BUSINESS NEWS

Sponsored by SPX Communication Technologies (TCI & ECS)

www.tcibr.com

www.enterprisecontrol.co.uk

———————————————————————————————————————————————————————————————————————————————————————————————————————————-

24 Oct 24. Honeywell sales projections fall short due to ongoing supply-chain disruptions. Honeywell projected annual sales below Wall Street expectations and missed quarterly revenue estimates on Thursday as the industrial giant struggles with persistent supply-chain disruptions and weakness in its industrial automation business.

The automation segment, which helps factories and plants mechanize their manufacturing processes, reported a 5% decline in organic sales for the third quarter, mainly due to soft demand from warehouses.

“Industrial automation has struggled for some time now due to prolonged headwinds in the Intelligrated warehouse automation business,” said Jake Levinson, an analyst at Melius Research.

“They rode the pandemic-driven boom in warehouse construction, notably as it relates to Amazon. But the overhang from that cycle has been painful,” he said.

The company’s shares fell nearly 5% in afternoon trade.

In a post-earnings call with analysts, executives said some “discrete” supply-chain snags in aerospace prodded the company to reconsider its expectations for the year, while Hurricane Helene disrupted some manufacturing. (Source: Reuters)

24 Oct 24. L3Harris lifts lower end of 2024 results forecast amid global tensions. L3Harris (LHX.N), opens new tab raised the lower end of its annual profit and revenue forecasts on Thursday, betting on sustained weapons demand and robust defense spending amid escalating global security concerns.

Shares rose 3.6% after the bell.

Geopolitical tensions have benefited arms manufacturers such as Lockheed Martin , RTX , and Northrop Grumman all of which also raised their 2024 earnings forecasts.

Advertisement · Scroll to continue

The company now expects 2024 adjusted profit to range between $12.95 to $13.15 per share, up from its previous estimate ranging $12.85 – $13.15 per share.

Revenue for the year is now expected to range between $21.1bn to $21.3bn, up from its previous forecast range of $21.0bn to $21.3bn.

The ongoing war in Ukraine has fueled strong demand for U.S. weaponry globally, with nations actively negotiating and striking deals to acquire arms and seeking to expedite ongoing contracts. (Source: Reuters)

24 Oct 24. L3Harris Technologies Reports Strong Third Quarter 2024 Results, Increases 2024 Guidance.

Highlights*

Orders of $7.2bn; book-to-bill of 1.4x
Revenue of $5.3bn, up 8%, and 5% organically
Operating margin of 9.4%; adjusted segment operating margin of 15.7%
Diluted earnings per share (EPS) of $2.10; non-GAAP diluted EPS of $3.34
2024 revenue guidance range increased to $21.1bn – $21.3bn
2024 adjusted segment operating margin guidance increased to ~15.5%
2024 non-GAAP diluted EPS guidance range increased to $12.95 – $13.15

L3Harris Technologies (NYSE: LHX) reported third quarter 2024 diluted EPS of $2.10, an increase of 4% from third quarter 2023, on third quarter 2024 revenue of $5.3bn, an increase of 8%. Third quarter 2024 non-GAAP diluted EPS was $3.34, a 5% increase from third quarter 2023. A reconciliation of non-GAAP results are detailed in tables beginning on page 11.

“We delivered strong third-quarter results, highlighted by outstanding book-to-bill of 1.4x, solid organic growth, and while continuing to improve margins as we make progress toward the financial framework announced at our 2023 Investor Day. These results reaffirm that our Trusted Disruptor strategy is working, driving value for our customers, shareholders and employees,” said Christopher E. Kubasik, Chair and CEO.

Kubasik added, “We are making impressive progress on our LHX NeXt initiative and expect to exceed the 2024 cost savings target of $400 m. As a result, we are updating our 2024 savings target to at least $600 m and now expect to reach the overall target of $1 bn a year early. Our pipeline provides opportunity for additional cost savings opportunities to exceed the $1bn target. All of this gives us confidence to deliver 2026 segment operating margins of at least 16%.”

Revenue: Third quarter revenue increased 8%, primarily driven by the acquisition of Aerojet Rocketdyne (AR) and 5% total organic growth, primarily from continued robust demand for our resilient communication products and night vision devices in our Communication Systems (CS) segment. Organic growth was also driven by our Integrated Mission Systems (IMS) segment, with higher aircraft missionization volumes, increased volumes for advanced electronics related to space and munitions programs, and higher volumes in our Commercial Aviation business, the divestiture of which is pending closure.

* Adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS, pension adjusted non-GAAP diluted EPS, organic revenue and adjusted free cash flow are non-GAAP financial measures defined on page 17. A reconciliation of adjusted segment operating income and margin, effective tax rate on non-GAAP income, non-GAAP diluted EPS and adjusted free cash flow on a forward-looking basis to GAAP is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 7 for more information.

Operating Margin:

GAAP: Third quarter operating margin decreased 30 bps to 9.4% primarily driven by an increase in unallocated items, including an increase in valuation allowance related to the pending Commercial Aviation Solutions business divestiture and increases in fair value of non-qualified retirement plan liabilities. This was partially offset by improved segment performance and a full quarter of contribution from AR.

Adjusted segment operating margin: Expanded 70 bps to 15.7%, with solid contribution from LHX NeXt cost savings, strong performance from higher volume and favorable mix in our CS segment, and improved program performance in our IMS segment. This was partially offset by the absence of a non-recurring license sale that positively impacted 2023 and challenges on classified space development programs, both in our SAS segment.

Diluted EPS:

GAAP: Third quarter diluted EPS increased 4% to $2.10 due to an increase in operating income and lower FAS/CAS operating adjustment, partially offset by higher interest expense.

Non-GAAP: Increased 5% to $3.34 driven by higher adjusted segment operating income, partially offset by higher interest expense.

Pension Adjusted Non-GAAP: Increased 8% to $2.94 driven by higher adjusted segment operating income, partially offset by higher interest expense. We believe this represents the best economic measure of our EPS as it reflects the operational performance of our segments without non-cash impacts of pension accounting, primarily FAS/CAS operating adjustment.

The largest differences between GAAP and Non-GAAP diluted EPS are attributable to amortization of acquisition-related intangibles and LHX NeXt implementation costs.

Cash Flows:

Cash from Operations: Third quarter cash from operations increased 44% to $780m driven by net income growth and decreases in transaction costs related to the AJRD acquisition, partially offset by timing of working capital.

Adjusted free cash flow: Increased 18% to $728m driven by net income growth and decreases in capital expenditures, partially offset by timing of working capital.

SEGMENT RESULTS AND GUIDANCE*

SAS

Revenue: Third quarter revenue was flat, reflecting the divestiture of the antenna business in the second quarter. Excluding the divestiture impact, organic revenue increased 2%, primarily from growth of classified programs in Intel and Cyber, and increased volume in our FAA mission-critical safety of flight networks business. Organic revenue was partially offset by lower F-35 related volumes as TR-3 development ramps down in our Airborne Combat Systems business. Growth was also impacted by challenges on classified development programs, LHX NeXt cost savings and the absence of a non-recurring license sale that positively impacted 2023.

Operating Margin: Third quarter operating margin decreased 90 bps, primarily due to the absence of an $18m non-recurring license sale that positively impacted 2023 and challenges on classified development programs, partially offset by growth in Intel and Cyber and FAA mission-critical safety of flight networks businesses, and LHX NeXt cost savings.

IMS

Revenue: Third quarter revenue increased primarily from higher aircraft missionization volumes, increased advanced electronics demand for space and munitions programs, and higher volumes in our Commercial Aviation Solutions business, the divestiture of which is pending closure.

Operating Margin: Third quarter operating margin increased 30 bps, primarily from improved program performance across the segment, LHX NeXt cost savings and higher volume and favorable mix in Commercial Aviation Solutions, partially offset by unfavorable mix impact in our aircraft missionization business.

Revenue: Third quarter revenue increased 10%, primarily driven by robust demand for our resilient communication equipment, related waveforms, and night vision devices. Growth for software defined tactical radios was especially strong across international markets, in particular from NATO countries, reflecting demand for our superior capabilities for critical battlefield communications equipment and waveforms.

Operating Margin: Third quarter operating margin increased 350 bps as a result of strong performance from higher volumes, favorable high margin international mix, proprietary waveform license sales, and LHX NeXt cost savings.

Revenue and Operating Margin: Third quarter results are attributed to program execution across both sectors, Missile Solutions and Space Propulsion and Power Systems, reflecting a full quarter of contribution for 2024 and a partial quarter for 2023, from the July 28, 2023 acquisition date. Operating margins include the positive impact of amortization related to purchase price adjustments.

24 Oct 24. Northrop Grumman Reports Third Quarter 2024 Financial Results

Net awards of $11.7bn; record backlog of $85bn
Q3 sales of $10.0bn; year to date sales up 6 percent
Operating margin rate of 11.2 percent; segment operating margin rate1 of 11.5 percent
Diluted earnings per share increase 13 percent to $7.00
Company raises lower end of 2024 segment operating income1 guidance and increases MTM-adjusted EPS1 guidance by 75 cents to $25.65 – $26.05. Northrop Grumman Corporation (NYSE: NOC) reported third quarter 2024 sales increased 2 percent to $10.0bn, as compared with $9.8bn in the third quarter of 2023. Third quarter 2024 sales reflect continued strong demand for our products and services. Third quarter 2024 net earnings totaled $1.0bn, or $7.00 per diluted share, as compared with $937m, or $6.18 per diluted share, in the third quarter of 2023.

“Based on the strength of our year-to-date results and our positive outlook for the future, we are once again raising our 2024 guidance. Sales remain on target for 5% growth this year and the deliberate actions we are taking to improve margin rates have resulted in further expansion this quarter,” said Kathy Warden, chair, chief executive officer and president. “With our investments to create capacity and focus on performance, we continue to deliver value for our customers and our shareholders. As we look toward 2025, our outlook includes continued top line growth, margin rate expansion and greater than 20% free cash flow growth.”

Sales Third quarter 2024 sales increased $221m, or 2 percent, due to higher sales at Mission Systems, Aeronautics Systems and Defense Systems, partially offset by lower sales at Space Systems largely driven by a reduction of $224m associated with wind-down of our work on the restricted space and NGI programs, as previously disclosed.

Third quarter 2024 sales reflect continued strong demand for our products and services. Operating Income and Margin Rate Third quarter 2024 operating income increased $104m, or 10 percent, primarily due to $57 m of higher segment operating income1 and a $40m increase in the FAS/CAS operating adjustment.

