Design Engineering

Heroux Devtek’s quarterly sales surge

By Canadian Press   

General Heroux-Devtek Montreal

Landing gear maker says large aircraft programs should offset jet fighter decision.


Montreal – An improving commercial aviation market should take the sting out of the U.S. government’s decision to suspend production of a variant of the new Joint Strike Fighter, Heroux-Devtek said Friday. The aircraft landing gear and parts maker said planned production rate increases on large Boeing and Airbus aircraft programs should ensure it ends the fiscal year on a strong note.

“We always have a very strong fourth quarter, but this one is going to be particularly strong,” president and CEO Gilles Labbe said Friday during a conference call.

The Montreal-area company expects revenues in the second half of the year will be 15 per cent higher than the first half. Heroux-Devtek said its third-quarter profit soared nearly 46 per cent to $5.1 million on improved conditions in the commercial aerospace market. The company, which also makes industrial products, said the results were equal to 17 cents per share for the three months ended Dec. 31. That compared with $3.5 million or 12 cents per share a year earlier. Analysts had forecast an EPS of 14 cents. Sales increased to $85.8 million from $76.7 million, but profit margins were particularly strong on a big rebound in the industrial segment and higher repair and overhaul productivity. Heroux-Devtek also booked currency losses of $1.4 million in the quarter, reducing top-line sales by 3.4 per cent, or $2.6 million.


Although the military aerospace segment remained healthy, the impact is beginning to be felt as governments address their budget deficits. The United States instituted a two-year freeze on the short takeoff and vertical landing variant of the Joint Strike Fighter F-35. Labbe warned that the JSF decision should mean the number of landing gear sets shipped next fiscal year will be lower than originally forecast. The company expects to ship 27 this fiscal year.

“The program is still solid. We’re a big believer this program, at a point, will ramp up,” he said, noting that total deliveries of the fighter jet will still increase over the next two years.

Canada plans to spend $9 billion on 65 of the new stealth fighters — a deal that could cost $16 billion once maintenance is factored in. Labbe said industrial sales and business jet landing gear sales are also expected to increase as both markets appear to have bottomed out. The company’s optimism and strong financial position has led it to work on new acquisition opportunities of aerostructure, engineering and sub-assembly targets.

“There are candidates and we are working actively on a pipeline,” Labbe said, adding the acquisition’s value could be up to $90 million.

Heroux-Devtek recently renewed its credit facility, raising available financing potentially to $225 million.

“(A strategic acquisition) is an important thing we have to do this year,” the company said.

The strong results and short-term revenue outlook prompted some analysts to raise their target share price. Cameron Doerksen of National Bank Financial increased his 12-month target by 50 cents to C$10.

“Longer-term we remain highly confident in revenue growth as commercial aircraft production rates are on the rise and backlog remains strong at $586 million,” he wrote in a report.

On the Toronto Stock Exchange, Heroux-Devtek’s shares gained 15 cents, or 2.16 per cent, to $7.10 in afternoon trading Friday.

© 2011 The Canadian Press


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