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Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Paul Luther, Vice President of Investor Relations. Please go ahead.

Thank you, Gary. Good morning, and welcome to the Howmet Aerospace Fourth Quarter and Full Year 2025 Results Conference Call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Patrick Winterlich, Executive Vice President and Chief Financial Officer. After comments by John and Patrick, we will have a question-and-answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In today's presentation, references to EBITDA, operating income and EPS, mean adjusted EBITDA, excluding special items, adjusted operating income, excluding special items and adjusted EPS, excluding special items. These measures are among the non-GAAP financial measures that we've included in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix in today's presentation. In addition, unless otherwise stated, all comparisons are on a year-over-year basis. With that, I'd like to turn the call over to John.

Thank you, PT. Good morning, and welcome to Howmet's Q4 and Full Year 2025 Earnings Call. Let's start with the highlights on Slide #4. Q4 was an extremely solid quarter. Revenue of $2.17 billion was up 15%. Full year revenue was up 11%, and hence, the final quarter saw an acceleration of growth. EBITDA was $653 million, up 29%. Our operating income was $580 million, an increase of 34%. Full year EBITDA of $2.42 billion was an increase of 26%. Free cash flow after record capital spend of $453 million was $1.43 billion, which is more than $100 million above the guidance and a 93% conversion of net income. . Over the last 6 years, aggregate net income conversion to free cash flow has been 95%. Earnings per share were $1.05, an increase of 42% in the quarter over 2024, resulting in a 40% increase for the year. Capital deployment in the quarter included $200 million of share buybacks, $50 million of dividends, $55 million for preferred share redemption and a further $125 million for debt reduction. The closing cash balance was $743 million, allowing for further share buybacks in January and February with $150 million completed quarter-to-date. I'll stop at this point and let Patrick provide commentary by end markets and by segment.

