Canadian aerospace profits cut by half last year: Report
Conference board report says rising costs pushed margins to four percent in 2013 and $699 million in profit.
Canada’s aerospace industry saw profits cut by more than half to $699 million last year as a falling loonie raised costs and offset a 13 per cent boost in revenues, according to a report by the Conference Board of Canada.
The industry’s margin was just four per cent in 2013, compared with 9.3 per cent in 2012 when profits were $1.46 billion. Profits were pushed lower last year due to a 19.6 per cent increase in costs. The Conference Board says it expects average profit margins to recover to around five per cent in 2015 as the dollar stabilizes, up from an estimated 4.4 per cent this year.
The Conference Board says the global aerospace industry is expected to enter a cyclical upswing as a pickup in the world economy, rising airline profits, increased capacity in emerging countries and the need to replace aging aircraft increase demand.
The order book for the Canadian aerospace industry reached a record $49.2 billion in February 2014, representing 34 months of production and supporting long-term revenue growth. It was as up more than $10 billion from a year earlier and above the recession low of $20.9 billion in the fourth quarter of 2010, a year in which profits were just $678 million.
The business aircraft segment has been slower to recover from the 2008 financial crisis and recession. Only 678 aircraft were delivered in 2013, six more than 2012.
The board says negative sentiment about private aircraft will change as the U.S. economy recovers and China views business jets as a corporate tool rather than status symbol.
© 2014 The Canadian Press