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DRS Write-down Drives $1B Finmeccanica Loss

Apr. 23, 2013 - 08:08PM   |  
By TOM KINGTON   |   Comments
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ROME — Italy’s Finmeccanica announced a net loss of €786 million (US $1.02 billion) for 2012 on Feb. 23, due mainly to a write-down of the value of US electronics unit DRS.

Orders dropped 2.2 percent to €16.7 billion, while revenue rose 1 percent to €17.2 billion. The firm forecast revenue would drop in 2013 to between €16.7 billion and €17 billion as it navigates a tight defense market.

After buying DRS for $5.2 billion in 2008, the firm has suffered from a dip in orders as the US pulled out of Iraq and prepares to pull out of Afghanistan. Finmeccanica took a write-down in the value of DRS of €993 million in its 2012 results, as well as a value write-down of €155 million for its Selex EC electronic unit. The company stated that its defense electronics activities in Italy, the UK and the US would see revenue decline in 2013, “but to a large extent in the US market, also following the recent restrictive measures triggered by the sequestration.”

Without the write-downs, the company said in a statement, it would have seen a profit of €362 million in 2012.

A drop in civil transport, missile and underwater systems, energy and space orders was partly compensated for by an increase in orders of military vehicles by Italy, new AW169 and AW189 helicopters and orders related to the Eurofighter, M346 training jet and C-27J transport aircraft.

In a press conference, Finmeccanica CEO Alessandro Pansa said Finmeccanica would begin to reap the benefits of restructuring in 2013, with results already improving at aeronautics unit Alenia Aermacchi due to restructuring.

At DRS, a reduction in orders “and prospective orders” was being countered by a reduction in 3,000 jobs and a reduction in the number of sites, he said. “Profitability remains constant, even the cut in orders, thanks to vigilance,” he said.

Pansa took over Finmeccanica after the arrest of former CEO Giuseppe Orsi in February by magistrates who suspect him of involvement in alleged corruption in the 2010 sale of helicopters to India. The arrest delayed the issue of the 2012 results from March.

Orsi had planned to sell off Finmeccanica’s stake in civil unit Ansaldo Energia to drive down debt, which stood at €3.37 billion at the end of 2012. But the political uncertainty in Italy robbed the firm, which is state controlled, of the political backing it needed to push through the sale.

Pansa suggested on Tuesday he would try and proceed with the sell-off when a new government is formed, likely this week.

“When there is a government it will be the right moment to present our strategy and our economic and financial position and propose solutions and receive suggestions,” he said.

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