 2024. What's driving that? Is it sustainable? Are you on track for that? Well, I must have got carried away with myself and made a bold prediction. It's going to be the same. What we've tried to do is to have a very consistent methodology in approaching price. So early on, I tried to make an assessment of Howmet, what technologies we had, where we fit it into, I'll say, the picture in, let's say, broader aerospace. And really thought to myself, I did not really see or understood why this should be a price deflationary industry or a part of it should not be. And then we tried putting a series of reviews and processes to make sure that we treated the top line of the company with the same rigor and analysis as we do all of the other parts of the company. So I always think there's not much point in spending all your time looking at labor productivity or material usage or scrap and yields if you're not paying attention to your top line. And so I've always believed that my first responsibility as CEO is to pay attention to the top line of the company. And I do that, first of all, looking at our growth rate, our relative growth rate compared to the industry, our market shares, and then our commercial stance. And I do think that paying attention to price is really important because, I'll say, one minute's inattention on price can take years to correct in the manufacturing environment. And so we highlighted for ourselves the frequency of long-term agreement renewal. And of course, for us, most of our business is done under long-term agreements and then put in place a process to review them with some pretty rigorous analysis. So looking at not only the application of where those parts go but also the volumes and varieties that they have as they change over time because they do. We know between whether it's an engine program or a fastener program, it's just starting or whether it's mid-lifecycle or end-of-lifecycle or about to go into past model. And so I think all of that analysis helps us come to the right view around the approach to pricing. And I think it's pretty independent of whether we're in conditions where there's scarcity of products. So today, maybe there's been relative scarcity because of the demand profile. Or have you taken some of the COVID years where there was vastly excess capacity? And therefore, the question was, could we possibly even consider raising price during those years? And the answer was, yes. Yes, we could. And so we had a consistent approach. And early on, it was written by certain analysts that all we were doing was correcting some sins of the past, which no matter what I said, didn't appear to have traction in terms of, I'll say, people believing it. But I think now you can see we've had this consistent approach. And there's some confidence, I think, that 2024 might be as good or in the zip code plus or minus as 2023. It's only forecast. And who knows? It's only the forecast is like what the future is. Who knows? Yeah. Yeah. Yeah. That makes sense. When we think about the spares opportunity in the airfoils business, given GTF and LEAP, time on wing, and more just CFM56s flying around because Boeing can't deliver airplanes, it would seem like it's a very robust opportunity for your airfoils business. Yeah. There's no doubt that our spares business has been growing. And clearly, from the times of COVID where we took a major hit because when aircraft aren't flying, there's not a lot of demand for spares. But then you have to really separate out the different strands within the company. So that which pertained to defense continued to be strong and has continued to grow and has probably seen a 50% increase in demand between 2019 and now in our defense and IGT segment. We just lump them together for opacity reasons, has that. So we're not trying to be too open about it. And then in the commercial aerospace market, it took us a long time to claw back from the COVID years. And last year, let's say, we reached the same level as 2019, which was like the reference point that we've used, albeit the exit rate was at a higher level. And therefore, it does all go well for the future. Of course, rather than recapping the past, the most important thing is, so what does the future hold? And there are two or three themes going on which I think are important to understand. The first one is, what's the trajectory of, let's call it, the historical past, so CFM56, as you say, whereas we know that those shop visits have not yet peaked. They will peak and possibly in 2025 or probably more likely 2026, I feel, that that's going to see a peak and then a consistent demand but diminishing over the next 10-15 years of CFM56. Meanwhile, of course, the demand for spares for the GTF programs and the LEAP programs is beginning to increase. And then you've got to separate out within that, so what's a normal level of demand and what might that look like? And then what's the higher level of demand that will be produced because those engines are working at elevated temperatures, elevated pressures? And therefore, inherently, when you put that amount of stress inside any engine of any form, whether it's a car engine or an aircraft engine, the answer is the parts don't last as long. And it's all in the quest to achieve a higher level of fuel efficiency or lower carbon footprint as you atomize the jet fuel. And so inevitably, the engineered duty cycle of these parts is going to be less. So whatever numbers of cycles you want to use for the benchmark for a CFM56 now is that inherently, my belief is that