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Phase-out of Airbus, Boeing jets hits FACC's operating profit

Stock Markets Oct 15, 2019 04:16AM ET
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By Kirsti Knolle

VIENNA (Reuters) - Plane parts maker FACC's (VI:FACC) operating profit fell 6% in the second quarter as it produced fewer components for the Airbus (PA:AIR) A380 and Boeing (N:BA) 737NG jets being phased out and start-up costs for new cabin interiors bit.

Chinese-owned FACC makes components for wings, tail assemblies and fuselages as well as engines and cabin interiors for all major planemakers.

So far 2019 has been a slow year for the commercial aerospace industry, beset by negative headlines on safety following two deadly plane crashes and the U.S.-China trade war.

FACC said in its half annual report on Tuesday that while production rates of all major aircraft types had stabilized at a high level, no significant increases were expected for 2020.

"We expect sustained growth in the aviation industry in the long run, but are currently observing a slight flattening of the growth curve," Chief Executive Robert Machtlinger said. "This trend is reflected in our sales development, which shows a smaller increase than planned."

However, operational measures to reduce costs were progressing and would lead to stable profitability from the second half of 2020, he said.

Its shares fell 2.6% in early trading.

Owned by China's Aviation Industry Corporation (AVIC) (SZ:000768), the group reported earnings before interest and tax (EBIT) of 8.6 million euros ($9.5 million) on largely flat revenue of 179.7 million in the three months through end-August. New orders surpassed $800 million.

Around half of FACC's revenue comes from Airbus (PA:AIR), which reported a 13.5% rise in nine-month deliveries, well ahead of U.S. rival Boeing, whose deliveries nearly halved due to the grounding of the B737 MAX. FACC does not supply the new aircraft, which has been grounded following two deadly crashes.

A decision by the World Trade Organization, which formally authorized the United States on Monday to impose tariffs on Airbus aircraft, does not cover aircraft components "and thus products of the FACC Group are not affected," the company said.

FACC also produces components for Chinese planemaker COMAC, which Machtlinger expects to become a fierce rival to Airbus and Boeing within 10 years. Revenues for COMAC's ARJ 21 regional jet and the narrow-body C919 increased in the first half and have become a major revenue driver at the cabin interior unit, FACC said.

FACC expects sales of around 600 million euros and an EBIT margin of close to 6% for its shortened March-December 2019 financial year. From 2020, the group will report per calendar year.

Phase-out of Airbus, Boeing jets hits FACC's operating profit
 

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