2002 FIN – SPS’ Thompson: Aircraft Rollouts Down 19%
Increases in military spending and orders from Europe’s Airbus are offsetting some of the aerospace decline for SPS Technologies Inc., new CEO John Thompson said at the Gabelli & Company’s 8th annual aircraft supply conference in New York earlier this month.
The aerospace industry, SPS’ largest market, continues to decline, with 2002 aircraft rollouts falling 19%. Thompson said that trouble with airline profitability resulting in newer aircraft being grounded as surplus will continue to depress demand for new aircraft. “Where this cycle will bottom is not clear at present,” he stated. However, Thompson pointed to a potential silver lining for SPS in the dark cloud of recession. The company’s growing position with Airbus participants heralds a softened economic blow. Airbus rollouts are expected to decline only 5% this year, compared with a 28% drop at Boeing. During 2001 SPS acquired Airbus supplier Dacar of France.
In addition, Thompson predicted that developing markets in Europe, along with a boost in military spending, may offset commercial decline. SPS reported first half sales in 2002 for aerospace fasteners were $155 million, of which 30% came from military orders.
A group led by investor Gabelli increased its stake in SPS to 29.44% during 2001.
Sales of fastener products accounted for 70% of SPS’$918.1 million revenue in 2001. Aerospace fasteners totaled $352.9 million, with an operating profit of $44 million. Engineered sales were $278.9 million, producing an operating profit of $16.6 million.
Annual net sales rose steadily from 1996 to 2001 but are expected to drop 11% to $825 million for 2002. However, sales grew 4% between the first and second quarters of 2002, and earnings per share increased 16%.
Those results are largely due to aggressive company restructuring, which eliminated six manufacturing plants, cut their workforce by 13% to reduce annual payroll over $25 million and downsized aerospace infrastructure. In addition, SPS relocated production of certain magnetic products to Asian facilities. The restructuring plan is expected to be completed by the end of the month.
For now, the company is focused on increasing cash flow and reducing the aerospace cost structure. Capital investment has been slashed 50% to $22 million in 2002. Thompson stated that acquisitions for Jenkintown, PA-based SPS will center on technically advanced products, which provide greater room for growth. ©2002/2013 Fastener Industry News
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