the shop visits will be more frequent on today's more modern engines. So you have a structural change in the aftermarket which will go on for the next 10, 20, 30 years. Who knows how long? But that's only one part of it because then separate to all of that is the fact that these engines are still fairly early in their lifecycle. And there are robustness issues which, again, have been talked about and reported in the press whereby compared to the secular growth of spares because of the nature of the performance and duty cycle of those engines, there is, let's say, these robustness issues. And that's been referred to as time on wing. Then for time on wing, that is, we know that they are lower and exceptionally lower compared to the predecessor engines. Within that analysis, they are very much lower in countries where, I'll say, the aircraft are being operated where there's high pollution, high amount of particulates in the air. They've been causing particular difficulties, whether it's been the dust and particulates blocking the holes in the combustor and therefore making the engines run hotter and therefore the turbine blades receiving those, I'll say, those elevated temperatures way above the engineered level of temperature performance, which of course causes degradation. Then effectively, the particulates that do get through, they are shot blasting the coatings on those turbine blades. So you've got the double effect of elevated temperature combined with a very corrosive environment which is, again, causing the required replacement of those much earlier. So there are engineering programs which were originally maybe more aimed at further developments of fuel efficiency which are now probably more aimed at robustness. And you're familiar with those coming through. So I deem the time on wing more like a two, three, four-year bubble of replacement which, I'll say, comes and goes. But the backlog fundamentally is as you work through that elevated short-term, I'll say, demand increase, you've got the longer-term increase just because with more and more engines that go into the fleets is that with the reduced times between air and motor shop visits, that's going to increase. So I do see, I'll say, reinforcing benefits that we will see in terms of demand for spares. And therefore, I think in good thoughts for us in that department. Now the question is, how much is the good thoughts? Well, we haven't categorized it yet. It's tied up in, as I said, you start off with when does CFM56 peak? How hard are the existing fleet of aircraft run? And what does that give us compared to the, I'll say, the time on wing issue and then the more structural thing? And then trying to project out, so when do we think the peak visits for LEAP or GTF will occur and trying to pick out those years? And excuse me, while I've had discussions with some of the engine manufacturers in terms of their own planning and having to build out capacity for the MRO shops that they want to use to serve the industry, I mean, that's something which I have not talked about yet in terms of what years do we think that will peak but into the future? So we just see for many years that demand growing. So maybe a natural question, if you can answer, is that secular shift from the prior generation to the new generation when you think about the time between shop visits or because investors are always thinking, how can I model this? Yes. It's difficult. How should one think about that? You just stick a pin in it and have a go. That's what we have to do. Well, you know it's good. The only question is how good? Yeah. Yeah. Yeah. Yeah. Interesting. Yeah. One day when I'm a bit smarter, I'll try to do it myself and tell you. Or maybe I've already done it myself. I just won't tell you at the moment. Yeah. Yeah. That's fine. I mean, I guess that's what everybody's going to be wondering. Yes. And again, it's all wrapped up in how effective are the fixes? Can you do retrofits of the existing engines with the new? Do you have to have match sets of parts across the engine or even across a turbine? Not necessarily that you'll replace every single blade on a shop visit. And therefore, is there a demand for, say, the historical parts which will go on longer? There's so many factors to be considered. It's not easy to necessarily fix it just yet. Yeah. It seems like a lot of variables. On the Q4 call, you mentioned about expanding capacity in airfoils with committed share from an engine OEM customer. Is there anything else you can say about that? Any other color you can put around that? Not really except that we think it's really good. I think that anytime you have the opportunity of raising your organic growth rate is really the best type of growth at all. It's far clearer and I think likely produced better returns than considering M&A risk. And therefore, I've been quite happy that we would kick up our capital requirements. I mean, I do recognize that there will be considerations from, let's call it, more fast money where they say, well, let's sell on the news because the free cash flow might be diminished for a period, although I haven't really laid it all out exactly what we think we're going to do. And then I'll come back in at a time when that capacity comes on stream. I think that's fool's gold in my view, trying to chase that new cycle for us because of all the things we just talked about on the spare side. But at the same time, I do think that when you can deploy capital with making more of the same, which it doesn't get better than that, more of the