Italy’s Leonardo expects core profit rise despite aviation struggle


 Italy’s Leonardo said on Tuesday that its core earnings would improve in 2021 after earnings before interest, tax and amortization (EBITA) fell 25% last year as the COVID-19 pandemic wrecked its civil aviation sales.

Leonardo, which is planning to list a minority stake in its DRS unit this month, said its EBITA was expected to rise to between 1.075-1.125 billion euro ($1.28-1.34 billion), up from 938 million euros in 2020.

Revenue will rise to 13.8-14.3 billion euros, from 13.4 billion euros last year, thanks to new orders and the delivery of activities on military and government programmes, including a 2016 contract with Kuwait for 28 Eurofighters.

Lower orders from Boeing and Airbus for the Aerostructures division, which produces parts of civil airplanes, and the drop in contracts for turbo-prop aircraft by ATR will still weigh on the businesses this year.

“Our civil business is expected to still be heavily affected by the effects of the pandemic, with a further contraction of production volumes in Aerostructures and ATR expected deliveries still far below the pre-pandemic levels,” Leonardo said.

To address the challenges, Leonardo said it plans to adopt measures for the early retirement of about 500 employees, adding it had cut the valuation of its assets in the division.

The Aerostructures business is expected to absorb 350-400 million euros of cash this year, with free operating cashflow seen improving to 100 million from 40 million euros last year.

Assuming no dividends on 2020 results, the group sees net debt at 3.2 billion euros at the end of this year.

Leonardo last year forgave $300 million of related-party debt of DRS, which is now preparing for a listing on the NYSE, the unit said in a filing to the US Securities and Exchange Commission.