Thank you, John. Good morning, everyone. Please move to Slide 5. Another solid quarter for Howmet's with end markets continuing to be healthy. We are well positioned for the future and continue to invest for growth. Revenue was up 15% in the fourth quarter and up 11% for the full year. Commercial aerospace growth remained strong throughout 2025, with revenue up 13% in the fourth quarter and up 12% for the full year. Commercial aerospace growth is driven by accelerating demand for engine spares and a record backlog for new, more fuel-efficient aircraft with reduced carbon emissions. Commercial aerospace engine spares were up 44% for the full year, driven by both legacy and next-generation engines. Defense aerospace growth continued to be robust at 20% in the fourth quarter. For the full year, Defense aerospace was up 21%, driven by engine spares, which increased 32% as well as new F-35 aircraft builds. Commercial transportation revenue was up 4% in the fourth quarter. However, it was down 5% for the full year, including the pass-through of higher aluminum costs and tariffs. On a volume basis, wheels was down 10% in the fourth quarter and down 13% for the full year. We continue to outperform the market with Howmet's premium products. As mentioned on the Q3 earnings call, we have combined the oil and gas and IGT markets into a single market we are calling gas turbines. The definition of oil and gas versus mid- to small IGT has become blurred since many turbines now have an increasing end use for data centers. We have provided historical gas turbine revenue in the appendix on Page 19. Gas turbine growth has been very strong with revenue up 32% in the fourth quarter and up 25% for the full year. Gas turbine growth is driven by the increased demand for electricity generation, especially from natural gas for data centers. Within Howmet's markets, we had robust spares growth. The combination of commercial aerospace, defense aerospace and gas turbine spares was up 33% for the full year to $1.7 billion. Spares revenue accelerated throughout 2025 and now represents 21% of total revenue versus 17% in 2024 and 11% before and 11% in 2019. In summary, 2025 continued strong performance in commercial aerospace, defense aerospace and gas turbines. Moving to Slide 6 and starting with the P&L. I will focus my comments on full year performance. Full year 2025 revenue, EBITDA, EBITDA margin and earnings per share were all records. On a year-over-year basis, revenue was up 11% and EBITDA outpaced revenue growth being up 26%, while absorbing approximately 1,500 net new employees predominantly in the Engine segment. EBITDA margin increased 350 basis points to 29.3% with a fourth quarter exit rate of 30.1%. Incremental flow-through of revenue to EBITDA was excellent at approximately 60% year-over-year. Earnings per share was $3.77, which was up a healthy 40% year-over-year. Now let's cover the balance sheet and cash flow. The balance sheet continues to strengthen. Free cash flow for the year was a record at $1.43 billion. Free cash flow conversion of net income was 93% as we continue to deliver on our long-term target of 90%. The year-end cash balance was a healthy $743 million. Debt was reduced by $265 million in 2025. We paid off the remaining $140 million of our U.S. dollar long-term due in November 2026 at par. We also paid off our $625 million 2027 notes with newly issued $500 million notes due 2032 and $125 million of cash on hand. The interest rate for the 2032 notes is 4.55%. The combined debt actions for the year will reduce the annualized interest expense by approximately $22 million. In the fourth quarter of 2025, we redeemed all of the outstanding shares of our preferred stock for $55 million, simplifying Howmet's capital structure. Net debt to trailing EBITDA continued to improve, ending the year at a record low of 1x. All long-term debt is unsecured and at fixed rates. Howmet is rated 3 notches into investment grade by all of our rating agencies, reflecting our strong balance sheet, improved financial leverage and robust cash generation. Liquidity remains strong with a healthy cash balance, plus a $1 billion revolver complemented by the flexibility of a $1 billion commercial paper program, neither of which were utilized in 2025. Turning to capital deployment. CapEx was a record $453 million, up approximately $130 million year-over-year as we continue to invest for growth. About70% of CapEx was in our Engines business as we continue to invest for market expansions in commercial aerospace and gas turbines. Investments are backed by customer contracts. In 2025, we deployed approximately $1.2 billion of cash to common stock repurchases, redemption of preferred stock, debt paydown and quarterly dividends. For the year, we repurchased $700 million of common stock at an average price of approximately $161 per share, retiring approximately 4.4 million shares. Q4 was the 19th consecutive quarter of common stock repurchases. The