Thursday, February 4, 2016

Spirit AeroSystems Set to Adjust to Jet Makers’ Output Changes: Company’s production of components for Boeing and Airbus make it bellwether of supply chain health

The Wall Street Journal
By Doug Cameron
Feb. 3, 2016 1:48 p.m. ET

Spirit AeroSystems Holdings Inc. said Wednesday it was well placed to adjust to planned changes in output by the world’s two largest jet makers, calming investors who remain nervous about a potential oversupply of aircraft.

The company’s production of large components for Boeing Co. , Airbus Group SE and the big engine manufacturers make Spirit a key bellwether of the health of the aerospace supply chain ahead of large planned increases in output.

Spirit Chief Executive Larry Lawson said it wouldn’t need to construct a new factory to expand production of fuselages for the Boeing 737 as the aerospace company boosts monthly production to 47 and then beyond to 52 and eventually 57.

His comments on an investor call came as Spirit reported a quarterly profit alongside 2016 guidance that was broadly ahead of analysts’ expectations, even though it incorporated planned trims in Boeing’s output this year as it prepares to introduce new airplane models.

Boeing’s surprise announcement last week that deliveries would fall this year from 2015’s record level added to existing pressure on the shares, which are down 17% this year, the second-worst performer on the Dow Industrial benchmark index. Airbus shares have lost 14% in 2016.

“We haven’t seen a slowdown in demand,” said Boeing Chief Financial Officer Greg Smith on a separate investor call.

Spirit Chief Financial Officer Sanjay Kapoor said discussions with Airbus and Boeing remain fluid over production changes, but declined to give further details.

The company produces fuselage parts for the Airbus A350, and the European plane maker plans a big boost in production this year to more than 50 jets. The company delivered 14 of the planes last year, one fewer than planned when a component supplier failed to meet commitments.

Spirit reported fourth quarter profit of $138.3 million compared with a loss of $106.2 million a year earlier, with adjusted per-share earnings of 95 cents falling seven cents short of consensus. Sales rose 2% to $1.61 billion.

The company forecast revenue of $6.6 billion to $6.7 billion in 2016, in line with last year when it delivered “shipsets” of components for 763 Boeing jets and 632 Airbus planes. Mr. Kapoor said the 2016 guidance reflected higher deliveries for the Airbus A320 and A350 programs and “steady” rates on the Boeing 737 and 787 jets. Deliveries related to the Boeing 777 and 747 and Airbus A330 are expected to decline from last year.

Separately, Mr. Lawson said he had no “imminent’ plans to step down, though Spirit continued to beef up its executive team and normal succession planning. A media report last week said the company was seeking a chief operating officer as part of a potential succession plan for the CEO.

—Jon Ostrower and Robert Wall contributed to this article.

Original article can be found here:

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