Link : http://www.theaustralian.news.com.au/busin...2-23349,00.html
QUOTE ('The Australian')
Boeing Profit Dives On Strike Losses
Bill Rigby | October 23, 2008
BOEING'S quarterly profit fell 38 per cent as a strike by its jetliner assembly workers wiped out almost a month of production.
The plane maker, which is also the No. 2 US defence contractor, effectively suspended its financial outlook until after the end of the strike by its largest union, now in its seventh week.
Boeing shares closed down 7.5 per cent on the New York Stock Exchange, as all the major indexes fell. The shares are down 51 per cent this year.
Almost 27,000 members of the International Association of Machinists and Aerospace Workers walked out of Boeing's plants on September 6 after rejecting the company's three-year contract offer.
The two sides are set to resume talks with the help of a federal mediator tonight (AEDT), but have so far struggled to find common ground on the key issue of outsourcing.
Boeing is to update its financial outlook when the strike is settled. Each day of the strike would add a day to existing production schedules, said chief executive Jim McNerney, plus an unquantified period for getting operations back up to pre-strike production rates. Analysts are anticipating significant cuts from the company's current guidance.
The company said it had a strong balance sheet to deal with a long strike and the effects of the global financial crisis. But its cash and marketable securities fell 29 per cent in the quarter to $US4.2 billion ($6.2 billion), partly due to the strike, but also because of rising 787 inventories and some acquisition costs.
Boeing warned that it might need to provide financing to some of its customers for planes delivered in 2009, a sign that it is concerned about the financial health of airlines.
It expects US defence spending growth, the key driver of its military business, to moderate, but said it would focus on keeping its own programs on track.
The new 787 Dreamliner was progressing, Boeing said, but it did not update its targets for the first flight, which was supposed to be at the end of this year, or delivery, which was set for the third quarter of next year.
Industry watchers are expecting another delay to the plane, which is already at least 16 months behind schedule.
Chicago-based Boeing, which outsold EADS unit Airbus last year, said third-quarter net profit fell to $US695 million, or US96 cents per share, from $US1.1 billion, or $US1.44 per share, a year earlier.
Excluding one-time tax effects, earnings were $US1.02 per share, US2c higher than Wall Street's lowered average forecast, according to Reuters Estimates.
Boeing said the strike cut about US35c per share from profit, while delays in getting galleys installed on some widebody planes cut a further US25c.
Revenue fell 7 per cent to $US15.3 billion, largely because of the effect of the strike on the commercial plane business. The defence unit posted higher revenue and profit.
Chief financial officer James Bell said Boeing's pension assets were down about 20 per cent at mid-October, following recent plunges in global markets.
He said that would likely increase the company's pension costs next year by $US100 million and could cut the company's equity by "several billion dollars" if it has to pay money into its pension funds.
Boeing's shareholder equity stood at $US8.7 billion at the end of September. The company will gauge the position of its pension investments at the end of the year, and establish whether more funding is needed.
Bill Rigby | October 23, 2008
BOEING'S quarterly profit fell 38 per cent as a strike by its jetliner assembly workers wiped out almost a month of production.
The plane maker, which is also the No. 2 US defence contractor, effectively suspended its financial outlook until after the end of the strike by its largest union, now in its seventh week.
Boeing shares closed down 7.5 per cent on the New York Stock Exchange, as all the major indexes fell. The shares are down 51 per cent this year.
Almost 27,000 members of the International Association of Machinists and Aerospace Workers walked out of Boeing's plants on September 6 after rejecting the company's three-year contract offer.
The two sides are set to resume talks with the help of a federal mediator tonight (AEDT), but have so far struggled to find common ground on the key issue of outsourcing.
Boeing is to update its financial outlook when the strike is settled. Each day of the strike would add a day to existing production schedules, said chief executive Jim McNerney, plus an unquantified period for getting operations back up to pre-strike production rates. Analysts are anticipating significant cuts from the company's current guidance.
The company said it had a strong balance sheet to deal with a long strike and the effects of the global financial crisis. But its cash and marketable securities fell 29 per cent in the quarter to $US4.2 billion ($6.2 billion), partly due to the strike, but also because of rising 787 inventories and some acquisition costs.
Boeing warned that it might need to provide financing to some of its customers for planes delivered in 2009, a sign that it is concerned about the financial health of airlines.
It expects US defence spending growth, the key driver of its military business, to moderate, but said it would focus on keeping its own programs on track.
The new 787 Dreamliner was progressing, Boeing said, but it did not update its targets for the first flight, which was supposed to be at the end of this year, or delivery, which was set for the third quarter of next year.
Industry watchers are expecting another delay to the plane, which is already at least 16 months behind schedule.
Chicago-based Boeing, which outsold EADS unit Airbus last year, said third-quarter net profit fell to $US695 million, or US96 cents per share, from $US1.1 billion, or $US1.44 per share, a year earlier.
Excluding one-time tax effects, earnings were $US1.02 per share, US2c higher than Wall Street's lowered average forecast, according to Reuters Estimates.
Boeing said the strike cut about US35c per share from profit, while delays in getting galleys installed on some widebody planes cut a further US25c.
Revenue fell 7 per cent to $US15.3 billion, largely because of the effect of the strike on the commercial plane business. The defence unit posted higher revenue and profit.
Chief financial officer James Bell said Boeing's pension assets were down about 20 per cent at mid-October, following recent plunges in global markets.
He said that would likely increase the company's pension costs next year by $US100 million and could cut the company's equity by "several billion dollars" if it has to pay money into its pension funds.
Boeing's shareholder equity stood at $US8.7 billion at the end of September. The company will gauge the position of its pension investments at the end of the year, and establish whether more funding is needed.