same, something so you haven't got to go down new learning curves. You really can crank the handle on the manufacturing side. That's the best type of capital. So you know what it is. You're going to make more. It enables you to continue to achieve the goal of being in growing above market rate. It enables you to take share and own, by the way, the returns in our engine business are truly good. You can see the margin returns. It's more difficult to get out what's the return on capital, but it's superior to the company average, which, when we look at it, we strip goodwill out because we can do nothing with it and say we know we're earning in the 30s as a company. And clearly, with the engine being one of our better performing margin, parts of it is even better than that. So where else do you get the opportunity to deploy capital with that sort of returns? Maybe as a follow-up to that, can you speak a little bit to the competitive environment in airfoils? What's happened there? I mean, kind of it seemed like we had one world pre-COVID and the world's changed post-COVID, the competitive environment. I don't know if it's anything to do with COVID. I think it's more to do with the technology change which has been going on in engines and the degree of technological change which you've seen to try to make these engines perform, these, I'll say, improved fuel efficiencies and the complexity that's there. So maybe when you look at a turbine blade, you think, well, that's pretty straightforward and simple. It's just a lump of metal, isn't it? Whereas my view is it really truly is a thing of beauty in that the majority of what makes it very special is things that you can't see. It's the shaping and quantum of the airflow passages with inside it where now it's not just a matter of air flowing through it. We actually accelerate the airflow at certain points and decelerate it as it goes through those turbine blades. That enables us to achieve temperature performance which I think are unique. It's also now moving to the arena where we're also explaining the benefits of shaping the exit paths of airflow so you can hold those molecules on the face of the blade. To do that, you can't really use existing drilling techniques which are just a drill is a round hole. There are far better ways of shaping airflow than just round holes and trying to put those exit orifices on shapes that you could never possibly get a machine in to drill. So that's the technology development which is going on. I think that we're at the forefront of that. Enables us to achieve things that otherwise couldn't be done. I think, as you know, we're unique, for example, in providing the turbine blades to the F-35 engine which operates, say, at 1,000 degrees higher at a nominal temperature above the normal commercial, even though, as I try to say, today's commercial aero engines are actually operating much higher than their design specification because of the issues we've just talked about. Got it. Got it. Yeah. If those of you haven't seen it, we got to tour the Whitehall facility where Howmet does a lot of the airfoil stuff. It's a pretty awesome tour. Once a decade, Ron, we allow people in. Yeah. It was a pretty remarkable tour. The other thing is, as we tried to show you, that's what we were, let's say, what production looked like a decade ago. This is what it looks like now. When we put this additional capacity in, we're taking it to yet another level beyond that which you saw in September. We'll wait 10 more years to see that one, right? Well, we might make concession for you. How's that? All right. All right. That's fair enough. Fasteners margins recovered during the course of 2023, but it seems like the fasteners business still isn't to where it was pre-pandemic. When do you expect it to get there? I've never said, first of all, it'll get there, wherever there is. Okay. Fair enough. Because I rarely make clear and unequivocal projections about the future because it assumes a level of prescience I just don't have. Or maybe it's another way of saying, I just don't feel like putting my head in that noose. Future, remind me two years on, by the way, you didn't quite achieve that. So what I do think is we in Howmet had, let's say, suffered and it's suffering, I guess, for ourselves. We had the mix effect initially during the COVID years where we'd had cessation of almost totally wide body build. In fact, when the 787 was closed down for production as it was, even though it's normally one a month with the inventory they got, we weren't producing. Therefore, when we supply metallic fasteners, they have a different value proposition to a metallic-based fastener for a narrow body because composites produce a requirement for a lot more sophisticated products which we're able to provide for the airframe manufacturers to provide the, I'll say, electrical paths through the fuselage. And so that bad mix combined then with I didn't feel as though we were hitting our stride in terms of neither manufacturing efficiency nor being on top of things necessarily as much as we should commercially. And that also included in pricing. So we recognize that certain things are market-based which we can do nothing about. I'm going to sort of call that in the mixed bucket. And then there are things we can address which are the manufacturing operations and also our stance relative to recovery of inflation or whether it's pure pricing, etc. We made leadership changes, you know. I feel as though that's been a very positive thing for us as I see additional cutting edge brought to the development and pushing on those two elements of what is in our control. Then we also, as everybody needs in life, you need to get a little bit lucky. Of course, now we're seeing the reemergence of wide body build. 