Plane parts makers GKN and Meggitt said civil aerospace orders would likely grow in the second half, adding to signs that the sector is recovering from a deep two-year industry downturn.
“Global air traffic and airline profitability are up and lease financing has returned, which is now underpinning order books,” GKN’s Chief Executive Kevin Smith said.
“Our main customers are quite bullish about increased production rates next year and there are new aircraft coming, so I’m optimistic on the outlook.” Britain’s GKN, which produces airframes, engine structures and components for Airbus and Boeing, swung to a first-half profit, driven by growing aerospace and automotive sales as well as cost cutting initiatives.
Meggitt, which supplies flight displays and wheels to planemakers, reported rising half-year profits and margins and upped its 2011 cost-cutting target after reducing its cost base further in the first six months of the year, Reuters reports.
“Sales of spares and repairs picked up in the last quarter and it looks as if the recovery in the aerospace sector is soundly underway,” said Meggitt’s Chief Executive Terry Twigger, who added that conditions were still challenging. Shares in Meggit were down 5 percent at 292.9 pence by 0925 GMT, while GKN were up 2 percent at 139.4 pence.
“There was a mismatch between high expectations from the market and a more cautious outlook from Meggitt management than was anticipated,” said Bryan Garnier analyst Christophe Menard. “Meggitt has good long-term prospects and the aerospace sector is growing so I think the market is thinking short-term.”
Last year’s slump in global passenger demand meant Airbus and Boeing recorded their worst annual order tally in 15 years. However, EADS, the parent company of Airbus, boosted its revenue and commercial airliner forecasts on Friday, adding to evidence that the sector was on the road to recovery.
Planemakers bagged orders by the dozen at last week’s Farnborough Airshow, particularly from leasing companies whose speculative decisions often anticipate the economic mood. GKN, which also supplies parts to vehicle manufacturers, is also benefiting from the recovery in the automotive market, where it expects sales to continue rising.
“We continue to believe that the structural recovery and subsequent growth profile of global auto is ignored by the market and when added to the aerospace growth the combination is compelling,” Evolution analyst Harry Philips said.
GKN posted a pretax profit of 175 million pounds for the six months to the end of June, compared to a 6 million pounds loss in the same period a year ago, while its sales rose 25 percent to 2.7 billion pounds. Meggitt posted a 3 percent rise in underlying pretax profit to 116.2 million pounds on sales 6 percent lower at 549.7 million pounds in the six months to June.