Boeing: aerospace group has industrial strength headaches
Cost inflation, supply chain hiccups and war in Ukraine have dented early enthusiasm for a post-Covid resurgence
Just when long-suffering Boeing investors thought the worst had finally passed, more cracks appear in the fuselage.
The US aviation group not only racked up a hefty loss during the first quarter amid an array of one-off charges, but also burnt through more cash than Wall Street had expected. Worse, Boeing has decided to push back the debut of its newest passenger jet to 2025. The delay will result in an added $1.5bn in abnormal production costs in future quarters.
The market’s punishment was swift. The share price plummeted more than 10 per cent. The poor financial performance raises questions over the ability of David Calhoun — who took over the top job in 2020 — to correct Boeing’s operational problems following three tumultuous years
Heading into 2022, skies were clearing for Boeing. The rebound in air travel brought a resurgence in demand for its 737 Max plane, which returned to service in late 2020 after two fatal crashes. However cost inflation and supply chain hiccups have beset both its commercial and military aircraft businesses, all exacerbated by Russia’s invasion of Ukraine.
These were blamed for the $1.2bn worth of one-off charges Boeing took during the first quarter, including higher production costs and losses related to two defence-side fixed-price aircraft projects. Even excluding those charges, Boeing still posted a core operating loss of $1.5bn, far worse than the $279mn loss consensus from Visible Alpha.
This result is jarring — given that its peers have suffered less. General Dynamics, which also reported on Wednesday, delivered a 3 per cent rise in quarterly earnings despite flat revenues.
Meanwhile, Boeing’s debt balance stands out at around $56bn compared with its market value of $88bn — down two-thirds from its 2019 peak. Boeing insists it will turn operating cash flow positive in 2022, for the first time since 2018. But $3.57bn of negative cash flow in the quarter will cause scepticism.
Boeing’s latest results underscore how deep its problems run. Best to keep seat belts buckled as it returns to the sky.