25th Apr 2019 09:55
LONDON (Alliance News) - Senior PLC said Thursday trading in the three months ended March was in line with expectations but expects further disruption from US airplane manufacturer Boeing Co's ongoing troubles.
The technology components manufacturer for the aerospace, defence, land vehicle and energy markets sectors warned that it is expecting "some impact from the Boeing 737 MAX "situation".
Earlier in April, Boeing said it will cut production of 737 Max jets to finalize a fix to get the grounded aircraft flying again. The 737 Max airplanes were grounded globally following two deadly crashes.
"However we are taking action to reduce costs across the group and together with a slightly lower forecast tax rate, we expect only a modest reduction in our earlier expectations. We continue to monitor developments on the 737 MAX situation closely and should anything change that affects our current assumptions, we will update the market accordingly," Senior said.
Senior said it has been talking to its 737 MAX aerostructures and propulsion customers about the "potential schedule impact on our operating businesses" following the Lion Air and Ethiopian Airlines tragedies.
"Although these discussions are ongoing and initial schedule changes have not yet been fully defined, we are working hard to mitigate any likely impact following Boeing's announcement of a cut in production to rate 42 [per month]," added Senior.
Senior's largest business within its Structure unit, Senior Aerospace AMT in Seattle, US, has the largest content on the 737 MAX.
"This is one business in particular that is unlikely to be able to fully mitigate this impact of a cut to rate 42 instead of gearing up for an increase to rate 57. AMT has also secured a high level of new content on the Boeing 777X and therefore is already absorbing high new product introduction and industrialisation costs as that platform moves closer to entry into service. As a consequence, AMT is less able than our other operating businesses to fully absorb the likely impact of the 737 MAX production cuts and this will have some impact on Aerospace margins for the rest of 2019," said Senior.
Senior said activity in its Aerospace division as a whole increased in the quarter with new programmes "ramping up" and mature programmes decreasing. Senior said the division is benefiting from the ramp up in production of the Joint Strike Fighter military aircraft.
Senior said activity in its Flexonics division during the quarter was in line with expectations, including the effect of the sale of the company's Blois operating business in February. The company expects margin progression in the Flexonics division to offset any decrease in sales.
Shares in Senior were down 1.1% at 225 pence each.
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