Okay. So- They said we make a nice couple. Thank you. I'm not in pink today, so. Ah. Remember Ken and Barbie last year? Was it- I wore pink last year, and I was- You did! I was like, "I'm Ken- Ken. I'm Barbie, where's Ken? Okay. He was on stage. You don't remember that? No, I don't. The transcript must have cut it off. PT must have done it. Where is he? I can't see him in the light. Give me a minute. Okay, perfect. Good morning, everyone. My name is Sheila Kahyaoglu with the Jefferies Aerospace and Defense Equity Research Team, and thank you for Howmet for supporting our conference. We have John Plant, in case you don't know him, he's Chairman and CEO. And thanks, John, for joining us. We have Ken in the audience and PT somewhere back there, too. I can't see them through the lights, but John, you've defied the odds and raised all guidance metrics two quarters in a row, despite people thinking you wouldn't do that, so thanks for that. Really support my buy rating here. And how would you assess the current state of aerospace build rates, given the schedule changes we've seen? You've been quite conservative and quite right on that. What are your major customers saying to you? How should we think about the under-build or over-build opportunities from here for Howmet? I guess the most important thing to focus on is what does 2025 look like, rather than, like, try to guess a build rate on a particular platform for the remainder of this year. I mean, this year is essentially pretty much over with, I think, even though it's probably doesn't feel like it to yourself, Sheila. And my assumption is that everybody's gonna want to try to build more, and therefore, everybody's gonna want more product in the commercial aerospace arena. And I think it's whether it's, you know, Boeing lifting their rate of production higher than where they are today, or Airbus again raising their rate of production because they originally wanted to be at a higher rate than they currently have been already, even back in this year. And so both of them want to build more. I think airlines want the product. I think they need it not just for fuel efficiency, compared to the older aircraft, but also to meet their emissions targets as well, and so my assumption is OEM's gonna require more product and also aftermarket as well, and I think the fact of running the existing aircraft longer is gonna produce demand for spare parts in the, let's say, the traditional fleet. There's gonna be more spare parts required for both the, I'll say, the long-run effect in the more modern engines of LEAP and GTF. Plus, also, I'm gonna call it what I see as the more of the bit of a bubble effect because of the time on wing issue. So my going-in assumption is that 2025, everybody's gonna want more, and the big question, of course, is: to what degree? And I won't be commenting on that today because I, first of all, I don't have a number, and secondly, I, you know, if I'm gonna do it, then we would probably give some form of revenue outlook in our November earnings call, or if we're not sure, I guess we'll duck it and push it out into next year. But, I mean, the basic back cloth is everybody wants more. It's one thing to tell us that you're only gonna do 20 MAXes a year, but you also - per month you also have to plan internally, both from a labor and inventory perspective. So I guess, how does Howmet - how do you plan for that internally, and how do you manage your own suppliers through the volatility that we've heard about in the cycle? I mean, certainly the last three years have been really problematic in terms of trying to manage our own supply chains and our own labor force because demand has been choppy. And we've seen a fairly inconsistent picture of against long-run targets of builds in terms of fundamental under-build. And then there's been particular, I'll say, crises that we faced, whether it was the grounding of the 737 or then the 787, and more recently, this year, it was only in January when the door plug issue occurred on a fairly recently built 737. And so again, that's impacted significantly the build rate at Boeing. And so, you know, our basic thought has been they're gonna struggle to meet the rate expectations, which they've been saying for a long time, which was rate 38. And indeed, it seems to be proven that they have struggled to get anywhere near that, and build collapsed in terms of rollouts in the Q1 of the year. Yes, it's beginning to build back, and so I did, I say, get a little bit more confident and say, you know, I'm willing to believe that they'll go from a rate 20 a month to a rate 22 in our August call. It's no prediction of how many they'll actually make, so I have no real insight into that because I don't know if they really know. It's something which I want to base our financial guidance on so that we don't get too far ahead of ourselves. I've seen other companies just take rate guidance and just build that into their financial guidance, and it's not served them well. But it doesn't mean to say that we can't supply, because in the first instance, should Boeing build 38 next month, we would supply them out of principally out of inventory in the first instance for a period of time, but we'd begin flexing our workforce and again, our supply chains. But what I've been trying to guard against is where we have extraordinary commitments to our suppliers, which we have to honor. Meanwhile, our customer isn't taking from us, so you know, try to avoid that. You know, I think I said to you in our February call that I was making some provision for a little bit extra working capital this year, just in case we were