Finmeccanica posts weak results, cuts 2011 forecasts

1853

Italy’s biggest defence company Finmeccanica reported that first-half operating profit fell 25 percent and cut its revenue forecast for the year, citing a weak economy and structural problems in two business units.

The Rome-based company, which assembles military jets and builds electronic warfare systems, said it was studying ways to resolve the structural issues at its key aeronautics division and its transport unit. It cited insufficient orders and concern over “economic conditions” in the contracts as among the issues, Reuters reports.
“Finmeccanica has grown a lot and now is the time for strong consolidation to make our industrial capabilities more efficient,” CEO Giuseppe Orsi told reporters.

The company plans to merge its Alenia Aeronautica and Aermacchi divisions as a first step to making its aeronautics business more efficient, he said.

Adjusted earnings before interest, taxes and amortisation — a key measure of profit for the company — fell 440 million euros in the first half of the year from 586 million euros in the same period a year earlier.

Revenue fell 3 percent to 8.432 billion euros, hurt by poorer performance in its defence, security electronics and energy units. An uncertain economic recovery and turmoil in emerging markets like Libya also weighed on results.

Finmeccanica has been cutting costs and stepping up its focus on emerging markets like Brazil and India to offset a sluggish economy and weak defence spending in more mature markets closer to home.

LOWER OUTLOOK

Libya in particular was expected to generate billions from contracts in coming years, until a revolt against leader Muammar Gaddafi tore apart close ties between Rome and Tripoli and virtually halted business activity in the North African country.

Net profit more than doubled, thanks largely to the sale of a 45 percent stake in its Ansaldo Energia unit that resulted in a 443 million euro capital gain.

Finmeccanica lowered its revenue forecast for the year to 17.5 billion to 18 billion euros from 18.3 billion to 19 billion euros previously.

The company still expects to take in orders worth about 20 billion euros this year, but is “more uncertain” about its previous EBITA forecast, Chief Financial Officer Alessandro Pansa told reporters.

The company, which earlier this year predicted free operating cash flow of between 410 million to 450 million euros in 2011, declined to provide a precise estimate but said cash flow would be positive this year.

Finmeccanica has been in the spotlight in recent months after a company in which it has a stake was embroiled in a money-laundering probe. Chairman Pier Francesco Guarguaglini was put under investigation this month by Rome prosecutors examining allegations of secret slush funds.

The company denies creating slush funds abroad.

The results came as French peer Thales reported higher-than-expected operating profit in the first half, driven by cost cuts and a dip in provisions for over-budget projects