David M. Drillock, Vice President and Chief Financial Officer of Cytec Industries, presented at Wednesday morning at the Cowen & Co. 35th Annual Aerospace/Defense & Transportation Conference at the InterContinental New York Barclay in New York City.
In prepared remarks, Drillock explained that Cytec Industries is newly transformed. He said aerospace materials now account for 50% of the business, with 75% of that coming from civil aircraft. The bulk of company operations are in North America.
Cytec expects modest growth for 2014, accelerating as new programs start to take affect. The focus for 2014 includes margin improvement, productivity and volume increases.
The company sees long-term opportunity for carbon composites. The drivers here include a desire for lower vehicle weight, better fuel efficiency and tighter EU regulations.
In terms of specialty chemicals, growth drivers include new mines, geographic expansion and adjacent/nonmining markets. Cytec leads the market with next-generation technologies to separate minerals. Drillock said there are a large number of opportunities in this space, and Cytec is well-positioned to capture growth.
The capital-allocation strategy for the company is to continue to support organic growth. Cytec, says Drillock, has a strong balance sheet and strong free cash flow. It expects to generate $1 billion in free cash flow between 2014 and 2018, and expects sales for 2014 to be between $1,975 million and $2,050 million.
Drillock said he is retiring for personal reasons, and he expects a new CFO in four to seven months.
The industrial segment has been lagging, but it is starting to see some strength. Cytec had a tooling order for a large aerospace platform which should translate to strength for the first two quarters of the year. That order will translate to approximately $10 million over a two year period.
Cytec has focused on increasing productivity in the aerospace area, which should bring higher margins. The company is applying expertise to existing assets that previously were constrained and making equipment more efficient. Additionally, the company is insourcing more actions because increased productivity provides that opportunity.
Overall, Drillock says the portfolio is less volatile than it previously was. In aerospace, there are some concerns about the possibilities of program delays, but most programs appear on track. This risk is manageable because Cytec is involved in numerous different programs. Mining could run into difficulties if developing markets stop investing for long periods of time, but that is not likely.
To hear the webcast on the corporate web site, visit http://phx.corporate-ir.net/phoenix.zhtml?c=110732&p=irol-EventDetails&EventId=5091088
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