gonna get caught with a bit of inventory, and so far, I think we've managed it reasonably well. And where we're not supplying on a schedule, you know, a part for an aircraft, it's - we operate on a min-max system, for example, in our faster business. And we've again dropped our planning to the minimums required, such that we meet our legal obligations to Boeing while keeping everything very tight, so we're not caught with inventory. And I think it's served us well in terms of trying to plan our own business and our own workforce. But at the same time, having, you know, made sure we are secure in the fact that we can supply, and when that supply is, whether it's to a Boeing, an Airbus, or indeed, an engine manufacturer. Are there any early investments that Howmet needs to make to support those 2025 build rates? I've no doubt that we're gonna recruit in 2025. Again, it's like, to what degree? I mean, 2023, I think we recruited, I don't know, maybe 1700 or 1800 people. This year we were targeting about 1200. Now we probably see it less than 1000, because our efficiency metrics have been better than we had anticipated. And if I had to just give you a complete guesstimate at this point, I'm gonna guess we'll probably have to recruit another 1000 people in 2025. And to some degree, it depends upon not only the 2025 demand, but also what we're seeing into 2026. And given the investments that I've talked about on recent earnings calls, where we are, you know, we have kicked up our capital expenditure against the new engine requirements that we have by way of contract and share, is that I expect it will be ticking up recruitment such that we, you know, get the labor force in place and trained to be able to meet those requirements. Let's talk engines. Q2 set a record margin at 31%, which if you go back to 2019, when volumes were somewhat similar levels, the margins in that business were 22%-23%. So how do we get 1,000 basis points better, essentially, and what does expansion look like next? Well, I guess it's gonna be manifold in many of the things we've done in the business. I do think the product that we're supplying today, it has a different mix, a different level of technology that we had in 2019. And so I think those turbine parts have become more sophisticated, and that's also gone to the value that we provide to both the engine manufacturers and therefore to airlines. And to some degree, some of the technology that we have is pretty unique. If you look again at, you know, what's coming over the horizon, which is essentially further upgrades of those turbines for meeting what was originally, you know, improvements in fuel efficiency, but now it's more for robustness, such that the duty cycles are longer than they have been in the more recent years. Then we're deploying technologies that we've really developed for the military engines and bringing that capability back into the commercial arena. I think everybody knows that, let's say, the most exacting condition, probably in the world at the moment, is on the Joint Strike Fighter, and that's about 1,000 degrees Fahrenheit higher than the average commercial jet in terms of operating temperature. That in itself is already above the, I'm gonna say, melt point of the alloys. There was a really good article on Bloomberg this week, which commented on Cathay and all of the requirements that modern jet engines face into. I think if you could read that article, it would give you an insight to what I'm talking about. The actual experience of the more modern engines has actually been even more exacting than probably the original design requirements that were considered and specifications. We know that we have to improve further the temperature performance for these upgrades, and with that, we'll be deploying some of the technologies that we developed for the military, and where we're pretty unique in that capability. I think that's, you know, been part of the story. It's deployment of our capabilities using the fundamental IP that we have, and then I think the ability to make those very complex parts at scale, and I think that's probably one of the, again, really important criteria that we've been able to bring to the party, because I think anybody can possibly make one or two of them in a laboratory, but to deploy this technology, these technologies at scale, to gain the yields that we need with the processes that are required, I think is extraordinary, and also the degree to which we've increased our automation in recent years, and therefore goes to the labor part of the productivity equation, which also plays a part in this. I think that's served us well, because to meet - If this was back to, I think somebody this morning used the word, the artisanal way of making some of these castings, we would not get either the throughput nor the yields that are required, and just to be able to keep pace. And automation has been, I'll say, fundamental to our journey, and to try to adopt automation in the aerospace environment, which has a different volume and variety characteristics than many other industries, I think has been part of the breakthroughs that we've had. My favorite is the barcodes you have. It's like you're always watching every employee cycle time, and accountability with that. Yeah. We do track every single part through our plants, from like what, where was the fundamental source of metal, all the way through to the delivered product, and so we track everything, and then we can track it through to the engine build and where it's used in the world. In February, and again in July, you announced two long-term agreements of renewals