Operating margin rate increased to 11.2 percent from 10.4 percent primarily due to benefits associated with the FAS/CAS operating adjustment and a higher segment operating margin rate. Segment Operating Income and Margin Rate Third quarter 2024 segment operating income increased $57m, or 5 percent, primarily due to a higher segment operating margin rate and higher sales. Segment operating margin rate1 increased to 11.5 percent and reflects higher operating margin rates at Space Systems and Aeronautics Systems, partially offset by lower operating margin rates at Mission Systems and Defense Systems. Federal and Foreign Income Taxes

The company’s third quarter 2024 effective tax rate (ETR) decreased to 13.6 percent from 16.2 percent in the prior year period principally driven by a net reduction in tax reserves largely due to a recent federal court decision, partially offset by higher interest expense on unrecognized tax benefits.

Net Earnings and Diluted EPS Third quarter 2024 net earnings increased $89 m, or 9 percent, primarily due to $104 m of higher operating income, a $36 m increase in the non-operating FAS pension benefit and a lower effective tax rate, partially offset by a $97m gain recognized in the prior year upon the sale of a minority investment. Third quarter 2024 diluted earnings per share increased 13 percent, reflecting a 9 percent increase in net earnings and a 3 percent reduction in weighted-average diluted shares outstanding.

Cash Flows Third quarter 2024 cash provided by operating activities decreased $137 m and third quarter 2024 free cash flow1 decreased $139m principally due to higher net federal tax payments. Awards and Backlog Third quarter 2024 net awards totaled $11.7bn and backlog totaled $84.8bn.

Significant third quarter new awards include $2.7bn for restricted programs (primarily at Mission Systems, Aeronautics Systems, and Space Systems), $1.6bn for E-2 and $0.7bn for certain military ammunition programs.

Segment Operating Results Effective July 1, 2024, the company realigned the Strategic Deterrent Systems (SDS) division, which includes the Sentinel program, from Space Systems to Defense Systems. This realignment is reflected in the accompanying financial information. Recast financial information for certain prior periods is presented in Schedule 6 of this release.

AERONAUTICS SYSTEMS

Three Months Ended September 30

Sales

Third quarter 2024 sales increased $112m, or 4 percent, primarily due to higher F-35 production volume largely driven by the timing of materials, increased E-2 fleet sustainment and modernization work, higher Triton LRIP production volume and an increase in Global Hawk sustainment activities. These increases were partially offset by lower restricted sales.

Operating Income Third quarter 2024 operating income increased $15m, or 5 percent, due to higher sales and a higher operating margin rate. Operating margin rate increased to 10.4 percent from 10.2 percent principally due to higher net EAC adjustments, largely driven by improved performance and cost efficiencies on certain mature production programs.

DEFENSE SYSTEMS

Three Months Ended September 30

Third quarter 2024 sales increased $34m, or 2 percent, primarily due to higher volume on the Sentinel program, ramp-up on the Stand-in Attack Weapon (SiAW) program and higher volume on certain military ammunition programs. These increases were partially offset by lower volume due to the completion of an international training program and lower volume on the Special Electronic Mission Aircraft (SEMA) program as that program nears completion.

Operating Income Third quarter 2024 operating income decreased $5m, or 2 percent, due to a lower operating margin rate, partially offset by higher sales. Operating margin rate decreased to 9.4 percent from 9.8 percent principally due to lower net EAC adjustments and changes in contract mix.

Northrop Grumman Reports Third Quarter 2024

Financial Results

MISSION SYSTEMS

Third quarter 2024 sales increased $195m, or 7 percent, primarily due to higher volume on restricted advanced microelectronics and technology programs, increased marine systems sales due, in part, to the timing of materials, and higher Ground/Air Task Oriented Radar (G/ ATOR) volume due to continued ramp-up on full-rate production (FRP) awards.

Operating Income Third quarter 2024 operating income increased $4m, or 1 percent, due to higher sales, partially offset by a lower operating margin rate. Operating margin rate decreased to 13.8 percent from 14.7 percent primarily due to lower net EAC adjustments and changes in contract mix toward more cost-type content.

SPACE SYSTEMS

Sales

Third quarter 2024 sales decreased $83m, or 3 percent, primarily due to wind-down of our work on the restricted space and NGI programs, which reduced sales by $224 m. This reduction was partially offset by a $129m increase on Space Development Agency (SDA) satellite programs and higher sales across our remaining restricted space portfolio.

Operating Income Third quarter 2024 operating income increased $43m, or 14 percent, due to a higher operating margin rate, which more than offset lower sales. Operating margin rate increased to 12.0 percent from 10.2 percent principally due to an improvement in net EAC adjustments, partially offset by a $16m benefit in the prior year from insurance recoveries in our commercial space business. (Source: BUSINESS WIRE)

24 Oct 24. Textron Reports Third Quarter 2024 Results.

EPS of $1.18; adjusted EPS of $1.40, down from $1.49 in the prior year
Net cash from operating activities of $208m in the third quarter of 2024
$215m returned to shareholders through share repurchases in the third quarter
Textron Aviation segment revenue and profit impacted by IAM strike

Textron Inc. (NYSE: TXT) today reported third quarter 2024 income from continuing operations of $1.18 per share, as compared to $1.35 per share in the third quarter of 2023. Adjusted income from continuing operations, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, was $1.40 per share for the third quarter of 2024, compared to $1.49 per share in the third quarter of 2023.

“The labor disruption adversely impacted our third quarter results and we expect it to negatively affect fourth quarter financials.”

Post this

“In the third quarter, Textron Aviation experienced a strike upon the expiration of its existing labor agreement with bargaining unit employees that was recently settled with the ratification of a new five-year contract,” said Textron Chairman and CEO Scott C. Donnelly. “The labor disruption adversely impacted our third quarter results and we expect it to negatively affect fourth quarter financials.”

“In the quarter, Bell achieved a key milestone on the FLRAA program with the U.S. Army’s approval of Milestone B establishing FLRAA as a program of record,” said Donnelly. “In addition, at Textron Aviation, the ongoing investment in new products continued to drive demand, achieving over $1.0 bn of new orders.”

Cash Flow

Net cash provided by operating activities of the manufacturing group for the third quarter was $208 m, compared to $270m last year. Manufacturing cash flow before pension contributions, a non-GAAP measure that is defined and reconciled to GAAP in an attachment to this release, totaled $147 m for the third quarter, compared to $205m last year.

In the quarter, Textron returned $215m to shareholders through share repurchases. Year to date, Textron has returned $890m to shareholders through share repurchases.

Outlook

On October 20th, the International Association of Machinists and Aerospace Workers (IAM) District 70, Local Lodge 774 representing the Wichita-based direct labor workforce, ratified a new five-year labor contract, after engaging in a four-week strike. While it has been resolved, we expect revenue and segment profit to be unfavorably impacted in the fourth quarter of 2024 related to the labor disruption and the recovery of production and delivery activities as our employees return to work.

Textron now expects 2024 adjusted earnings per share from continuing operations to be in a range of $5.40 to $5.60, down from its previous outlook of $6.20 to $6.40. Manufacturing cash flow before pension contributions is now expected to be in a range of $650 m to $750 m, as compared to its previous outlook of $0.9 bn to $1.0 bn, with planned pension contributions of about $50 m.

Third Quarter Segment Results

Textron Aviation

Delayed aircraft deliveries along with unfavorable performance from manufacturing inefficiencies associated with the labor disruption resulting from the IAM strike lowered Textron Aviation’s third quarter revenues by approximately $50m and segment profit by approximately $30m.

Textron Aviation’s revenues were $1.3bn, essentially unchanged from last year’s third quarter, with higher pricing of $36 m mostly offset by lower volume and mix of $35m.

Textron Aviation delivered 41 jets in the quarter, up from 39 in the third quarter of 2023, and 25 commercial turboprops, down from 38 in last year’s third quarter.

Segment profit was $128m in the third quarter, down $32m from a year ago, reflecting lower volume and mix of $29m.

Textron Aviation backlog at the end of the third quarter was $7.6bn, up $162 m from the second quarter.

Bell

Bell revenues were $929 m, up $175m from the third quarter of 2023, largely reflecting higher volume and mix of $148m. Volume and mix included higher military volume of $81m, primarily related to the FLRAA program, partially offset by lower volume on the V-22 program, and higher commercial volume and mix of $67m, reflecting an increase in deliveries.

Bell delivered 44 commercial helicopters in the quarter, up from 23 in last year’s third quarter.

Segment profit of $98m was up $21m from last year’s third quarter, largely due to a favorable impact from performance of $17m, and a favorable impact from pricing, net of inflation, of $12m.

Bell backlog at the end of the third quarter was $6.5bn, up $2.3bn from the second quarter, largely reflecting approval of Milestone B for FLRAA and the resulting transition into the Engineering and Manufacturing Development phase of the program.

Textron Systems

Revenues at Textron Systems were $301m, down $8m from last year’s third quarter, largely due to lower volume.

Segment profit of $39m was down $2m, compared with the third quarter of 2023.

Textron Systems’ backlog at the end of the third quarter was $1.9bn.

Industrial

Industrial revenues were $840m, down $82m from last year’s third quarter, mainly due to lower volume and mix of $86m, principally in the Specialized Vehicles product line.

Segment profit of $32m was down $19m from the third quarter of 2023, primarily due to lower volume and mix.

Textron eAviation

Textron eAviation segment revenues were $6m and segment loss was $18m in the third quarter of 2024, compared with a segment loss of $19m in the third quarter of 2023.

Finance

Finance segment revenues were $12m, and profit was $5m.

(Source: BUSINESS WIRE)

23 Oct 24. Branford Castle Partners, a North American-focused private equity firm, today announced that it has acquired Hoffman Engineering, a leading provider of proprietary situational awareness solutions for mission-critical aerospace and defense applications, from Trident Maritime Systems (“Trident”). Terms of the transaction were not disclosed.

Hoffman marks the sixth platform investment and eleventh acquisition overall for Branford Castle’s Fund II, which closed in 2021. Over the last few months, Branford Castle has also announced the successful exits of its investments in Clean Solutions Group, the first exit from Fund II, and Earthlite Massage Tables, the fourth exit from Fund I.

Based in Stamford, CT, Hoffman is a global leader in the development and manufacturing of night vision test equipment, night vision imaging lighting systems and commercial aviation LED specialty lighting products. Since its inception in 1955, the Company has developed a strong brand reputation within the night vision sector and its products are utilized by the U.S. military, aerospace and defense OEMs, as well as by commercial airlines. Hoffman CEO Ron Hayward and the rest of the existing management team will remain with the Company going forward.

Ceon Francis, Managing Director at Branford Castle, said, “We are excited to partner with Ron and the entire Hoffman team. We see attractive opportunities in this market as the aerospace and defense industry continues to expand, creating increased demand for the most advanced, mission-critical products available. The Company’s leading position in the night vision market, along with its proprietary capabilities, makes it a terrific platform for growth.”

