January 16, 2020 / 9:48 AM / 2 days ago

Plane supplier FACC cuts margin view, seeks efficiencies

VIENNA (Reuters) - Plane parts maker FACC (FACC.VI) on Thursday cut its profit margin forecast for its shortened 2019 fiscal year amid tough trading conditions in the aviation industry, and announced an efficiency program to help reach its medium-term targets.

FILE PHOTO: Austrian aeroplane parts maker FACC CEO Robert Machtlinger answers questions during a Reuters Interview in Vienna, Austria, February 1, 2019. REUTERS/Kirsty Knolle/File Photo

The Austrian headquartered group, owned by China’s AVIC (000768.SZ), now expects the margin on earnings before interest and tax in its 2019 fiscal year, which runs March-December, to come in between 5.2% and 5.7% after previously forecasting 6%.

FACC, which makes components for wings, tail assemblies and fuselages as well as engines and cabin interiors for all major planemakers, also increased its 2019 sales forecast to 668 million euros ($745 million) from 600 million euros.

The company’s profitability has recently been hit by higher than expected start-up costs for new assembly lines.

From 2020, the group will report per calendar year.

At 0930 GMT, FACC shares were down 0.6% at 12.64 euros.

To boost profitability, FACC will spend up to 50 million euros to streamline its supply chain and business processes and bring the production of strategic components in house, it said.

The supplier is feeling the effects of slowing plane orders due to lingering fears of an economic downturn and U.S.-China trade tensions.

“The medium-term growth and earnings targets remain unchanged, albeit depending on the market development - significant rate increases on growth projects have been completed,” FACC said.

Around half of FACC’s revenues come from Airbus (AIR.PA), which reported higher airplane orders for 2019 but failed to keep pace with deliveries after axing its A380 superjumbo program.

Boeing’s (BA.N) orders slumped to the lowest in decades last year after the grounding of the its 737 MAX jet after two fatal crashes. FACC supplies several Boeing planes including the 787, but not the 737 MAX.

FACC might benefit from an initial trade pact between the United States and China as Boeing is expected to get a major order for wide-body jets from China, including its 787 or 777-9 models, or a mixture of both, according to industry sources.

Reporting by Kirsti Knolle, editing by Emma Thomasson and Mark Potter

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