ROME — As it rolls out its new Leonardo brand, Italy’s Finmeccanica is in good shape thanks to a new Eurofighter deal. However, a decline in helicopter sales are negatively affecting the company.
The firm, which is currently known as Leonardo-Finmeccanica, released first quarter results Thursday that showed earnings before interest, taxes and amortization (EBITA) were up 4.5 percent to €164 million (US $187 million).
That prompted CEO Mauro Moretti to claim the company “had the wind in its sales."
Orders in 2016 are also expected to mushroom from a forecast of €12.2-12.7 billion to €20 billion in response to the €8 billion deal struck in April with Kuwait for the sale of 28 Eurofighter jets — the firm’s largest ever order.
Moretti said Leonardo-Finmeccanica’s share of the deal would be 60 percent, while Chief Financial Officer Gian Piero Cutillo told analysts that the firm would be “the only interface with the customer,” meaning there wouldn't be a direct role for other Eurofighter partner firms like BAE Systems or Airbus.
The eight-year contract will cover 2016 to 2023, with deliveries starting in 2019 and all production, delivery and acceptance procedures undertaken in Italy, the firm said.
Quizzed by analysts, Cutillo said the €8 billion figure did not cover long-term support deals. Armaments are also yet to be contracted.
Revenues from the deal will start to kick in from 2017 and run through to 2021 at about €2 billion a year.
But despite Moretti’s talk of “incredible” results, the firm’s share price slipped on Friday over concerns about orders for helicopters, long a mainstay of the firm’s balance sheet.
While aeronautics orders rose by €664 million in the first quarter thanks to civil work with Boeing and jet trainer sales to Italy, and electronics sales rose €215 million on healthy air traffic control system sales, helicopter orders dropped a massive €964 million in the first quarter from €1.35 billion last year to €384 million.
The problem, said managers, lay in the oil and gas sector, which is buying fewer helicopters to reach oil rigs while the price of oil remains so low.
Overall sales fell 4.4 percent to €2.54 billion, lower than analysts' average forecast of €2.76 billion.
Cutillo said helicopter orders in the second half of the year would be higher than in the first six months and that year-end profitability in the sector would be double digit, on par with last year.
The firm has been reportedly shortlisted, alongside Airbus, for the supply of 12 helicopters to Singapore in a $1 billion deal to replace ageing Super Pumas.
Moretti has been pushing to cut costs by turning Leonardo-Finmeccanica’s semiautonomous units into more tightly coordinated divisions, and he told an Italian parliamentary commission on May 4 that he was still struggling with money wasted on poorly managed supplier contracts.
“We are experiencing great difficulty on strategic programs due to problems with supplies, something we cannot allow, because it can lead to the failure of whole programs,” he said. “In the past, Finmeccanica has lost up to €1.4 billion at some facilities and we cannot allow this anymore."
One corporate move that appears to be on hold is the plan to build the firm’s stake in Avio, the Italian satellite builder, from the 14 percent now held.
Avio management said last year that due diligence had begun for Finmeccanica to take over the firm from UK-based private equity firm Cinven, which now holds 86 percent.
Cinven previously owned a larger firm, also called Avio, which comprised space and propulsion activity. The fund sold the propulsion activity to General Electric in 2013, which it has renamed Avio Aero, while keeping the space activity.
But moves to cede control in the space business to Finmeccanica appear to have stalled.
“Our shareholder has said there are lots of expressions of interest, but they continue to be interested in the firm and see no urgency to sell,” Avio CEO Giulio Ranzo said.
“Cinven is flexible and considers it worth maintaining its investment,” he added. “They have an open mind and no deadline and continue to see value in the company.”