Eric Korsten, Senior Managing Director at Branford Castle, said, “This important transaction would not have been possible without our long-time financing partners, O2 Sponsor Finance and Brookside Capital Partners, whose continued support of our growing portfolio is greatly valued.”

Mr. Hayward added, “Today’s milestone is a validation of the trusted innovative solutions and customer-focused culture that we have worked tirelessly to achieve. We are extremely grateful for the support of our previous owner, Trident, and look forward to continuing to deliver on future growth opportunities with our new partners at Branford Castle Partners.”

Branford Castle was advised by its legal counsel, Akerman LLP, and RSM served as its accounting/tax advisor. Hoffman was advised on the sell-side by Philpott Ball & Werner, LLC. O2 Sponsor Finance is providing senior debt financing and Brookside Capital Partners is providing mezzanine debt financing for the transaction.

ABOUT BRANFORD CASTLE PARTNERS

Branford Castle is a private market investor focused on lower middle-market investments, with more than 35 years of helping to grow businesses. The Firm typically makes control investments in companies with up to $15 m of EBITDA and a leadership position in a niche industry. Branford Castle is particularly keen on the strong relationships it develops with its portfolio company managers. Branford Castle has particular expertise in industrials/specialty manufacturing, consumer products, business services and logistics. For more information, please visit branfordcastle.com. (Source: PR Newswire)

24 Oct 24. Patria Group’s Interim Report for 1 January – 30 September 2024.

Patria’s net sales and order stock development were at a good level in the third quarter.

The third quarter of 2024

Patria Group’s net sales for the for the three quarters was EUR 538.1m (EUR 487.9m in the comparison period).
Operating profit was EUR 30.0m (EUR 36.9m).
Equity ratio was 33.4% (41.5%) and net gearing 110.8% (80.5%).
The third year of Patria’s Horizon 2025 strategy commenced according to expectations. Patria’s net sales and the development of order stock are at a good level and profitability at the expected level.
The development of customer-centricity, operational efficiency and productivity and new ways of working continued in the third quarter according to the strategy. The focus of the development has been on Patria’s Operations unit, responsible for company’s production and supply chains, and Portfolio unit, responsible for Patria’s products and services and their development. Patria’s renewed operating model came into force on 1 January, 2024.
Patria’s success in 6×6 and 8×8 vehicle programmes has continued, which supports the development of other business operations and Group’s internationalization.
The first locally produced Patria 6×6 armoured personnel carrier was handed over to the Latvian National Armed Forces in August. Patria’s Valmiera production facility was opened in May. In August, Patria, Finland and Latvia also signed a Life Cycle Management (LCM) contract related to the Common Armored Vehicle System (CAVS) programme. In September, the Finnish Defence Forces redeemed the last 29 Patria 6×6 vehicles that were part of the additional procurement reservation, which were already included in the previously signed series agreement as part of the CAVS programme.
In September, it was announced that Patria will provide modification design (Supplemental Type Certificate) for Norwegian Armed Forces Bell 412 helicopters.
In September, Patria announced that it acquires an open source data collection product and business related to its cyber business area from WithSecure. As a result of the transaction, Patria will open an office in Oulu, Finland and 10 WithSecure experts working in the business area will join Patria.
The multi-year cooperation between the U.S. Army and Patria reached a major milestone at the Maneuver Warfighter Conference in Fort Moore, Georgia in September where several successful fire missions were conducted using Patria NEMO 120 mm Turreted Mortar System, integrated onto a U.S. made Armoured Multi-Purpose Vehicle (AMPV) and Fire Direction System (FCD).
In September, Patria and Rheinmetall unveiled first UK prototype Boxer Armoured Mortar Variant at Defence Vehicle Dynamics exhibition.

Events after the period

Patria received authority approval for the Nordic Drones acquisition and transaction of open source data collection product and business from WithSecure and the businesses were transferred to Patria on 1 October, 2024.

Outlook for the rest of the year

Patria continues to strengthen its operational efficiency and productivity and seeks profitable growth in line with its Horizon 2025 strategy in the third year of the strategy period. Patria’s reliable and cost-effective lifecycle support services and top-notch products have a key role also in the future in maintaining required performance of customer fleets in all conditions.

Following Finland’s decision in December 2021 to acquire F-35 fighter jets, negotiations concerning industrial participation of the selected aircraft will continue also in 2024. Preparations to kick off the production are under way, and the resourcing needs are being analysed and the relevant recruiting has commenced.

The multinational joint CAVS programme of the Patria 6×6 vehicle is proceeding as planned. The serial production of the Finnish and Latvian vehicles is ongoing and the first batch of vehicles to Sweden has been delivered. Germany has officially joined the programme by signing the Technical Arrangement. The joint programme has raised interest and is open also for other countries to join by mutual consent of the participating countries.

In 2023, Patria and Japan Steel Works Ltd. signed a relating license agreement on manufacturing Patria AMV XP 8×8 vehicles in Japan and the preparations for kicking off manufacturing are ongoing. The start of serial production of Slovakia’s 8×8 vehicle project has been slower than expected, which may affect the outlook for the rest of the year.

The impact of long-term development of the current geopolitical situation, general economic uncertainty, inflation and increasing costs for the rest of the year are difficult to evaluate reliably. At the same time Patria’s delivery capability is expected to stay at a good level. The outlook for net sales and profitability for the rest of the year remains strong. In the mid and long term, Patria and the defence industry in general are likely to see an increase in demand as defence spends are increasing in the majority of European countries.

22 Oct 24. MTU Aero Engines Q3 beats market expectations. German engine manufacturer MTU Aero Engines (MTXGn.DE) beat third-quarter profit expectations on Thursday buoyed by commercial original equipment manufacturing and its spare parts business.

Adjusted earnings before interest and taxes (EBIT) rose by 42% to 273m euros ($295m), in line with preliminary results published in October and above the 235 m euros expected by analysts in a company-provided consensus.

“Earnings in the OEM business reflect the profitable revenue mix, with a high proportion of spare and lease engines, the high demand for spare parts and the increase in the military business,” Peter Kameritsch, CFO of the Airbus (AIR.PA), and Boeing (BA.N) supplier, said.

Airbus, one of MTU’s main clients, cut its delivery target for 2024 in June. This led to increased demand for spare parts, of which sales are usually highly profitable. (Source: Reuters)

23 Oct 24. General Dynamics’ revenue rise on defense, but profits hit by bizjet deliveries.

Summary
Companies
Defense unit revenue driven by global conflicts
Bizjet deliveries fall short due to engine delays
Marine Systems profit margins revised down by Novakovic

General Dynamics reported a more than 10% rise in third-quarter revenue on Wednesday, driven by strength in its defense unit, but fewer business jet deliveries hurt company profits.

Shares of the Reston, Virginia-based company were flat in early trading after reporting quarterly revenue of nearly $11.67bn, up from $10.57bn a year ago.

The ongoing conflicts in Ukraine and the Middle East and the United States’ efforts to replenish its inventory are driving increased global demand for munitions, vehicles and other military equipment.

For the quarter ended Sept. 29, the company’s aerospace segment which makes Gulfstream business jets saw revenue rise to $2.4bn, up 22.1% from a year ago. But profit margins were 12.3%, lower by nearly a percentage point compared to the same period a year ago.

Total deliveries in the company’s aerospace segment rose to 24 jets, including four G700s, from 22 a year ago. But the company said it delivered 11 fewer G700 business jets than expected due to engines arriving later than hoped due to an elongated certification timeline.

(Source: Reuters)

23 Oct 24. General Dynamics Reports Third-Quarter 2024 Financial Results.

Revenue of $11.7bn, up 10.4% from year-ago quarter
Operating earnings of $1.2bn, up 11.7% from year-ago quarter
Diluted EPS of $3.35, up 10.2% from year-ago quarter
Operating margin of 10.1%, a 10-basis-point expansion from year-ago quarter

General Dynamics (NYSE: GD) today reported third-quarter 2024 revenue of $11.7bn, up 10.4% from the third quarter of 2023. Operating earnings of $1.2bn were up 11.7% from the year-ago quarter. Diluted earnings per share (EPS) were $3.35, up 10.2% from the year-ago quarter. Operating margin for the quarter was 10.1%, a 10-basis-point expansion from the year-ago quarter.

“The company continues to see strong growth and steady improvement in operating performance,” said Phebe Novakovic, chairman and chief executive officer. “Demand across the portfolio also remains strong in the current environment.”

Gulfstream delivered 28 aircraft in the quarter, of which 24 were large-cabin aircraft, including four G700s. This compares with 27 aircraft delivered in the year-ago quarter, of which 22 were large cabin.

Cash and Capital Deployment

Net cash provided by operating activities in the quarter was $1.4bn, or 152% of net earnings. During the quarter, the company paid $390m in dividends, invested $201m in capital expenditures, and used $44m to repurchase shares, ending the quarter with $2.1bn in cash and equivalents on hand.

Orders and Backlog

The consolidated book-to-bill ratio, defined as orders divided by revenue, was 1.1-to-1 for the quarter. Company-wide backlog was $92.6bn. Estimated potential contract value, representing management’s estimate of additional value in unfunded indefinite delivery, indefinite quantity (IDIQ) contracts and unexercised options, was $45bn. Total estimated contract value, the sum of all backlog components, was $137.6bn.

In the Aerospace segment, orders in the quarter totaled $2.4bn. The segment ended the quarter with backlog of $19.8bn.

In the defense segments, orders in the quarter totaled $10.5bn, with particular strength in the Combat Systems and Technologies segments. Significant awards in the defense segments included $885 m for various munitions and ordnance, with maximum potential value of $1.7bn; $465m, with maximum potential value of $1.7 bn, for two U.S. Army contracts for production of 155mm artillery projectile metal parts; $780m, with maximum potential contract value of more than $6.7bn including options, for the construction of additional John Lewis-class (T-AO-205) fleet replenishment oilers; $1.5bn for long-lead materials for Block VI Virginia-class submarines; $840m, with maximum potential value of $1bn, for several key contracts for classified customers; and $605m for multiple awards from the U.S. Space Development Agency to develop and integrate ground systems for the low-Earth orbit satellite network.

23 Oct 24. Luerssen, Rheinmetall among potential suitors for Thyssenkrupp marine unit, sources say. German shipbuilder Luerssen and defence group Rheinmetall (RHMG.DE) could emerge as potential suitors for the warship division of conglomerate Thyssenkrupp (TKAG.DE) two people familiar with the matter said.

It comes a day after news that private equity firm Carlyle (CG.O) had dropped out of the process for Thyssenkrupp Marine Systems (TKMS), in what was a blow to Thyssenkrupp’s ongoing restructuring and had weighed on shares.

Rheinmetall and Luerssen declined comment.

