How should one react to news of another Boeing 787 delay? Some airlines grumble at having to line up alternative capacity, others (secretly) rejoice at hanging on to their cash a little longer. Industry analysts must be happy enough to have more to analyse, and some comedians, even, clearly relish another plateful of rich material ("Hitler learns that his 787 order is delayed" is a YouTube mini-hit).
But suppliers to this most talked-about new airliner programme must, surely, despair at every new setback?
Not necessarily. Mark Rollins, chief executive at Rickmansworth, Hertfordshire-headquartered manufacturing group Senior, says his company has spent £10-12 million ($17-20 million) on equipment and tooling to supply Boeing, Goodrich and Rolls-Royce with a variety of structural aluminium and other machined components for the 787 and its Trent 1000 engines and nacelles. But despite the expenditure, he says the expanding timeline is not a "particular concern". His concern is the "delay in the opportunity. We think Boeing are a great company and we look forward to [working on] other aircraft with them."
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© Jim Larsen |
And what an opportunity it is. For Senior, each 787 will be worth more than $800,000, its largest-ever shipset at more than twice the value of any other programme it supplies. At Boeing's projected rate of 120 aircraft a year, Senior will see $100 million annually, making the aircraft worth about 12% of group sales, which - including the 39% of turnover that comes from the Flexonics land vehicle components division - totalled £562 million in 2008.
At the half year, Senior's aerospace division turned over £169.2 million (down 12% on 2008) and made an operating profit of £22 million (down 23%).
Those numbers look normal enough this year, and it is no surprise to learn that revenue from business jet programmes suffered, while revenue from Boeing was soft as inventory delivered during the 2008 machinists' strike was used in place of new orders.
But Senior is in better shape than many of its rivals. Rollins points out that strong cash generation and currency effects cut net debt by a quarter, to £127.4 million, during the half year to end June, and he sees the group as being in a "very good position financially" after refinancing last year to see it through 2012.
The 787 is not the only programme with future impact. "Significant" Lockheed Martin F-35 content - ducting, lift fans and other items - make the next generation fighter another $100 million a year programme for Senior when production reaches projected full rate. Military work has grown to about 16% of group business, with key programmes being the Lockheed Martin C-130 and Sikorsky Blackhawk.
On the civil side, the Airbus A320 and Boeing 737 are key to Senior's business. Rollins hopes to win new business on both of the programmes.
The 787 and the JSF may turn out to be major chunks of Senior's business, but for now it is diversified, with Boeing its largest customer at less than 12% of aerospace division revenue and most airframers and primes on the customer roster. And, although it is based in the UK, the group gets two-thirds of its revenue from its North American operations. Rollins says: "We're largely a US corporation, listed on the London Stock Exchange."
He has no view on likely production rate moves by Airbus or Boeing. But in its analysts' comment on Senior's six months to the end of June, investment manager Brewin Dolphin describes the group as resilient, and adds that while 2010 prospects could suffer from falling production in business and regional jets, "we are increasingly of the view that the Boeing/Airbus cuts may not be as bad as we feared".
Taking a similar tone, Investec Securities notes that while Senior's aerospace prospects are "highly geared into Boeing and Airbus production schedules", the group's defence market exposure should remain "robust", the JSF should underpin growth and "impressive cash generation should relieve some concern on the level of indebtedness".
In summary, it says, "while the outlook continues to look challenging, Senior is a survivor, and looks set to exit the downturn stronger than it went in".
Source: Flight International