average diluted share count improved to a fourth quarter exit rate of 404 million shares. Moreover, so far in 2026, we have repurchased an additional $150 million of common stock at an average price of approximately $215 per share. As of today, the remaining authorization from the Board of Directors for share repurchases is approximately $1.35 billion. Finally, we continue to be confident in the strong future free cash flow. For the year, we paid $181 million in dividends, which was an increase of 69% year-over-year from $0.26 per share in 2024 to $0.44 per share in 2025. Now let's move to Slide 7 to cover the segment results from the fourth quarter. The Engine Products team delivered another record quarter for revenue, EBITDA and EBITDA margin. Quarterly revenue increased 20% to $1.16 billion, commercial aerospace was up 17%, and defense aerospace was up 18%. The gas turbine market was up 32%. Demand continues to be strong across all our engine markets with strong engine spares volume. EBITDA outpaced revenue growth with an increase of 31% to $396 million EBITDA margin increased 290 basis points to 34%, while absorbing approximately 320 net new employees in the quarter. For the full year, revenue was up 16% to $4.3 billion. EBITDA was up 25% to $1.44 billion, and EBITDA margin was 33.3% which was up approximately 250 basis points. All of these were records for the Engine Products segment. Moreover, the Engine Products segment added approximately 1,440 net new employees which has a near-term margin drag, but it positions us well for the future. Please move to Slide 8. Fastening Systems had another strong quarter. Quarterly revenue increased 13% to $454 million. Commercial aerospace was up 20%. Other markets were up 14% on renewables demand Defense Aerospace was up 7% and commercial transportation, which represents approximately 10% of fasteners revenue was down 16%. EBITDA continues to outpace revenue growth with an increase of 25% to $139 million despite the sluggish recovery of wide-body aircraft builds along with weakness in commercial transportation. EBITDA margin increased a healthy 290 basis points to 30.6% as the team has continued to expand margins through commercial and operational performance. For the full year, revenue was up 11% to $1.75 billion. EBITDA was up 31% to $530 million and EBITDA margin was 30.4%, which was up approximately 460 basis points. The fasteners team delivered solid year-over-year revenue and EBITDA growth, while maintaining a relatively flat headcount. Moving to Slide 9. Engineered Structures performance continues to improve. Quarterly revenue increased 4% to $287 million. Commercial aerospace was down 6% due to product rationalization and was essentially flat with the previous 3 quarters of 2025. Defense aerospace was up 37%, primarily driven by the end of destocking on the F-35 program. Segment EBITDA outpaced revenue growth with an increase of 24% to $63 million. EBITDA margin increased 350 basis points to 22% and as we continue to optimize the structures manufacturing footprint and rationalize the product mix to maximize profitability. For the full year, revenue was up 8% to $1.15 billion. EBITDA was up 46% to $243 million, and EBITDA margin was 21.2%. EBITDA margin was up approximately 560 basis points as the team continues to make significant progress. Finally, Slide 10. Forged Wheels quarterly revenue was up 9% as a 10% decrease in volumes was largely offset by higher aluminum costs, tariff pass-through and favorable foreign currency impacts. EBITDA was strong at $79 million, an increase of 20% despite the challenging market. EBITDA margin increased 270 basis points to 29.9%. The unfavorable margin impact of lower volumes and higher pass-through was more than offset by flexing costs, a strong product mix driven by premium products and favorable foreign currency. For the full year, revenue was down 1% to $1.04 billion. EBITDA was up 3% to $296 million. EBITDA margin was a strong 28.5% and in a challenging market and was up 130 basis points year-over-year. The wheels team has continued to expand margins despite market metal cost and tariff uncertainty. Lastly, before turning it back to John, I want to highlight a couple of items. Firstly, in mid-2024, we established a 2025 dividend policy to pay cash dividends on the company's common stock at a rate of 15% plus or minus 5% of adjusted net income. Cash dividends were approximately $181 million or 12% of adjusted net income in 2025. Looking forward, we envisage that the dollar value of dividend distributions in 2026 will be higher than in 2025. Secondly, in the fourth quarter of 2025, we completed the annuitization of the U.K. pension plan, resulting in a $128 million reduction to Howmet's gross pension obligations. No new pension contributions were required in 2025 to complete the transaction. A third-party carrier will now pay and administer future annuity payments for this plan. Now let me turn the call back to John.

