June 16, 2013
Italy’s Finmeccanica expects to return to profitability this year as the restructuring of the aerospace and defense conglomerate over the last 18 months begins to reap rewards.
Progress was slowed by goodwill write-downs in 2012 on its U.S.-based DRS and Europe-based Selex ES defense electronics businesses, and the removal of top management in February amid allegations of corruption that the company strenuously denies.
New CEO Alessandro Pansa says he plans to further increase the restructuring measures introduced by predecessor Giuseppe Orsi, accelerate the review of the company’s portfolio, consider the disposal of further assets to improve its cash position, and concentrate capital into key products that are successful in the marketplace.
Finmeccanica is faced with cuts in defense spending in what it considers its three domestic markets – Italy, the UK, and the U.S. – lending further urgency to restructuring its core businesses, says Giovanni Soccodato, Finmeccanica’s executive vice-president for strategy, business development and innovation.
The group suffered losses of EUR786 million ($1 billion) in 2012, a considerable improvement on its 2011 results, which saw it lose EUR2.3 billion. Revenues were down slightly to EUR17.2 billion. Goodwill write-downs were EUR155 million on Selex ES and EUR993 on DRS. Without these, Finmeccanica would have earned a profit of EUR362 million.
Order intake was down EUR731 million to EUR16.7 billion, with many of the losses felt in Finmeccanica’s defense systems and space companies, as well as those in transportation and energy. Defense systems suffered because of the postponement of several key contracts, while space revenue dipped because of the delay in the acquisition of the Cosmo 2G observation satellites.
The losses were offset, however, by stronger performances in the AgustaWestland helicopter manufacturing and Alenia Aermacchi divisions. AgustaWestland’s new AW169 and AW189 products recorded 98 orders in 2012, while orders for the Eurofighter, M346 jet trainer, C-27 Spartan airlifter and the ATR family of regional airliners also received a boost.
“Starting this year, we should see a return to profitability and an improvement in our overall cash position,” says Soccodato. “We will continue to reassess the portfolio across the group and within the businesses—that’s our next phase.” It already sold off its Avio aero engine business to GE for $4 billion at the end of last year.
Consolidation of Alenia Aermacchi was the first priority at the beginning of 2012, and the aeronautics company has since rationalized its industrial and management structures with the creation of a military center in Turin and a civil center in Naples. It has since seen significant savings and improvements in competitiveness, Soccodato says.