Thyssenkrupp referred to comments made on Tuesday, when it said it would intensify efforts to find a standalone solution for TKMS, including a possible spin-off, adding that it also remained open to industrial partnerships.

Handelsblatt reported earlier, citing industry sources, that Luerssen had expressed interest in TKMS and that talks were also being held with Rheinmetall about a potential deal. (Source: Reuters)

23 Oct 24. Sophos acquires Secureworks in $1.3bn deal. Major British cyber security software firm Sophos has announced its acquisition of US cyber security company Secureworks in an US$859m (A$1.3bn) deal. Now formerly Dell-owned, Secureworks is best known for its Taegis cloud-native security platform, which makes use of analytics and machine learning to identify hidden threats as well as prioritise higher-risk threats. Sophos said the acquisition of Secureworks will see it integrate solutions from both firms and deliver its customers a stronger security portfolio, which is currently made up of its identity detection and response (ITDR), next-gen SIEM capabilities, operation technology (OT) and enhanced vulnerability risk prioritisation.

“Secureworks offers an innovative, market-leading solution with [its] Taegis XDR platform. Combined with our security solutions and industry leadership in MDR, we will strengthen our collective position in the market and provide better outcomes for organisations of all sizes globally,” said Sophos CEO Joe Levy.

“Secureworks’ renowned expertise in cyber security perfectly aligns with our mission to protect businesses from cyber crime by delivering powerful and intuitive products and services. This acquisition represents a significant step forward in our commitment to building a safer digital future for all.”

The Sophos-Secureworks deal will be a US$859m all-cash transaction, with Sophos backed by software investment firm Thoma Bravo. (Source: https://www.cybersecurityconnect.com.au/)

22 Oct 24. RTX (RTX.N) on Tuesday raised its 2024 adjusted profit and sales forecasts for the second time, citing strong demand for aircraft repairs and defense systems, and reported better-than-expected quarterly earnings.

Shares of the Arlington, Virginia-based company were up 2.1% before the opening bell.

The aerospace and defense giant expects full-year adjusted profit per share to be between $5.50 and $5.58, compared with its prior forecast range of $5.35 to $5.45.

The company raised its revenue forecast range to $79.25bn to $79.75bn, from $78.75 to $79.5bn.

With a surge in air travel demand, airlines had to extend the service life of aircraft amid the limited availability of new commercial planes, creating a bustling aftermarket business. (Source: Reuters)

22 Oct 24. RTX Reports Third Quarter 2024 Results. RTX delivers strong operational performance; Increases 2024 outlook for adjusted sales* and adjusted EPS*

RTX (NYSE: RTX) reported third quarter 2024 results.

Third quarter 2024

Reported sales of $20.1bn
Adjusted sales* of $20.1bn, up 6 percent versus prior year, and up 8 percent organically* excluding the divestiture of the Cybersecurity, Intelligence and Services business
GAAP EPS was $1.09 and included $0.31 of acquisition accounting adjustments and $0.05 of restructuring and other net significant and/or non-recurring charges
Adjusted EPS* of $1.45, up 16 percent versus prior year
Operating cash flow of $2.5bn; Free cash flow* of $2.0bn
Company backlog of $221bn; including $131 bn of commercial and $90bn of defense
Returned $1.1bn of capital to shareowners, returning over $32bn since the merger
Realized $90m of incremental RTX gross cost synergies, achieving the $2bn post-merger target

Updates outlook for full year 2024

Adjusted sales* of $79.25 – $79.75bn, up from $78.75 – $79.5bn
Adjusted EPS* of $5.50 – $5.58, up from $5.35 – $5.45
Confirms free cash flow* of approximately $4.7bn

“RTX delivered another strong quarter of organic sales* growth, adjusted segment margin* expansion, and free cash flow*,” said RTX President and CEO Chris Calio. “Demand across our portfolio, particularly within commercial aftermarket and defense, remains robust and gives us the confidence to again raise our full year outlook for adjusted sales* and adjusted EPS*.”

“With a record $221bn backlog, we are focused on executing our strategic priorities to drive best-in-class performance, deliver for our customers and create long-term shareowner value.”

Third quarter 2024

RTX reported third quarter sales of $20.1bn. Adjusted sales* were $20.1bn, up 6 percent over the prior year. GAAP EPS of $1.09 included $0.31 of acquisition accounting adjustments, and $0.05 of restructuring and other net significant and/or non-recurring charges. Adjusted EPS* of $1.45 was up 16 percent versus the prior year.

The company reported net income attributable to common shareowners in the third quarter of $1.5bn which included $418m of acquisition accounting adjustments, and $58m of restructuring and other net significant and/or non-recurring charges. Adjusted net income* of $1.9bn was up 7 percent versus the prior year driven by growth in adjusted segment operating profit* and a lower effective tax rate. This increase was partially offset by higher interest expense and lower pension income. Operating cash flow in the third quarter was $2.5bn. Capital expenditures were $552m, resulting in free cash flow* of $2.0bn.

The prior year reported results included a charge related to the previously disclosed Pratt powder metal matter which reduced sales by $5.4 bn, net income by $2.2bn, and GAAP EPS by $1.53.

Summary Financial Results – Operations Attributable to Common Shareowners

Segment Results

Collins Aerospace

Collins Aerospace had third quarter 2024 reported sales of $7,075m, up 7 percent versus the prior year. The increase in sales was driven by a 14 percent increase in defense and a 9 percent increase in commercial aftermarket, partially offset by an 8 percent decrease in commercial OE. The increase in defense sales was driven by higher volume across multiple programs, and the increase in commercial aftermarket sales was driven by continued growth in commercial air traffic, including higher flight hours. The decrease in commercial OE sales was driven by lower narrowbody volume. Adjusted sales* of $7,075m, were up 6 percent versus the prior year.

Collins Aerospace reported operating profit of $1,062m, up 18 percent versus the prior year. The increase in operating profit was driven by drop through on higher commercial aftermarket and defense volume. This increase was partially offset by lower commercial OE volume, unfavorable commercial OE mix, and higher R&D expense. Q3 2024 benefited from the absence of a $57 m charge related to a litigation matter in the prior year, as well as lower restructuring costs. On an adjusted basis, operating profit* of $1,096m was up 5 percent versus the prior year.

Pratt & Whitney

Pratt & Whitney had third quarter 2024 reported sales of $7,239m. Adjusted sales* of $7,239m, were up 14 percent versus the prior year driven by a 13 percent increase in commercial aftermarket, a 20 percent increase in military, and a 9 percent increase in commercial OE. The increase in commercial sales was driven by higher aftermarket volume, as well as favorable OE mix in Large Commercial Engines. The increase in military sales was driven by higher sustainment volume across the F135 and F117 platforms, as well as higher development volume driven by the F135 Engine Core Upgrade program.

Pratt & Whitney reported operating profit of $557m, up versus the prior year. Operationally, the increase was driven by drop through on higher commercial aftermarket and military volume. Favorable mix and lower OE delivery volume in Large Commercial Engines were offset by higher production costs. On an adjusted basis, operating profit* of $597 m, was up 45 percent versus the prior year.

The prior year reported results included a charge related to the previously disclosed powder metal matter which reduced sales by $5,401m and operating profit by $2,888m.

Raytheon

Raytheon had third quarter 2024 reported sales of $6,386m, down 1 percent versus prior year. Higher volume on land and air defense systems, including Global Patriot, NASAMS and counter-UAS programs, as well as higher volume on advanced technology programs was more than offset by the impact from the divestiture of the Cybersecurity, Intelligence and Services business completed in the first quarter of 2024 and lower volume on air and space defense systems. Excluding the impact of the divestiture, sales were up 5 percent versus prior year*.

Raytheon reported operating profit of $647m, up 16 percent versus the prior year. Favorable mix, improved net productivity, and drop through on higher volume was partially offset by the impact from the divestiture of the Cybersecurity, Intelligence and Services business. On an adjusted basis, operating profit of $661m was up 16 percent versus the prior year. (Source: PR Newswire)

23 Oct 24. Boeing CEO Message on Third Quarter Results. Boeing President and CEO Kelly Ortberg shared the following message with all employees today, including his prepared remarks for the third quarter financial results webcast:

Team,

As we report our third-quarter 2024 results today, I want to take this opportunity to share my perspective on the challenges we face and, more importantly, my focus for how we will move Boeing forward, together.

I am sharing my remarks directly with you this morning, because when it comes to our future the only way to be successful is by working together.

It will take time to return Boeing to its former legacy but, with the right focus and culture, we can be an iconic company and aerospace leader once again. We will be focused on fundamentally changing the culture, stabilizing the business and improving program execution, while setting the foundation for the future of Boeing.

To define that future, we will stay true to our roots and the values that defined our legacy.

Be on the lookout for an invitation to an all-employee meeting in the coming weeks where we will share more about our path ahead and answer your questions. Thanks for all you do.

Kelly

Boeing Reports Third Quarter Results

Third Quarter 2024

Financials reflect impacts of the International Association of Machinists and Aerospace Workers (IAM) work stoppage and previously announced charges on commercial and defense programs
Revenue of $17.8bn, GAAP loss per share of ($9.97) and core (non-GAAP)* loss per share of ($10.44)
Operating cash flow of ($1.3)bn and free cash flow of ($2.0)bn (non-GAAP)*
Total company backlog of $511bn, including over 5,400 commercial airplanes

The Boeing Company [NYSE: BA] recorded third quarter revenue of $17.8bn, GAAP loss per share of ($9.97) and core loss per share (non-GAAP)* of ($10.44) primarily reflecting impacts of the IAM work stoppage and previously announced charges on commercial and defense programs. Boeing reported operating cash flow of ($1.3)bn and free cash flow of ($2.0)bn (non-GAAP)*.

“It will take time to return Boeing to its former legacy, but with the right focus and culture, we can be an iconic company and aerospace leader once again,” said Kelly Ortberg, Boeing President and Chief Executive Officer. “Going forward, we will be focused on fundamentally changing the culture, stabilizing the business, and improving program execution, while setting the foundation for the future of Boeing.”

Operating cash flow was ($1.3)bn in the quarter reflecting lower commercial widebody deliveries, as well as unfavorable working capital timing, including the impact of the IAM work stoppage.

Cash and investments in marketable securities totaled $10.5bn, compared to $12.6bn at the beginning of the quarter driven by free cash flow usage in the quarter. In October, the company entered into a new $10.0bn short-term credit facility and now has access to total credit facilities of $20.0bn, which remain undrawn.

Total company backlog at quarter end was $511bn.

Segment Results

Commercial Airplanes

Commercial Airplanes third quarter revenue of $7.4bn and operating margin of (54.0) percent reflect previously announced pre-tax charges of $3.0bn on the 777X and 767 programs as well as the IAM work stoppage and higher period expense, including research and development.