Thank you, Patrick, and let's move to Slide 11. Let me turn to the outlook for the company and I'll provide summary comments before providing more detail for each market segment. The vast majority of the markets we serve, including commercial aerospace, defense, and land-based gas turbines are in a growth phase. The commercial truck wheel segment is stable at a low level and should begin to show signs of growth towards the latter half of 2026. Firstly, commercial aerospace is buoyed by increased air travel, both domestic and international. The highest growth is seen in Asia Pacific, notably China, but also in North America and in Europe. Freight traffic also continues to grow. Passenger demand combined with the recent multiyear underbuild of commercial aircraft have together led to a record OEM backlog stretching into the next decade. New aircraft builds, including narrow-body, wide-body and freighters are planned to grow at all aircraft manufacturers. I'll provide expected build rates later in the call. . In addition to these robust newbuilds, spares continue to be elevated by the expanding size and growing age of the current fleet of aircraft. This is further enhanced by durability issues found in some modern engines essentially due to higher operating pressures and temperatures, which are required to achieve increased fuel efficiency. Air pollution in certain parts of the world further contribute to the problem. Defense markets, especially fixed wing aircraft are also buoyant. The largest platform, the F-35 continues to be steady for OE builds, again, with a very large new build backlog while spares also continued to grow due to the size of the fleet. In fact, for our Engine Products segment in 2025, the F-35 spares demand exceeded the OE demand for the aggregate value of spare parts provided. The F-15 and F-16 programs are also seeing new builds with reasonable quantities. Howmet see a strong further demand from other parts of the defense and space industry also, namely tank turbines, missiles, rocket motors, [indiscernible] and also spare rocket parts. The gas turbine business is entering its largest growth phase in years, while oil and gas demand seem to be steady. The demand for electricity generation, especially from natural gas for data centers is extremely high. If we aggregate both large gas turbines and small- to medium-sized gas turbines, we expect that our base business of approximately $1 billion should double in revenue to $2 billion over the next 3 to 5 years and even more growth is envisaged beyond that, especially for mini grids. Howmet is well positioned in this segment by the supply of turbine blades, where we are the largest manufacturer of gas turbine blades in the world, covering our key customers of GE Vernova, Siemens Power, Mitsubishi Heavy and [ Saldo, Solar and Baker Hughes ], plus parts for aero derivative engines produced by GE Aviation. We have recently completed new contracts with 4 of these 7 customers while negotiations continue with the other 3. Additionally, the build-out of the turbine fleet over the next 5 years, and she has a healthy and growing spares market for years to come. Turning now to commercial truck wheels. We weathered the volume downturn in 2025, especially in the second half, share growth and penetration versus steel wheels helped. For the year, commercial transportation revenue is down 5% despite material and tariff recovery covering part of the volume downdraft. The market appears to be stabilizing, and we now believe that Q1 will be the quarterly low point. Given the new 2027 emissions regulations remain in place, we anticipate that this will begin to help demand in the second half of 2026 and then we should see the inventory multiplier effect still take effect as the truck builds increase. I'd like to mention the commercial aircraft build rate assumptions upon which our guidance is based. Albeit we will match aircraft build rates, whatever they eventually turn out to be. For Boeing, the 737 assumption, is 40 aircraft per month based on a rate of 42 as a daily average coming to the month without vacations. And the 787 is 7 a month rising to 8 a month by the fourth quarter. For Airbus, the A320 assumed to be 60 a month, while the A350 is at 6 per month. Q1 2026 guide numbers are revenue of $2.235 billion, plus or minus $10 million; EBITDA of $685 million, plus or minus $5 million and EPS of $1.10, plus or minus $0.01. You'll note that our Q1 revenue is an increase of 15% year-on-year above the average for 2025. We remain positive on the growth for 2026 while noting the dependency on aircraft builds. For 2026, the numbers provided exclude the acquisition of CAM. Revenue of $9.1 billion, plus or minus $100 million, EBITDA of $2.76 billion, plus or minus $50 million, earnings per share of $4.45, plus or minus $0.01 and finally, free cash flow of $1.6 billion, plus or minus $50 million. The EBITDA incremental for the year, is it guided to be approximately in the early [ 40% ]. I would now like to turn to portfolio commentary. In the first -- sorry, in the last few months, we've been very busy. We've signed and closed on the purchase of our fastener business in Wisconsin, [ Puna Inc ]. We believe that this acquisition enhances our product offering and opens up new markets for Howmet to explore, especially in the longer length and wider diameter parts in the fasteners market. The impact of this acquisition on Howmet's earnings is not material. However, it provides a very good platform for future growth. The more significant acquisition has come in the Aerospace fastener and fittings business, for which we have agreed to pay $1.8 billion. Upon deal closure, the earnings per share effect in the balance of 2025 will not be of a material effect. And hence, the guide is kept clean until the date of closing is known post the regulatory processes. These actions strengthen Howmet's portfolio of businesses going into 2027. The theme has been and will continue to be to play to our strengths and allocate capital decisively to businesses that are growing and showed the strongest returns on capital and cash generation. We're excited about the future given these portfolio improvements as well as the growing commercial aerospace and gas turbine businesses. Further growth updates concerning the gas turbine business will be provided as we've progressed throughout the year. I'll now start and turn the meeting over to questions. Thank you.

