VERGIATE, Italy — Italian defense group Leonardo has promised double-digit profitability within five years, thanks to 6 percent annual growth in new orders and 5-6 percent revenue growth.
The prediction was contained in a new 2018-2022 industrial plan, which envisages a total of €70 billion (U.S. $87 billion) in new orders by 2022 and €200 million in annual costs, according to officials who presented the plan at Leonardo’s helicopter plant in Vergiate, near Milan, on Tuesday. Transportation to Milan from Rome for Defense News was provided by Leonardo.
CEO Alessandro Profumo said the performance would kick in after a “consolidation” year in 2018, but the numbers failed to impress analysts, who triggered a sharp fall in the firm’s share price.
Leonardo’s share price previously tumbled by one-fifth in November when the firm cut its short-term forecast amid concerns about performance in its helicopter division.
At the time, the firm reduced its new order forecast for 2017 to €12 billion, ahead of the full results announcement due this March.
On Tuesday, officials cut the forecast again to between €11.3 billion and €11.7 billion, stating a predicted order for new C-27J tactical transport aircraft had slipped and would not be closed by the end of the financial year.
“We are awaiting administrative approval, we are not worried about it,” said Profumo, who was appointed last April. The firm has declined to identify the buyer.
Leonardo predicted Tuesday that the new order book would hit €12.5-13 billion in 2018. Revenues will be €11.5-12 billion next year, the same predicted for 2017, the company predicted.
Asked about the share slide, Profumo said analysts had been disappointed by projections for 2018, but stressed he was focusing on the long-term ambitions of the firm.
Profumo and the helicopter division’s chief, Gian Piero Cutillo, took time during the presentation to explain what went wrong at the division in 2017, which Profumo called a “disappointing” year.
They pinned the problem on engineers trying to carry out late configuration changes on the new civil AW169 helicopter, which has received about 120 orders.
“There were far too many late-stage configuration changes made by commercial teams chasing sales in a difficult market,” Profumo said.
“A simple new rule: You cannot change configurations once a helicopter is on the final assembly line,” Cutillo noted.
The admission came 10 months after the firm said it had the AW169 situation in hand.
At 2017’s end-of-year results presentation, held by Profumo’s predecessor Mauro Moretti, the firm said “earlier production issues with the new AW169 (are) now resolved.”
Profumo said Tuesday there were no “structural problems” at the division, only “self inflicted problems.” The shrinking of the helicopter market by 45 percent between 2013 and 2016 did not help, the managers added.
Furthermore, in the defense helicopter market, Leonardo had been “ineffective in tender processes and major campaigns,” the firm admitted in its presentation.
Cutillo was moved by Profumo to head up the helicopter division in October from his previous job as chief financial officer.
“He is the right person to manage the situation,” Profumo said. The firm now expects a “full recovery” in the market, he added, and it believes the helicopter division will return to double digit profitability by 2020.
Looking ahead, Profumo said he had no intention of selling Leonardo’s stake in European missiles house MBDA, an option considered by management before he took over last April.
“I like MBDA, I have no intention of selling it,” he said.
He suggested the firm would push on with plans to develop a new, 100-seater version of the ATR aircraft it builds with Airbus. Last year, Moretti said the new plane could be sold in passenger, cargo or military transport configuration, the latter acting as replacement for the C-27J tactical transport aircraft.
Chief Commercial Officer Lorenzo Mariani confirmed Leonardo’s plans to beef up its global sales effort, stating it would open 10 new offices in 2018-2019 and double its current total of 25 overseas offices by 2022.