Collins Aerospace took a $175 million hit in the first quarter of 2024 due to switching suppliers of titanium, though the aerospace giant still turned an $849 million operating profit in the period.
Parent RTX disclosed the results on 23 April, saying Collins’ results “included $175 million of charges related to unfavorable purchase commitments and an impairment charge as a result of initiating alternative titanium sources”.
Collins uses significant amounts of titanium in its landing gears, says RTX chief financial officer Neil Mitchell.
The company switched titanium suppliers due to “supply chain dynamics” and Canadian sanctions, Mitchell says. He is not more specific and does not name Collins’ former or new titanium suppliers.
Many western aerospace companies have traditionally sourced significant amounts of titanium from Russia, specifically from the country’s primary supplier VSMPO-Avisma.
Some firms have sought new titanium sources following Russia’s invasion of Ukraine, which left some aerospace executives uneasy about relying so heavily on a US foe. While western governments imposed wide-ranging sanctions prohibiting Russian imports, Canada stands largely alone in prohibiting imports of VSMPO-AVISA’s titanium, according to reports. Canada put those sanctions in place earlier this year.
The $175 million titanium-related charge taken by Collins in the first quarter includes costs associated with “unfavourable purchase commitments and an impairment charge as a result of initiating alternative titanium sources”, RTX says.
Mitchell says RTX secured two new suppliers during the first quarter, adding, “This is an important step in putting these issues behind us”.
VSMPO has been among four major aerospace titanium suppliers, the others being US firms TIMET, ATI and Howmet Aerospace.
But the Russian firm has outsized market share. It 2022, aerospace analyst Kevin Michaels with AeroDynamic Advisory said VSMPO produced at least half of the global aerospace industry’s required structural titanium.
Collins $849 million first-quarter operating profit was 5% less than its operating profit in the first quarter of last year. The company’s first-quarter sales jumped 23% year on year to $6.5 billion, largely reflecting a 14% year-on-year bump in sales of equipment and aftermarket services for the commercial aviation market.