The 787 program is currently producing at 4 per month and maintains plans to return to 5 per month by year end. In the quarter, Commercial Airplanes booked 49 net orders and delivered 116 airplanes, with backlog of over 5,400 airplanes valued at $428bn.

Defense, Space & Security

Defense, Space & Security third quarter revenue of $5.5bn and operating margin of (43.1) percent reflect the previously announced pre-tax charges of $2.0bn on the T-7A, KC-46A Tanker, Commercial Crew, and MQ-25 programs. Results also reflect unfavorable performance on other programs.

During the quarter, Defense, Space & Security delivered the first production MH-139A to the U.S. Air Force and definitized a contract for two E-7A Wedgetails from the U.S. Air Force. Backlog at Defense, Space & Security was $62bn, of which 28 percent represents orders from customers outside the U.S.

Global Services

Global Services third quarter revenue of $4.9bn and operating margin of 17.0 percent reflect higher commercial volume and mix.

During the quarter, Global Services secured agreements for Landing Gear Exchange Program and Integrated Material Management with All Nippon Airways and a KC-135 spares contract from the U.S. Air Force.

23 Oct 24. KBR, Inc. (NYSE: KBR) today announced its third quarter fiscal 2024 financial results.

“KBR’s exceptional team has once again exceeded expectations with outstanding third-quarter results,” stated Stuart Bradie, KBR’s President and CEO. “Our team’s dedication to our customers has resulted in year-over-year growth across all financial metrics, including Revenues, Adjusted EBITDA2, Adjusted EPS2, and notably, Operating Cash Flows. The bookings and awards this quarter align well with our focus areas of energy security and transition, national defense, and sustainability, and bolster our confidence for the rest of 2024 and heading into 2025.”

“During the quarter, we strategically shaped our portfolio and allocated capital in a thoughtful, balanced way,” Bradie continued. “Our acquisition of LinQuest, a leader in advanced engineering, data analytics, and digital integration, enhances our capabilities in space, air dominance, and connected battle space missions and introduces KBR to new U.S. government customers and contract vehicles. With strong performance across KBR and the integration of LinQuest progressing well, I am pleased to announce an increase in Revenue, Adjusted EBITDA2, and Adjusted EPS2 guidance for 2024. We welcome our new colleagues to the KBR family and look forward to the opportunities to shape the future together.”

New Business Awards

Backlog and options as of September 27, 2024 totaled $22.1bn. Delivered 1.2x quarter-to-date (QTD) and 1.1x trailing-twelve-months (TTM) book-to-bill1 as of September 27, 2024. Awarded $3.3bn of bookings and options1 in the quarter.

Sustainable Technology Solutions (STS) delivered 1.0x QTD and 1.1x TTM book-to-bill1 as of September 27, 2024, including awards and achievements in the quarter as follows:

Announced that KTJV, a KBR and Technip Energies joint venture, has been selected by Lake Charles LNG Export Company, a subsidiary of Energy Transfer LP, for its Lake Charles LNG transformation project that includes the delivery of three liquefaction trains and modifications to existing storage and dock facilities designed to enable the export of 16.45 metric tons per annum of LNG. Under the terms of the agreement, KTJV will provide high-end engineering, procurement, construction management, construction, commissioning, startup and other related services, subject to Lake Charles LNG’s decision to issue a notice to proceed for the project.
Awarded an engineering and procurement services contract for the Beachfield Manatee upgrade, the onshore portion of Shell’s Manatee gas field project located in the East Coast Marine Area of Trinidad and Tobago. The Manatee gas field supports global energy security and natural gas production, providing gas for the country’s Atlantic LNG facility.
PureSAF℠ technology, which is exclusively licensed by KBR worldwide, was selected by Avina Clean Hydrogen Inc. for its project in the U.S. Under the terms of the contract, KBR will provide technology licensing, proprietary engineering design, and front-end engineering design for Avina’s facility to produce 120m gallons of sustainable aviation fuel per year.
Awarded a conceptual study contract for floating blue ammonia production from Samsung Heavy Industries (SHI), one of the world’s largest shipbuilders in South Korea. The study will utilize KBR’s innovative blue ammonia technology, suitable for offshore production, and leverage SHI’s expertise in the design of mega floating vessels.
Awarded engineering contracts by Seatrium Group to develop topsides facilities for two new high-production, energy-efficient floating production storage and offloading units. The units are being designed for Petrobras’ Atapu and Sepia fields in the Santos Basin, Brazil.
KBR’s ROSE® supercritical Solvent De-Asphalting (SDA) technology was selected by Zhejiang Petroleum & Chemical Co. Ltd., the operator of China’s largest refinery. KBR is a global leader in SDA technology with the largest installed base and has been involved in the licensing, design, engineering, and commissioning of 72 ROSE units worldwide with a combined licensed capacity of nearly 1.66m barrels per day.
Awarded an advisory consulting contract by Kuwait Oil Company for the development of a country wide masterplan for the production of 17GW of renewables and 25GW of green hydrogen by 2050.
KBR’s blue ammonia technology selected by Shell for its Blue Horizons low-carbon hydrogen and ammonia project in Duqm, Oman. The facility will utilize KBR’s leading ammonia synthesis loop technology to deliver cost-competitive and low-carbon intensity ammonia.

Government Solutions (GS) delivered 1.3x QTD and 1.1x TTM book-to-bill1 as of September 27, 2024, including awards and achievements in the quarter as follows:

Awarded an estimated $199m cost-plus-fixed-fee contract supporting the Naval Information Warfare Center Pacific Program Executive Office Digital and Enterprise Services Technical Director’s Office. KBR was awarded this contract under the Department of Defense Information Analysis Center’s multiple-award contract vehicle.
Awarded the follow-on Space Science Instruments and Experimental Payloads (SSIEP) 3 contract by the U.S. Navy for continued development of space science instrument systems at the Naval Research Lab (NRL) in Washington, D.C. This award maintains KBR’s presence at NRL where it has supported SSIEP 1 and 2 since 2015.
Awarded an estimated $153m cost-plus-fixed-fee recompete contract to support Naval Test Wings Atlantic and Pacific Aircrew Services over a five-year period. This strategic win builds on KBR’s 45 years of aircrew services and flight test support for the U.S. Navy.
Awarded a 60-month cost-plus-fixed-fee recompete IAC MAC task order with an estimated value of $140m to provide operational safety, suitability, and effectiveness engineering tasks supporting the Air Force Life Cycle Management Center. As the U.S. Air Force’s trusted partner, KBR will continue to perform research and analyses at Hill Air Force Base in Clearfield, Utah, and other U.S. Air Force locations.
Awarded an estimated $230m cost-plus-fixed-fee recompete IAC MAC contract by the U.S. Air Force’s 774th Enterprise Sourcing Squadron to develop and create new knowledge for the enhancement of the DTIC repository and the R&D and S&T community. The work will be primarily performed at Naval Air Station Patuxent River, Maryland and Huntsville, Alabama over a period of five years.
Awarded an estimated $113m IAC MAC task order to perform aeronautical systems research, development, test and evaluation for the Air Force Life Cycle Management Center Mobility Directorate at Wright-Patterson Air Force Base, Ohio over a period of five years.
Awarded a contract to continue to deliver technical design services at HMAS Stirling by the Security and Estate Group and the Australian Submarine Agency. This work will support the sovereign nuclear-powered submarines facilities and infrastructure program, enabling the Submarine Rotational Force – West, and accelerating Australia’s ability to safely own, operate, maintain and sustain its own future nuclear powered submarine fleet.
In the month since the acquisition closed, LinQuest secured over $60 m of new orders under a unique contract vehicle that KBR does not currently utilize — SBIR Phase III, which allows for the commercialization of technologies designed by small businesses.
Selected as NASA’s Agency-Level Large Business Prime Contractor of the Year. This win underscores KBR’s ongoing commitment to critical programs at Goddard Space Flight Center, where it holds three prime contracts, including Ground Systems and Missions Operations III, as well as multiple subcontracts and joint ventures.

KBR recently published its 2023 Sustainability Report and received the following awards and achievements in the quarter:

Received an AAA designation in MSCI’s 2024 ESG (environmental, social and governance) Ratings. The AAA rating is MSCI’s highest and is given to companies that are leading their industries in managing the most significant ESG risks and opportunities. This is KBR’s second consecutive year receiving this designation.
Earned a Gold Rating from EcoVadis, one of the world’s largest and most trusted providers of business sustainability ratings for global supply chains. The Gold Rating places KBR in the top 5% of assessed companies.
Recognized by USA Today as one of America’s Climate Leaders for 2023. This data-driven recognition ranks U.S.-based companies that have cut their carbon footprint in recent years.
Achieved an industry leading 93% Zero Harm days in 2023 and delivered 37% of KBR’s 2023 revenues from sustainability focused projects.

Financial Highlights for the Three Months Ended September 27, 2024

Revenue of $1.9bn, up 10% on a year-over-year-basis
Net income attributable to KBR of $100m; Adjusted EBITDA2 of $219 m, up 18% on a year-over-year basis (11.2% Adjusted EBITDA2 margin)
Diluted EPS of $0.75; Adjusted EPS2 of $0.84, up 12% on a year-over-year basis
Operating cash flows of $161m
Bookings and options1 of $3.3bn during the quarter with 1.2x QTD book-to-bill1

Financial Highlights for the Nine Months Ended September 27, 2024

Revenue of $5.6bn, up 8% on a year-over-year-basis
Net income attributable to KBR of $299 m; Adjusted EBITDA2 of $642 m, up 15% on a year-over-year basis (11.4% Adjusted EBITDA2 margin)
Diluted EPS of $2.22; Adjusted EPS2 of $2.44, up 12% on a year-over-year basis
Operating cash flows of $422m
Bookings and options1 of $6.7bn during the year to date period with 1.1x TTM book-to-bill1

Commentary on the Three Months Ended September 27, 2024

Revenues were $1.9bn, up 10% compared to 3Q’23, primarily due to on-contract growth across all of the Government Solutions business units, the acquisition of LinQuest, and growing demand in Sustainable Technology Solutions from engineering and professional services and technology licensing.

Net income attributable to KBR was $100m, up $121m compared to 3Q’23, primarily due to a non-cash charge of $114m in 3Q’23 in connection with the election of cash as the settlement method for our Convertible Notes that did not recur in the current year.

Adjusted EBITDA2 was $219m, up $33m compared to 3Q’23, with Adjusted EBITDA2 margins of 11.2%, up 74 bps year-over-year.

Diluted earnings per share was $0.75, up $0.91 compared to 3Q’23, primarily due to the increase in Net income attributable to KBR noted above and the decrease in diluted weighted average common shares outstanding in the current year. Adjusted earnings per share2 was $0.84, up $0.09 compared to 3Q’23, due to increases in gross profit, partially offset by higher selling, general and administrative expenses, interest expense, and provision for income taxes.

