By Scott Hamilton
May 6, 2020, © Leeham News: Spirit Aerosystems, a major supplier to Boeing and Airbus, reported a net loss of $163m for the first quarter.
With a majority of revenues coming from Boeing, the grounding of the 737 MAX continued to hit Spirit hard. The COVID-19 crisis further impacts the company.
Spirit will deliver 125 737 fuselages to Boeing this year, down from 216 previously agreed, reflecting the COVID crisis. This includes 18 delivered in January before production was suspended.
Spirit did not reveal how many of 116 produced and stored in parking lots will be among the 125.
On the earnings call, Spirit said the the storage will grow somewhat, peaking in July-August. It will get back down to the 120s by year end. The inventory will decline in 2021 and “burn down” in the next two years.
Although Spirit’s 1Q results were better than expected, the global airline crisis and resulting impact on Airbus and Boeing will hit Spirit hard.
“The first quarter 2020 financial results do not contemplate the impacts of the recently announced lower production rates by Boeing and Airbus,” the company said. “[Spirit] is currently evaluating the potential impacts to the Boeing 787 and Airbus A350 programs. Based on preliminary assessments, the Company expects to recognize incremental forward losses in the second quarter of 2020 of approximately $70m to $90m on the Boeing 787 program, and $15m to $20m on the Airbus A350 program.”
Spirit incurred forward loss charges of $19.7m in the first quarter for the Boeing 747, 787, Airbus A350, and BR725 programs.
The company ended the quarter with $1.8bn in cash. In April, Spirit raised $1.2bn in debt. This was a $1bn ask; it was oversubscribed to $1.2bn. It used $800m to pay debt, with the remaining $400m going to the bank account.
Spirit is not seeking government funding.
Spirit suspended financial guidance for the time being.
Spirit still plans to close the acquisitions of ASCO and Bombardier’s aerostructures companies. The latter expands Spirit’s Airbus business. Bombardier’s Belfast, Ireland, facility produces A220 wings and A320 thrust reversers. ASCO expands Airbus and defense business.
Seven hundred employees displaced by reduced production are reassigned to designing and building ventilators, masks and PPEs for health care workers.
Spirit was in a profitable position for the A350 at Airbus production rate 9-10/mo. With the announced reduction to 6/mo, the company is closer to break-even.