[Operator Instructions] The first question is from Doug Harned with Bernstein.

John, I'd like to understand sort of how your thinking has evolved when you look ahead over the next 5 years with engine products. Clearly, things have changed. And can you contrast your expectations for the relative growth across commercial, aero, defense, gas turbines as you think about planning, investments and so forth. And then related to this, you just reached a record EBITDA margin of 34%. In [ branding ] products. Are you near a ceiling with this? And what's enabling you to get to these higher margins?

Okay. So as you say by thinking has evolved. I guess, thinking always evolves with the passage of time and the circumstances change. I mean, I think the constant throughout this start off with commercial aerospace, where I've been convinced that growth will be robust and continuing. As you know, sometimes over the last 2 or 3 years or maybe 4 years, it hasn't been quite as good as we had envisaged, and that's principally due to the difficulties in final assembly of aircraft and also engines. But the trajectory has been positive and the future continues to look really good. And so when I consider the backlog the commercial aircraft that are there. I think it is quite extraordinary. And I think the word extraordinary is appropriate. And that applies to both narrow-body aircraft and wide-body aircraft. Since if you were to order a new aircraft today, you're really looking at delivery beyond 2030. If build rates were not to increase that it would be possibly almost towards the end of the 2030 decade. And so there's a very strong requirement for builds to increase. And so I think that backlog number gives great comfort in the investments that we've made. And you've seen our capital expenditure developed very notably over the last few years. And we've talked previously about building out another complete manufacturing plant and extending say, 1.5 manufacturing plants in it for our commercial aerospace business. So that's been very significant, and that's on top of the new engine plant that we built in 2020 coming on stream at that time, we started COVID there's been a tremendous investment for the commercial aerospace market. At the same time, we've seen very solid demand for defense and I think the surprise there has not been the solidity of the F-35 more so the fact that the other legacy aircraft have also seen significant new orders. But the F-35 is the flagship program that we have. But now when we look out, there's a significant emerging segments of missiles for us, where we are seeing very significant demand increases and just at the moment, we're also spending a lot of engineering efforts to try and ensure that we have position on engines for drones and for the larger cruise missiles. And so again, we see defense as a continuing good sector for us and which we're backing with investment dollars in a significant way. I think the biggest change to my thinking has been for the gas turbine market. And historically, if you've gone back by 7 years, I said this was a more cyclical business. It has shown periods of rapid growth and rapid decline and it was one where I was quite leary about making investments in that segment. And then I think things began to change with, I'll say, more consistency of product management by our customers so far less new product introductions and therefore, more buildable repeatable product. And then the emergence of demand, which seem to be a long ongoing need to support the renewable industries where the base level of capability and fast response. But you didn't really stop there and now I'll say, the emphasis is probably a little bit less on renewables and more on fossil fuels. And certainly, when you look at it, if coal-fired power stations are not being retired then the tremendous demand that's there can only really -- realistically be filled by the natural gas market. And so when you look at it with the demand projections for data centers and that was without the advent of AI, it caused me to think about willingness to invest. And so we did tick up capital deployments in new equipment in 2024 and then more again in 2025. And you saw the capital expenditure for the year very, very significantly above that, which we envisaged at the beginning of the year, you could go back to our guide a year before. And now we're looking at 2026, where it's going to be a higher number again. And we've picked the midpoint of about $470 million but I could envisage it rising above that. But at the same time, we're really trying and ensuring that we have that consistency of free cash flow conversion of the 90%. And so 2025 was a year where there was not a lot of new output from the capital expenditures that we had put into the ground I think it's more a question of yield improvement to allow for the average of a 25% growth in that area. And we had been, I'll say, quite successful and probably exceeded our expectations of the improvements we could make. And as you know, in previous calls, I've talked about building a new plant in Japan, which has been done. Building a new plant in Europe, which has been done and then placing new capital into those 2 new manufacturing plants plus the existing one in the U.S. And so a lot of that capital will come on stream towards the back end of 2026 and into 2027. But it hasn't really stopped there. And in dialogue with our customers more recently, we are seeing again, further demand patterns evolve where additional investments are required. And so right now, if I were to call it, I envisage that 2027, we'll see an even higher capital number if all of the -- all of our discussions come home. And I quoted in my prepared remarks about 4 out of 7 customers that was the -- both a very large gas to [ via ] customers and the, I'll say, small and midsized. But if I just confine it to the large gas turbines for the utilities, but now some of them being sold directly to data centers where it's a gigawatt of energy output is required. Then we've now completed 3 out of 4 I will say, outcomes or discussions with those customers and have reached agreements whereby we would seek to invest more for the future while ensuring, again, that we have healthy returns for Howmet shareholders. So I think that really covers how -- I think that is involved in our thinking, both through commercial aerospace, defense, supplementary areas and further market opportunity in defense maybe be collaborative combat aircraft as well and their engine requirements and now in the gas turbine market. So it's a particularly exciting time. And as you know, we always back the areas investment in the company, which earn higher returns. I hope that covers it, Doug.

Well, and just on margins, the 34%, which was unusually high.