Operating cash flows were $161m, up $201m compared to 3Q’23, primarily due to a $132 m after-tax outflow in connection with the settlement of a legacy legal matter in the prior year and strong customer collections in the current year. Adjusted operating cash flows were $161 m, up $69 m compared to 3Q’23, primarily due to cash from strong collections in the current year.

Capital returned to shareholders totaled $29m during the quarter, consisting of $9m in share repurchases, inclusive of $8m of open market repurchases and $1m of repurchases to satisfy requirements of equity compensation plans, and $20m in regular dividends.

Commentary on the Nine Months Ended September 27, 2024

Revenues were $5.6bn, up 8% compared to YTD 3Q’23, primarily due to growth across Sustainable Technology Solutions; and within Government Solutions, new and on-contract growth across International, Defense & Intel, and Science & Space, partially offset by decline in Ukraine activity in Readiness & Sustainment.

Net income attributable to KBR was $299m, up $585m compared to YTD 3Q’23, primarily due to a $132m settlement of a legacy legal matter in the prior year, as well as a non-cash charge of $428m recorded in connection with the election of cash as the settlement method for our Convertible Notes and the repurchase of a portion of our Convertible Notes in the prior year that did not recur in the current year.

Adjusted EBITDA2 was $642m, up $83m compared to YTD 3Q’23, with Adjusted EBITDA2 margins of 11.4%, up 73 bps year-over-year.

Diluted earnings per share was $2.22, up $4.32 compared to YTD 3Q’23, primarily due to the increase in Net income attributable to KBR noted above and the decrease in diluted weighted average common shares outstanding in the current year. Adjusted earnings per share2 was $2.44, up $0.26 compared to YTD 3Q’23, due to increases in gross profit and equity in earnings of unconsolidated affiliates, partially offset by higher selling, general and administrative expenses, interest expense, other non-operating expenses, and provision for income taxes.

Operating cash flows were $422m, up $174m compared to YTD 3Q’23, primarily due to a $13m after-tax outflow in connection with the settlement of a legacy legal matter in the prior year and strong customer collections in the current year. Adjusted operating cash flows were $422m, up $42m compared to YTD 3Q’23, primarily due to strong collections in the current year.

Capital returned to shareholders totaled $226m during the year to date period, consisting of $167m in share repurchases, inclusive of $154m of open market repurchases and $13m of repurchases to satisfy requirements of equity compensation plans, and $59m in regular dividends.

Updated Fiscal 2024 Guidance

The table below summarizes updated Fiscal 2024 guidance and represents our views as of October 23, 2024. Updated guidance reflects KBR’s strong operational performance and the acquisition of LinQuest.

22 Oct 24. Dutch Ministry of Defense invests 100m euros in fund to increase innovation power of Dutch startups.

– Defense, the provinces, Economic Affairs, regional development corporations and industry are joining forces for national security, innovation power and economic growth.

The Ministry of Defense is creating a 100 m euro investment fund, the SecFund, to provide financing to Dutch startups, scale-ups, and innovative SMEs that meet Defense’s innovation needs. The fund will invest up to a maximum of 5m euros per company.

Thus, the Ministry of Defense, the provinces, the Ministry of Economic Affairs, regional development companies, and industry are joining forces to promote national security, innovative strength, and economic growth.

According to research by the European Union, innovative companies in the defense sector more often experience a barrier in obtaining financing. Raising venture capital poses a major challenge not only because these companies’ capital needs are very high but also because financiers are reluctant to invest in the defense industry. The SecFund should bridge this gap.

Dual-use

The SecFund will focus on dual-use products. These products can be used in civilian and security sectors, such as technology that can make installations silent. Another example is LiFi, a new generation of data transmission that is faster than WiFi and can transfer more data per second. Or consider advanced radio technology. “With the SecFund, we support start-ups and scale-ups in a crucial phase to come up with innovations together for a safer Netherlands,” said Gijs Tuinman, State Secretary of Defense.

The SecFund is a collaboration of the Ministries of Defense and Economic Affairs and the nine regional development companies (ROMs). It is a fund with national coverage. Implementation is invested in the Brabant Development Company (BOM) in cooperation with the other ROMs. The fund is expected to open in January 2025. From then on, interested companies can apply.

“Business can make an unprecedented contribution to the innovation power of defense and vice versa,” said Brigit van Dijk-Van de Reijt, general director of the Brabant Development Corporation (BOM) on behalf of the nine regional development companies. “The SecFund thus strengthens strategic autonomy and economic security in the Netherlands and contributes to long-term earning power.” (Source: Paulo Dominonni via LinkedIn)

23 Oct 24. France’s Thales reports higher nine-month sales and orders. France’s Thales reaffirmed full-year targets as it posted nine-month sales up 6.2% on an underlying basis, with its new order intake rising 23% led by defence and security demand.

Sales for the first nine months reached 14.07bn euros ($15.20bn) and new orders rose to a better-than-expected 15.55bn, Europe’s largest defence electronics supplier said.

Analysts were on average expecting nine-month revenues of 14.04bn euros and new orders of 15.26bn, according to a company-compiled consensus.

New orders included a 40% rise in orders for the Defence and Security division, including systems for the French Army’s SCORPION armoured vehicles programme and lightweight LMM precision missiles ordered by Britain on behalf of both Ukraine and the replenishment of its own stocks. Thales said it had also won an order to renew the air traffic control system of a European nation it did not identify.

Chief Financial Officer Pascal Bouchiat said roughly stable third-quarter sales in Digital Identity and Security had fallen short of the company’s hopes for growth, citing lower banking demand especially in the United States. (Source: Reuters)

23 Oct 24. Lockheed Martin shares slide 5% on F-35 headwinds despite lifting profit and sales forecast. Defense contractor Lockheed Martin (LMT.N) lifted its annual profit and sales forecasts on Tuesday, but shares slid 5% because the company’s F-35 fighter jet program faced payment headwinds stemming from the government contracting process.

The Bethesda, Maryland-based company now expects per-share profit of $26.65 for 2024, above its earlier forecast of $26.10 to $26.60.

Still, shares slid 5.2% in early trading in New York to $582.71.

Lockheed’s flagship F-35 program has been facing challenges, particularly due to delays in rolling out an upgrade intended to enhance the fighter jet’s processing capabilities.

But drawn-out contract negotiations have meant Lockheed is having to incur procurement costs for the F-35 jets in lots 18 and 19, set to be delivered in 2026 and 2027.

The absence of a contract means Lockheed is having to pay suppliers for long-lead materials such as sensors, radars and other electronics for the jets without being reimbursed by the government. This impacted sales and profit at both the business and company level. (Source: Reuters)

22 Oct 24. Lockheed Martin Reports Third Quarter 2024 Financial Results

Net sales of $17.1bn, an increase of 1% year over year
Net earnings of $1.6bn, or $6.80 per share
Cash from operations of $2.4bn and free cash flow of $2.1bn
$1.6bn of cash returned to shareholders through dividends and share repurchases
Increased share repurchase authority by $3.0bn to a total authorization of $10.3 bn
Increased quarterly dividend 5% to $3.30 per share
2024 financial outlook increased

Lockheed Martin Corporation [NYSE: LMT] today reported third quarter 2024 net sales of $17.1 bn, compared to $16.9bn in the third quarter of 2023. Net earnings in the third quarter of 2024 were $1.6bn, or $6.80 per share, compared to $1.7bn, or $6.73 per share, in the third quarter of 2023. Cash from operations was $2.4 bn in the third quarter of 2024, compared to $2.9bn in the third quarter of 2023. Free cash flow was $2.1bn in the third quarter of 2024, compared to $2.5 bn in the third quarter of 2023.

“In the third quarter, we advanced our strategic, operational and financial priorities, as demonstrated by our record backlog of more than $165 bn, 48 F-35 deliveries, increased production on missile programs, and $2.1 bn of free cash flow generation,” said Lockheed Martin Chairman, President and CEO Jim Taiclet.

“As a result of our strong year-to-date results and confidence in our near-term performance, we are raising the outlook for full year 2024 sales, segment operating profit, EPS and free cash flow. Looking forward, we continue to make progress on the three key initiatives of our 21st Century Security® strategy of strengthening the resiliency and scalability of our production system, accelerating cutting edge digital and physical technologies into all our mission solutions and our internal operations, and expanding international partnerships to broaden our production capacity and drive more international sales. We are making substantial investments in these areas, while continuing to focus on our fundamental financial objective of driving free cash flow per share growth to generate returns for shareholders. Given our confidence in the company’s ability to deliver on these objectives, our Board has also approved a five percent increase in our quarterly dividend, the 22nd F-35 Lots 18-19 Contract Update

The company remains in negotiations with the U.S. Government on the Lots 18-19 production contract. Although negotiations for this contract are in process, the company has been performing work on Lots 18-19 production under initial customer authorization and funding to begin work pursuant to an advance acquisition contract received in the fourth quarter of 2023. The company and its industry team continue work in an effort to meet the customer’s desired aircraft delivery dates for the Lots 18-19 aircraft. The company’s costs began to exceed the advanced acquisition contract value in the third quarter of 2024. As a result, the company was unable to recognize revenue and profit on approximately $400m of costs incurred on the program in the third quarter of 2024, with at least an additional $300m of impacts across the supply chain. Additionally, the company was prevented from invoicing and receiving cash of approximately $450m through the third quarter of 2024. At the end of the third quarter of 2024, the company also had approximately $2bn in potential termination liability exposure to third parties related to Lots 18-19 (some of which would be recoverable in the unlikely event of a termination). Currently, the company expects to receive contractual authorization and funding on the Lots 18-19 production contract with the U.S. Government and resume invoicing costs incurred and recover sales, profit, and cash in the fourth quarter of 2024. However, until a final agreement is reached, or the U.S. Government otherwise provides additional contractual authorization and funding, the company’s results of operations, cash flows, and financial condition will continue to be negatively impacted, and the impacts could be material and differ from the company’s current 2024 outlook.

2024 Financial Outlook

The following table and other sections of this news release contain forward-looking statements, which are based on the company’s current expectations. Actual results may differ materially from those projected. It is the company’s practice not to incorporate adjustments into its financial outlook for proposed or potential acquisitions, divestitures, ventures, pension risk transfer transactions or discretionary contributions, financing transactions, changes in law, or new accounting standards until such items have been consummated, enacted or adopted. For additional factors that may impact the company’s actual results, refer to the “Forward-Looking Statements” section in this news release.

