Carpenter Technology (CRS) Status Update summary

Strategic Outlook and Growth Drivers

• Projected operating income of $765M–$800M in FY2027, a 25% CAGR from FY2025, driven by productivity, product mix, and pricing actions.

• No new capacity needed to reach FY2027 targets; $400M brownfield expansion in Athens, AL, to add high-purity melt capacity in FY2028, funded by internal cash, with >20% expected ROI.

• Demand in aerospace, defense, and medical markets remains robust, with supply-demand imbalance expected to persist and even widen.

• Margins in SAO business have expanded from under 12% in FY2023 to over 28% recently, with further margin expansion anticipated.

• Cash generation expected to total $1B from FY2025–FY2027, with a 90% conversion rate and continued balanced capital allocation.

Brownfield Expansion and Capacity

• $400M brownfield project at Athens, AL, to add 9,000 tons of high-purity melt capacity, leveraging existing downstream assets.

• Capacity addition is minimal relative to industry demand, ensuring no material impact on the supply-demand imbalance.

• New capacity will target high-value markets; initial output in FY2028, with most qualifications achieved by 2030.

• Project expected to generate $150M operating income by 2030, with further upside as more stringent qualifications are achieved.

• CapEx for the project will be mostly incurred in FY2026 and FY2027, with little impact on fixed costs until commissioning in FY2028.

Market Environment and Demand Trends

• Aerospace and defense now comprise over 60% of revenue, with medical at 15%; both segments expected to grow as a share of the mix.

• Commercial aerospace demand is strong, with backlogs at Boeing and Airbus representing 13 years of production and over 14,000 planes.

• MRO activity and new build rates are both driving higher specialty material demand, with industry capacity unable to keep pace.

• Energy and semiconductor markets also contributing to strong demand for specialty materials.

• Industry specialty materials supply remains tight, with demand projected to rise 30–35% above pre-COVID highs, extending the growth cycle.