Well, I think it's a good margin. As you know, I never I'm willing to consider what margins are for the future because I find it always a very difficult topic to cover. As you know, we don't seek to take them down at the same time, predicting increases is not something that I've ever been willing to do and because so many factors come into play regarding that. I mean, at the moment, I see, for example, I have to take on additional cost, not only of the new manufacturing plants, but also I think that we're going to sort of recruit another net 1,500 people plus in 2026 into our Engine segment. And so on all of those people would require training and et cetera, et cetera. So there's a lot going on and I'm also very clear that if we were to hit all that marks then again, the output that we need to achieve won't come from just the new capital load, we've got to try to attain further yield improvements, which then requires us to have effective labor and also bringing together all of the -- I'll say, the flow that we have and trying to get more repeatable product through our manufacturing facilities. And I think the opportunity, which I see in the midterm is that we will be able to move for more batch production in the gas turbine area, it's more of a flow style production which, again, towards the end of the decade, should begin to, say, further give us impetus on yields and therefore, margin. But it's way too early to predict that, Doug.

the next question is from Seth Seifman with JPMorgan.

This is Alex on for Seth today. Maybe one kind of more specific to the guide for this year. Based on the guide for Q1, the midpoint of the rest of the guide for 2026 kind of implies minimal improvement in revenue, adjusted EBITDA and adjusted EPS. Now wondering if you could kind of walk us through the puts and takes there and why that is? And also on the margin, the full year guide kind of implies that the margin is going to decline 30 bps for the full year from the 30.6% in Q1. Wondering how much of that might be related to maybe some start-up friction related to the engine capacity additions you're expecting to come online this year? Or if there's maybe some other things we should account for there?

Let's say, the most important thing to note is that we do have an extraordinary amount going on in the company. We are deploying capital for new equipment at an extraordinary rate. We're building -- we're extending 5 new manufacturing plants. And one thing I haven't commented on is that we actually purchased another manufacturing plant. So let's call it a brownfield in February of this year essentially aimed at the gas turbine market because we've literally run out of square footage. And so I mean, all the capacitization that we've been considering. And then as you have heard, we're taking on 2 acquisitions, 1 of which we've closed, 1 of which we expect to close during the year. So between building out of capital equipment, building out of new sites, recruitment of labor and also the acquisitions we've talked about. That's an enormous amount going on and it's always a struggle to believe you'll be successful on every single one of them and et cetera, et cetera. So I mean, for me, 30 basis points of margin is not really significant. I'd look at the incrementals, and I'll say it's like, I think, 43% in Q1 and maybe, I think, 41% for the year. So again, pretty close. And we've got to make sure that all of those new manufacturing facilities come on stream, build products while taking on labor. And there's always the possibility of us not hitting everything in quite the way we do it, and therefore, I think the caution is always the best way. And we take, as you've heard we say in the past I guide seriously. So I think predicting 30.3% EBITDA margins for the year is pretty good at this point. And if we manage everything really well, and maybe it will be better. But at this point, I think we've given you the best shot of what we think is a balanced view of everything that's going on.

The next question is from Robert Stallard with Vertical Research.

John, I just wanted to follow up on your comments on the ITT investment. Do you think the ROIC on all this spending is going to be similar to what you've achieved in commercial and aerospace in the past?

I think, first of all, if you go back and review what I've said publicly is that there essentially is no difference between the margin that we have on gas turbines and put in our commercial aerospace or defense space. And so it's all the order of magnitude. If you look at the embedded return on capital, again, at a very similar nature. Of course, the more, I'll say, brand-new virgin capital, you deploy [ Catacas ] a bit of a drag on those returns. And at the moment, it's difficult to plan out all of the blends that might be going on since we haven't bottomed yet what the final capital deployment will be in the gas turbine sector. As I said, we've completed 3 out of 4 of the major large gas turbine customers or across the whole of the gas turbine segment 4 out of 7. So there's still a lot to consider. And each one of our customers are also looking themselves whether they can achieve an output increase across all of the, I'll say, their own builds plus other, I'll say, component suppliers. So all of those discussions are continuing and therefore, the final capital build and exactly the timing of it will, it's going to be deployed, it's difficult to know. But the direction of what I've tried to indicate, we know it's like we spent maybe 300 -- I can't remember the number there, $350 million plus or minus or $340 million in '24, $450 million in '25, we're saying 470 midpoints with a plus or minus 20%. But if you ask me to give a gut feel, obviously, more like a plus at the side at this point? And '27, again, it's not fully baked by any means, but I envisage at the moment to be at least the amount that we have in 2026 or possibly higher as we complete all of these things. And then just trying to say, bring it all to earth as we plan all these things out. And again, make sure that we can afford as you envelope of cash generation we've talked about. So just specifically being on ROIC, it's also of a similar order of magnitude today but the blends of what's new capital versus the existing base, that can change as we move through the next 2 or 3 years.