with the major engine OEMs. They came back-to-back, and you're on the record calling them, "Okay and adequate," and I guess that's proper English for amazing. But clearly, the fact that they were so back-to-back implies that they were necessary to the engine OEMs. So how do we think about the revenue and profitability, and when they start coming online? I did notice your research report started with the headline- It was a tag. Adequate. Adequate. Satisfactory. I think you almost wrote underwhelming, but I think you refrained from that one, so but I and I did spot it in the transcript of some words that I'd used, and, and I, I generally think it's probably best to understate than overstate. But there you go. So these additional contracts I referred to, and I was really trying to explain, you know, where's the company going? And in particular, for me, the best growth of all has always been organic growth. It's not to deny the benefits of inorganic and acquisitive growth, but if you can find the means to lift the output and revenues of what you know well, and therefore, the risk profile is fundamentally much more controlled. And if you can combine that with long-term agreements of contracts which specify share and economics, then all of that is really good. I mean, what other conditions you could ever dream about? It's those. You know, why would I not try to want to achieve that position for the company? The reason why I've spent time talking about it is 'cause the investments were significant, so we've been underspending against depreciation for the last three or four years, and now we're probably this year gonna be slightly ahead, but I wanted to explain the backcloth to the investment decision, the fact that it's contracted and not speculative, and it's not build and they'll come, it's just - it's there. It's needed by the industry, and it's the part of the capabilities I've just talked about those, that uniqueness. And then - o h, and by the way, I went as far as saying, "And this is not going to damage our free cash flow yield," because I didn't want to, you know, say, "Don't worry, in three years' time, it's gonna be really great." I've learned my lesson when I was, I would say, younger and more enthusiastic, Sheila. And I remember once telling the world that we're gonna build eleven new manufacturing plants in China, of course, and that didn't go so well, because people said they - u ltimately, say, the fast money said, we'll sell now, buy them when you've done them. And but so this was, you know, we've got the contract. We're gonna stay within the envelope of 4% of revenue in terms of CapEx. It's contracted, and, oh, and by the way, you know, our free cash flow yield metric of 90% plus or minus, you know, on average, conversion of net income is intact, and, you know, now and in the future. So I couldn't think of anything better that we could do with deploying shareholder money. Makes sense. Any sort of thoughts or guidelines you could give us on when the capacity comes online and the revenue starts flowing through in 2025 and 2026? Yeah. So, I mean, it is possible we might see some penny numbers in the back end of next year, in the Q4. But really, it's more aimed at 2026, and the ramp up there. And clearly, the investment we made six months ago is therefore six months ahead of the second one. So it'll be progressive through 2026 in terms of lifting our capabilities and with basically the customers wanting the product as soon as possible. Going back a few quarters, you said you believe the market share gains in engines is about 1% per year for the last four to five years. I think these agreements, these new deals, would come at share gains and better pricing. So how do we think about your ultimate share in this business, and is there a breaking point on the runway here? I never really subscribed to there's like a ceiling on such things. It always depends upon your capabilities, the offering you have, and the offering, it isn't just technology, it's the and scale, the ability to convert to scale, but it's also with the quality and delivery performance that you have. And I think in aerospace, particularly now, there's you know, to have assurance of delivery and quality is really important. So and I think we've pretty much excelled at that over the last few years, and so it plays well. So I'm not willing to buy into, by the way, there's this limit, there's a long way to go, and there's other products we're bringing through, and there's other segments we're going for, not just commercial aero. And as an example, we've been focused the last two or three years on building out our space business, which has been very healthy for us as well, and getting to the position where we're moving from more of the individual purchase order buys to contracted LTAs in that environment as well. So I think there's lots of runway for Howmet, both in commercial aero and in defense and space. Sounds really good to me anyway, when I say it. Yep, it does. Yeah. In the near term, you've talked about turbine blade output up 40% over the last six months, and if you look at growth levels compared to the OEM build rates, it doesn't look like you're the bottleneck in the process, but they somehow continue to point fingers your way. So I guess, how would you assess this? Yeah. Well, I certainly - y eah, it's mild, at least pursed my lips when I read a Bloomberg article saying that we weren't delivering, because I don't think we're like a wine producer or a producer of bourbon, where you wanna store it in casks for so long. I don't think our product gets better, the longer I keep it. I really don't. I've