Cash Flows and Capital Deployment Activities

The decrease in operating and free cash flows in the third quarter of 2024 compared to the same period in 2023 was primarily due to a decrease in working capital (defined as receivables, contract assets, and inventories less accounts payable and contract liabilities), which includes the cash impacts for the lack of additional contractual authorization and funding from the U.S. Government prior to the end of the third quarter of 2024 on the Lots 18-19 contract of the F-35 program.

The company’s cash activities in the third quarter of 2024, included the following:

paying cash dividends of $749m; and
paying $850m to repurchase 1.5m shares.

As previously announced on Oct. 2, 2024, the company’s board authorized the repurchase of its common stock up to an additional $3.0bn, increasing the total authorization for potential future common stock repurchases to $10.3bn. The stock repurchase program does not have an expiration date and may be amended or terminated by the board of directors at any time. The amount of shares ultimately purchased and the timing of purchases are at the discretion of management and subject to compliance with applicable law and regulation.

Additionally, on Oct. 2, 2024, the company authorized a fourth quarter dividend payment of $3.30 per share, representing an increase of $0.15 per share over the prior quarterly dividend payment.

Segment Results

The company operates in four business segments organized based on the nature of products and services offered: Aeronautics, Missiles and Fire Control (MFC), Rotary and Mission Systems (RMS) and Space. The following table presents summary operating results of the company’s business segments and reconciles these amounts to the company’s consolidated financial results.

The company’s consolidated net favorable profit booking rate adjustments represented approximately 20% and 19% of total segment operating profit in the quarters ended Sept. 29, 2024 and Sept. 24, 2023. During the quarter ended Sept. 29, 2024, the company recognized losses of $80 m on a classified program at the company’s Aeronautics business segment due to higher than anticipated costs to achieve program objectives.

Aeronautics

Aeronautics’ net sales in the third quarter of 2024 decreased $230m, or 3%, compared to the same period in 2023. The decrease was primarily attributable to lower net sales of $480m on the F-35 program due to lower volume on production contracts as a result of delays in receiving additional contractual authorization and funding under the Lots 18-19 contract. This decrease was partially offset by higher net sales of $120 m on the C-130 program primarily due to higher volume on production and sustainment contracts; and $85 m on the F-16 program due to the ramp up on production.

Aeronautics’ operating profit in the third quarter of 2024 decreased $12 m, or 2%, compared to the same period in 2023. The decrease in operating profit was attributable to $25m from lower volume described above and $20 m from unfavorable contract mix, partially offset by $30 m of higher profit booking rate adjustments. The increase in profit booking rate adjustments included an $85m favorable profit rate adjustment for a claim associated with a contract to modernize and install new engines in C-5 Galaxy aircraft, partially offset by $80m of unfavorable profit rate adjustments on a classified program due to higher than anticipated costs to achieve program objectives.

Missiles and Fire Control

MFC’s net sales in the third quarter of 2024 increased $236m, or 8%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $285 m for tactical and strike missile programs due to production ramp up on Guided Multiple Launch Rocket Systems (GMLRS) and Long Range Anti-Ship Missile (LRASM) programs. This increase was partially offset by lower net sales of $90m for integrated air and missile defense programs due to lower volume on Patriot Advanced Capability-3 (PAC-3) and Terminal High Altitude Area Defense (THAAD).

MFC’s operating profit in the third quarter of 2024 increased $58m, or 15%, compared to the same period in 2023. The increase in operating profit was attributable to $35m of higher profit booking rate adjustments and $20m from volume described above. The increase in profit booking rate adjustments was primarily due to higher favorable profit rate adjustments on PAC-3 as a result of better than anticipated cost performance.

Rotary and Mission Systems

RMS’ net sales in the third quarter of 2024 increased $246m, or 6%, compared to the same period in 2023. The increase was primarily attributable to higher net sales of $185m on integrated warfare systems and sensors (IWSS) programs due to higher volume on radar programs and the Canadian Surface Combatant (CSC) program; and $50m for Sikorsky helicopter programs due to higher production volume on CH-53K, Seahawk and Black Hawk programs.

RMS’ operating profit in the third quarter of 2024 was comparable to the same period in 2023 as a $25m increase due to the higher volume described above was offset by $25m of lower profit booking rate adjustments. The decrease in profit booking rate adjustments was primarily due to a reach-forward loss recognized on a radar program as a result of additional quantity ordering risk identified on fixed-price options.

Space

Space’s net sales in the third quarter of 2024 decreased $26m, or 1%, compared to the same period in 2023. The decrease was primarily attributable to lower net sales of $50m for commercial civil space due to lower volume on the Orion program, partially offset by higher volume on other space exploration programs. This decrease was partially offset by higher net sales of $25m for strategic and missile defense programs due to higher volume on reentry programs.

Space’s operating profit in the third quarter of 2024 increased $13m, or 5%, compared to the same period in 2023. The increase in operating profit was attributable to $25m related to favorable contract mix across the portfolio, partially offset by $10m of lower equity earnings driven by lower launch volume from the company’s investment in United Launch Alliance (ULA). Profit booking rate adjustments were comparable.

Total equity earnings (ULA) represented approximately $5m, or 2% of Space’s operating profit in the third quarter of 2024, compared to approximately $15m, or 6% for the same period in 2023.

21 Oct 24. Hexcel Reports 2024 Third Quarter Results.

Hexcel Corporation (NYSE: HXL):

Q3 2024 Sales were $457 m, an increase of 8.8% over Q3 2023 sales of $420 m (8.3% increase in constant currency).
Q3 2024 GAAP diluted EPS of $0.49 compared to Q3 2023 GAAP diluted EPS of $0.45.
Q3 2024 adjusted diluted EPS of $0.47, compared to Q3 2023 adjusted diluted EPS of $0.38.
Full year 2024 results expected to be at the lower end of guidance ranges and to benefit from lower tax rates.

See Table C for reconciliation of GAAP and non-GAAP operating income, net income, earnings per share and operating cash flow to free cash flow. Free cash flow is cash from operations less capital expenditures.

Hexcel Corporation (NYSE: HXL) today reported third quarter 2024 results including net sales of $457 m and adjusted diluted EPS of $0.47 per share.

CEO and President Tom Gentile said, “Hexcel saw 9% growth in total revenue year over year, driven by a robust 17% growth in commercial aerospace. Year-to-date commercial aerospace is now up 14%. Air traffic continues to grow post pandemic leading to record demand for aircraft that use Hexcel lightweight materials, but supply chain challenges in the global aerospace industry continue to delay planned production rate increases at our major customers. Our customers are currently indicating that production rates will increase in 2025. We will continue to monitor our cost and labor training position to meet those projected production rate increases as schedules firm.”

Mr. Gentile continued, “Whereas the overall aerospace supply chain seemed to be recovering in late-2023, new challenges and shortages have developed as 2024 has progressed. As our business is impacted by the near-term slowing of previously planned production rate ramps by our key customers, we now expect FY 2024 sales and adjusted EPS to be at the lower end of our 2024 guidance ranges and will benefit from lower tax rates. Further, given recent developments, the assumptions for future production rates that were the basis for our mid-term guidance for the three-year period 2024-2026 provided in February 2024 are no longer valid. We are therefore withdrawing our previously issued mid-term guidance and will provide guidance for 2025, with our Q4 earnings in January.”

Mr. Gentile concluded: “Our longer-term growth outlook remains robust, driven by the ongoing recovery of commercial aerospace production to meet historically strong backlogs. Hexcel lightweight materials are also in demand for military aerospace and next generation commercial aircraft that seek composite lightweighting to reduce fuel consumption, increase range, and decrease carbon emissions. We are continuing to focus on execution and cash generation. We see compelling value in our business and repurchased another $50 m of Hexcel common stock in the third quarter bringing the year-to-date total to $252m.”

Markets

Sales in the third quarter of 2024 were $456.5m compared to $419.5m in the third quarter of 2023.

Commercial Aerospace

Commercial Aerospace sales of $295.9m for the third quarter of 2024 increased 17.5% (17.0% in constant currency) compared to the third quarter of 2023. Airbus programs, which represent the largest portion of Hexcel sales, drove the sales growth including the A350 and A320neo. Boeing 787 sales, which represent about half of Hexcel’s sales to Boeing, also increased, whereas 737 MAX sales decreased modestly. Other Commercial Aerospace increased 9.1% for the third quarter of 2024 compared to the third quarter of 2023 led by latest-generation business jet sales.

Space & Defense

Space & Defense sales of $128.2m were relatively unchanged (0.9% lower in constant currency) for the quarter as compared to the third quarter of 2023. Strength in Sikorsky CH-53K and Black Hawk was offset by lower Bell V-22 sales and softer Space sales, with launchers, satellites, and rocket motors all lower.

Industrial

Total Industrial sales of $32.4m in the third quarter of 2024 decreased 16.5% (17.3% in constant currency) compared to the third quarter of 2023 due to declines in all sub-markets.

Consolidated Operations

Gross margin for the third quarter of 2024 was 23.3% compared to 21.8% in the third quarter of 2023. As a percentage of sales, selling, general and administrative expenses for the third quarter of 2024 was 8.7% compared to 8.4% for the third quarter of 2023. R&T expenses as a percentage of sales was 3.0% for the third quarter of 2024 compared to 3.2% for the third quarter of 2023. Adjusted operating income in the third quarter of 2024 was $52.9m or 11.6% of sales, compared to $42.8 m, or 10.2% of sales in 2023. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 10 basis points in the third quarter of 2024 compared to the third quarter of 2023.

Year-to-Date 2024 Results

Sales for the first nine months of 2024 were $1,429.2m compared to $1,331.5m, a 7.3% increase from the same period in 2023.

Commercial Aerospace (64% of YTD sales)

Commercial Aerospace sales of $915.9m increased 14.4% (14.3% in constant currency) for the first nine months of 2024 compared to the first nine months of 2023. Growth was led by both the A350 and 787, and the A320neo. Sales were down nominally for the 737 MAX. Other Commercial Aerospace increased 5.8% for the first nine months of 2024 compared to the same period in 2023, supported by latest-generation business jet sales.

Space & Defense (28% of YTD sales)

Space & Defense sales of $406.2m increased 3.5% (3.4% in constant currency) for the first nine months of 2024 as compared to the first nine months of 2023. Key program growth including F-35, CH-53K, Black Hawk and European military helicopter programs was partially offset by the winding down of V-22 production and lower satellite and civilian helicopter sales.

Industrial (8% of YTD sales)

Total Industrial sales of $107.1m in the first nine months of 2024 decreased 22.6% (22.8% in constant currency) compared to the first nine months of 2023 as all sub-markets declined.

