Helicopter manufacturers’ financial results

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During July and August, the five main helicopter manufacturers released their financial results for the first six months of 2015. It is time to have a look at the results of each company for the first half of 2015 and to highlight the common trends of the industry.

Following Sikorsky’s sale to Lockheed Martin, United Technologies Corporation was the first to present its results to financial analysts on July 21. Sikorsky’s sales for the first six month of 2015 increased by 1% to $2.958 billion compared to H1 2014, while reported Operating Profits reached $257 million. Despite this slight revenue increase, the company delivered only 98 helicopters (23 commercial and 75 military) which represent 13 less units than last year during the same period.

During the presentation of results, UTC’s management explained that overall aircraft shipment volumes were down compared to the prior year, but aircraft completion – aircraft customization that occurs following baseline delivery – was up significantly over the prior year. Besides, the company benefitted from higher development programme sales led by the ramp-up of the U.S. Presidential and Combat Rescue Helicopter programmes, leading to pretty good results despite the difficult commercial environment, as the deliveries show.

Bell helicopter’s revenue over the first half of 2015 was down by 16.5% from $1.992 billion to $1.663 billion and the segment profit was also down by 35% to $177 million. During this period Bell recorded the lowest revenue and profit of the company for the first six months of the year since 2012.

Moreover Bell Helicopter’s backlog has also constantly decreased since 2013, going down from $7.083 million in Q1 2013 to $4.810 million at end of June this year. The company delivered 103 aircraft in H12015 (with 74 commercial and 29 military) vs. 116 helicopters in H12015 (with 80 commercial and 36 military), but the biggest difference of course comes from the V-22 with 12 deliveries vs. 18 one year ago, representing a reduction of around $200 million in revenue.

Airbus Helicopters’ revenue reached $3.304 billion, up by 5.3%, and earnings before interst and taxation (EBIT) was also up by 8% to $181 million in the first six months of 2015. The revenue increase was mainly driven by the ramp-up of government programs and services and partially offset by the much lower helicopter deliveries (152 in H1 2015 vs. 200 in H1 2014). Orders were down for the period by 8.8% with 135 helicopters worth $3.053 billion in the first half of 2015 for an order book of 876 helicopters or around $13 billion.

During H1 2015, AgustaWestland increased its revenue by 3.6% compared to H1 2014 to $2.367 billion, with an EBIT of $284 million up by 3.7% and a strong operating margin of 12.3%. The company registered orders worth $2.527 billion during the six months period (reportedly the only western company with a positive book to bill in H1) and has an impressive backlog of around $14 billion.

Finally, Russian Helicopters recorded sales up by 26% to $1.571 billion for H1 2015, a record for the company. Moreover during the same period the profit was up by 194% to $234 million. These good results are mostly due to the increase military sales and maintenance while the civil segment has negatively impacted Russian Helicopters’ results with a 52% decrease. The Ruble-to-Dollar exchange rate might have had beneficial effects on the company’s results and export. By way of consequence, Russian Helicopters exports have known impressive increase in Asia with a 25% increase in sales and a 1,078.7% increase for Africa where revenue jumped from $31 million to $365 million for the first half of 2015 compare to the same period last year, the latter representing more than 23% of the company’s revenue in H12015.

Direct and indirect impact of oil price decrease

Even if almost all the revenue from western helicopter manufacturers are up, except for Bell Helicopter (-16.5%), oil price still remains a concern for all the companies, and clearly pressure helicopter deliveries. Oil & gas investment slowdown, which has already impacted O&G helicopter companies such as Bristow, whose operating income sunk from $65.192 billion to $4.834 billion during Q2 2015, has also already reached helicopter manufacturers, reducing sales but also maintenance and service revenue.

Moreover the oil price decrease also has an indirect effect on helicopter sales by reducing the financial capacity of countries whose economies rely on the O&G economy. As Textron’s CEO, Scott Donnelly, explained during the financial results presentation of Q1 2015 “I think for us a bigger knock-on effect of that is that historically we see a lot of sales, a lot of our aircraft particularly 412s in emergency medical services, and CSAR and a lot of sort of quasi-military, government operations and a lot of those countries that have very strong oil economies are seeing a lot of CapEx in their budget.”

Due to these two effects, most of the helicopter manufacturers have seen their orders decrease during H1 2015, -8% for Airbus Helicopters, -15.9% for AgustaWestland, and -13% for Bell Helicopter since the end 2014.

In this context, OEMs have adapted their production capacities to the demand end limited the impact of their backlog with a strong reduction in deliveries during the first half of 2015: -26% for Airbus Helicopters, -11.7% for Sikorsky and -7.5% for Bell Helicopter…



Republished with permission from ADIT – The Bulletin.