787 has come back from nothing to, let's call it, rate 5% at the end of last year for the 787. Maybe if Boeing are right, maybe it'll get to 10 in two or three years' time. The A350, which again had recovered to rate 5, is probably heading to rate 6. They're thinking good thoughts about rate 9 in the next couple of years. So it does seem as though there will be recovery of the wide body market, the use of composites, the additional value that's produced. And therefore, with a relatively outsized growth compared to narrow body, depending on how many narrow bodies actually produced, I think that's a positive mix effect for us. So I think we get a market tailwind plus our own, I'll say, fixing ourselves. So even though, let's say, 20% EBITDA margins aren't shabby, I didn't think they were appropriate. And therefore, we need to do better. And I think those three things together have begun to see the production of better margin profile for us. And we've seen margins climb probably 300 basis points during the course of, I'll say, the end of 2022 through 2023. And I'm hopefully good things happen this year. I guess we'll see when we. Yeah. Very well. Yeah. Absolutely. Sure. Our results. Maybe. I'm not committed that we'll achieve whatever number you've got for 2019 as a reference point. Gotcha. All right. Fair enough. Yeah. I don't see 13 or 14 787s in our future by 2025. Yeah. I don't think Boeing are talking that. Yeah. I don't think they could do it even if they were. That's a different matter. I have no comment on that. Yeah. Turning to the structurals business, are there any updates you can offer with regard to the Lockheed Martin dispute on titanium revert? Well, it's not particularly widely publicized, but it is in the public domain because the judge overseeing the case, which was the one that we went through at the end of last year, issued a notice last Friday. And that notice said something to the effect that the parties involved, that's Lockheed and Howmet, have now agreed through mediation. The mediator, which is also a judge, had informed the main judge who issued the notice last Friday that the matter is now settled. And And we're in the process of papering it and signing the final legal agreements which are due by March 29th. And because of that settlement is that the court hearing which was scheduled for July is now cancelled. So assuming we both stick to the heads of agreement that we have agreed, then that's done. And that's, say, what was done in the public domain. What isn't is any details around it. But the fact of settlement is. Can you say are you happy with the settlement? Well, I assume that, as maybe in any negotiation, there's always a degree of happiness for both parties. There's also a degree of unhappiness for both parties. Providing those are in equal measure on both sides, then everybody's okay. How's that? Fair enough. Yeah. Fair enough. That's how it works. Yeah. I mean, in life, nobody ever gets what they totally want, do they? Yeah. No. Not usually. Occasionally. Okay. Life must be better in BMA than it is in Howmet, then. No. I'm not saying that about BMA, but anyway. So it seems like in recent quarters, you've maybe de-emphasized the VSMPO opportunity. Or maybe I'm interpreting that wrong. Can you speak to that a bit? Is it? Well, the answer is, in the shortest form, my answer would be yes. But I don't think that's a satisfactory response because I think I need to amplify so to make sure it's put into context. First of all, that is a strand of revenue for the company to produce more titanium. I did feel it was getting over-emphasized because I do see other things growing actually at a faster rate than that and therefore wasn't appropriate. I'd also kept re-emphasizing that I'm fundamentally unwilling to add capacity to produce that strand of revenue as a result from the issues around, let's say, sanctions on VSMPO because of the time that it would take to put capacity in the ground and when it would actually produce. These are very long-run items for titanium production. And while I would consider minor bottleneck-breaking capacity that could earn a good return in the very short term, I'm fundamentally unwilling to put in large-capital assets which are then subject to fundamental geopolitical uncertainty. And the best way I can categorize that would be, I mean, who knows, by November of this year, we might be friends with Russia again. I don't know that. But you read enough in the press that certain parts of the political spectrum in the U.S. appears to be more favorable towards Russia than others historically. And therefore, what impact would that have? And because I don't know, I don't see why I should risk shareholder money to put capacity in for that. And so that, to me, is a fundamental unwillingness to invest. And then again, it doesn't stop the questions about how much should we take. But when I look at all the options we have in terms of deployment of capital, and I think a dollar of fixed capital and a dollar of working capital are exactly the same in terms of taking business on at the margin. And I know you can say, well, working capital can come in if volume drops. But we're not planning on that. We're planning on continuing to drive the company above market rate levels. And so with the very long, I will say, supply