Engine Market Share Gain and New OEM Deal
Q: What's the outlook for the second engine OEM deal and its impact?
A: Howmet is investing in additional capacity to meet demand from a second engine manufacturer, with volumes starting in 2026. This investment will enable Howmet to capture significant market share, similar to prior gains. The returns are expected to be satisfactory, delivering an adequate return on capital despite higher depreciation from new investments.

Incremental Margins and Long-term Margin Outlook
Q: How should we think about incremental margins and long-term targets?
A: Incremental margins are expected to be over 40% in Q3, driven by productivity gains and stable input costs. Howmet has achieved significant revenue increases with minimal headcount additions, particularly in the Fasteners business. The company refrained from providing specific long-term margin targets.

Risks to Outlook and Excess Inventory
Q: Are there any excess inventory concerns or risks to the outlook?
A: While Howmet has seen some unexpected reductions in low-pressure turbine parts due to lower LEAP engine assemblies, leading to excess inventory, overall demand remains strong. The company adjusts production and employment levels as needed and believes the current guide reflects the best knowledge of market conditions.

Casting Shortages and Opportunities
Q: How is Howmet positioned amid industry casting shortages?
A: Howmet acknowledges high demand for high-pressure turbine castings and is operating above engine build rates. The company is investing in new capital expenditure to increase capacity, but substantial increases in production will take time due to the need for new tools and equipment.

Pricing Trends
Q: Is pricing accelerating, and what is the impact on revenue?
A: Howmet maintains its previous guidance on pricing, expecting it to be similar to or slightly above the $100 million increase achieved last year. No further comments were provided on pricing acceleration.

Fasteners Business Margin Potential
Q: Can Fasteners margins improve as revenue recovers?
A: Howmet has achieved sequential improvement in Fasteners margins without adding incremental headcount, despite revenue increases of over 20%. Future margin rates were not specified, but the company is focused on continuous improvement.

Impact of Engine Issues on Business
Q: How are engine build issues affecting Howmet?
A: Engine build reductions have some adverse consequences on Howmet, affecting structural castings and low-pressure turbine parts. However, opportunities exist to supply more high-pressure turbine blades, especially for the aftermarket.

787 Production and Fasteners Demand
Q: What's the outlook for 787 production and its impact on Fasteners?
A: Howmet's Fasteners business is seeing deliveries in line with previous guidance. Boeing's production rates have been lower than expected, and Howmet adjusts inventory levels accordingly.

RTX Facility Impact
Q: Will RTX's new casting facility affect Howmet's outlook?
A: Howmet has not observed any material impact from RTX's new facility and continues to supply as per previous expectations. The company believes significant further investment would be required for RTX's facility to become cost-effective at scale.

Hiring Needs and Productivity
Q: When will hiring increase to match revenue growth?
A: Net headcount additions have been modest, with increases mainly in the Engine business. The company focuses on productivity gains and automation to meet demand without significant increases in labor.

Yield Improvements in Castings
Q: How much can casting yields improve?
A: Further yield improvements are marginal due to already high performance. Any improvements would come from minor changes that do not affect product quality.