The next question is from John Godyn with Citi.

Cash generation has been strong, financial leverage at record lows, like you mentioned. I just wanted to talk about capital deployment a bit. How you're thinking about M&A versus buybacks. And with M&A, we saw the consolidated aerospace manufacturing deal, which was a bit larger. I'm just kind of curious how you're thinking about the landscape for larger M&A and growth opportunities that could unlock.

First of all, we've been -- could you bold on providing returns to our shareholders essentially passing back all of the cash flow that we have achieved whether it's been share repurchase, dividend, I see debt reduction in the same category, while ensuring that we have always invested enough to be able to basically drive the organic growth of the company forward. And you've seen consistently growth in the double-digit area for several years and also indicating another double-digit growth for this year. And if we're successful on all of the capital expenditure this year than I envisioned '27 were also going to be healthy. So I mean, so first priority, John is always the deployment of capital to enable the growth opportunities that we have, say, come to fruition. Then clearly, measure the, I'll say, share buyback and also while taking into account the opportunity for M&A and where the leverage of the balance sheet is. And so if you think about CAM, $1.8 billion is significant. But at the same time, where we think about the leverage is we're below our long-run target average, let's call it, 1.5% or less than that. And so CAM doesn't really stretch us, and we envisage being able to continue to buy back shares as well. So it's not a -- currently, it's not a choice 1 or the other. We're able to -- I'll say, at this point, do it all. We're investing in the business at record levels, so $450 million, trending to $500 million. We're deploying share buyback in a significant way and probably going to end up with a larger buyback in 2026 that we had in 2025. We are deploying capital into CAM of about $1.8 billion. And if I give you dimensions for the [ Butner ] acquisition, it's in that $120 million to $150 million range of capital let's say, about $60 million of revenue. So at the moment, if you think about it and also be kicking up dividend as well, even though the dividend yield is not the highest because we're growing so rapidly. I mean we are managing at this point to do it all. So I don't see why we have to fundamentally say we're going to do one or the other. And so we shall keep doing whether other M&A opportunities come up, but again, be very disciplined. And you've seen in the 2 we've done very much down in the middle of the fairway. It's in segments that we know well, segments that have earned the right to grow, segments that are producing very healthy absolute margins. And so an increased CapEx for fasteners, absolutely. Willingness to deploy for an acquisition, absolutely. And it's not stopping us also buying back shares as an elevated rate above the previous years.

The next question is from Scott Deuschle with Deutsche Bank.

John, given the demand for gas turbines and the unique value that Howmet creates in that market, do you see a future scenario where your gas turbine revenue at interim products could ultimately be larger than the commercial jet engine revenue?

That takes me too far out there. I don't think so because I think our commercial aerospace and our defense aerospace business is also growing rapidly, has grown. And I don't see that at this point in time. So I guess the short answer would be no. I think the most notable thing though, that it's going on, it's not just for us, the growth in absolute volume and I think I've talked about it in the past, but maybe not sufficiently. There's also a product mix change going on at the same time, whereby some of the technologists that was previously deployed in aerospace are also now being deployed in the gas turbine business probably even more so in the small to mid-range gas turbines, but also now in the large gas turbine area, when that is providing air flow passages through the turbine blades and therefore, requiring us to call the core tools to be able to provide those air passage ways. And that, again, produces for us a content increase. So we're looking at the -- both the absolute requirement to build more tunnels plus also the evolving landscape over the next few years, I'll say, more complex type of turbine blades, which again plays to our strength and capabilities. So it's all good, but I'm not yet ready for the premise that it could exceed. I mean, I don't know where we're going to be, say in 2030 or beyond its -- there's a lot of things going to happen yet to get this current obviously, requirements built out. But you do see the need for electricity increasing at a rapid pace, really for not just the next 3 years but well beyond maybe for the next decade and beyond.

The next question is from Sheila Kahyaoglu with Jefferies.

