Poor first quarter results for Leonardo

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Italian defence group Leonardo warns the coronavirus outbreak will have a bigger impact in the second quarter, after reporting a net loss in the first three months.

The company, with key production sites in Italy including the Vergiate helicopter facility, kept all plants open during the lockdown incurring higher health and safety costs due to the crisis.

In addition, some plants ran at a suboptimal rate and the shipping of finished products slowed and even stopped in some areas, hurting profitability.

An order intake of 3.4 billion euros in the first quarter, up 36% compared with last year, helped cushion the business.

“The second quarter will be worse, as in April we were still in complete lockdown and in May we are in a partial lockdown,” CEO Alessandro Profumo told an analysts’ conference call.

The group, with civilian and military customers, suspended its 2020 guidance and pledged to update investors on the full year outlook when releasing second quarter results.

Tt sees the situation gradually improving in the second half of the year provided a second wave of the contagion does not materialise.

“We are not able to quantify the COVID-19 impact in 2020 yet but strongly believe in our solid fundamentals and remain focused on executing our industrial plan,” Profumo said.

A major problem was delivering finished products to clients worldwide at a time when travel was banned or discouraged.

ATR aircraft

As a result, Leonardo did not deliver any aircraft from its ATR unit and delivered only 11 helicopters, compared with 19 last year, during the quarter. The slowdown in deliveries hit sales and core profits.

Revenue fell five percent year-on-year to 2.6 billion euros.

Earnings before interest, tax and amortization (EBITA) dropped 75% percent to 41 million euros. Return on sales, an indicator of profitability, worsened to 1.6% from six percent in the same period last year.

The group swung to a net loss of 59 million euros compared with a profit of 77 million euros in the same period last year.

“We are preparing for smart deliveries,” said Chief Financial Officer Alessandra Genco, adding this would be done by transferring to customers all data of a helicopter’s final tests, without requiring client pilots to carry out the test at the production site.

The group is postponing non-urgent investment, freezing new hires and will cut non-fixed costs by up to15%.

It said it could count on more than five billion euros of available liquidity and did not face debt maturity this year.