never believed that. And, you know, I always thought this thing, you know, you build it and you ship it. And, you know, you can see our inventories. The fact that our revenues are up means that we are building and shipping, and so it was, you know, my response to when I read some of this stuff. Well, maybe the questioning or the journalists should maybe research a little bit more thoroughly. And, you know, if we're up 40% on production of the so-called items, and if engine build isn't up 40%, in fact, maybe it's not up, but, you know, that, that's for somebody else to work out. The averages are there, then they're going somewhere. And I'm not storing them, I'm selling them. Right. So, it's that simple, really. So I - you know, I'm trying hard not to, like, get into like - so, cause the next obvious question is, so what, so what is restricting build, if anything? Because supply chain has been blamed so much in the last three or four years, and it's been, like, the go-to word since COVID, it's supply chain. And, you know, I think we've tried to manage ourselves well against that. I wanna hit on a sticking point for a lot of investors, going back to your organic growth thesis here, and it's the engine upgrade programs that are coming with the LEAP and the GTF. The assumption is that those upgrades require more sophistication, which means Howmet is the ultimate beneficiary, whether it's a price or volume perspective. So you said in Q2, you have tens of thousands of engine upgrade parts in inventory, awaiting the certification of those engines. How should investors think about sizing the opportunity for Howmet? Well, you said it's a sticking point, but I actually think of all the things we've talked about are actually really good points for the company. We've also been preparing for the upgrades which are coming both for both U.S.-based engine manufacturers, and I think everybody's familiar with. I'm certainly one, because publicly you stated the word that the Advantage Engine, in the case of Pratt & Whitney. I don't know that the code word for GE is used, but we've been in good stead and been manufacturing those parts in addition to the parts for today, which are being assembled into engines and supplied into the spare parts MRO shops today. So those parts are there. They're sitting in inventory at our customers, and obviously, they will use them as soon as they're able to use them to, you know, upon certification, and so, you know, I'm optimistic that's going to occur, you know, fairly soon, and therefore, you know, it's gonna be a, you know, a good condition for engine build, and therefore, you know, airlines and the MRO world are gonna be even happier than they are today. You don't actually give us content per platform, so you- No You make a sell-side analyst actually work for a change, so how do we think about- But your reports have it in, Sheila. Yeah, we do. So I just assume that you've got some insight which is unique, and PT's obviously feeding you stuff that he doesn't give to anybody else. No, he actually, he keeps his lips tight. He doesn't give us a word, and so... But how do we actually- Yeah ... think about increasing the content on LEAP and GTF with these upgrades coming in? They are more sophisticated, and therefore, that in itself lends itself to content because they're solving problems which exist. Right. That's it, really. Okay. But I am resistant to giving set values, but I did read your report, which laid out every aircraft and every helicopter and every military jet and got content on it, and I thought, "Oh, I've got to do that myself. I figure if I put in as much stuff as possible, somebody's gonna come back. Then we'd be denying part of it, therefore- Exactly P roving the other part of it. Exactly. Yeah, I know. So let's talk about one last thing on engines, is about spares, which you've backfilled or almost all of it. So in 2019, you had $400 million of aerospace spares, $400 million of defense and IGT. Now, both of those are comfortably about, comfortably above $500 million in 2024. That's almost 15% of total sales. How do we think about the aftermarket? It's actually a little bit bigger than that. I mean, I think I used a couple of earnings calls. We were probably heading for the $1.1 billion-plus combined, and I think it's, you know, it's north of that right now. As a percent of revenue, certainly that part of our business which is flowing into the spares market has gone from about 11% to about 16% of total revenue, so that's pretty good. And my thought, given the things we've talked about already in our discussion this morning, is that it, you know, it has a propensity to possibly increase further, especially given the duty cycles and that time when ring issues. That's all good. Sounds good. The other part of the business that's quite good is fasteners in addition to engines. And you said fasteners margins are running around 25%-26% versus 28% in 2019. A lot of that is widebody coming back in the first half of this year. But you've also run the business on a contract minimum to avoid any destock risk. So how should we think about the near and long-term opportunity within fasteners? Of course, nothing is exactly the same, and it would be really hard for us to replicate 2019 conditions in 2024 or 2025. Because back then, to give you a reference point, you know, the 787 I think was striding along at about 13 a month, and maybe the occasional month at 14, or was it 12 and 13, and maybe the A350s were up at maybe 9 a month or something. And so we, you know, we're still well below that, and the balance is still, in terms of mix, more metallic-based