Second Quarter 2008 Highlights

• Record sales of $359.5 million are 24.1% higher than last year (17.5% in constant currency). Led by a 28.5% increase in commercial aero sales (25.1% in constant currency)
• Net income of $26.7 million, $0.27 per diluted share ($0.21 adjusted for one time items) versus $0.18 last year
• New prepreg plant to be built in Colorado to support the rapidly growing US wind energy market

Hexcel Corporation (NYSE: HXL):

Hexcel Corporation (NYSE: HXL), today reported results for the second quarter of 2008. Net sales from continuing operations during the quarter were $359.5 million, 24.1% higher than the $289.8 million reported for the second quarter of 2007. Operating income for the second quarter was $29.3 million, compared to $34.0 million for the same quarter last year. The 2008 operating income included $7.6 million of additional environmental reserves for remediation of a manufacturing facility sold in 1986. Net income from continuing operations for the second quarter of 2008 was $26.7 million, or $0.27 per diluted share, compared to $17.5 million or $0.18 per diluted share in 2007, aided by an $11.1 million net tax benefit primarily from the reinstatement of previously written off U.S. deferred tax assets. Excluding the environmental charge and the tax benefit, adjusted net income from continuing operations for the second quarter of 2008 was $0.21 per share (see Table D).

Chief Executive Officer Comments

Mr. Berges commented, “We are pleased with the continued strength of our core aerospace and wind markets which translated into 17.5% constant currency sales growth year over year. These higher sales drove growth in adjusted net income by 16% in the quarter and by nearly 33% year to date. Start-up costs for four new facilities, a further weakening of the dollar and some input costs put pressure on our results, but we are maintaining our guidance of $0.90 - 0.95 per diluted share for the year adjusted for one time items.”

“Each of our new European facilities has demonstrated their capability to achieve the required technical standards and we have now moved to the customer qualification stage, with our new A350 prepreg system using Hexcel carbon fiber being one of the first priorities.”

“Despite the abundance of bad economic news, demand for our products remains robust as does our outlook. For wind energy, our new glass prepreg plant in Tianjin China is scheduled to be opened in October and is expected to rapidly reach its targeted utilization in the second quarter of 2009. We are announcing a new glass prepreg plant in Colorado to support the emerging North American wind turbine blade manufacturing capacity. With renewable energy targets now set in 30 states, the U.S. is expected to continue to be a strong growth market for wind turbines and we are pleased to see our customers investing in the region.”

“As we previously announced in the second quarter, Hexcel will be supplying carbon fiber prepregs for major primary structures on the new Airbus A350, an award that could generate $4-5 billion over the life of the contract – the largest contract in Hexcel’s history.”

“As the cost of fuel climbs, the case for wind energy and newer, larger, lighter aircraft like the A350, B787 and A380 become even more compelling. We remain convinced that our 2010 revenue target of $1.7 billion is still achievable.”

Markets

Commercial Aerospace

• Commercial aerospace sales of $198.7 million grew 28.5% (25.1% in constant currency) over second quarter 2007. Sales to Airbus and its subcontractors grew over 30% for the second quarter in a row as we generally benefited across all programs. In addition, we are delivering significant quantities of carbon fiber prepreg materials to a number of Airbus sites in support of the A350 development program. Sales to Boeing and its subcontractors increased about 12% over the second quarter of 2007, even though B787 sales were dampened as customers reduced their requirements to align themselves with the program’s delay.
• Sales to “other aerospace” which includes a wide range of aircraft producers as a group were up over 25% for the sixth consecutive quarter as both regional jets and turboprop build rates have been strong.

Industrial

• Industrial sales of $85.8 million were up 13.1% over the second quarter 2007, though they were essentially flat on a constant currency basis. Industrial sales other than for wind energy were again impacted by capacity constraints to meet the strong aerospace sales and by portfolio pruning.
• Year to date wind energy revenue maintains its mid-teens growth, on a constant-currency basis, as the market outlook for wind remains robust. Our customers continue to expect strong global growth and we are moving to support them with our new facilities in China and the U.S.

Space & Defense

• Space & Defense sales of $75.0 million for the quarter were 26.6% higher compared to the second quarter of 2007 (21.5% in constant currency). The growth was across a wide range of programs, led again by the continued strength in global rotorcraft sales and growth in European military aircraft such as the A400M program.

Operations

• Gross margin decreased to 21.2% for the quarter compared to 24.3% for the second quarter of 2007. The benefits of higher volume were offset by the impact of start-up activities associated with the new facilities in Spain, France, Germany and China (about 200 basis points), exchange rates (about 110 basis points) and certain commodity materials, utility and freight rates (about 100 basis points). We aim to have the new European facilities at least cover their costs in the second half of this year, and China next year. We are increasing prices as contracts and market conditions permit as well as implementing cost reduction actions.
• Selling, general and administrative expenses increased by $2.6 million to $30.0 million for the quarter. About two-thirds of the increase is due to exchange rates. Research and technology expenses were $0.5 lower than last year as last year’s results were impacted by the development and qualification costs of our HexMC^® products.