chain and then the time to produce from start to finish, let's say, for a titanium plate, it's extremely working capital intensive. And I've felt that we've got better options inside the company to deploy capital than that. And so there are I don't want to chase something which I don't feel I should. I want to chase something sufficient to, let's say, keep filling up a little bit of our capacity steadily at the right pricing level, not chasing it and certainly not putting in high levels of new fresh fixed capital to put fixed capital and then a huge amount of working capital on something which I don't think can ever be as good as, let's say, investing, for example, in our engine business because margins, even at the incremental level, are not as good. So I think it's really important. One of my roles is to be clearly focused on how we allocate capital in the company. Not all mouths are equal in terms of being willing to feed them. So titanium is not at the top of my list. It doesn't mean to say I'm not willing to take on business. It's just how much, where, and who with. I'd like to put ourselves in the position of choice of which customer am I willing to consider, not just we'll sell it to anybody. I want to sell it to people I think are going to win themselves. Yeah. That makes a ton of sense. You mentioned that F-35 is 35%-40% of defense revenues. And I think you mentioned recently that you see that end-market defense growing mid-single digit. Do you worry about the it seems like, at least in the last budget request, F-35 numbers got cut back. There's been some of the issues with the Tech Refresh 3. That said, however, now F-35 is at full-rate production. It got awarded that. What impact could that have on the defense business? And then I guess the flip of this is there is things like the XA100 and the XA101 and NGAD and F/A-XX I think you alluded to before. Can that offset any of the softness you might see on F-35? First of all, the current, I'll say, budget constraints appears that it will cut back if it's carried through. If it's carried through, which is not by any means certain by the time it's finally finished coming out of, I'll say, Congress and, let's say, agreement, then production might be cut back or requirements for the U.S. Air Force. But when you look at the demand for the F-35 globally and all of the, I'll say, order intake, which seems to have been accelerating - and maybe it's been accelerating because of the invasion of Ukraine - is that it's been surprising to the upside just how many air forces have been ordering the F-35. And if I roll the clock back four years, I was thinking the F-35 would peak at around 2025 and then decline. And now, because of those foreign country orders, I just see the rate of production requirement at Lockheed continuing through the end of the decade. And so it's fundamentally changed my assumptions around fundamental F-35 demand. Within that, you get the normal what I call anecdotal noise. And as a businessman, I try to tune out anecdotal noise, which is, so today, they can't deliver those aircraft to the Department of Defense because the software isn't ready for those upgrades. And so maybe if it's just a matter of flashing a bit of software in as a way it's ready, they can deliver them fairly quickly if they've been produced properly in the first place. So the question then becomes, does Lockheed continue to build at rate? And have they got space to store them? Because obviously, they have to be stored in a protected area. Providing they've got parking space, then life's good. My thought is that Lockheed will need to continue to produce at rate because to take rate down and collapse it and then expect it's going to come back up fairly quickly is foolish. Just look at the 737 as an object lesson in how difficult it is to move rates up and down quickly with the loss of skills you get. I think collapsing F-35 production because of a bit of software being late would be really the height of folly. Not that I run Lockheed or anything like that. That's not a heady decision. I think it's better that we see a stable environment for production. They reflash the software when it's ready, and off we carry on for the next decade. Meanwhile, in our case, the size of the fleet continues to grow. It's almost 1,000 or it is 1,000 aircraft now deployed mainly in the U.S. but around the world. As they fly those things - not that they necessarily fly many combat missions, but they still have to get flown and people trained in them - is that they require spares. The duty cycle of any military aircraft is very different to a commercial airliner just because of what's expected of them in terms of, I'll say, climbing vertically or, I don't know, doing loop-to-loops or, let's say, combat training. It's very different, and the stress is there. The shop visits are much more frequent. With that comes a spares demand. I really do believe that we'll see spares demand next year or the year after equivalent to the level of OE production. It's coming up very rapidly, which is good. At the moment, for example, this year is helping offset that last bit of the bleed down of the bulkhead inventory which is at Lockheed, which they overscheduled in years gone by compared to actual production. So we've been bleeding that inventory off between us to come more into line probably by the second half late or hopefully no later than the end of 2024. Great. Cool. Well, I think with that, we're out of time, John. Thank you very much, as always. Thank you. Super informative. Thank you.