aircraft. But we have seen a slight improvement in widebody production. We are seeing the relative mix beginning to improve, and it's no secret that, you know, widebody mix is important in that the... For example, the structural parts, which is, let's say some of our titanium parts, plus the fastener suites are significantly higher value than for a metallic aircraft. You're looking at two X or three X the value. And so if that trend were to continue, then hopefully in 2025 and 2026 we'll begin to be further beneficiaries of that, 'cause that's nothing that we do, it just happens. So it's not one of those factors in our control. But at the same time, it would be nice to have a little bit of a tailwind on something compared to the choppiness we've had in recent years. And so, you know, I never have given a margin prediction, because 2019 is a different mix, different everything to now. But it's getting better, and we've done some really good things in our fastener business. I mean, I've talked this year about the productivity progress as an example has exceeded my expectations, and we've actually put through, I think, like a 28% or 25% quarter on quarter, you know, relative to last year, increase in revenue, and yet with no additional people. And so that's been really good in terms of productivity story. So we've put an improving mix with good productivity. It's and with some better commercial discipline, I think it's all been good. But where it goes, who knows? Next to structures. A lot going on there. You've changed management. Yes. A bit of divestitures there too. Margins snap back to the 14% range, but it is one of the lower margin businesses, so, or the lowest margin business. How do we think about what happens with structures from here? One, it is our lowest margin business, but it's still actually well ahead of many other companies. So, I don't think of it in those terms. I think of it. What are the conditions in that business today? And my view has been that in the last three or four years, given the dearth of production of widebody, which is, you know, again, with the composite-based aircraft going to use a lot more titanium, it's not had great conditions for that. We've also been burning off inventory on the F-35, where because of the supply prior to COVID and during the COVID years and when Lockheed didn't build anywhere near their expected rate, they've been burning off inventory of parts, and so it's been a pretty difficult backlog to manage that business. Having got margins to be similar to 2019 with the revenue picture still well below in that segment, I think it's pretty creditable for the business. And it but more important than that is, where do I think it's going to go? Because, you know, past doesn't matter. It's only about the effect of tomorrow. And I'm convinced that the margins in that business are going to get better. I mean, I have said maybe it'll get to higher teens. I don't think it's ever gonna get to the levels of a, of a, of an engine business. I don't think that, 'cause I think again, the technological moat is different. The supply capability and efficiency, 'cause the type of product is going to be different. And the volume variety, again, you know, with widebody and military is different, and so I just don't think it has the same characteristics, but I think it's gonna be better than it is today. And I mean, for me, the development of what I think about is economic added value. It's like, w here do you make things better? Do you raise your margins? Do you raise your capital? And I think the business has all the hallmarks of being able to do that. And then, you know, we'll take that for the next period of time, and then we'll see what happens in the future, you know? I think I needed another thirty minutes to cover wheels and industrial and defense, so- Have we done time already? We might have to extend this se- Oh. Yeah, you're out of time already. Oh, good. But one last question for you. So sum all this organic growth up for us, EBIT growth and free cash flow growth a nd I want to talk about the balance sheet too. Yes B ecause Ken will find any way to save 10 basis points, no matter where he's refinancing in the world. That means he's good, then. Yes, he is. Yeah. You're doing buybacks. You've raised the dividend a few times. What does this all mean for free cash flow and capital deployment from here? I've been absolutely convinced that managing a balance sheet and capital allocation is fundamental to the success of any business, and you know, we've been judicious over trying to balance the improving our free cash flow yields by reducing the interest drag in the company, paying down debt. Yes, we've also walked and chewed gum. We've bought back a lot of shares as well. We've been raising the dividend, so I think it presses all the buttons of things that we should be, we should be doing, and you know, when we look forward, you look at the trend, you know, is that some of the benefits of those transactions we've done will help us as we move with a lower interest drag as we go into 2025. We also try to neutralize the company by having a majority of our debt in a fixed-rate environment. It's all worked out well for us on our latest refinancing, which we did last month. Again, I think we executed that perfectly, both in terms of timing and structure, and duration, such that by the time we finished, you know, there's probably a you know an annualized $20 million pickup there, which is not to be sniffed at. So all good. Sounds like it. Well, thank you so much, John for joining us. Thank you very much, Sheila. Thank you. Thank you. Thanks, everybody.