World News

Boeing supplier Senior confident it will ride out MAX crisis

By Yadarisa Shabong

(Reuters) – Senior <SNR.L>, a British supplier to U.S. planemaker Boeing, expects to restart production of parts for the 737 MAX jet in the second quarter, its chief executive said on Monday after reporting better than expected 2019 profit.

Shares of the FTSE 250 company jumped 10% by 0920 GMT, with analysts pointing to its ability to ride out the grounding of 737 MAX jets after two fatal crashes.

The December decision by Boeing to suspend production of its best-selling jets led Senior to warn in January of a 20% fall in revenue this year at its aerospace division, which accounts for the bulk of its revenue.

Boeing CEO Dave Calhoun told reporters in January that the planemaker expects to resume MAX production months before a forecast return to service in mid-2020.

Senior’s aerospace unit makes MAX parts including airframes and engine build-up tubes directly for Boeing, while also supplying parts to other manufacturers involved with the MAX program.

“We are confident we can cope with either a ramp-up or even a further delay,” Chief Executive David Squires told Reuters, referring to production of MAX parts.

The company, with free cash flow of 58.3 million pounds ($74.40 million) at the end of last year, raised its dividend by 1% and said it was taking firm action to restructure its business to ensure a return to growth in 2021.

Most of its restructuring activities have been in operations most exposed to the MAX program, Squires said, adding that he expects a 6% cut to the aerospace division’s workforce by the time the company’s restructuring is completed.

“It is clear that our performance in 2020 will continue to be affected by the 737 MAX situation and the company is taking all necessary action to mitigate the impact,” Squires said.

Its woes have been compounded by economic forecasts that suggest that markets for its flexonics division, which makes parts for a range of industrial sectors, will continue to decline in 2020. The company warned that revenue at the smaller division would also be lower in 2020.

Adjusted pretax profit for the year to Dec. 31 fell 9% to 78.5 million pounds ($100.75 million). Analysts had expected pretax profit of 72.97 million pounds, according to Refinitiv IBES data.

(Reporting by Yadarisa Shabong in Bengaluru; Editing by Patrick Graham and David Goodman)

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