Consolidated Operations

Gross margin for the first nine months of 2024 was 24.6% compared to 24.8% in the prior year period. As a percentage of sales, selling, general and administrative for the first nine months of 2024 was 9.0% compared to 9.2% for the first nine months of 2023. R&T expenses as a percentage of sales for the first nine months of 2024 was 3.1% compared to 3.0% for the first nine months of 2023. Adjusted operating income for the first nine months of 2024 was $179.0 m or 12.5% of sales, compared to $167.6 m or 12.6% of sales in 2023. Other operating expense (income) for the first nine months of 2024 and 2023 included restructuring costs and the first nine months of 2023 also included a pre-tax net gain of $0.8 m from the sale of a facility in Windsor, Colorado. The impact of exchange rates on operating income as a percent of sales was favorable by approximately 30 basis points in the first nine months of 2024 compared to the first nine months of 2023.

Cash and other

Net cash provided by operating activities in the first nine months of 2024 was $127.3m, compared to $98.1m for the first nine months of 2023. Working capital was a cash use of $93.1m for the first nine months of 2024 and a use of $112.1m for the comparable period in 2023. Capital expenditures on a cash basis were $68.4m for the first nine months of 2024 compared to $94.4m for the same period in 2023, which included approximately $38m for the purchase of the land and building at the Hexcel Amesbury, Massachusetts facility. Net cash used for investing activities for the nine months ended September 30, 2023 included net proceeds of $10.3m received from the sale of a facility in Windsor, Colorado. Free cash flow was $58.9m in the first nine months of 2024 compared to $3.7m in the first nine months of 2023. Free cash flow is defined as cash generated from operating activities less cash paid for capital expenditures. Capital expenditures on an accrual basis were $59.6m and $88.7m for the first nine months of 2024 and 2023, respectively.
The Company used $50.4m to repurchase shares of its common stock during the third quarter of 2024 and $252.2m during the first nine months of 2024. The aggregate remaining authorization under the share repurchase program as of September 30, 2024 was $234.9m.
As announced today, the Board of Directors declared a quarterly dividend of $0.15 per share payable to stockholders of record as of November 1, 2024, with a payment date of November 8, 2024.

2024 Guidance

Sales of $1.90 bn to $1.98bn (unchanged)
Adjusted diluted earnings per share of $2.02 to $2.18 (unchanged)
Free cash flow of around $200m (unchanged)
Capital expenditures less than $100m (unchanged)
Effective tax rate approximately 19% (reduced from 22.0%)

(Source: BUSINESS WIRE)

22 Oct 24. Saab profit rises, sees sales growth at upper end of forecast range.

Summary
Companies
Saab Q3 op profit 1.19bn SEK vs forecast 1.14bn
Order intake rises 41% yr/yr in quarter
Sees 2024 organic sales growth at upper end of 15-20% range

Swedish defence material maker Saab (SAABb.ST) on Tuesday reported a slightly bigger-than-expected rise in third-quarter operating earnings and affirmed its outlook for surging sales and profits this year as countries scramble to re-arm.

The company reported quarterly operating earnings of 1.19bn Swedish crowns ($112.8m) versus a year-ago 859 m and analyst expectations of 1.14bn, according to a LSEG mean forecast based on three estimates.

The maker of military hardware such as missiles, advanced electronics, submarines and the Gripen fighter jet repeated its forecast for sales to grow organically by 15-20% in 2024 while operating earnings were seen rising even more. However, it added that it expected organic sales growth to come in at the upper end of the range. (Source: Reuters)

22 Oct 24. Saab Q3 2024 results: Strong sales growth and cash flow.

Saab presents the results for January-September 2024.

“We continue to see increasing demand as European nations need to replenish their defence stocks, which will require long-term efforts. This is reflected in our strong order intake in the third quarter. We are growing to meet this increasing demand, for example by investing in capacity, automating our production and building new plants. At the same time, we are delivering strong growth and improving our profitability,” says Micael Johansson, President and CEO, Saab.

Key highlights Q3 2024

Order bookings increased 41% and amounted to SEK 21,173m (14,977), driven by strong growth in Dynamics.
Organic growth was 17% and sales amounted to SEK 13,546m (11,527), with growth from all business areas.
Operating income increased 38% and amounted to SEK 1,187m (859), corresponding to an EBIT margin of 8.8% (7.5).
Net income increased to SEK 972m (656) and earnings per share amounted to SEK 1.79 (1.21).
Operational cash flow improved in the quarter and amounted to SEK 3,188m (-2,058), driven by large customer payments.
Net debt position was SEK 0.5bn (-1.4) at the end of the period.
The full year 2024 outlook on organic sales growth, EBIT growth and positive operational cash flow is reiterated.

21 Oct 24. Ricardo plans sale of defence arm. Engineering consultancy Ricardo (RCDO) plans to sell off its defence business as it continues its shift towards becoming an environmental and energy transformation specialist.

The defence arm, which retrofits various systems to land vehicles, has been a significant contributor to Ricardo’s bottom line, generating 26 per cent of the group’s revenue but 60 per cent of underlying operating profit in the financial year that ended in June.

The company therefore warned that a sale “is expected to be dilutive” to earnings per share in the short term. However, depending on the amount a sale brings in, it could reinvest “some or all” of the proceeds in businesses that would be earnings accretive.

The shares climbed by 2 per cent but are down 13 per cent year-to-date.

(Source: Investors Chronicle)

Shore Capital has published a research note on Ricardo this morning, following their Strategy Update earlier this week. See a summary of the key points below and the full note attached.

Jamie Murray, Equity Analyst, said: “Ricardo’s decision to sell Defense is unsurprising but interesting. It has been the key driver of growth over the past five years, but is facing a cliff edge when the ABS/EBC contract ends. As a result, management are expected to sell the business at a low multiple, which could reveal that the rest of the business is overvalued. Whilst the impact on forecasts will be material, the merits of the sale will depend on the proceeds and the subsequent capital allocation process. We conclude that the current Group ex Defense is likely overvalued and therefore would reiterate our recommendation to SELL the shares.”

Rationalising the sale: The division has been viewed as a non-core business unit since the Capital Markets Day in May-22 as it does not align with the future direction of the Group. It is also facing a revenue cliff edge as the end of the ABS/EBC contract approaches. By announcing its intention to sell, Ricardo is ripping the Band-Aid off and accelerating the sale.

Valuing Defense: We believe the division is worth $75m-$105m, which equates to a FY26F EV/EBIT multiple of 4-5x. This is the sum of (1) the ABS/ESC programme ($30m), (2) Defense ex ABS/ESC ($30m-$60m) and the optionality of new programmes ($15m).

Use of proceeds: It is likely the proceeds will be used to pay down debt and/or to acquire a business. Ricardo’s borrowing costs are high given gross debt is over £10m, so it would be sensible to deleverage. In addition, we believe Ricardo will attempt to buy a fast growing, high margin business, exposed to Energy and Environmental Transition markets.

Impact on valuation: Ricardo is expected to sell its best performing division at a low multiple. The result is that the remaining Group will be placed on a high multiple, which will imply it is overvalued. For shareholders, the outcome depends largely on the size of the proceeds. Our most likely scenario is that management sells the business for c$60m, a discount to our FV estimate, which places the rest of the business on 10.5x EV/EBIT. We would argue this is too high given the limited growth, modest margins and uncertainty across its core markets (i.e. automotive and Energy and Environmental Transition). We reiterate our SELL recommendation.

BATTLESPACE Comment: BATTLESPACE understands that Ricardo is still retaining its UK defence division.

20 Oct 24. Boeing exploring asset sales to boost finances, WSJ reports. Boeing (BA.N) is exploring asset sales in a bid to boost its fragile finances by shedding its non-core or underperforming units, the Wall Street Journal reported on Sunday.

The planemaker last week reached an agreement to offload a small defense unit that makes surveillance equipment for the U.S. military, the paper reported, citing people familiar with the deal.

Boeing has lurched from crisis to crisis this year, ever since Jan. 5 when a door panel blew off a 737 MAX jet in mid-air. Since then, its CEO has departed, its production has been slowed as regulators investigate its safety culture, and in September, 33,000 union workers went on strike.

The Journal reported that in recent financial-performance meetings, new CEO Kelly Ortberg asked the heads of the company’s units to lay out the value of those units to the company.

Boeing’s board recently met to discuss the next steps for the company, where directors questioned division heads and combed through reports to examine the state of each unit, the report said. Boeing declined to comment on the report. (Source: Reuters)

20 Oct 24. Boeing (BA.N) closed a deal this month to sell a small defense subsidiary that makes surveillance equipment for the U.S. military, the company said on Sunday, as the planemaker looks to shore up its struggling finances.

Boeing said in a statement that Digital Receiver Technology, which makes wireless equipment used by intelligence services, will be sold to Thales Defense & Security, an arm of Europe’s largest defence electronics firm, Thales SA (TCFP.PA). (Source: Reuters)

17 Oct 24. Nurol Holding acquires full ownership of FNSS from BAE Systems. Turkish defense company FNSS announced a major shift in its ownership structure as Nurol Holding has agreed to acquire the remaining shares of FNSS from BAE Systems. The deal, currently pending approval from Turkiye’s Competition Authority, will see Nurol Holding, which already holds a 51% majority stake, become the sole owner of FNSS. The acquisition is expected to significantly boost FNSS’s capacity for innovation and expansion into new markets. As part of the Nurol Group, FNSS will continue its operations with a strong focus on sustainability and maintaining its leadership in the defense sector.

FNSS CEO Kadir Nail Kurt commented on the development, stating, “With the comprehensive support of Nurol Holding and the synergy created within the group, FNSS will continue to achieve new milestones in innovation and sustainability. Under the 100% ownership of Nurol Holding, FNSS remains fully committed to fulfilling all legal, contractual, and financial obligations.”

This change marks a significant step for FNSS, which has been a key player in the defense industry, known for producing armored combat vehicles and advanced defense systems, serving both domestic and international markets. (Source: Defense Arabia)

——————————————————————————————————————————————————————————————————————————————————————————————————————————————

SPX CommTech, part of SPX Technologies Inc, innovates specialised technologies within the Radio Frequency (RF) spectrum to ensure a smarter, more secure future for all. Formed by TCI and ECS, SPX CommTech’s Battlespace portfolio enables defence and security teams to detect, defeat and exploit RF signals to enhance communications intelligence (COMINT) and counter unmanned aerial systems (Counter-UAS). Additionally, its Tactical Data Link portfolio allows intelligence gathering agencies, special forces, emergency response, and security teams to securely and reliably transfer video and data between enabled-aircraft and ground teams over long distances for airborne Intelligence, Surveillance, Reconnaissance (ISR).

For more information visit www.tcibr.com and www.enterprisecontrol.co.uk

——————————————————————————————————————————————————————————————————————————————————————————————————————————————–

BUSINESS NEWS

Protek Selected By Dutch Armed Forces

PARLIAMENTARY QUESTIONS

MANAGEMENT ON THE MOVE