B/E Aerospace hits $2 billion target for 2008

Top airline seat manufacturer B/E Aerospace duly hit its target of $2 billion in revenues last year and expects to do even better in the next 12 months despite the recession.

Announcing it 2008 fourth-quarter and full-year results today, the Florida-based company reported 12-month net sales of $2.1 billion, a record and up 26 per cent compared with 2007. Operating earnings of $354 million, up 43 per cent, and net earnings of $201 million also represented new peaks in the company’s history. High-profile product launches during the year include the first-class suite aboard Qantas’ Airbus A380s.
 
“It was a record year for us in spite of deteriorating global economic conditions beginning in the second half,” says chief executive Amin Khoury. “We are also pleased with fourth-quarter earnings and cash flow in light of the deterioration in global economic conditions, which negatively impacted demand for our higher-margin aftermarket products.”

Of the company’s three business segments, it was Commercial Aircraft that took the biggest hit in the fourth quarter, with net sales declining 24 per cent to $233 million compared with the $307 million of the corresponding period last year. B/E says the result reflects the postponement of retrofit programmes, reduced aircraft deliveries as a result of the Boeing strike, and reduced spares revenues as a result of cash conservation action by airlines and MRO providers.

Fourth-quarter bookings totalled $450 million and backlog at the end of the year was around $2.9 billion, 32 per cent up on 12 months earlier. US airlines account for nine per cent of backlog, with 55 per cent originating outside the USA.

The company says its decision to seek supplier-furnished equipment (SFE) positions with the airframers has paid off in the form of awards that will substantially increase its revenues per aircraft on a number of new programmes. These include the galleys and passenger oxygen system for the Airbus A350, and oxygen and passenger service units for the Boeing 787. B/E values its current total of SFE awards at more than $2.3 billion and says that so far only a small part of it has been included in the backlog.

The company’s excellent performance in a rapidly deteriorating environment has not come without a cost, however. “Last year we initiated contingency planning that meant we were well positioned to address the sudden decline in demand as the global economy worsened in the third quarter,” says Khoury. “While painful, affecting employees and their families, the steps we have taken are expected to enable us to protect our balance sheet and cash flow during what may well be a prolonged downturn. When fully implemented, these actions are expected to provide substantial savings in 2009 and significantly more in 2010 and beyond, allowing us to emerge as a significantly stronger business.”

But there will be pain in the meantime, Khoury warns. “It is expected that air traffic will continue to decline in 2009, negatively impacting our customer base,” he says. “The airlines are parking aircraft, delaying new purchases and retrofits, and depleting existing inventories. Our customers’ tough cash conservation measures are clearly having an impact on the demand for our products. Nevertheless, we’re cautiously optimistic about the next two years and expect our 2009 revenues to be slightly higher than the 2008 result, at about $2.25 billion.”