Written by Abhijit Ganapavaram and Alison Lampert
(Reuters) – Aerospace supplier Spirit AeroSystems posted a big loss and burned through more cash than expected in a turbulent first quarter at top customer Boeing Co. , said it may raise cash in the financial markets.
Spirit was spun off from Boeing nearly 20 years ago, but has been losing money in recent years. The two companies have been in talks to reunite after the 737 MAX panel burst on January 5th.
Spirit's cash on hand fell to $352 million from $824 million at the end of December. The company posted a net loss of $617 million in the three months ended March 28, burning through $444 million, far more than analysts expected.
“The supply chain strains that Spirit and other suppliers are experiencing are both commercial and operational risks,” CEO Pat Shanahan told analysts.
Analysts on average had expected cash usage to be $108 million for the quarter, according to LSEG data.
Shares fell 1.9% in Tuesday trading.
Boeing's bid to buy Spirit is currently facing obstacles due to complex negotiations with Europe's Airbus, which accounts for about one-fifth of Spirit's sales. Reuters reported last week that Airbus is seeking compensation for taking over Spirit's loss-making business.
The supplier of the 737 MAX aircraft also has nearly $1.8 billion worth of inventory.
Spirit was already grappling with loss-making programs and industry-wide supply chain bottlenecks that delayed aircraft deliveries. The airline is also facing additional pressure from slowing production of its 737 planes, due in part to quality checks imposed by the US Federal Aviation Administration (FAA) after the January crash.
Spirit said in a regulatory filing that it is pursuing a variety of options to improve its liquidity, including issuing stock or debt, restructuring its business and seeking more advances from customers.
Airbus had no immediate comment Tuesday.
“The outlook for the stock is entirely dependent on whether the company reaches sale agreements with Boeing and Airbus,” Robert Stallard, aerospace analyst at Vertical Research Partners, wrote in a note.
“These results may play a role in this process because they highlight how desperate Spirit's financial position has become.”
production delays
Spirit's current Boeing 737 production rate is approximately 31 aircraft per month, and the company expects this to remain constant through the end of 2024.
Airlines and lessors have complained to both Boeing and Airbus about delivery delays caused by production and supply chain issues.
Sheikh Ahmed bin Saeed Al Maktoum, CEO of Dubai airline Emirates, said on Tuesday that Boeing's new management is working to resolve delays plaguing the company's 777X planes. He said he hopes to do so.
Compounding Spirit's cost concerns, Boeing announced it would limit travel and only hire aircraft that adhere to quality standards. Sales to U.S. aircraft manufacturers accounted for 64% of Spirit's revenue last year.
Chief Financial Officer Mark Suchinski said the company had a total forward loss of $448 million, primarily due to Airbus' two aircraft programs, the A220 and A350.
“We know it's a significant loss, but it's actually due to our inability to conclude commercial negotiations with Airbus,” he told analysts.
Quarterly adjusted loss per share widened from $1.69 to $3.93, but revenue increased 19% to approximately $1.7 billion due to higher overall sales from commercial, space and defense programs.
Analysts had expected a loss of 48 cents per share.
(Reporting by Abhijit Ganapavaram in Bengaluru, Alison Lampert in Montreal and Tim Heffer in Paris; Additional reporting by Sidharth S. in Bengaluru; Editing by Sharon Singleton and Sriraj Kalvilla)
