Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Boeing said it would miss its target for 737 Max deliveries this year, as well as taking nearly $800mn in charges in its defence business, including its high-profile programme to build Air Force One.
The plane maker reported a net loss of $1.6bn for the third quarter on $18.1bn in revenue. Its adjusted operating loss of $3.26 per share exceeded Wall Street’s expectation of $3.18.
Chief executive David Calhoun said in a memo to employees that, “despite the challenges that came our way in the third quarter”, Boeing remained on track in its recovery following the Max’s grounding in 2019 after two fatal crashes and the dive in demand for jets during the Covid-19 pandemic.
“That said, we still have work to do,” he added.
The company will deliver between 375 and 400 Maxes in 2023. The narrow-body jet comprises a significant portion of Boeing’s sales volume, and earlier this year it had targeted 400 to 450 deliveries, before discovering two separate quality lapses in fuselages supplied by Kansas-based Spirit AeroSystems.
While the problems with fasteners on the vertical tail fin and improperly drilled holes in the rear pressure bulkhead do not threaten safety, chief financial officer Brian West said last month that deliveries would be at the low end of the previous range.
Though aerospace manufacturers receive the bulk of their cash when they deliver planes to customers, Boeing reiterated its cash guidance for the year. The company still plans to generate $3bn to $5bn this year in free cash — the metric investors typically use to judge the stock. Shares were up $1.33 in pre-market trading, after closing on Tuesday at $182.36.
Baird analyst Peter Arment said that while Boeing’s results reflected “weaker performance” in the third quarter, the company’s reaffirmation of free cash flow guidance “should support a positive reaction to the stock”.
The amount of work to fix the rear pressure bulkhead defect is greater than Boeing originally estimated. The company had made its quality processes more exacting, Calhoun said, and “as a result, we’re finding items that we need to resolve”.
“These are not newly created defects in the system,” he said. “Instead, thanks to the culture we’re building, we have identified non-conformances from the past that we now have the rigour to find and fix once and for all.”
But Boeing’s plans to ramp up production remain unchanged. It will go from building four 787s per month to five, and will reach 38 737s per month by the end of the year.
In its defence business, Boeing lost $482mn on Air Force One during the third quarter, driven by higher manufacturing costs, labour instability and resolving a dispute with a supplier.
The company has struggled to build the presidential aircraft on a fixed-price contract. Originally costed at an estimated $5bn, former president Donald Trump harangued the jet maker on Twitter, now X, until it agreed to reduce the price.
Boeing also took a $315mn charge on a satellite contract, due to increased costs on the programme.
Credit: Source link
