Question · Q3 2025
Sheila Karin Kahyaoglu asked about the expected inventory unwind and its implications for Hexcel's projected $1 billion in free cash flow over the next four years, considering the additional $500 million in revenue and 35% incremental margins. She also sought clarification on the factors contributing to the implied 100 basis point margin decline in the 2025 guidance, beyond the impact of tariffs.
Answer
Tom Gentile, CEO, Chairman, and President, stated that the goal is to reduce inventory from the current 90-95 days to a steady-state of 70 days, with unwinding expected in coming quarters. He attributed the remaining margin pressure (beyond tariffs) to absorption impacts from inventory drawdown, investments in the new Microsoft D365 ERP system, lower volumes due to destocking, and changes in product mix.