Tax

• The Company has U.S. net operating loss (NOL) carry-forwards, the use of which are limited by an “ownership change” in 2003 as defined by Internal Revenue Code (IRC) Section 382. We identified and are implementing tax planning strategies which support a change in our estimate of the NOL carry-forwards which we expect to realize in the future. Accordingly, in the second quarter of 2008, we reinstated $14.7 million of U.S. deferred tax assets which had previously been written off. In addition, primarily as a result of the elimination of our pension obligation for the terminated U.S. defined pension plan, a $3.6 million tax provision (previously included in other comprehensive income) was recognized in the second quarter. The net of these items increased our net income by $11.1 million or $0.11 per diluted share – and we expect to realize a $14.7 million cash savings as we use the net operating loss carry-forwards over the next few years.
• After excluding one-time adjustments to the tax provision, our year-to-date effective tax rate is 38.5%. We continue to review our tax strategies to align with our changing manufacturing footprint and prospects.

Cash and other

• Total debt, net of cash as of June 30, 2008 was $376.2 million, an increase of $30.9 million (see Table F) during the quarter. Higher working capital needs arising from sales growth and the higher capital spending contributed to the increase.
• Capital spending for the quarter was $42.3 million compared to $30.5 million in the second quarter of 2007, primarily due to our capacity expansion plans.
• The second quarter of 2008 included $7.6 million of additional environmental reserves (recorded in other operating expense) to remediate our former Lodi, New Jersey manufacturing facility sold in 1986. While we have an agreed plan to clean the site, we continue to develop information about site contamination and have recently concluded that the extent and projected length of time to complete the remediation is likely to be greater than we had previously anticipated.

Guidance

• As we continue to accelerate our capacity additions and launch early phase capacity for the A350, our capital expenditure forecast has increased for 2008 from $150 million to $175 million.
• Our sales guidance for the year was an increase of 10% - 15% over 2007 in constant currency; we now expect to be at the high end of the range but with a mix shift from industrial to aerospace.
• We had expected to end 2008 with net debt of $300 - $320 million. With the increase in capital expenditure forecast and the higher working capital usage as a result of the increase in sales, we now expect year end net debt to be $340 - $360 million.
• The weakening dollar vs. the Euro again hurt our returns, especially as a percent of sales, lowering operating income by 130 basis points compared to the second quarter of last year. The dollar has weakened 15% against the Euro as compared to our guidance in December and if it stays at its current level, our 12-12.5% operating margin goal would translate to 11.3-11.8% for the year.
• We reaffirm our 2008 guidance of $0.90 - $0.95 per share (excluding one-time items such as tax benefits, pension and environmental charges) and still target the high end of the range, though the oil cost surge and continued weakening of the dollar have created new challenges that we are striving to meet.

Hexcel will host a conference call at 10:00 A.M. ET, tomorrow, July 22, 2008 to discuss the second quarter results and respond to analyst questions. The telephone number for the conference call is (913) 981-5549 and the confirmation code is 2744154. The call will be simultaneously hosted on Hexcel’s web site at www.hexcel.com/investors/index.html. Replays of the call will be available on the web site for approximately three days.

Hexcel Corporation is a leading advanced composites company. It develops, manufactures and markets lightweight, high-performance structural materials, including carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives and composite structures, used in commercial aerospace, space and defense and industrial applications such as wind turbine blades.

Disclaimer on Forward Looking Statements

This press release contains statements that are forward looking, including statements relating to anticipated trends in constant currency for the market segments we serve (including growth in commercial aerospace revenues, the estimates and expectations based on aircraft production rates made publicly available by Boeing and Airbus, the revenues we may generate from an aircraft model or program, the impact of delays in new aircraft programs, the outlook for space & defense revenues including rotorcraft applications and the trend in wind energy, recreation and other industrial applications); our focus on maintaining and improving margins; the expected impact of currency exchange rates and the price of oil on our cost structure; and our expectations of 2008 earnings per share. Actual results may differ materially from the results anticipated in the forward looking statements due to a variety of factors, including but not limited to changing market conditions, increased competition, product mix, inability to achieve planned manufacturing improvements and cost reductions, conditions in the financial markets and changes in currency exchange rates, environmental regulations and tax codes. Additional risk factors are described in our filings with the SEC. We do not undertake an obligation to update our forward-looking statements to reflect future events.

(a) Other operating expense for the quarter reflects a charge related to the increase in environmental remediation liabilities. Other operating expense for the six months ended June 30, 2008 also includes a charge related to the termination of our U.S. defined benefit plan.

(b) The (Benefit)/Provision for income taxes for the quarter and six months ended June 30, 2008 includes ($11.1) million and ($13.6) million, respectively, in benefits primarily from the reinstatement of U.S. deferred tax assets previously written off.