BOEING MILITARY DIVISION TO OVERTAKE JETS AS PROFIT CENTRE in ’03
16 Oct 02. Boeing Co.(NYSE:BA – News) on Wednesday said quarterly profit fell 43 percent as the world’s No. 1 jet maker saw deliveries to struggling airline customers shrink, and it predicted sales and profits would fall again next year.
Boeing posted net earnings of $372min the third quarter,(2001: $650m), as weakness in commercial jets, space and customer financing outweighed solid growth in its military unit.
The company also officially conceded for the first time that it would ship fewer jets than rival Airbus SAS (XETRA:EAD.DE – News; Paris:EAD.PA – News) in 2003. But Boeing officials predicted the jetliner unit would remain profitable.
Boeing said it would take a large noncash charge against equity in the fourth quarter to account for a decline in the value of its pension fund, citing stock market losses and low interest rates. The charge will not affect reported profits.
Including a one-time charge to write down slumping aircraft values, but excluding other one-time items, Boeing earned 46 cents per share in the third quarter, meeting the consensus Wall Street analyst forecast, according to market research firm Thomson First Call.
Revenue fell 7 percent to $12.7bn in the quarter, (2001: $13.7bn), as commercial jet revenues declined by $1.9bn. Boeing’s military and space unit revenue rose $468m in the quarter to $3.8bn, and the company confirmed earlier predictions that the unit will overtake commercial jets as its largest business for the first time in 2003. Boeing delivered just 73 commercial jets in the third quarter, down from 120 in the third quarter of 2001. The company trimmed its full-year 2003 delivery forecast to 275 to 285, compared with a previous estimate of 275 to 300, and left its full-year 2002 forecast unchanged at 380.
Boeing Chairman Phil Condit said that Airbus used aggressive pricing to win the sale, but that jet prices in general would not likely weaken further. Claiming Boeing is just as efficient as Airbus, Condit repeated that the U.S. company would not sell jets below cost.
“We have said that we will be aggressive but we won’t be stupid,” Condit said. “The events of the first part of this week bear that out.”
Boeing cut its 2003 revenue forecast by $2bn to $50bn. It left its 2002 forecast unchanged at $54bn. The company reduced its 2003 estimate for free cash flow to a range of $2bn to $2.5bn, from $3bn previously. Boeing also lowered its guidance for operating margins, a measure of profit to sales, to 6.5 percent in 2003 from 8.25 percent previously. It cut its 2002 estimate to 7.25 percent from 8.25 percent.
In a teleconference, Condit said the company would likely make small job cuts beyond the 30,000 layoffs at its commercial jet unit that wind down by the end of this year. Airline weakness was also delaying a decision on launching one of two proposed new jets — a sleek, faster aircraft dubbed Sonic Cruiser and a more efficient mid-sized jet that would look more like the current fleet.
Condit also predicted the commercial satellite and launch business, hit hard by the collapse of many telecommunications networks, would remain weak for years.