And John, it does seem like you are doing it all. You are in the process of closing CAM and you just did the [ Bruner ] acquisition, marks more M&A than you've done in the past. Maybe if you could just give us greater depth in terms of the market that opens up, the product offering and how you're thinking about maybe the returns as you think about either building or buying in terms of these investments?

Yes. I think the -- so I start with the CAM acquisition. For us, it takes us into the fittings and couplings area of, I'd say, the wider fastener market and that helps us to build out those segments in a more significant way and bring another very powerful force to market with the, I'll say, the backing and the ability to deploy capital behind it. And so that's particularly exciting for us and also, I think it's also exciting for our customers because I think they need and they see the opportunity for Howmet to provide further support in those segments of the market. . I mean at fasteners, of course, it's good, it's interesting, and we appreciate all of it. But I think the main thrust would be in those other adjacent segments that we can build out. So that would give you a bit of a theme on CAM. In terms of Bruno, what we saw so far, if I take just bolts as an example, we've been in the market producing I'll say, the smaller range of bolts, which a threaded bolts in particular, plus obviously nuts, but I'm really concentrated in this discussion on bolts. But we've never really had the ability or the size of capital to manage long lengths of bolts nor diameters in excess of an inch diameter. And so [ Bruner ] offers us a ready-made solution for that. And when we think about the markets that we don't serve, both in aerospace and in parts of industrial, where if we had got that product offering, then we would be more significant in the market and therefore, again, help our growth rate. And that's what [ Bruner] brings to us. And so if we were to try to build out that capability ourselves, particularly in the commercial aerospace segment, by the time you've engineered it or how you've deployed the capital you've got the certifications whereas now we have already made profitable in the base business which we can now seek certification of into certain aerospace applications and also to the wider market. So again, it's where I think the application of the heft of how [ met ] and our commercial position and the ability to deploy capital and make further investments is really going to see a benefit for us and for our customers where we're bringing a powerful new product capability to the market. And so that's the essence of the [ Brewer ] acquisition.

The next question is Myles Walton with Wolfe Research.

You have [ Louis Fed ] on for Myles.

Good morning.

John, I was hoping you could provide some additional color on how spares performed in the fourth quarter and the full year 2025 between commercial and then defense, I guess IGT. And what are your thoughts for 2026?

Yes. So in aggregate, our spares business grew over 30%, probably getting close to 33% for the year. And so again, a very healthy growth rate for us. Against the mark, where I think I said that we saw spares moving towards 20% over '25 and '26 in terms of the total revenue of Howmet. In actual fact, we exceeded that. We were at 21% for the 2025 year. So again, the overall growth rate helped us get to that level and hopefully, that we don't stop at 21%. Inside that 21% is that it's about 40% of our engines business. And to give you one other bit of color inside our overall, let's say, 32%, 33% growth last year. Commercial aero was early 40%. And so healthy growth. And we see that growth continuing into 2026. I haven't called out a specific number yet. But having achieved the 21%, then hopefully, we don't regress from that. And hopefully, it continues to be a larger portion of the Howmet overall revenue picture.

The next question is from Peter Arment with Baird.

Patrick. John, regarding like engine margins in general, like automation has been a big part of kind of a beneficiary for you. Can you maybe give us a little more color on like kind of where you are in the automation journey and for engines and are there other opportunities in the business that you seek for automation?

We spent quite a bit of money over, I'd say, '23, '24 in automation. And that's obviously been very beneficial for us and has help us or need for additional employees, there you can see we've been hiring at a significant rate. We've made sure that all of the new capital we deployed as a high level of automation. So when we showcase our new manufacturing plant in Whitehall next month, you'll see something that I talked about in one of the previous calls about digital thread and to track manufacturing to an extraordinary degree and also allow us to bring I'll say, machine learning and AI to a degree across that plant. And so I'm very hopeful. But I also know that first, for capital has been so high, and it's not just can we deploy the cash, but it's also where we can. It's also the engineering bandwidth, which has been totally absorbed by I'll say, the new markets that we've been developing for and customer requirements. And so it's taken a bit of a back seat in '25 and '26 and so the moment our choice has been will match the market and achieve that. And that's far more important for us to just to say, maintain and grow our market share and meet customer demand, and we have the opportunity in maybe it's '27 or probably more like '28, '29 to go back and also make some of the processes that we did not do while we're doing all of this, even though all the new stuff we're doing is highly automated.